News From the Louisville SBDC
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Three Powerful Types of Competitors to your Business
And How to Beat ‘Em!m
Even if your product or service is the best around, you have competitors. That’s because when it comes to making a purchase, a customer has several choices. Your competition isn’t just the business across town that sells similar items or services as your business. There are other types of competitors your business faces that aren’t quite so obvious.
Freelance copywriter and marketing consultant Bob Bly said,
“You do not have a monopoly on solving the customer’s problem. He has many options.”
Those options are your competition. To win the sale, you need to identify what those competing options are before you can develop ways to position your product or service in a way that will make customers see you as the preferred option Let’s take a closer look at what those options might be.
#1 Do nothing:
Most business owners don’t consider this option. Yet, inaction is often the easiest course for your prospective customers to take. Indecision, procrastination, and the human nature to maintain the status quo are powerful forces. According to Forbes, “About 60 percent of qualified leads fall by the wayside because the customer doesn’t find value in purchasing something new and therefore, they decide to forgo any type of change.”
More often than you may think, prospective customers choose to just do it themselves. Often the customer can do as good a job as you can … or at least thinks she can. Photographers compete against smartphones with cameras. Lawn care companies compete with homeowners with lawnmowers. The same thing goes for stock brokers, travel agents, and restaurant owners. Keep in mind that when people opt to go it alone, it’s not always about saving money.
#3. Other companies in your market:
All the companies who offer the same or similar products in your market are your direct competitors. You’re also up against indirect competitors. These companies’ products or services are not the same as yours, but can still meet your customer’s needs. For example, even though a pizzeria and a burger joint sell different food items, they’re both targeting hungry people. That makes them competitors.
So, now that you know who your competition is, how do you go toe-to-toe with them and emerge victorious? Every situation is unique but here are some ideas that can help you win.
#1. The Do Nothings:
When a potential customer decides to do nothing, it’s up to you, the business owner, to convince them to take action. A good approach is to help them realize they’re unsatisfied with their current situation. Make them aware of their problem and your ability to solve it. Then you can gradually work on persuading them to take action. Since these people aren’t actively trying to solve their problem, you don’t want to hard sell them. Keep the focus on them and their problem. According to the Harvard Business Review, “there tends to be a higher no-decision rate where product differentiation is extremely small” so when you do talk about your product, make it clear how you solve the problem better than your competition.
#2. The DIYers:
These people understand their problem/situation. They are also opting to take care of it themselves. If you want them to buy from you, highlight the negative consequences if they try to solve the problem themselves. Show how they can get the result they want in less time or for less money by letting you do it. For example, if solving the problem is time-consuming, stress how letting you handle it will give them more leisure time. If it’s work that needs special equipment, tools, or skills, talk about how getting the work done professionally saves money and prevents future problems. Choosing to hire a professional to file your taxes is the best example I can think of here.
#3. Other companies in your market:
To compete with companies that offer the same or similar products in your market, you need better marketing. What sets you apart from your competitors? Whatever it is, let potential customers know. If you don’t want to compete on price, offer better customer service. Perhaps the most important tip for beating the competition is to get really good at two things. Know your competition and know your customers. When you know who your competitors are, what they offer, and how much they charge you can find ways to stand out. When you know what your customers want and need you can find ways to deliver that better than everyone else.
Remember, your prospects always have three choices and you are the last: to do nothing, to do it themselves, or to use you. Focus on being the first choice every time. I enjoy assisting clients in developing successful marketing strategies. Please reach out to me if I can assist you in developing your company’s path to selling success!
Written by Vallorie Henderson,
Vallorie began working with the Kentucky SBDC in August of 2011. Prior to joining the team in Louisville, she served as the business development director for the Kentucky Arts Council in Frankfort for over 10 years. She holds a B.A. from Berea College in Berea, Kentucky and a M.F.A. from Miami University in Oxford, Ohio. Vallorie has over 25 years of experience in marketing and promotion with such regional organizations as the Speed Art Museum and the Indianapolis Children’s Museum. She owns and actively markets her own fiber arts studio on both a national and international level. Vallorie’s own success in marketing and selling her artwork allows her to relate to individual business owners on a very personal level. Assisting small business owners in understanding how to grow their revenue streams is high on Vallorie’s list of priorities. She has worked closely with fair trade organizations around the globe to assist artisan entrepreneurs in growing their businesses and to assure they are paid a living wage. Vallorie has her Export and Trade Counseling Certification from the U.S. Small Business Administration and is also a member of the KSBDC’s Million Dollar Loan Club. She has her Export and Trade Counseling Certification from the U.S. Small Business Administration.
502-625-0123 | firstname.lastname@example.org
How to Find Venture Capitalists and Angel Investors
When you’ve mapped out the coming months for your business and expect to need a good amount of capital to grow, you may need to find outside funds. If you have a wealthy family member who believes in your venture, you’re in a good position. Otherwise, you can seek funds in the form of debt or equity financing.
Debt financing is when you take on someone else’s money in exchange for interest paid throughout the duration of the loan. Equity financing is when you take on someone else’s money in exchange for some ownership of your company.
Two popular forms of equity financing are VCs, or venture capitalists, and angel investors. If you’re thinking “I’ve heard of those and want in,” ask yourself these questions first:
• Are you ready to share control of your company? VC firms and angel investors can provide capital, guidance, and a big network of important people, but you may have to give up partial control of your company.
• Is your company the type of business that equity financing would work well for? VCs and angel investors are looking for generous returns on their investment in a short amount of time. If you’re a slow growth company or aren’t focused on how you will scale, this is not the way to go. Venture capital funding in particular is best for companies who already have proof of concept and a management team with a proven track record.
• What stage or development is your business in? If you answered “yes” to the previous two questions, ask yourself this. A startup that’s just getting off the ground, or trying to get from business plan to proof-of-concept, will want to focus on angel investors. Many angel investors will even want to see that you’re selling already. Venture capitalists will almost always want to see that you’ve proven that your product or service is something people want.
• Do you have your documents in order? If you’re a brand new company, you’ll need a sound business plan and financial forecast that’s based on industry averages or larger companies related to your business. If you’re already in business, you’ll need additional documents like your financial statements from your previous months/years in business.
Angel investors can simply be a source of funds, or they can be a source of funds, advice and expertise. Both types can be found online or offline.
Offline investors would likely be wealthy individuals in your area or that you are somehow connected with. Ask your friends or other business owners if they know of any angels that work with businesses like yours. Angels will do their research on your business, so you’ll need to research them as well — if you’re a medical device company, for example, don’t target angel investors that are exclusively interested in retail.
Online investment platforms are another option for finding angel investors. Sites like OneVest, FundersClub, and Seedrs connect investors to small businesses. This is a good option if your business is ripe for investment but you don’t have the personal network to make it happen. These sites and the investors that use them are generally looking for early-stage companies with experienced leadership teams that have already demonstrated traction.
Venture capital firms demand even more than angel investors, in terms of the financial projections of your business (think 10X on their investment in five years). Here are a couple tips for finding VCs:
• Research firms that fit with your type of business and stage of development. Are there VC firms in your local area that fit the bill? Those should probably be at the top of your target list.
• Go through your address book and find out how you’re connected to people at the firm. This is one of the most important steps for business owners seeking venture capital funds. You’ll need to get an introduction to a representative of a VC fund, whether it’s an associate, partner, etc. Cold calling a partner at a VC firm is usually fruitless — they want a recommendation from a trusted source.
• Once you’ve narrowed down the pool, make sure the firms you’re considering have a solid reputation. Check out sites like The Funded to see what folks who have previously pitched or worked with the firms have thought of their experience.
• Once you have an idea of how you’re going to get an intro and to which VC firms, but before you reach out, craft an executive summary that will be sure to grab an investors attention. Have an elevator pitch for you business that you can bounce off your contact giving the intro. If they’re doing the intro via email, make your response personal — don’t send the same email to every potential investor.
Alternatives to Outside Investment
If you’ve arrived down here and are thinking that an outside investor isn’t the perfect fit, here are a couple of other options you can consider.
• Friends and family. Here’s where you reach out to your rich, savvy aunt to pitch her your business idea. Be careful with this method — if your business goes under, you don’t want your relatives coming after you for their money. Decide ahead of time whether you want to take their money as a loan with interest or offer them part ownership in your company, and start the conversation with an idea of what the terms of your agreement with them will be.
• Source capital from your community. If you’re offering a product that your community can get behind, consider pre-selling it on a crowdfunding site. Crowdfunding sites like Kickstarter and Indiegogo allow you to showcase your product to a national or international community. Community sourced capital is another option for local businesses. Via these sites you offer rewards — a first pick at the supply of your product, a T-shirt with your company’s name on it, or even a thank you card — to those willing to put in some cash.
• Debt financing. Business loans and lines of credit are hard to get if you’re a brand new company. But if you have excellent credit and a good relationship with your bank, you may be able to use business credit cards or personal financing sources (personal loans, credit cards, or lines of credit) to get your business off the ground. (Sign up for a free Nav account to see where your credit stands.)
About the Author: Lydia serves as Content Manager for Nav, which provides business owners with simple tools to build business credit and access to lending options based on their credit scores and needs.