Investors are, well, invested in the success of your business. They're taking a risk, so naturally, they're concerned about how you're distinguishing your company from the competition (and they expect you to be, too). How can you answer their questions in a way that will reassure them?
Eleven entrepreneurs from Young Entrepreneur Council (YEC) offer advice on how to deal with answering the tough questions about the competition, as well as some wise words for you to keep in mind.
1. Figure out where there's space for you to compete.
I'm in the coffee business, which is no doubt crowded. It's hard to convince people that our coffee is better when it's based on something subjective like taste. So I found where we could compete, and that's how we treat our guests. We want our coffee to be good, but if guests have a bad time while getting it, they're not coming back. We'd rather compete on experience. It's far more objective.--Nick Bayer, Saxbys Coffee
2. First, decide if you need to.
Often, the major competitors in a given field aren't concerned with your startup. Focusing on how you'll deal with them distracts from you focusing on providing an awesome product to your customers. By the time you're big enough for them to care about, both you and they will be very different companies. Have a halo strategy, but don't get distracted by the tactics.--Adam Roozen, Echidna, Inc.
3. Portray competitors as exit opportunities.
While many founders dream of someday ringing the bell at NASDAQ the day of their IPO, most exits are done as private sales. Each competitor in your field, especially the major players, is a potential acquirer of your business. Have a strategy for getting on their radar, and communicate this strategy to your investors as one avenue for them getting the pay day they are hoping for.--Peter Minton, Minton Law Group, P.C.
4. Prove it with revenue.
I don't like to get into these battles with our investors. I like to prove to them that our numbers are growing and we're kicking our competition's butt online. If an investor is constantly seeing your numbers grow and you're making more money than the preceding month, they will be happy.--Peter Daisyme, Hosting
5. Don't look back.
If you are focusing on your competition, you are looking backwards. Focus on what's in front of you rather than what is behind. Anyone can be a reactive follower. A truly innovative company pioneers the market and lets their competition follow.--Josh Teigen, Crossfox Innovation
6. Answer them differently.
I often note to people that I have no idea what other companies (in our space) are doing with regards to their marketing or products. Why? Because I only care about Fitmark and what we're doing as a brand. What are we doing for our customers? Are we maintaining our mission? That's what I care about. So, if the investor asks what you're doing differently, tell them, "everything."--Mark Samuel, Fitmark
7. Know the facts.
When responding to an investor, make sure they know you're wary of your competitors but do not spend too much time on them. Touch on the competitor's value proposition and how your company differs. Additionally, be prepared to know the competitor's business model and financial numbers for any follow-up conversations.--Jayna Cooke, EVENTup
8. Share your SWOT analysis.
The best way to think about and discuss competition is through a SWOT analysis. A SWOT analysis is a structured planning method used to evaluate the strengths, weaknesses, opportunities and threats involved in a project or in a business venture. By discussing competition within the context of a SWOT analysis you'll be able to quickly address questions or concerns on the part of your investors.--Kristopher Jones, LSEO.com
9. Know your strengths and their weaknesses.
The key to delivering a home run response to an investor inquiring about major competition is know your strengths and your competition's weaknesses. Focus on the primary reasons why your business is going to capture market share. Explain how you are going to leverage the weaknesses of your competition to differentiate and win.--Obinna Ekezie, Wakanow.com
10. Where there's competition, there's a market.
It is much easier to create a case against your competitors if you know the market very well and your competitor's position in the market. Once you have this information, it is simpler to compare the value proposition of your product versus the ones offered by competitors and find their weaknesses. It is also important to highlight that, if there is competition, there is a market.--Daniele Gallardo, Actasys
11. Embrace competition.
Have a clear vision about how you are going execute your growth strategy first. Then list the ways you are better than the competitors and ways that you might be lacking. Knowing your weaknesses is better than being delusional. Transparency is important. Any seasoned investor can spot nonsense from a mile away.--Janis Krums, OPPRTUNITY