When you talk about competition and competitors in any business and the real estate business is no different. It can tend to strike fear into the hearts of many investors who are in direct competition with them. The fact is, for most of us, our competition is here to stay, so we need to be able to know how to deal with it. In addition, there are a lot of facts about healthy competition, so let’s talk about those things first:
• Healthy Competition is Good for Business. It makes us strive to make our businesses better. It helps to keep pricing in line and more affordable to our customers. Finally, it forces us to make our products and businesses better, safer and more efficient.
• Competition is Here to Stay, so Learn to Contend with It. Contending with competition doesn’t necessarily mean competing toe to toe. If your competitor has deeper pockets a bigger staff, a bigger marketing budget, more experience, more business connections etc., then you have to find ways to deal with this. (More on this later in this article.)
• If Your Competitor was the Perfect Fit for everyone, they would likely have Everyone’s Business. It is impossible for any business to be able to accommodate everyone. Many businesses have gone out of business attempting to do so. The companies that come closest to almost having everyone’s business that come to mind are Microsoft and Apple, both of which have a huge share of the computer software business; but they still don’t have all of it!
• Your Business is Unique. You have to determine what is unique about your business, who your customer truly is, and how to best serve that end. For most customers, the price is important, but it isn’t everything. People like to do business with companies and people that they believe will be honest, fair, service oriented and have good follow up. Great service and follow up can be a big Achilles heel for larger businesses.
Now that we have mentioned a few facts about competition, let’s explore a few ways that you might be able to effectively deal with it:
• Know Your Competition. Keep a steady eye on your competition. Google them and do internet searches on websites such as Yelp on them. For rehabbers, attend yourself or send an associate to functions that they will be at; such as REIA meetings, Real Estate classes, and open houses. Check out their social media such as Facebook, Twitter, and others. Know how they structure their offers, if possible. Ask around and find out as much as possible about them. Finally, because things and circumstances change, keep checking up on them regularly.
• Explore Your Uniqueness and Use it to Your Advantage. Every business has some things that are unique about it. Take some time to brainstorm with partners, team members, clients, mentors or others about what they believe is unique about your business. Google and follow up with internet research on both yourself and your company. You should come up with a list of some good things and some items that need work. Work on the items that need improvement, but really key in on those items that you already possess and use them to your advantage.
Let’s say that you and others feel that you have stellar customer service and a great reputation for honesty and integrity. Use that in your marketing and business approach in dealing with customers.
• Don’t Get Into Price Wars! Price wars only tend to drive prices and the quality of services downwards. I’m not saying that if offering a lower price makes sense (if the numbers work for your business) that it is a no-no. However, try to emphasize your other strengths, especially those areas that your competition is lacking in. Some of these areas might be customer service, customer satisfaction, communications, product quality, the price range of products, etc.
• Use Your Competitors to Your Advantage. There are sometimes when having a good relationship with a competitor allows you to keep an eye on and possibly learn from them. In addition, possibly you can do business that helps both of you. A few years back, we ran into a situation where we had several possible deals in several areas and we weren’t equipped to rehab them all at the same time. We knew of a rehabber that worked the same area where two of the possible deals were located, so we chose to wholesale both properties to that competitor. This was good for our competitor, allowed us to make a small profit on both deals and permitted us to concentrate on some other rehabs located elsewhere.
• If All Else Fails Re-think Your Business Model. If all else fails, it may be time to take a close look at your business model and re-strategize. Markets change, laws change, competition happens, so sometimes one needs to rethink about their current way of doing business. That doesn’t mean that you get out of real estate altogether, you just find another niche or two with which to acquire and sell properties. For example, if you were using short sales to acquire properties to wholesale, rehab or hold, maybe it is time to look at another way of targeting your sellers such as lease options, money or credit partners, creative financing or other options with which to buy them. The possibilities, when you really think about them, are endless! Businesses must adjust to changes in the business environment to remain successful and for a smaller business; it is a lot easier to accomplish than a large business!
• Finally, Never Stop Marketing. This is one of the most common errors that many businesses, both large and small, can make. When business is so good that it is almost overwhelming, there is a tendency to slow down the marketing. When times are slow and cash flow is tight, businesses also tend to cut the marketing budget. Be aware that is what your competition may, do so it is time to get a competitive edge and market hard!
When business is overwhelmingly good, one can pick and choose the best deals and either wholesale or turn them over to another investor that will take good care of that customer. When business is slow, nearly everyone cuts their marketing, so it’s time for you to go all out. However, make sure that you preplan for this expenditure in your annual business and marketing budget.
Indeed, competition can be frightening, especially to a newer investor. However, most of the time, healthy competition is a good thing and we have hopefully given you some great tools to handle yourself in the real estate battle.
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