Knowing and keeping your competitive advantage
When we reflect on the main driver for owners of Small to Medium-Sized Enterprises (SMEs) to set up and go into business for themselves, one in particular driver comes to mind. They want to use their existing expertise, or the thing that they’re good at, to establish a profitable business and get ahead as their own boss. However, what makes your business profitable when you start out selling your product or service, doesn’t necessarily, or even commonly, persist throughout the life of your business. There are many external factors which impact how profitable your business will be.
Among the most important is your competition. One of the top ten business concerns for SME business owners according to a recent SME Research Report is competition. To remain profitable, you have to position your business so you have an advantage over your competitors. To do this, you need to do your research. As they say, keep your friends close and your enemies closer. For each of your product or service offerings you need to understand:
- your target market;
- who your competitors are;
- for each of your competitors you should know what they are charging, who their customers are, what new products and services they may have, how they differentiate themselves, what marketing they do;
- where you sit relative to your competitors; and
- what your point of difference is:
- the level of service you provide, quality, price;
- the availability of your product - your distribution channels, your web presence;
- are you selling into a niche market;
- your ability to implement technological advancements/innovation;
- your branding, for example, are you part of a well-recognised franchise;
- your technical expertise or that of your key staff;
- the value you can add to the base product/service - is your business vertically integrated and can you provide services along the supply chain, do you provide related products/services or a package, do you tailor your product or service for your customers; and/or
- you have a lower cost structure or are more productive than your competitors.
These things are not static. You need a process in place to monitor the state of play over time. Your competitive advantage may be eroded for a number of reasons, and you need to anticipate this and adapt your business model accordingly.
This analysis should be part of your business planning process. As you monitor your performance vis-a-vis the goals you set in your business plan, you should look at key indicators such as sales and profitability by individual product/service, statistics regarding customer retention and repeat business, and new business from recommendations.
You can also ask your customers/potential customers about your products and services, and those of your competitors, to determine where there may be room for improvement. This evaluation may alert you to changes in the competitive landscape of which you need to be aware. Then you can be proactive rather than reactive in setting your business strategy to ensure you maintain or strengthen your competitive advantage.
Your Hanrick Curran advisor has the skills and expertise to help you assess your position in the market and develop or review your business plan to take your business to the next level. For assistance please speak with your usual Hanrick Curran advisor or call 07 3218 3900 and speak with Angela Winton, Tony Hunt, Tim Taylor, Stephen Brake or Robert Pitt.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.