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5 Techniques to Scare Competitors Out of the Market

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On many levels, competition is good.

For example, when you start a business, you want there to be competition. Since if there was no competition, there may not be a market or customers who want to buy what you are selling.

And once in business, competition is generally good since it forces your company to get better. It forces you to better satisfy customers (or they will choose your competitors) and it forces you to become more efficient (so you reap more profits even if you have offer more competitive pricing).

Now, while competition does provide these advantages, you clearly want to have less competition, and you'd like for fewer new competitors to enter the market. In doing so, you'll enjoy more of a monopoly in your market, which means more customers and more profits.

The best way to knock competitors out of your market and discourage new entrants is to build "business assets" that your competitors don't have. (I define "business assets" as resources you build now that will give you and your company future economic value.)

Here are five examples of business assets you can build:

1. Customers: Most mobile phone companies offer 2 year service contracts that all new customers must sign (and face penalties if they leave before the two years are up). This essentially "locks up" customers making it harder for new entrants (or existing entrants) to come in the market and take their customers. Customer agreements and contracts are one of the most powerful business assets you can build.

2. Systems: Most franchise organizations (e.g., Subway, McDonalds, etc.) have made significant investments in systems in areas such as taking orders, producing products, handling customer complaints, etc. These systems make it easier and less expensive to hire and train employees and better service customers. This makes it harder for others to compete against them. Likewise, I know many companies who have built customized software systems that allow them to perform faster, cheaper, and more consistently than their competitors.

3. PPE (Plant, Property and Equipment): When I was a teenager, I made a lot of money shoveling snow. I used that money to buy a snow blowing machine. Equipped with the snow blowing machine, I was able to remove snow ten times faster than my competitors. This allowed me to dominate my local market.

4. Product or Service Variations: A local pizza shop promotes itself as having 36 varieties of pizza. Offering this large variety makes it harder for new pizza companies to enter the market. Because a new company would have a very hard time creating 36 varieties from the start, it would be harder for them to satisfy customers.

5. Exclusive Partnerships: Creating exclusive partnerships could be a key business asset that gives you competitive advantage. For example, if you create exclusive partnerships with top organizations in your industry, they would only work with you and not your competitors. For example, let's say you and a competitor both serve the senior market. But you have an exclusive relationship with the AARP whereby they only promote you, and not your competitors. With 37 million senior members, your AARP relationship would give you considerable advantage.

What I want you to consider now is how you can build business assets that "unlevel the playing field." How can you make it so that nobody wants to compete against you?

  • Can you lock-up customers with agreements and contracts?

  • Can you build new systems to make your company more effective and efficient?

  • Can you make investments in plant, property and equipment that allow you to cut costs or increase output?

  • Can you develop new product and/or service options that better serve customer needs?

  • Can you form exclusive partnerships to help you gain new customers that your competitors can't?


Importantly, whatever answers you come up with, realize that building these business assets will take time. Often times they may take as much as a year (or even longer). And also realize that short-term profits may go down when you are building them. For example, in the AARP example above, forging such a relationship could take 6-months, during which you invest lots of time and generate no incremental revenue.

But, once the asset is built, you may profit (and profit big) for years.

So make sure to properly plan and prioritize the development of your business assets, even though they often have less short-term benefits than other activities (such as setting up a new advertising campaign).

Set a long-term goal for when you want the assets built. And make sure that you build time into your daily, weekly and monthly schedules to move the development forward. Doing so will dramatically improve your revenues and profits, and at the dismay of your competitors who will be forced to go elsewhere.


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Jay Turo

Dave Lavinsky