When thoughts about your competitors pop into your head, the last thing you may think of doing is reach out to them to start a relationship. After all, you’re going after the same customers so what if you accidentally give away a secret or worse see what they’re doing and start feeling like they’re better than you.
Any entrepreneur who has done the hard work of building a business knows that the secret is really in hard work and execution, not only in the secret sauce. You also know that, even though your competitors may offer essentially the same product or service as you, there are inherent differences between the offers.
This is a positive aspect of capitalism, that there is enough room in the market for multiple players to offer the same products and services and have some of them be right for a certain segment of the market while others are better for others.
Each company offers a differentiated version of the same products and services. The deeper you understand the actual value of what your customers are buying from you, the deeper you understand your own differentiation. For example, my customers at Butter Beans, a healthy school lunch service, valued convenience and menu variety when buying our service.
The more I came to understand this, the more I understood the specific customers in the market who would value the Butter Beans service versus the specific customers who would value the Red Rabbit service, our competitor. Those clients valued how quickly they could eat lunch.
After meeting with enough prospective customers, you can start to tell within the first couple of meetings if your service is right for someone based on what they value.
In some cases, when I heard what was important to them in the first one or two conversations, if I knew Red Rabbit was better fit, I would go ahead and tell them that to save us all a bunch of time. Red Rabbit did the same for us. They did not provide lunch servers with their offer and we did. If they met a prospect who wanted lunch servers, they would suggest they consider Butter Beans.
I’m making this sound easy and once you take the time to build a relationship, it can be as easy as I’m describing. Here are five reasons why I recommend getting to know your competitors.
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At the advice of an advisor in the early stages of building my first business, I got to know my competitors. I saw them from time to time at RFP pitch presentations and trade shows, but eventually became friendly enough to have lunch a couple of times a year.
One day, I received a call from my insurance broker that my insurance company was raising my premiums 10 times or dropping my coverage! I panicked. The problem was that we had started offering cooking classes and the insurance company didn’t want to cover that part of our business.
After pulling myself together, I called one of my competitors to ask him who his broker was and who he had for insurance. He gave me the info and within a week, I had a new broker and new insurance at a much cheaper price than my previous company quoted.
If I had not had that relationship, I don’t know what I would have done.
He was in the same industry and was willing to share information that would help our company. I have never forgotten how much I appreciated his help that day.
You can’t do it alone, so use the resources you have. Remember to ask for advice when you need it — and who better to help than someone who has been through this before.
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Some businesses have seasonality or other reasons for part-time labor needs. In these cases, they can’t always offer full-time work to their best employees even though they risk losing them to companies with better hours. If you and your competitors can help each other out by hiring each other’s employees when they have down time from your operation you have a triple win.
You always want to make sure you have an agreement not to “steal” each other’s staff, and this can work well. There may be other resources such as delivery vehicles, for example, that you can also share to cut costs.
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As I relayed earlier in this article, friendly competitors can be a great source of leads. I routinely received two or three leads per year from competitors who came across prospective clients that fit the Butter Beans mold better than it fit their own.
They were happy to have a vendor they trusted to introduce these prospects to since they were not a good fit for their own service and they still wanted to help them.
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There were plenty of times when I did the same. If a prospect called me for a quote and I could tell from the conversation they really wanted to go with another firm, but they needed a certain number of quotes, I was happy to provide them what they needed to help them get through their selection process.
Once you figure out your ideal client attributes, you’ll recognize them, and they’ll recognize you immediately. At that point, it is about finding the best way forward to support each other.
Nurture Relationships That Could Turn into an Acquisition Target
As you grow and operate your business you develop short-, medium-, and long-term goals. If you decide to grow larger, you may be searching for an acquisition at some point.
If you’re looking to exit, you may be searching for a buyer. By having strong relationships with your competition, you can size up if any of them would be useful in these scenarios — if not for a transaction, then for support.
Evolve the Industry Together
Industries evolve over time. Improvements, efficiencies, and quality ways of working make things better every year.
I invited my competitors to see our operations at client sites and they invited me to tour theirs. We were able to learn from each other, grow our best practices, and make things better for ourselves and our customers. You may even decide to do a joint venture in creating new software or other industry game-changing activity.
There are lots of great stories about competitors helping each other out. I hope these examples are helpful to you in figuring out how to engage with yours. The moral of this story is to get to know your competitors and realize that you’re stronger together.
Belinda DiGiambattista is a serial entrepreneur, business coach, and outsourced financial controller, and can be found at www.belindadi.com
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