At first, it may seem inadvisable to get too chummy with your competitors. But those foreign bedfellows can be a boon to business, says Adelaide Lancaster, co-author of The Big Enough Company and co-founder of In Good Company Workplaces, a workspace and consulting firm for women entrepreneurs in New York City. The book, written with Amy Abrams, Lancaster's business partner, points out that—by consulting other business owners, even (or especially) if they offer similar products or services—you can gain access to critical information for managing your own business. Here’s how.
Find ways to work together
At the very least, touch base with competitors to stay on top of industry trends. That way, you can gauge how your own performance compares to others. That information is especially critical in tough economic times. "There’s a strength-in-numbers mentality, especially in a recession," she says. Often, that information can help you uncover mutually beneficial opportunities. For example, Lancaster found that several of her clients, who owned women's wear boutiques in the same neighborhood in New York City, had begun running joint promotions after facing a 30 percent dip in year-to-year sales.
Further define your market
Lancaster says knowing your competitors can help you better articulate your own business proposition. Even if companies have similar offerings, they often differ in their focus or fundamental purpose. Having intimate knowledge of those distinctions will allow you to clarify to customers what makesyou unique. Lancaster has found that her relationships with other networks for women entrepreneurs, for instance, has helped her and Abrams streamline their own services. Because In Good Company serves clients with existing businesses, she will often refer aspiring entrepreneurs to other networks. Many of those business owners come back to In Good Company once their companies mature, she says.
Is it advisable to show competitors your entire hand?
Though she advocates forming as many industry connections as possible, Lancaster acknowledges that some bonds may be more difficult to forge. If your company depends on a first-to-market advantage, for instance, it probably isn't feasible to develop a close relationship with the upstart nipping at your heels. But in most cases, she adds, seeking a relationship with industry peers has more upside than downside. "The biggest challenge I see with the entrepreneurs that we work with is that they get isolated," she says. "Often, they're reinventing the wheel."
One mistake you don’t want to make
Lancaster offers one caveat. Though competitors can yield valuable information, take care not to let that information have too much influence on your own plans. "You shouldn’t derive direction from your competitors," she says. "You should get clear answers for that on your own." You should instead weigh the outside data you have collected before making any pressing decision. Ultimately, your choices should adhere to your own motivations and goals. Don't, says Lancaster, get into "a position of following rather than leading."