When you are building a company, it is easy to be overwhelmed by the number of things that have to be done just to keep your company running. Between accounting, paying bills, signing contracts, financial planning and payroll you might find yourself spending half of your time just on operations. If you have never done these kinds of things before you might spend all of your time learning and doing them until you get proficient. It can be fun to learn and makes your new business seem like a real business.

The problem is that none of it matters.

At all.

Not even a little.

No company has ever been acquired because it paid all its bills on time, had flawlessly accounting ledger, perfect financial planning or impeccable contracts. Those are just the table stakes to play the game.

Absolutely the only thing that matters to your new company is whatever makes you different. That difference is what separates you from the competition and makes you stand out as a better solution. That difference makes you better. It is your competitive advantage (See Never Play Fair) and it underlies everything from your sales pitch to your strategy. If you do raise investment or get acquired, it will be because of that difference.

You should spend 100% of your time investing in your differentiation. Make it better. Make it obvious how you are different. Think of it like a wedge that you are using to split the market wide open and keep hitting it. Be relentless and focused on winning through your differentiation.

This extends to “feature parity” as well. If you look across all your competition and create a feature comparison matrix (See Only the Paranoid Survive), there will be a lot of features everyone else has that you lack. You could spend your time adding those features to get even with the competition, but what does that get you? If you look exactly like them why would anyone choose you? You should understand those gaps but invest in your differentiation.

What about all those operations that your company needs to run? Outsource. Pay people to do them for you. Don’t think of it as a cost, think of it as an investment. Every hour you pay for them to review contracts, pay your bills or run payrolls is an hour you can invest in your company’s differentiation. You are buying time, which is a rare commodity for start up companies, and investing it in the only thing that matters.

If you succeed, your differentiation will be so clear that it will be easy to create marketing materials, sales pitches and investor presentations. That differentiation will be how you recruit employees, close partnerships and build value. The message of your company will be told through your differentiation because that will be the story of why you are the best in the market.

Even if you pay your bills late.

“Just because you’re paranoid doesn’t mean they aren’t after you” 
― Joseph Heller, Catch-22

Your competitors are out to get you. They do not want to compete with you any more than you want to compete with them, and they will look to steal your customers at every opportunity. You should treat them with respect, caution and a large helping of paranoia.

There are three keys to effectively competing and ensuring that your competitors do not dominate your business.

1. Know Everything About Your Competitors

As with any situation, the more you know the better the decisions you can make. You should study your competitors as closely as possible and know them and their products as well as you know your own.

This is easier if you follow a simple and structured format for collecting and tracking information on your competitors. I’ve made the template that I use available as a Google Spreadsheet that you are welcome to use here:

Competition Tracking Worksheet Template

Note that the template includes every aspect of your competitor’s business. Many first time entrepreneurs focus entirely on feature comparisons between products which can be very misleading. For example, if you have more features than your closest competitor but they have raised more capital, then they have more resources and will likely close the gap soon.

As an example, I filled out a version of the template for my app Wine Fog below.

Example: Wine Fog Competition Tracking Worksheet

2. Focus on Your Differences

Since you are competitors, by definition you will have a lot in common. You are in the same market, with products solving the same problems. It should not be surprising, then, that when you study your competitors the differences stand out the most. Understanding those differences, and why they exist, tell you a lot about your competitor’s strategy and market opportunity.

Specifically, you want to identify a few important things about each competitor:

• What are their competitive advantages?
• Why are customers choosing them over you?
• What moves are they likely to make in the near future?

Considering these questions can help you think about the future of your company. If customers are choosing your competitors because of a certain feature, you might move that up on your roadmap. If they are going to be raising more money in the near future, you should consider how that might affect your ability to raise capital.

When focusing on these differences, be careful not to let them dominate your thinking. It is tempting to get into feature wars where you constantly try to add all of the features offered by your competitors. This is a never ending cycle because your competitors will continue changing and you will constantly be playing catch up. Instead, accept that you will always differ from your competitors in some ways and invest in areas that differentiate you even further.

3. Always Assume The Worst

One of the lessons of Game Theory is that you should always assume your opponent will make the best possible move. To assume otherwise is too risky and if you prepare for it you will be ready no matter what they do. You should do the same for your competitors and assume they will make the best possible moves for their business.

This is a difficult thing to do and it is easy to fall back into bad habits. You might assume you are smarter than your competition or that since they don’t know of your top secret project that you will catch them by surprise. Even if these were true they are not long term sustainable advantages so you should avoid the temptation.

Try to assume that your competition knows all of your plans and is in the process of hiring some brilliant people. Then focus on  your core competitive advantages (see Never Play Fair) and use them to beat your competition in areas where they are weak. If you do that you can win even if they know what you are planning, no matter who is on their team.

Live Your Own Life

While focusing on competition is a good thing, it should never dominate your thinking. Companies that obsess about their competition do not innovate because they spend too much time reacting to their competitors. You want your competitors reacting to you while you choose your own path.

Your competition does affect your market but they should not define your business.