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Why You Need to Understand Your Business Competition

21/10/2014 12:59 BST | Updated 21/12/2014 10:59 GMT

Business is a competition. As soon as you open your first business you're at the start of a huge race to the finishing line. And it's not just one race - it's many different ones all at the same time. Not only are you signed up to compete in the marketing event but you're entered into the customer service race too; you're also in the quality and innovation races, and the sales and price-comparison events. In fact, you're in all the races simultaneously - so you're going to need all the information you can get on your competitors in order to win!

No one runs a business in isolation from their competition; no one has a complete monopoly in business, even the biggest companies on the planet have competitors. Once you take your competitors, large and small, seriously, you can start to see them as the key to winning all your races. If you can understand exactly how your competitors are running their businesses you can find the gaps, exploit their weaknesses and ultimately be successful.

Who is your competition?

Every established small business thinks they know who their competitors are - until you ask them to tell you! At this point they'll decide that they have maybe two main competitors and the rest are the also-rans. This is rarely true. If they looked carefully enough they'd see that they probably have at least three or four times this amount of main competitors. Many businesses underestimate their competition because they generally only look at the market when they start up and in the early stages. Once they're fairly well established they stop looking and stop seriously researching anyone, comfortable in the knowledge that they've cornered the market. But no one can afford to stop looking at new competition and seeing how the old competition has changed. A business starting today could be taking your market share in three months' time and an old competitor could have revamped their entire brand while you weren't looking.

What do you need to look out for?

It's important to keep up to date on what your competition is selling. If they're a service business, have they changed their offering, have they created a new combined service, gone into partnership with a related company to diversify their offering or created a new innovation? If you're a retail business, have your competitors slashed prices, sourced new types of product, rebranded, changed ownership or started to market themselves in a different way? All these things are important and will have an impact on how you run your own business.

How does knowing your competition help you?

When your competitors change an aspect of the way they do business it means they think there is a change in the market or a change in customer behaviour. No established business makes a change without analysing their profits and looking at the trends within their own business. You can bet that if they're making a change - especially if it's a big one - then they've done their research first.

If your competition is changing then it gives you a free insight into what's happening with their customers, your customers and within the industry as a whole. The changes they make are also important because they can show you different ways of doing things - give you new ideas on how to run your own business.

Finally, and most importantly, if you know your competition, you know what choices your customers or clients have elsewhere; if you understand what they offer, you can be ready when customers start to compare the choices on offer and you'll know how to answer the difficult questions before they're asked by your clients. You can sell-in your services or products much more successfully if you're confident you offer the best value and quality. Only with this knowledge can you offer a better, more cost-effective service or product range. Knowledge really is the key to beating your competition!