Your competitive advantage gives you an edge over your competitors, it makes sense to keep these unique and exclusive to your business for as long as possible.
Sometimes you can get a permanent advantage such as legal protection on intellectual property, but for most small businesses it’s probable competitors will try to battle their way into your market. When you first start up it can be like surviving a siege, as competitors try to tear down your castle walls. Luckily there are things you can do to bolster the ramparts.
Build a Defensive Perimeter for Your Competitive Advantage
Look to dissuade new entrants by emphasizing the barriers to enter your market, or anything that makes another business owner think it’s ‘too hard’ to compete directly. An established brand in the minds of customers is one way. If you asked ten people to name an online marketplace, an accounting software provider and fast food, nine of them will probably say Amazon, QuickBooks and McDonalds. These businesses have invested in their brands to be top of mind.
To prevent new businesses entering your market try:
- Being first to market with unique products or services
- Setting up an exclusive trading area you can defend legally
- Having a supplier agree to only supply your business
- Being the only approved vendor
- Developing partnerships within your industry
- Building an online following in social media
- Topping search rankings
Anything which makes someone think twice before setting up outside your business is useful.
Protect Your Intellectual Property
Having the law on your side is handy when it comes to stopping any imitators. Your intellectual property (IP) includes the parts of your business that you can legally protect and take action if anyone breaches your rights.
- Trade secrets
- Company and domain names
To help decide what to do, make a list of the essential elements of your business you can’t do without, identify if they can be protected and then weigh up the cost of legal protection versus the possible loss.
Visit the United States Patent and Trademark Office to get an overview of what is covered under IP and seek advice from a professional adviser or lawyer before you take action.
Protect Your Intellectual Assets
An intellectual asset is a competitive advantage that usually can’t be legally protected, such as your business contacts, networks, your business know-how and knowledge of what customers want.
In these cases, you can still build a barrier by:
- Keeping your information secret
- Having staff sign confidentiality agreements
- Documenting internal processes with key employees only
- Sharing information (like prices) only to qualified leads
- Limiting what you place online and in the public arena.
List what intellectual assets are mission-critical to your business and outline how you’ll keep these elements confidential.
Protect Your Price Advantage
If one of your key advantages is being able to source inventory or materials cheaper than competitors (allowing you a higher than average margin or to price lower while still making a decent profit), protect it by:
- Locking in exclusivity of supply with a legal contract
- Building cash reserves to buy in bulk for volume discounts
- Documenting your systems or processes that give you a cost advantage
- Keeping fixed costs low (own your location, contract out when busy etc.).
Having an amazing business with happy customers that refer business is the ultimate way to protect your competitive advantage, but even then, it’s useful to not take anything for granted.
Audit the quality of your products or services to check you are better than the competition. Do your products last longer than your rivals? Do you have superior after-sales service? Are you the most reliable? Find out what makes you awesome and put steps in place to make sure the customer experience is consistent every time.
Be the Industry Expert
If you can prove you know more than anyone about your industry, it’s a great advantage and hard to copy. Post your thoughts in social media, speak at well-known events, run webinars or podcasts with other industry experts, emphasize your qualifications and publicize any testimonials from high profile people or businesses.
At the end of the day if you’re trading and making a profit then you’re doing something right. Find out what that ‘something’ is and plan to protect it for as long as you can.
If you have questions about your business or need financial guidance, reach out to Diamond’s Business Services Team.