Small businesses need to work hard to stay ahead of their competition and keep growing.
“You think that you’re in a good position today. Meanwhile, someone down the road, across the street, across the country is focused on disrupting your business,” says Bill Murtha, CEO of Roberts Communications Inc.
To effectively avoid or counter those disruptions, you have to know they are coming. Though small businesses can use a variety of tools to scope out their competitors, they face a number of hurdles that larger firms might not encounter.
For example, e-commerce and the growth of the economy have increased the size of their playing field.
“In the past, small companies’ competition generally was other small companies,” says Paul Kaiser, president of the Small Business Council of Rochester. “Now these companies have to compete on a much larger field—with Amazon, for example.”
Many small businesses also lack the resources needed for conducting in-depth research of this kind.
“A small, 50-person company doesn’t have the same pockets and budgets that a Fortune 500 company might have,” Murtha says. “Nor do they have the ability to go that deep and wide.”
Even those that have the time and money to monitor the competition can have difficulty finding the information they need. Volumes have been written about global packaging firms, but the companies that compete with Andrew Carpentier’s businesses are often relatively unknown. Carpentier is the president and owner of Connover Packaging, SECUR-PAK and Rochester Magnet, which all together employ 18 people in East Rochester.
“There are literally thousands of us that fly kind of at a much lower tier,” Carpentier says. “We produce smaller volumes, but tend to be the most efficient in small-run custom products. It’s hard for market research to get down to exactly our level.”
Despite such difficulties, small companies can obtain the information they need to stay ahead of their opponents—if they take the proper steps. Before it opens its doors, a company needs to formulate a business plan that takes into account the contours and boundaries of its competitive landscape.
“It’s important to have your initial market research on your product, your market, your customer base,” Kaiser says. “Then, revisit that at least annually to understand if your market’s changed, if your products are still relevant to the marketplace.”
In order to use its resources most efficiently, the firm needs to limit its inquiries to fruitful areas. Instead of following the actions of the tens of thousands of other advertising agencies in the U.S., Murtha’s company researches those that are active in its key markets: health insurance, health care, financial services and business-to-business marketing.
“It’s a smaller set when you say, ‘And, who’s really doing a good job in the health care space now?’” Murtha says. “Now, I’m looking at a group of competitors and maybe they’re a hundred.”
Geographical factors also play a part in an effective research effort, especially for very small businesses that depend upon local customers.
“In particular for a startup, they need to know the competition in the area where they’re going to start their business,” says Art Roberts, chairman of Greater Rochester SCORE. “For a retail business, that might be a number of ZIP codes. For a production business, that could be a number of counties or states.”
Greater Rochester SCORE, the local chapter of the nonprofit, provides free mentoring and educational assistance to those who are starting or own small businesses. Roberts, a retired Kodak executive, is one of about 85 former and current executives and business owners who volunteer for the organization in the Rochester area.
Firms also need to look for the kind of information that can signal a threat—or an opportunity.
“Are they doing or adding something new, or did they suddenly get out of something?” Carpentier says. “Is their pricing changing in one direction or another, and does that arrive at an opportunity?”
Purchases, such as the addition of a machine to a firm’s production line, can also signal a potentially important move.
“They’re either growing and adding capacity, or they’re potentially adding new capabilities that they didn’t have before, which will allow them to address a different market,” Carpentier says.
A list of the firms that are pitching to a company’s customers can also be of great value.
“Who’s in the pitch is always a good set, because that tells you what the customers are looking for,” Murtha says. “If we lose to these two or three companies all the time, well, obviously they must be key competitors of ours.”
A new business that would depend upon walk-in trade might also take an in-depth look at the neighborhood in which it planned to open its doors.
“I might look at how many businesses are within the ZIP code around my business,” Roberts says. “Is there enough density of businesses that I would service?”
Effective use of the web could unearth the answers to some of these questions. Hoovers Inc., Dun & Bradstreet Inc. and other major research firms provide a great deal of data on millions of companies worldwide. Other sources of information are narrower; Gartner Inc., for instance, focuses its research efforts on IT.
Such research firms generally do not give much attention to small companies, however. And though they might provide general business information free of charge, more in-depth research can come at prices that those companies can’t pay.
“As a small business, you don’t have the resources to spend on huge market research,” Carpentier says.
For that reason, Carpentier regularly rolls up his sleeves and digs for the information he needs.
“It’s really using the web to dig in anywhere you can find data, whether it’s the competitor’s website, trade magazines, some places where they’ve posted data or information,” he says.
Social media can also provide information or tips.
“You can see what’s going on on their Facebook page and understand their product,” Kaiser says. “If they have a LinkedIn page, you can see how many followers they have, if they’re trending anything, if their customers are talking about them.”
Should a competitor’s product find a niche in the market, a small business might need to change its line.
“Say my product doesn’t have that niche,” Kaiser says. “Maybe I need to change my product, in my next product development cycle, because it’s trending on my competitors across the northeast or the country.”
Business owners and executives can also make use of more traditional sources for the information they need. Wayne Holly, president of the wealth management and financial planning firm Sage Rutty & Co., regularly turns to financial services industry publications for news of his larger competitors.
“There are a lot of industry publications, and they spend a lot of time doing that research and sharing it,” Holly says. “There’s so much of it out there from an industry standpoint that we get a really good handle on what’s going on.”
Roberts says small business owners can take steps that obviate the need to buy such publications.
“The one that I find the most efficient and effective is to actually use the general business section of the Rochester Public Library,” he says. “They have access to databases that most people don’t have.”
Yet another tactic small business owners often take is a more personal approach to gathering data on their competitors. Holly attends at least three financial services industry conferences a year.
“We have leadership in the industry talking about direction and talking about trends that they’re seeing,” he says.
Murtha and his staff regularly talk to the competition at trade shows, and Carpentier listens carefully to his customers and suppliers for clues as to the actions of his companies’ opponents.
As difficult as it can sometimes be to divine an opponent’s actions or plans, such work is essential.
“You have to constantly be thinking about where you are today, but also anticipating what might be the next big thing,” Murtha says.
Mike Costanza is a Rochester-area freelance writer.
7/8/2016 (c) 2016 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email firstname.lastname@example.org.