Business owner looking over a city skyline with an editorial headline about understanding and dealing with the competition.

The 9 Hour Small Business Tune-Up — Hour 4: Studying Your Competition

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The 9 Hour Small Business Tune-Up — Hour 4: Studying Your Competition

This hour is about your competitors. Most business owners see them as a threat. This lesson shows you why that’s the wrong way to think about it, and how to turn what your competitors do into an advantage for your own business.

Why Competition Is Good for Your Business

Your competition can be a great advantage for you. Many business owners dread their competitors and wish they would just go away.

I disagree with this. Competition keeps the market alive. Studying your competitors keeps you on your toes, and your business benefits from it.

I would rather have my business running at its peak than spend time worrying that a competitor is picking up market share. In some cases, competitors are actually a bonus. If a product or service is new to the market, their advertising and awareness efforts can rub off on you too.

I don’t like putting down competitors in advertising. It feels petty. Picture a baseball game where the players stop mid-inning to trade insults. Everyone forgets the point of playing.

A rock-solid business that gives customers real value and service doesn’t need to attack a competitor publicly. It’s smarter to study your competitors, learn their practices, and strengthen your own business by filling in the gaps in your service or products.

Watching your competitors helps you figure out what the market wants, and keeps you current in your field. When you do need to respond to a competitor, do it in a way that builds your business up. Keep your focus on your customers.

What to Look At When You Study a Competitor

Keep your research simple. Focus on three things for each competitor:

  • Products and features. What do they offer that you don’t, and what do you offer that they don’t?
  • Quality and customer experience. How good is what they sell, and how do customers feel about buying it?
  • Pricing. How do they structure and justify their prices compared to yours?

Some Tips to Keep in Mind When Studying the Competition

  1. Look at the market as a whole, then fill in any profitable gaps in products or services you find.
  2. Make improvements that are missing in the industry.
  3. Look for a chance to start a new trend in your industry.
  4. If you’re on a tight budget, low-cost research still works. Check your competitors’ social media, join their email lists, and visit in person if they’re local. Your local Small Business Development Center (SBDC) or SCORE office can also offer free research support.
  5. If you want to track competitors online, you don’t need a paid subscription. A free alert service can notify you when a competitor is mentioned online, and the free tiers of most SEO and traffic-checking tools will give you a basic look at their website traffic and keywords.

Exercise: Get to Know Your Competitors

Before you start, it helps to know there are two kinds of competitors. Direct competitors sell something very similar to what you sell. Indirect competitors solve the same problem for your customer in a different way. Think of both when you make your list.

Complete the items below:

  1. List five of your top competitors.
  2. List each competitor’s primary advantages.
  3. Looking at the list above, can you spot any missing services or products?
  4. What advantages do you have over your competitors?
  5. What advantages do your competitors have over you?
  6. List five steps you can take to overcome your competitors’ advantages.
  7. List five major ways your customers benefit by doing business with you instead of your competitors.

Note: This exercise should reveal gaps in your industry, and gaps mean opportunity. It should also show you your strengths and weaknesses.

Most people work to improve their weaknesses. That’s fine, but it’s usually more productive to build on your strengths. Strengths come naturally, and it’s easier to build on a strength than to fix a weakness.

Exercise: Build Your Competitive Advantage Plan

Using the research above, create a plan that will improve your business and give it a competitive edge. Ask yourself:

  1. What can I add to my business that isn’t available in my industry?
  2. How can I use my strengths to gain market share?
  3. How can I use my strengths to create a niche in my industry?

Your competitors and your market will keep changing, so don’t treat this as a one-time exercise. Put a reminder on your calendar to run through it again in a few months.

Key Points and Facts About Studying Your Competition

  • Competition is normal. Almost every small business has competitors, so studying them is a routine part of running a business, not a sign something is wrong.
  • Watching competitors helps you spot market gaps, keep up with trends, and set realistic goals for your own business.
  • Naming and attacking competitors in your ads usually backfires. It reads as petty instead of confident.
  • A useful competitor review covers three areas: their products and features, their quality and customer experience, and their pricing.
  • Competitors come in two types — direct (same product or service) and indirect (different product, same customer problem) — and a full competitor list should include both.

Action Steps for Studying Your Competition

Map the market

  • List five direct and indirect competitors.
  • Note each one’s main advantage over your business.

Study what they offer

  • Compare their products, quality, and customer experience to yours.
  • Compare how they price and justify their pricing.

Find your opening

  • Identify gaps in the market their offerings don’t cover.
  • List ways your customers benefit from choosing you instead.

Build on your strengths

  • Pick one or two strengths you can use to gain market share.
  • Turn that strength into a plan you can act on this month.

Checklist for Studying Your Competition

  1. Identify your competitors
    • List at least five direct and indirect competitors.
  2. Research each one
    • Look at their products, quality, customer experience, and pricing.
  3. Spot the gaps
    • Note what’s missing from the market that your business could offer.
  4. Know your edge
    • List your advantages and your competitors’ advantages, side by side.
  5. Make a plan
    • Turn your strengths into two or three concrete actions.
  6. Set a review date
    • Put a quarterly or monthly check-in on your calendar to repeat this exercise.

FAQ: Studying Your Competition

Should I be worried about my competition?

  • No. Competition keeps the market healthy and pushes you to stay sharp. Treat it as information you can use, not a threat.

How often should I study my competitors?

  • Make it an ongoing habit rather than a one-time task. A quarterly or monthly check-in keeps your picture of the market current.

What’s the difference between direct and indirect competitors?

  • Direct competitors sell something very similar to what you sell. Indirect competitors solve the same customer problem with a different kind of product or service. Your competitor list should include both.

Do I need expensive tools to study my competitors?

  • No. Checking their social media, joining their email lists, visiting in person if they’re local, or using a free online alert service can get you a long way. Free counseling through your local SBDC or SCORE office can also help.

Should I mention competitors by name in my advertising?

  • It’s best to avoid it. Publicly attacking a competitor tends to look petty and shifts attention away from what you offer your own customers.

References:

Next: The 9 Hour Small Business Tune-Up – Hour 5
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