When people request me to invest in their companies, the first thing I always want to know is who is competing against them. This is something that any serious investor will always want to know.
There are entrepreneurs who understand this question and will answer it confidently and conclusively. This is because they aren’t afraid to comprehend how their competitive landscape appears.
However, some people will try to beat around the bush either because they don’t want to admit about the existing competition or they haven’t done their research.
I always get concerned about unprepared or delusional business people who are quick to answer the question by saying “We have no competitors”. This kind of response makes me want to respond “Yes, you are right”.
They often respond with the intention of making their business appear more attractive. On the contrary, it makes it appear less attractive to me.
I never waste my energy responding to such people. I instead keep mum and concentrate on businesses that need to be my support.
Theoretically speaking, every business in a free market has some form of competition regardless if it’s venturing into a completely new category. A customer can spend his or her money in numerous ways. As much as the competition may not be readily available or simple to find, it is still there.
As an entrepreneur, your work is to look for and assess the most imminent competitors. The best way to do this is to find and assessing businesses or companies that can easily take advantage of their resources to such as intellectual capital, distribution channels, or investment capital to penetrate your market.
One common mistake made by startups when researching their competitors is ignoring substitutes. What do we mean by substitutes? These are pairs of goods that are usually used in place of others for example video rentals and movie tickets.
In most cases, entrepreneurs concentrate on organizations that use the same business models. Unfortunately, this form of short-sited thinking leaves out the threat posed by dissimilar substitutes and can result in the collapse of a good business.
Business people should always try to think outside the box when it comes to competition. Identifying your real competitors requires a lot of research and creativity. You might not be able to know if the competition exists as long as you are focusing on similar business models.
In a nutshell, competition is crucial for any business. Avoid the mistake of telling potential investors that you don’t have any competitors.
Any serious investor will dismiss you because he or she thinks you are full of yourself. The best thing to do is to reveal your competition and describe the severity that it poses to the business.