Step Four: Know Your Enemy What it is: Thoroughly researching your competition.
Why it’s important: Can you name a successful national fast-food burger chain that’s opened during the last few years? When you go to a restaurant, are you able to order a cola that isn’t Coke or Pepsi?
The answer to both these questions is no, and the reason why is also the reason why it’s important to gain as much information about your competition as you can. No one is opening a burger chain because McDonald’s, Burger King, and Wendy’s already have a stranglehold on the market. If your market is already teeming with companies that sell replacement siding, you may want to eliminate those projects from your repertoire, or at least limit that type of work to past or current clients. Furthermore, if you can find something that no one is offering — Owens Corning’s basement finishing system is a good example on the national level — you’ll be able to carve out a nice little business for yourself as the sole purveyor of that product or service.
How it’s done: This can be a bit tricky if you’re not working with an outside agency. In Step Two, we talked about how you can learn about your own company by surveying your past clients. The same principles apply to your competition, but you don’t have easy access to their clients.
If you’re paying someone to do the market analysis for you, they might do some “mystery shopping,” in which they pose as potential customers to get a feel for the competition’s sales pitch, proposal process, pricing, etc. If you’re known to your competitors, this obviously isn’t an option. However, you should be able to find homeowners who can provide you with information. Take a look at your list of past clients. In addition to asking them why they chose you to do their project (as outlined in Step Two), ask them why they didn’t choose your competitors. Some may be uncomfortable answering, but most will be specific enough to get a real sense of the other businesses out there.
Similarly, go over the list of potential customers who eventually didn’t buy from you. Graham calls these “lost opportunity” surveys, and says you should ask not only “why they didn’t choose you, but also what they liked or didn’t like about whichever competitor they might have chosen.”
In addition to being a valuable piece of your market analysis, this method has the added benefit of keeping you in their minds should they be dissatisfied with their current remodeler and/or need additional work done. Take care, however, to frame the questioning in such a way that makes it clear that you are simply interested in learning more about their motivations. You don’t want your competitors to think you are trying to steal their customers.
Trade contractors can be a valuable resource in this aspect of a market analysis. Subs are probably the only people you’ll have access to who are familiar with both you and your competition. Get as much information as you can from them about other remodelers in your area.
If you bid competitively and are searching for information on how you measure up, price-wise, against the competition, make it a condition of the bid that you get to see at least the final bids of the other contractors, win or lose. If not, try looking at the job costs submitted with building permit applications, although these numbers are typically less reliable.