How to Kill Competition, Effortlessly
Competitors are essential for any business. They motivate you to capture market share, expand the market size and give you hope. You start thinking: if they can do it, I can do it as well.
However, competition can also take away your market share. People try to kill their competition by offering better products and services, lowering the price, and coming up with innovative marketing and sales methods.
I do not necessarily believe in reducing prices to capture market share. Because reducing prices will make it difficult for you to survive and later thrive in the niche that you are trying to dominate. Reducing prices also reduces your capability to increase CACs (customer acquisition costs).
After reading the title of this blog post, you might be thinking - is it even possible to kill the competition effortlessly? Yes, it is.
The economic downturn, that happens once in a while, will by default kill the competition. You just need to stay alive when people are getting killed by the market conditions.
Most businesses expect a flowery future when they are growing. And while growing they keep expanding by being extremely bullish. High expectations set in and investors also expect a quick fast growth. The growth gets to an unsustainable level that they will not be able to sustain when market conditions are bad.
A business is like driving a car. To get started you need the 1st gear. The first gear will not let you go fast, but it will give the initial torque for getting the car up and running. However, if you want to go faster, you will have to put the 2nd gear, then the 3rd, and so on.
However, the risk of driving fast in the 6th gear is that if you have to come to a sudden stop or press the brakes hard, then the car will turn off. Then you might have to start from the 1st gear again, assuming you have not stopped after a crash that has broken the car.
When market conditions are bad, monetary policy gets tightened, interest rates get hiked, countries are at war, slow down the business in such a way that you always have 6 months to 1 year of runway left (even if your revenue drops to zero).
Just like slowing down a car from 6th gear to 3rd gear will give more control at the sacrifice of speed, slowing down the business during economic uncertainty is important to make sure that your business stays alive long enough that when it is time to accelerate, you can effortlessly do so.
Many businesses will not be able to take the hard decisions to scale down during a period of economic uncertainty and then they have to put a sudden brake or crash the car.
If you manage to just stay alive during bad market conditions, that's all you need to do to kill your competition. Even with very good market conditions, most businesses will not survive more than 5 years because of too many variables involved in the equation.
Founders changing their expectations from life, co-founder conflicts, founder's personal life going for a toss and a ton of other factors will make sure that 50% of your competitors will not be around long enough even during extended bull markets.
Just stay alive for long enough. That makes sure that you have a business in hand to capitalize on the next bull run.
Every business gets some wind that pushes them forward once in a few years. You can capitalize on such winds only if your ship stays afloat. Even the perfect market conditions won't help you if your business is dead.
Uncertain times are ahead for startups and founders. I wish you success.