Small business: Outflanking your giant competitors

Thoughts for new biz Davids about to take on Goliath. Photo: UPI

MANILA, November 9, 2012 - Everybody loves it when David goes mano y mano against Goliath. Cheering for the underdog has always been something that people have loved since ancient biblical times. It has been hardwired into our collective consciousness to root for the little guy. 

Budding entrepreneurs can tap into this phenomenon when starting up their businesses, especially if their competitors are big businesses dominating the market share that these little guys want to compete for.

In the world of business, battling Goliath is no easy task. But for start-up businesses to be successful, they have to have the forward-looking vision to do things right and, of course, the patience and the grit to hang in there for twelve rounds with the current heavyweight champion. 

The first thing a small business needs to do is to solidify the organizational structure. This requires that everybody in the organization get in line with the company’s vision. From company management to the newest employee on board, the entire company team should be sold on the company’s key goals; and more importantly, what it will take to achieve those goals. This is imperative, because challenges will arrive almost like clockwork within the first months and perhaps the first few years dating from the smaller company’s inception. Employees and management will come and go. But if there is a solid core group running the organization, navigating through the treacherous waters of entrepreneurship will not be as hard. 

Organizational culture is also important. There are ways to make a company’s culture effective for employees, but the process has to start with management, primarily because the people that started the business are the ones the new employees look up to for leadership and corporate direction. Google offers an excellent example for establishing a corporate culture of creativity and fun that at the same time yields impressive results on the corporate bottom line. 

Having a fun-break inside Google’s corporate HQ.

New businesses require a lot of sacrifice from the people who joined them from the start. For this reason alone, it follows that the workplace atmosphere of a startup small company should not be tense or threatening. Such negative vibes in the workplace will quickly kill any motivation on the part of employees to help build that company into something bigger and better. 

Why start a business in the first place?

Profit is obviously the main reason for taking a chance on starting a new business. But black ink is nearly impossible in the early days of any new startup company. For this reason, while eventual profitability is a must, that goal should be backed up by something other than the basic desire to make money. Vision, fun, and the desire to improve society are good places to start. A startup company and its employees should fervently believe in the products and/or services they will be offering to the public. No matter how great your vision is, if what the company is offering is not uniquely useful to potential customers, the corporate ship will sink even before it’s left the harbor. 

Developing a great product, or already having it in the on-deck circle before the company begins to do business is a tremendous boost for any startup business. The next phase for the company is to position its product and/or business area to compete where the company’s key customers are. Any small company that does not do this, especially a new player in the market, will not last for long. This is not a Kevin Costner movie where just building it and hoping that “they will come” will not cut it. 

There are numerous ways of promoting a business or new product including advertising, networking, or even building your brand via social media or word-of-mouth. The key thing to remember: let your customers know that you exist. 

To position the business where you will have an advantage when engaging big businesses is to… 

Go local 

Establish the new company as a mom-and-pop store in its community. Be the one business on the block that really knows how to engage with customers. That is your selling point as a start up business. Client relations are the key, because people are not simply robots talking to automated machines or to customer services that parrot back canned responses to customer issues. 

Don’t be overly ambitious initially. Rather, start small because you are just beginning your business and likely don’t have the cash on hand to remedy early blunders or company overreach. 

On the other hand, don’t think too small. Make sure not to get stuck on that “small business” mentality—the kind where an over abundance of caution stands in the way of robust growth. This letter tendency can be a trap for new businesses because once they have grown and made a name for themselves, they still cling to their small business habits and fail to look past current horizons. This can be detrimental and possibly fatal in the long run as it permits copycat competitors to get out in front and leave the overly conservative small business in the dust. 

Once the image and the brand of a new venture is recognized and sought for by customers, it is time to go on the offensive. First, target local big name businesses that may already be established in your company’s field of expertise. Pay attention to their customers, see where your competitor falls short, particularly in the customer service area,  and get the attention of customers by providing them something that they need that your competitor is simply not providing. Once you’ve succeeded in this process, and once increasing numbers of your competitors’ customers have shifted to your business, though, it will be your task to retain them, so always work to improve customer service and processes. 

Encourage customer loyalty by providing excellent service. Once customers are hooked on what your company has to offer, your bottom line will start to improve. It’s a universal truth that retaining existing customers drives greater profitability than the constant marketing expenses required by a high customer churn rate. 

Competing on price to gain market share

When your corporate brand and offerings are starting to be more widely known, it is time to slowly branch out into other areas, locations, or products. This can be a costly proposition and is often where new companies—successful up to this point—begin to fail. Startups are tempted to lower their prices during this phase with the hope that they will gain market share based on price. There is no logic in this. While such a strategy can achieve early apparent success, it undercuts margins in the longer run. Worse, it can attract less loyal customers who shop only on price—customers that will instantly desert your company when a competitor steps in with a lower price once again.

Expansionary activities will cost the new company. Overhead will increase because your company will need to hire more people, upgrade equipment, and incur greater marketing and sales costs to make greater numbers of people aware of your business. Consequently advertising costs, either offline or online, will increase as well.

Merely funding such activities and hoping that potentially new customers will patronize the products and services outside a company’s local base will bring in revenue for expansion based only on price-cutting is absurd. It’s like an electoral candidate promising to lower taxes and at the same time saying that more infrastructure will be built. One promise directly contradicts the other. 

Trying to compete with big businesses for the price is a no-win situation. First and foremost, Goliath has more capital. Second, this larger competitor can afford to lose market share in a specific geographic location because they doubtless have numerous additional stores or business centers in other geographic areas to absorb any temporary price squeezing in a single location. Your business end up like a splattered bug on Goliath’s windshield, a likely situation for a small business that attempts to compete head on with a larger, more established institution. 

The key is to outflank them… 

To do this, startups should do what these big corporations do not do. Establishing intimate relationships with your customers or investors is a good place to start. People would rather deal with people who they are emotionally attached to instead of a faceless and impersonal corporation.   

Providing a unique and enjoyable customer experience will make a lasting impression. Ever heard of Alexa Von Tobel? The company she started—LearnVest—is making established financial planning businesses nervous. The reason? Her company targeted the needs of underserved customers in the financial planning industry. Customers who need financial planning but often can’t afford the outrageously high cost of professional financial advisors. 

By using technology and positioning her company online, Von Tobel encouraged new customers to switch to her services. Not only did she do a great job of taking existing customers from her company’s larger competitors who were looking for more reasonably priced financial advice. She went one better by expanding her services to a more interactive platform based on mobile devices and web products.

Nobody said that starting a business is easy, let alone establishing a new David that can successfully compete against big business Goliaths. But having a vision and planning a strategy to keep up with whatever obstacle may stand in your path is a great way to start. Implementing those strategies and following up on those actions plans are of key importance, because even if your plan is fool-proof it won’t see the light of day if you lack a clear vision and fail to plan in advance.

 


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Johann Carpio

Johann has a degree in Philosophy and Human Resource. He is a business development specialist at Xight Interactive

 

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