Competing against small start ups

If you find yourself competing for sales against small start-up businesses, you will need to exploit their weaknesses while remaining conscious of their advantages.  To help you do this, think back to the days when your business started out and to some of the issues you encountered.  Some sales you seemed to win with ease, others drifted away despite you making Herculean efforts to win them.

There will always be some sales opportunities in which your chances of winning against a small start-up is minimal.  Don’t fall into the trap of thinking that just because you are competing head-to-head with a start-up, your winning the sale is little more than a formality.  Buyers tend to spot when sellers are over-confident and/or complacent.

In most cases, small start-up companies will have a small client list.  It is quite possible they will have just one key (established and very loyal) client, possibly with a handful of new, less established clients.  Most of the start-up situations in which I’ve been involved have revolved around a single “launch client”.  This is the one client who was signed-up when the business was launched and under-pinned the start-up’s finances during the early months.  Perhaps you started your own business in this manner.

Launch clients are always incredibly loyal towards their start-up supplier.  Therefore, the first thing to find out, whenever you are competing against a small start-up, is whether your prospect is their launch client.  If it is, expect a tough battle throughout the sales cycle.  In fact, you might be wise to pull out of this opportunity and focus your time on other, more winnable, sales opportunities.

However, if your prospect is not a launch client for your start-up competitor, then you should immediately focus in on their likely weaknesses and begin work to neutralise their apparent strengths.  Before looking at their likely weaknesses, let’s look at where they will have an advantage over you.

Firstly, they will have at least one very complimentary reference client (their launch client) who will provide positive feedback to other potential buyers.  Secondly, they will be very responsive.  They will have few defined processes so they have short decision-making hierarchies.  It is quite likely one of the founders is driving sales to new clients and can, therefore, make instant decisions.  This helps them to maintain momentum in the sales cycle and you will need to keep up, even if your decision making processes are a little slower.

Lastly, their overheads will be low, possibly lower than yours.  This means they will exhibit a willingness to be the lowest priced supplier in any sales competition.  Due to their very low overheads, it is likely they will generate a small profit even when they undercut all the other competitors on price.  You must do everything you can to avoid price becoming the determining factor on which the prospect selects their supplier.

You should aim to position your proposition to be the best value for money, rather than the lowest price.  When faced with a choice of equally good products, prospects will always buy the cheapest – it is a totally logical response.  However, when faced with a choice between a cheap product with few extra benefits and a more expensive option which comes with lots of extra (and relevant) benefits, most prospects will buy the more expensive option provided they can afford it.

Your larger size should bring greater stability and access to more resources.  These factors can be emphasised when selling against a smaller start-up competitor.

If you incorporate plenty of extra value into your proposition, prospects should be prepared to pay a slightly higher price to realise these extra benefits provided they are relevant to the prospect’s circumstances.  This last point is very important.

There are likely to be several weaknesses associated with your start-up competitor that you can exploit.  I’ve touched on a few of these earlier, but look for the following weaknesses: small client list; limited track record; under-financed; low tolerance to delays due to their “hand-to-mouth” operation; fire-fighting mentality due to limited resources.

You should emphasise your proven track record with numerous happy clients.  A good approach is to highlight some of your successes in pre-written client profiles and distribute these to prospects.  These should emphasise your resource levels and focus on your key personnel to illustrate how they have been of benefit to your other clients.  Your key personnel are vital for establishing points of difference that will help separate you from your competition.

Of course, you will want to close the sale as soon as possible.  However, if you sense a start-up competitor is still in contention after you have done all you can to expose their weaknesses, try slowing down the buying process.  This has to be done carefully otherwise your prospect will think your lack of responsiveness means you are no longer interested in the order.  I always found the process of negotiating contracts was one area that could be slowed without too much difficulty.  A “go-slow” like this always puts the smallest suppliers under the greatest pressure.

A forecasted sale that is delayed by a few weeks can put considerable cashflow pressure on a small start-up venture.  They will have to divert their efforts to other sales opportunities that will yield revenues quicker, just to survive.  Their limited resource levels will mean their people can easily become very stretched.  As they work under this intense pressure, you can benefit from any misjudgments or mistakes they make when dealing with your prospect.

ACTION IDEAS

  1. When you are competing against a start-up company, find out whether your prospect is their launch client.  If it is, take great care when qualifying the sales opportunity.  You may never win the sale due to your prospect’s loyalty to the start-up venture.
  2. Work out a “pincer” strategy to beat your start-up competitors.  Focus on ways to add as much extra value as you can for the prospect and on ways to expose the weaknesses of each start-up competitor you are against.
Posted in Competitor / Market Knowledge