We have no Competition

Posted in Business Plan Tips, Entrepreneurship, strategy
By David Kaplan -
1 comment

Entrepreneurs sometimes think it is great idea to claim that they have no competition.  They suppose that investors will be impressed with the originality of their business idea and its potential to make money where there are no pesky competitors to take market share.  Don’t ever write that in a business plan.  Nothing could be further from the truth; for lots of reasons:

  • Even if your startup idea has no direct competitors, you probably have some indirect competition.  That is, some other kind of product or service is competing for the same dollars.  For example, even though no one else sells chicken wings in a particular neighborhood, someone may indirectly compete with hamburger and other fast food.
  • On the slim chance that you actually have no indirect competition, be mindful that buyers always have the choice of doing nothing.
  • Note that investors prefer startups that leapfrog competitors in an established market, and so claiming “no competition” may suggest to them that that no demand exists for the product or service.
  • Startups that take on larger sized competitors and succeed may find themselves an acquisition target of that competitor.  That could be an attractive exit strategy.

Now some clever people might reply that government agencies and monopolies have no competition.  Well, perhaps that is so in some instances, but rather few.  FedEx and UPS have shown the Post Office that they can compete quite well with a government agency.  There are few real monopolies any more, and those such as utility companies find themselves heavily regulated.  The point is that competition is not a bad thing at all.  In fact, it is an essential component of the capitalist system.

Competitors keep one another on their toes; forcing producers and suppliers to focus attention on consumer needs.  Every competitive analysis asks why the target market segment buys from company A or company B.  That answer to that question underlies every business success.  Competitors verify the existence of demand, help scope that demand and illustrate ways to satisfy it.  The question is not whether you have any competitors; it is whether you have learned what they can teach you about winning customers.

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