Starting a business comes with a unique set of challenges—from developing a product or service that sells, to building cash flow, to hiring employees whom you can trust, to differentiating your company and outselling your competition.
Each of these aspects is key to your success. Above all, you must be able to identify your competitive advantage as well as capitalize on it. Some of your startup competitors have already gotten it right. They’ve raised money from startup investors, and they’ve built a positive image in the marketplace.
These are the companies from which you should learn. Analyze their successes and apply them to your own business—improving upon them to increase your own competitive advantage. On the flip side, you’d be wise to also observe competitors who have failed. Where did they fall short? What could they have done differently? There are lessons to be learned from both sides of the fence.
Ask yourself these six questions:
#1. Which investors did your competition target or partner up with?
When funding a startup, many business owners don’t know where to begin. What startup investors should you look for? How did you find them? How do you convince them to invest in your business? Talk with former high-level employees of your competitors to discover the types of investors they targeted. Often, high profile or powerful investors are even listed on a company’s website. Build profiles around these investors and pinpoint those with similar backgrounds and interests for your startup.
#2. How did your competition position their business to investors?
Pitching your startup idea to investors is often a nerve-wracking process. You want to find a message about your business that resonates with your investor audience. By observing how your competition has positioned their company’s purpose, you can learn how to connect with investors.
What message did the competition send that resonated with their startup investors? If you can identify this, you can strategically customize your message to garner support with your own investors. Read more: The Top 10 Traits That Attract Investors To Your Startup.
#3. How did your competition allocate their initial funding?
Once you’ve raised capital, you must decide what to do with it. Study other companies in your market space to identify how they used their funding. Did they build up a strong team with impressive professional backgrounds? Did they acquire state-of-the-art equipment to improve their production schedules?
Try breaking your research down to the micro-level and pinpointing the departments of their startup to which your competitors allocated resources.
#4. What was your competition's initial business plan? How did it change over time?
Understanding a company’s goals and how they evolved along with their business tells you a lot about a company’s history. Business plans and goals change over time. Try to determine your competition’s initial goals and connect those goals with their current company objectives. Once you understand their goals, rework them to apply to your own startup.
#5. Where did your competition experience failure? How did they deal with it?
Did your startup competitors push a product that flopped? Did they choose a business location that couldn’t generate business? Failures like these may have broken your competition. If that’s the case, take these scenarios as lessons of what not to do. If, however, your competitors adapted to failure and adjusted the course of their business, learn the lesson of flexibility from that scenario.
The way you deal with failure in your first few years as a startup can either sink your company or set you on a course for success.
#6. How can you differentiate yourself from your competition?
This is the ultimate lesson you can learn from your startup competition: how to differentiate yourself from them. You want to capitalize on your competitors’ past experiences and learn lessons from their history. In addition, you really need to learn how to set your company apart. What areas of their business can be improved upon, and how can you make the improvements? Your competitive advantage—what you can offer customers that the competition can’t—is your key to increasing profits, growing your business and securing long-term success.
Learn more about running a successful startup and get the right financial guidance you need to grow your business. Contact us today.