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Business, 4 MIN READ

How to Compete
as a Startup?

5 actionable tips

August 12, 2019
ALEX SLOBOZHAN
137,000 businesses are born, and 120,000 more are shut down every day. By the time you finish our post on how to compete as a startup, over 400 businesses will cease to exist.

This is just another proof of the sad statistic:
9 out of 10 startups fail, and two of them fall flat because they get outcompeted
Existing startup rivals, big enterprises, and new market players all present a risk for promising startups. The information industry has the highest failure rate at 63%, and even the lowest rate of 42% for finance insurance still paints a bleak picture for aspiring founders.

However, there is a beacon of hope. Business services, food, health, and fitness industries are among the top business industries of 2018 with a growth rate of 10% to 11%. Accounting, legal, and business management services make up the top of the most profitable startup industries with a net profit margin of 15% and up.

If you have no idea how to compete as a startup when the numbers are against you, we have several viable solutions for you.

Compete Within the Niche

The flip side of believing you are the first and only one to come up with your idea is the belief your product or service is so great everyone will use it. If your offer is so all-encompassing, every company can be your rival. Google or Apple can compete on multiple fronts and come out on top, but as a startup, you don't possess the resources to do so.

Instead of waging a one-startup war against the whole market, focus on one or two of your strongest offers, and let others go. For example, if you have a range of five services and get outcompeted by niche rivals on two of them, you have to weigh the pros and cons of keeping them among your offers. One possible solution on how to compete as a startup is to focus all resources on a smaller number of services that outperform your rivals.

Keep Track of Failed and Future Competitors

Successful competition can tell you a lot about target audience expectations and needs, profitable marketing strategies, and mistakes to avoid. However, failed startups in your niche are an even more valuable source of information. Considering the number of failures is anywhere from 40 to 60 percent across most industries, you should be able to find as many failed companies as there are existing ones. Research startups that couldn't stay afloat and ask yourself:

  • Is the market segment too small for startup survival?
  • How do startups compete with industry giants?
  • Are the prospects willing to pay?
  • Is there a need for the product?
Looking at failed cases, you will learn how to compete as a startup and which mistakes to avoid to survive.

However, competition research can never be over. If you do your homework, you must know your current rivals, but that doesn't prevent new companies from entering the market. Nothing can protect your million-dollar idea from copycats. Regular market research to identify new players and evaluate their offers should be on your to-do list. Keep an eye out for the annual Global Startup Competition and similar events that attract the strongest new players on the market.
Remain flexible to match the newcomer's offers with better options, and you will never have to worry about being overtaken by competition in business.

Compete on Value, not Price

When you consider how to compete as a startup against industry giants, offering the cheapest option might seem like the only option. However, this approach comes with significant risks. You will have to reevaluate the business model to attract more customers to survive on thin margins. In the long-term strategy, this approach will result in low profits, the need to seek outside investment and lower the prices further after new players join the market with more affordable offers.

This constant race will never allow you to focus on your customers' needs and build a sought-after product. Alternatively, you can set your prices higher, making your product a premium solution and getting a profit from the start. However, this approach means you will have to be in constant communication with your clients and act on their feedback to keep them happy and encourage word-of-mouth. This strategy might not be suitable for every niche, but you should consider all the benefits and drawbacks of minimal profit margins when setting prices.

Build Your Brand to Connect with Customers

How can a startup compete with big companies? Only by putting customers front and center and establishing an emotional connection with them. International corporations can't afford to waste time on talking to every customer or respond to every review, but you can. Moreover, while big companies are selling features and an established brand image, you can promise more.
Let your clients believe your solution will make them better, smarter, wealthier, happier, and deliver on this promise.
Their positive UI/UX experience will ensure positive reviews and attract new customers, accelerating the rate of your growth.

Content marketing is among the most straightforward approaches to building an emotional connection with your target audience. However, content strategy is a long-term approach that is unlikely to produce quick results, but the ultimate returns will be worth it. Unlike advertising and paid traffic, sharing your knowledge, and getting people excited about your product through content is a natural and affordable way to grow your startup.

Establish and Grow Your Business Network

Even in a digital world, people are still one of the most valuable resources and among critical solutions to competition in business. As a startup founder, you should always be on the lookout for useful connections. You never know when you might stumble upon a potential investor, mentor, advisor, or a CTO to design a sturdy, flexible, and bug-free software architecture.

Tech startup competitions, meetups, conferences, hackathons, and trade shows are all great places for networking. Use these opportunities to connect with your customers, pitch your ideas to VCs, find answers to your questions. Industry events will also help you get a head start in your competition research. You can learn more about your rivals, their products, strengths, and weaknesses.

Startup competition is stiff, with 2 out of 10 companies falling victim to their rivals. Here is short plan to avoid the failure.
    Takeaways

    1. Research the closest competition (present, past, and future).
    2. Build emotional connections with your customers.
    3. Offer value for your target audience.
    4. Establish an extensive network of business contacts.

    Share your thoughts on how to compete as a startup in the comment section and let us know what other startup-related topics you want us to cover in future posts.
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