A common pitfall of running a business, is focusing on the competition. Why is this? Well, it is probably the easiest place to get inspiration, ideas, and learn what not to do.
It’s tempting to focus on the competition
When I started out, I did this much more than I would like to admit, and I still do sometimes. It became easier when I realised what/who The Daily Wine is and started to achieve product/market fit. It’s much easier to ignore the competition when things start going well with your business and you don’t need to worry about paying the bills at the end of the month. However, it’s still tempting to glance over to the competition every now and again.
The enemy is..
This week I came across a post on X (formerly Twitter) written by Jason Fried, the founder and CEO of 37signals. They have built a few awesome products, including Basecamp (project management) and Hey(email).
It was a very long post, but the gist of it was:
You only compete with one thing: Your costs.
If you want to read the whole post, you can find it here.
When I started The Daily Wine, there were two major competitors in the online wine sales ecosystem in South Africa.
- Getwine
- CyberCellar
I did not, and still don’t focus on Getwine that much, because I believe that they are a bit stuck in the early 2000’s. But I did like what CyberCellar was doing. I saw them advertising everywhere, they had amazing marketing campaigns on social media, they had crisp photography, and it seemed like they were winning in the market.
And then one day. The news broke. Cybercellar is bankrupt, and they are closing down. To make it worse, the fall was so spectacular that they took the holding company who bought them a year earlier down with them.
To make it clear, I don’t know exactly what happened with CyberCellar and why they closed down. The point I am trying to make is, looks can be deceiving.
Looks can be deceiving
Let’s take two companies:
Company A
- Advertising everywhere
- Has multiple delivery trucks
- Offers free shipping at a very low threshold
- Sells products below market value
- Carries a lot of stock
- Has a large number of people working at the company
Company B
- Advertises only where they see return on investment
- Uses 3rd party couriers exclusively
- Rather loses customers who demand free shipping
- Always makes a profit on a sale
- Avoids carrying any stock
- Has a small team and rather focuses on automation
At first, it might be easy to assume Company A is winning, but which of the two companies do you think is more likely to be profitable? Obviously Company B. They might not be millionaires or on the scale of Takealot or Amazon, but they also don’t need to rely on investment capital. Company B is more successful not because they are stingy, but because they focus on keeping costs low, and getting a return on investment. Take a wild guess which company will still be standing in a few years?
Control what you can
Running a business has a lot of variables. Most of the variables you cannot control. You cannot control the broader economy or what your competition is doing to steal customers. One of the things you can control is your expenses.
Spending (wisely) is not bad
I’m not against spending at all. If you know me, you’ll know that I always opt for state-of-the-art tech, market-leading software, and I invest in my businesses easily if it will make the business better.
But if I see an expense taking a toll on my business - I will make it my focus to eliminate it or make it considerably less.
That’s why I built my own internal management system Daily Sync which automates much of my business and makes it unnecessary to hire admin personnel, and also why I am busy building my own newsletter software (if all goes well, I will send out this post with it)
Until next time - go cut some costs!