If I asked you who your competition is, you're likely to mention the company down the street or across town that sells the same product or service as you. And when I ask you how you're different from your competition, you'll tell me that you're faster, cheaper, or better than your crosstown rival. But competition today comes in a lot more forms than just the guy down the block. If you want to compete effectively, you have to understand how you compare in more ways than just your prices.

A big part of the change in the competitive arena is the Internet. You may be the only company in town that sells purple doorknobs, and a year or two ago you could have cornered the local purple doorknob market. Today, however, customers flocking to buy those doorknobs hop on the Internet and start checking suppliers all over the country. Ask local bookstores about the impact of Amazon.com. They'll warn you about the power of Internet competition.

Services aren't immune from the power of Internet competition. Sure, if you're a dentist, it's impossible for a patient to have a tooth pulled on the Internet, but if you're a graphic designer, it's not that difficult for a client to have a brochure designed by a cross-country competitor. In an age of Internet competition, you have to distinguish yourself with better customer service, unusual offerings, the power of your personality or talent, etc.

The Internet doesn't just give you a million new competitors, it creates a new type of competitor: information. After surfing the Web, customers may walk into your store knowing the wholesale cost of your doorknobs. Ask a car dealer. Car shoppers these days walk into showrooms armed with a stack of computer printouts detailing the wholesale cost of every option. How will you cope with a more informed customer who may be willing to put up with the inconvenience of mail order if you don't cut your profit margins?

You're lucky, even though it may not seem that way, if all you're competing against is the Internet and your land-based competitor in town. An overlooked competitor -- and the hardest one to beat -- is inertia. In most cases, customers have the option not to buy at all. It's not enough for you to know that customers need your product or service -- the customers must truly believe they need you. If you're a plumber, someone whose sewer is overflowing isn't going to be doing a lot of comparision shopping. But most customers don't have that type of pressing need.

Most novice entrepreneurs badly underestimate the size of their potential customer because they include all those who would benefit from their company's offerings. Real life isn't so neat. Customers don't do what they should do; they do what they have to do or want to do. How will you compete against inertia? How will you make customers recognize that they truly want your product or service?If you're taking on the competition, you also have to attack all those other ways for customers to spend their money. If some customers walk into your jewelry store shopping for a pair of diamond earrings, they may walk out without purchasing anything -- not just because your earrings cost more than ones they can get at another store or on the Internet but because they realized they'd rather have a vacation or save for their daughter's college education. You have to understand the context of a customer's purchase. What makes your product or service more valuable than the other tugs on the pocketbook?

When thinking about your competitors, don't just consider those companies or options that compete with you currently. You also have to consider who might compete with you in the near future. It's not enough to take comfort in the fact that other companies have overlooked a particular product or service. Once you show you can be successful, who will want to take a piece of that market from you? How can you make it more difficult for them to compete? What are the barriers to entry?

In the end, the best way to beat the competition is to have all customers be so satisfied with the quality and value of your product or service that they couldn't imagine going anywhere else. When customers are so enthusiastic that they sing your praises to their friends and colleagues, it's tough for others to compete. So, today, as you work with your clients and customers, remember you're not just creating one satisfied customer, you're actually beating the pants off the competition.

Rhonda Abrams writes a widely read column on entrepreneurship and small business. Abrams is also the author of the well-regarded business plan guide The Successful Business Plan: Secrets & Strategies. She has started and built three companies, including her publishing company, Running 'R' Media, and her newest enterprise, RhondaWorks, which plans to offer a comprehensive online interactive business planning center. Visit Abrams at www.RhondaOnline.com.

Copyright © 2000 Rhonda Abrams