If your competitors are public companies, there's always plenty of tools you can use to see how they're doing: stock tables, analyst reports, websites, blogs, and tons more. Sure, the data is usually somewhat stale, and companies always put their best feet forward inc CEO letters and narrative. But when evaluating a private startup--particularly in its earlier years--getting real signs of their performance is far more challenging, particularly when trying to guesstimate competitors' sales traction.
Startups always tell me, "Uber must be doing great. Just look at how much money they've raised." That's hardly the answer, as this recent article suggests. Here, however, are some imperfect but clear signs a competitor of yours is struggling. There are rare exceptions to the guidance below, but not many. A recent mega-fundraising round might trigger massive increases in marketing and advertising. A new CEO or investor might shake things up.
In 45 years of running and ten years of coaching startups, I find these symptoms of a weakening startup very helpful:
1. A sudden Increase in the volume and frequency of customer acquisition emails
As any good founder, you're certainly on their prospect list, often with several different aliases and email addresses.
2. Deep discount promotional pricing "just for you"
I can't tell you how many email blasts a week I get from Canvas Discounters, a service I've used often. When the email screams "today's special...85 percent off," I know this company must be struggling. Either that or their retail prices are a total ripoff. (I wait for the 85 off pitch every time I want a photo canvas.)
3. Massive, expensive, untargeted advertising
Untuckit.com, the untucked-shirt company, either has an absolutely incredible business, tons of money to spend, or a bunch of investors pounding the table, demanding they raise the revenue number. Their answer seems to be running lots of mass, expensive advertising. At alarming frequency, I see 1/8-page ads in the New York Times, where--at the very least--50% of every ~$10,000+ ad is wasted, since the company sells to men only.
4. 'Spectacular' advertising
We've all seen entire city buses covered top-to-bottom in huge ads for a startup. In New York City, your startup can cover the interior of an entire subway train for $17,000 a month(the industry calls this a 'spectacular'), or an entire subway station. Your startup can own every commercial image in the busy Columbus Circle NY subway station, for example, for only $200,000 a month. To make matters worse, these prices never include design, photo shoots, printing, production and agency costs. This kind of advertising is done quite regularly, and to me reflects an extraordinarily hungry startup with no idea whatsoever who its target customer might be.
5. 'Let's play customer'
(caution-ethical question ahead). Either convince a friend to do this or use a pseudonym and a personal cellphone. Pose as a prospect. How hard do they sell? How quickly do they follow up? How quickly in the followup does the price drop because 'we have one slot remaining' or 'you'd be a perfect, showcase customer' or some other bogus reason.
6. Run a Help Wanted Ad
This may be the most marginally ethical of all. Run a series of help wanted ads that don't name your company, but refer to it as "hot, fast-growing company doing XXX." See how many resumes arrive. Test your ethics further by interviewing the candidates.
Competitive analysis was far easier in the 'good ol days' before the internet. Direct marketers could easily determine whose ads were working and whose weren't, simply by seeing if the direct marketing ads in the back of a publication (think Cosmo or USAToday or even BusinessWeek) either ran week after week, month after month, or they didn't. When they didn't, bingo--you had your clue.