Starting a Small Business, Part 3 : Dealing With Competition & Building Your Competitive Strategy

Competitive landscape: how to find competitors (and who really counts)

• Every business has competition—even if you don’t see “obvious” rivals yet.
• Competitors aren’t defined by your product/service, but by the market you serve and the fears/passions you address for the same customers.

Example:

• A book for lawyers on job interviews is not necessarily competing with a doctors/nurses version—even if it’s the same “product concept”—because the target markets differ.

The 2x2 competitor framework (4 boxes)

Use a 2x2 matrix:

• Dimension 1: Direct vs. Indirect
• Dimension 2: Actual vs. Potential

All competitors fall into one of these four categories:

1) Direct + Actual (“Enemies”)

• Doing the same thing, in the same market, today.
• Example (pizza): other pizza parlors on the same strip.

2) Direct + Potential (future direct entrants who can crush you)

• Not in the market yet, but could enter with enough scale/resources to overwhelm you.
• Examples: big-box chains and franchises expanding into your radius.

3) Indirect + Actual (substitutes in the market today)

• Same customer “job to be done” / same fears-passions, but with a different solution.
• “Substitute” identification method:
  • Ask: If customers couldn’t afford your product/service, what cheaper alternatives would they buy to address the same fear/passion?

Examples:

• Mock-interview software as an alternative to a job-interview book.
• Chinese takeout across the street as a lunchtime substitute for pizza.

4) Indirect + Potential (technology/approaches that can obsolete you)

• Things (people/companies/technologies) that can make your current business model obsolete.
• Heuristic: if the technology shift is coming, these competitors can be both a threat and an opportunity.
• Examples:
  • Internet replacing physical media/distribution for desktop publishing/publishing products.
  • Business models that should move from brick-and-mortar to online due to digital cost/efficiency.

Go from “names in boxes” to a competitive strategy

• After mapping competitors into the four boxes, the next task is building a competitive strategy—the “why you win” narrative.
• Key point: competitive strategy is not only about having a better product (“better mousetrap”).

Winning advantage can be:

• location
• messaging
• market positioning
• accessibility
• communication
• who you speak to

Practical competitive advantage examples (actionable tactics)

• Location advantage

  • Example: proximity + takeout convenience can beat “better food” competitors because speed matters (cold food problem after long travel).

• Language-based marketing as a growth lever

  • Example tactic: add three words to marketing collateral to double sales quickly:
    • “Se habla español”
  • Logic: underserved communities respond to trust and accessibility; you don’t need to be a native expert—just communicate clearly.

• Identity-based trust and targeting

  • People hire based on cultural cues (e.g., name-associated trust), and deliberate marketing targets that community.

• Service differentiation via communication/personality

  • In an over-supplied market (he mentions an abundance of attorneys), the competitive edge isn’t legal templates, but:
    • approachability and supportiveness
    • proactive outreach (classes, speaking)
    • strong communication and relationship building

Competitive strategy “outcome” framing

In the elevator pitch, he prioritizes:

1. Who you serve + what fears/passions you solve
2. Immediately following with Why you’ll win (your competitive strategy vs. competitors’ strategies)

Notable case/lesson: “no competitors” is often a warning sign

• Netscape/Microsoft example (high-level execution lesson):
  • Microsoft entered where it wasn’t initially “present” and used ecosystem control (default browser distribution) to capture the market.
• Takeaway for small businesses:
  • Even if you don’t see direct enemies today, potential and substitute competition can emerge fast.

Metrics / KPIs

• No explicit numeric business KPIs (e.g., revenue, CAC, LTV, churn, margins) are provided.

Actionable checklist implied by the segment

• Identify your customer fears and passions, not just your product.
• Populate the 4 competitor boxes with real companies/alternatives (direct/indirect; actual/potential).
• Don’t assume “no competitors” means safety—verify substitutions and potential entrants/technology shifts.
• Define your competitive advantage in terms of how you win (access, messaging, convenience, trust, communication, positioning), not just product quality.
• Exploit your edge by directing marketing and sales toward the customer segments that respond to it.

Presenters / sources

• Presenter: Cliff (speaker named “Cliff”; last name not provided in the subtitles).