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Starting a Business? Don't Skip Researching the Competition

You know what you want to do and you are sure you are going to find plenty of customers and make plenty of money. Your idea is inherently better than what you have seen out there, so why bother looking into the competition? This is a common, and dangerous, attitude for many first-time entrepreneurs. The reality is that failing to scope out the competition is a mistake that is difficult to recover from, and one that can easily be remedied with a little time, a little effort, and a decent internet connection.

Direct and Indirect Competition

Competition in business comes in two broad categories -- direct competitors who do exactly what you do and indirect competitors who fill the same need for consumers but in a different way. Gathering as much information about both types of competitors as possible is critical in developing the most likely road map to a successful venture. Learning all about direct competitors provides a benchmark for comparing your business idea to what is already available and finding opportunities to set your company apart from everyone else.

Shorten Your Learning Curve

Knowledge of competitors' operations and marketing can dramatically reduce the learning curve for your venture, especially if the competitor has enjoyed relative success over time. Much can be learned from spending time in a competitor's brick-and-mortar store, from expected traffic patterns to product placement. Well-developed business websites provide significant insight as well, such as the features that the competitor estimates are most important to their customer base. You may even be able to discuss your idea with a competitor that serves a different geographical market...people love to tell others what they know.

Unique Selling Proposition

An important step in developing a comprehensive marketing plan is identifying your product's USP -- unique selling proposition. This is the cut-and-dried reason that consumers will select your product. The only way to create a legitimate USP is to know the primary and secondary competition inside and out. Launching a new product in a crowded market means there must be a good reason to switch or to choose yours over the others. If you don't know what's out there, you won't be able to establish your product as better, faster, or stronger than the other options.

If you are introducing a new or innovative product, knowledge of the indirect competition is essential. Whatever need or want your product is designed to fill, it is critical to know how consumers are filling it now. Indirect competitors offer products that meet the same or similar needs as yours. For example, if your product is an innovative smart phone application for managing time, your indirect competitors would be hard copy planners, standard time-management software, and even time-management consultants. Investigating these competitors will tell you why people choose these other options and what features help them sell.

Be Sure Your Research is Thorough

If you are unable to find any direct or indirect competitors, either your research is incomplete or your product has no market. The old adage "there is nothing new under the sun" is true...somebody is offering something that competes with your business idea. It is essential to find and acknowledge those competitors before you enter the market and to keep tabs on them once the business is up, running, and making money. Business is all about competition, and the more you know, the better your chances of success.

Researching the competition is not just a startup responsibility. Don't just do it to fill in that section of the business plan. Rather, the more you know about the competition, the more you know about what works and what doesn't, where they think the market is headed, how they respond to changes. Always stay on top of your competition and at least one step ahead. No need to be secretive about what you do, just be sure you do it right and better and at the right time. If your competitors will share with you, take it all in.

About the Author

LaunchX.com is dedicated to training entrepreneurs to turn their good ideas into great companies. The LaunchX System provides step-by-step education in the mindset and skill set entrepreneurs need to succeed. Our program includes intensive seminar training, key business software, and specialized workbooks that teach you the fundamental skills you need to achieve your financial and worklife goals through entrepreneurship. Register today for our introductory course and see what LaunchX can do for you!