Some SaaS founders wespeak to obsess over what their competitors are doing. While it’s good to know where you are in themarket relative to peers, overly concerning yourself with your competition iscounter-productive. Below are a fewthings you should stop doing in regards to competitors:
Stopworrying every time a competitor raises money. Especially if you’re in a new market. A lot of that money your competitor justraised will inevitably go to building the market, which is a positive foryou. If your competitor is throwing alot of dollars at marketing to make customers aware they exist, savvy customerswill often research alternatives which means they’ll inevitably find you aswell. So long as you have a greatsolution, your competitors marketing spend will actually result in new businessfor you (prospects always do their research). Additionally, the more money your competitors have raised, the lessacquirable they are; large rounds at high valuations limit options forexit.
Stopworrying about competitors’ revenue. Let’s say you happen to find out a competitoris doing $100mm in revenue but you’re much newer and younger, only doing$1mm. How does that piece of informationchange the way you do business? The answer is it doesn’t. You still need to get up every day and buildthe best business you can, no matter where your competitors are, so stop tryingto figure out how many employees they have or how much revenue theygenerate.
Don’t pricebased on competitors’ pricing. Your competitors’ pricing pageshouldn’t be the guide for your own. That’s circuitous logic and has nothing to do with your valueproposition. You should be pricing basedon the value your product provides to the customer. Software should aim forcustomers to achieve a return on their spend of at least 20x.
Focuson the right questions. The real focus should be on thequestions that matter: ‘are you losing customers to competitors?’ and ‘are youbeating out your competitors for new clients?’ and ‘are you offering a superiorsolution?’ These questions are far moreimportant than what a competitor’s market share, revenue, or employee countis. Remember the story of eBay: at the time it wasstill young and Benchmark had invested $6mm in it, The Economist estimated thatthere were more than 150 online auction sites on the Web. One of those was far ahead of the rest,backed by Kleiner Perkins, and was already a public company with a marketcapitalization of about $175 million. eBay beat everyone because they focused on building the best solutionthey could and grew responsibly, focusing on profitability versus making abonfire with their cash just to build market share.
In summary, it’svaluable to understand where your competitors are, but it really won’t andshouldn’t change the way you run your business, so don’t obsess over it.
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