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Sizing Up the Competition - A Key to Small Business Success

Starting a business requires you to complete a number of steps and make some key decisions. Though part of your overall plan, you’ll need to decide on a business structure, and obtain the necessary licenses and permits. In addition, determining which financing options will meet your short-term needs and long-term goals is crucial.

When you start a business, it is most likely that there will be other businesses in your area competing for customers. These businesses may or may not be friendly toward you or receptive to the idea of your business joining the community. It is important to always be mindful of your competition, whatever your business may be. When you are starting a new business, visit these companies, not to spy on their techniques, but to learn how to best relate to one another and even help one another grow within the community.

It is first important to understand the competition's exact product or service. Don't simply duplicate this. The competition's company probably has already established a customer base and people will not turn their backs on one company to try your very similar product. Similarly, it is unwise to offer the same product at a lower price. Not only does this show poor business ethics, but it can be quite controversial within the community (think, as a child, how upsetting it would be to have a lemonade stand and for your neighbor to open one as well, but one that sells the same size cups for half the price). When you open a new business, have manners. It is a poor business decision for you to snub another established business in the community.


In starting a small business you should never think you can do it alone! One of the best ways to insulate yourself against business failure is to find and work with a mentor, someone with business experience who can guide and assist you.

A good resource are the Small Business Development Centers which can link you to organizations to help your small business grow and prosper.


Consider instead how you can improve upon or change their idea to meet other needs in the community. Perhaps instead of opening a bar like the man down the street, you will instead open an under-age dance hall that serves no alcohol. Maybe instead of making jewelry like your neighbor, you make other beaded items like bookmarkers or decorations. By changing the target audience or general idea, you can help both companies expand and grow, and you may find that there is less competition.

Of course, you may still have to deal with disgruntled business owners, even if you practice good business ethics. Put your best foot forward at forging a friendship, but remember, this is a business. If your product is simply better, you don't need to negatively attack their product. However, you also should not have to deal with negative comments about your own business. Try to come to an agreement if you have any problems, or hire a lawyer to help protect your business from slander.

Competition is usually a healthy thing. Business in the United States is based off of the fact that monopolies are not a good way to run a country. By being mindful of your competition when starting a new business, you can address the concerns of your competition while still running a successful business.

About the Author: Michael Saunders has an MBA from the Stanford Graduate School of Business. He edits a site on Starting a Small Business and is president of Information Organizers, LLC.

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