EP3 - Any Given Sunday - Overtime. Competitive Analysis for your company going towards ESOP

Thank you so much for joining today. I am the ESOP guy and we are on this journey to an ESOP. So happy you could join us. Um, if you have just discovered this podcast, we're actually now in our season 2 episodes. We did a whole bunch of these last year. This really was produced to help business owner or company management to understand how an employee stock ownership plan might work for their business. I was recently out at a company's office the other day. And they told me, look, they, they're doing all this different work to try to figure out what to do with their business. They didn't really understand how an ESOP works. And it was really the perfect. Really the perfect kind of type of situation. I'm like, of course, you know, so many people don't get it. And I think that when you do work in anything, you kind of understand what you do and you kind of start to assume that everybody else understands it. So this podcast is really meant for those folks that are thinking they might want to use an employee stock ownership plan for either a succession plan, an exit plan, possibly even a growth strategy. And there's There's a lot to it and that's why we've done the podcast and what we've tried to do with the podcast is, is break everything down into smaller pieces and try to put those in order of importance. So the journey to an ESOP is really about understanding what it takes to become an ESOP. There's a whole lot of other things to talk about. Once you've become an ESOP, but I think for the most part, um, I wanted to stay very narrow in that because I think sometimes people get so confused with, with post ESOP issues. So this is really what this is all about and I'm excited to start 2021 with y'all, and I want to kick off the year with this. You find out life's this game of inches. So is football. Because in either game, life or football, the margin for error is so small. I mean, 1/2 a step too late or too early and you don't quite make it. 1/2 2nd too slow, too fast, you don't quite catch it. The inches we need are everywhere around us. They're in every break of the game, every minute, every second. On this. So this is the speech that I alluded to in the last episode, which was Any Given Sunday. This is going to be entitled Any Given Sunday Overtime. And to really understand what this episode is about, I was, I was wanting to play that, that short portion of the speech, because what Al Pacino is saying, Just like in football, every inch, every little square inch matters. And when you're thinking about business, it's really the same thing. So as we, as we launch into this, it's really about the second extension of, of understanding your competition of what we did last episode. So one of the things that a company is going to go through in the ESOP process, is they're going to be documenting their competition in this valuation part of the process with the trustee and the trustee's advisor. So really, my advice here is there should be some work done early on so that the company who is going through an ESOP can really understand what that looks like. And I think that we all know deep down, this is going to have, you know, value no matter what, if you don't go towards an ESOP or not. So, so where I'm going with this is the really the second part of building your competitive analysis, and it is the process of identifying your competitors. And evaluating their strategies to determine their strengths and weaknesses really relative to your own business, products and service. This is a very important step to better equip your company for the future and more importantly, it comes up over and over again on anyone's journey to an ESOP. So with that, and with this great speech that Al Pacino kicks us off with, I wanted to just say thank you again for listening. If you like the podcast, please share it with a friend, please rate and review the podcast if you're an Apple subscriber. And just as we do that, it'll really help as a resource because we want to provide this to other folks and to make sure if you have, if you like it, it'll, it'll just be easier for it to go into the marketplace and help other people. So with that, I wanted to get into the, this really the next episode and as we, as I said, inspired by this approach that, that goes into the speech, that every inch matters, every little detail matters. I want to kind of like build up a couple of things and then we're gonna get into the next step of building your competitive analysis. Uh, we are going to dig deeper into practical steps of fully documented companies and as we talked about last time, some of this just makes sense because it gives our business insight, it gives us a business insight into our existing and future plan, and it makes it relative to the, to the world around us, or more specifically to the marketplace around us. A competitive analysis really is an assessment of the competition in certain markets aimed at informing business decisions and assessment typically involves creating a list of competitors, which we talked about last time. And creating a profile for each competitor that includes information such as the types of products and services they sell, their market share, marketing strategies. So we're going to go into detail with that. But what's the purpose of doing this? And, and I, and I want to stress this at the very beginning because I think there is a hesitancy sometimes in small to mid-size businesses. To not really go here and work on what I think is kind of important to um to business in general is, is this idea of, of taking this step towards understanding your business in the world around you. Sometimes we get into these pitfalls in business where we, we know what we do is really good because we're making money. And we don't really take the time to evaluate these types of things because it really isn't a major problem. Small to mid-size businesses are typically very, very busy, and it's very hard to do things outside of the normal day to day thing that you're doing to try to like continue on with what you've done. And when you're doing well, there's really not a lot of reason to do it. So I'm really just asking you to consider this as a, as a, a way to improve your business going forward. In addition to preparing for an ESOP. Um, I also want to say that, and as I said this last time too, I want to stress that it's very important to have somebody do this project, other than the busy CEO or the CFO or somebody else, because it does take a little work and there's details involved. And this episode is going to be more about the details. But what this is going to provide to you is it's gonna identify strengths and weaknesses of competitors. That allow you to really evaluate, maybe even exploit the weakness or emulate the strength or maybe even avoid something that's coming down the pike that you didn't even see. And this really does give you, I think, an edge when we start thinking, thinking about how do we build our competitive advantage going forward. So I think those are all very good and purposeful. The other side of this podcast or this episode, I wanted to kind of stresses, you know, let's talk about limitations to this, so I don't want to get over, over the top on how much work should be done here. And the first limitation here is, is don't use your competitive analysis by itself. To make decisions on what to build next. I think there's good information in there, but if you are a company that's continually redefining yourself in the future and doing new, new and great things in your marketplace, I certainly don't want to detract from that in your R&D departments or however you're, you're created. But I do want, I want to, to say there's really, you don't want to over, you know, here's, here's one extreme that could happen. I, I take my competitor, competitive analysis and I try to mimic everything that's happening in the competition by whatever I think is going on. I don't, I think that you, the best information you can get for the future products and services is talking to your customers. Talking to your prospects, um, building a customer, uh, forum of, of, hey, how does this really work? I think that's way more um resourceful and innovative than taking and trying to mimic something that somebody else is doing. So, I wanna be really careful about how we're using this information. The second is, there's a lot of industry research and information out there. I want, I want to point out that it's not always good information and industry researchers aren't really in the business necessarily of being your business consultant and being fully um hired by you to do the things that you need to do to create your competitive advantage and, and to do things. So just be be aware that that information isn't necessarily always there. It may not all be accurate number one, so, so be careful and and filter through that carefully. Secondly, I think you just want to make sure you don't go over the top with the industry information. You just want to use it enough to have a good barometer and good measurement of, of things in your business. The third thing is, don't spend too much time on this. Um, obviously, as we go into it, you could, you could do so much in you could provide so much information and so much data. Um, one of the things I talked about last time was when we went through the who are we going to document as competitors, we, what we did is we broke those down into 3 categories. And so we had a primary, a secondary, and a tertiary category. I think that's very important because it allows you to boil down what you're really looking at. And make sure that you're aligning that competitive analysis with, with not the entire world of competitors. So, so I think that helps to, to frame out this so that you don't spend too much time or you don't have somebody spend too much time on this, but make it for what it really is. And I think those are important to have in your mind as we start the next step of this, which is really writing the competitor analysis. When you're writing a competitive analysis, it's important to be objective, and it's important to be really honest. And I don't want to, I want to point out something, and this is one of the reasons I like to have somebody else do it, because I think sometimes as business owners, Or where we're tied, we're tied so closely to the market, we kind of don't want to look at all the, all the angles of things. I think you want a very objective approach, and that's one of the reasons I recommend having somebody else do it. So you don't even look at the data, you don't even know what's happening, and you didn't even source the data because they may find something that you don't find. And, and reporting that data. Um, needs to be done in a very, you know, high in in with high integrity where it just, it's everything you can think of that's real and it hasn't been manipulated at all. So I think that's, that's just very important. A competitor analysis is very helpful when you're putting that together because it allows you to then really as a business owner, a business leader, objectively review the information and come up with what I believe a real, uh, a real strong understanding of what's happening around you. So, um, as we went down when we did the, the who, we're gonna go into digging into the details of what, of what the competitors um offer. And the first step in this, I want to identify is, is really laying out, just kind of the obvious of this is, is their products and services. And it's important to really not try to like, so say for instance, you're, you're competing with somebody that's so much larger than you. And they do, you have some product lines that they have, but they have a ton more than you have. So it's really important to just do an apples to apples comparison and don't get overwhelmed by a large company that's doing all kinds of things. It's important to note maybe what they're doing, but in general, just focus and skinning it down to the products and services that you, that match up well, so it's an apples to apples comparison. Second thing is document your research. And, and as we go through this process, I want to make sure that you know where you got the information. Um, so, uh just helping my kid recently with a science. Fair project and doing the research paper, I'm reminded that you really do have to cite your sources. Make sure that you know where you got that information so that somebody could easily go back and challenge the information and look at the comparisons. Um, putting this into a written analysis, a comparison chart and graphs, written texts. The thing about this, I just want to make sure that you you make it as a an accessible and easy to understand informational type of report possible, so that, so that you're not buried in a in a. 30 page write up of information where somebody has to actually read so much. Um, as a, as a business owner, one of the things I like is a report that I could look at maybe on one page. Give me a quick summary, because I got to move on. I got to get things done. So be aware of that as you start to put those together. So what should be included in your competitor analysis, what we're going to start with in this is really 22 things, and these are really just continuing to help you gather more information. So the, the first episode was gathering information on the who. Now, as you have the who, these are your, your, your competitors, say your primary competitors. What we want in that is we want to, um, we want to make sure that we can identify other things about the who. So, so sometimes it's really helpful to utilize a SWOT analysis, or strengths, weaknesses, opportunities and threat in relationship to your competitor's business. So, so you'd be doing this as if you were them. And so what do they offer and how do they, how do they bring their product to market and What sort of opportunities and threats do they have in their, in their business place? So, so that's really helpful to, to pull data out. The second place to pull data out is what they call pest ana analysis, which is a political, economic, social, and technological works kind of the same way, but it focuses on those specifics. So if you look at a a SWOT analysis, the strengths and weaknesses are typically internal. The opportunities and threats are are typically external. On the pest analysis, these are all external, but they take you into more categorically, what's happening in the political environment, what's happening in the economic, social, technological, those are all very important too. So I think it pushes you a little bit farther to get more data. And this again, this is really just trying to get as much data as you can. Um, for those that are putting this, this assignment together. So as we, as we start about putting all this information together, now we're gonna put it into a, uh an actual framework so we can, we can use it. And we're gonna do that by, by working through multiple categories of steps. So imagine in your mind in this, in this step. Now we have a, a spreadsheet for To keep it as simple as possible. And then the left hand column, we're going to populate this, this spreadsheet with these certain um components of the competitor's business and and along the top of that spreadsheet, you're gonna have each of the competitors, so competitor A, competitor B, competitor C. And the first step we have in populating that is the what we call the feature matrix. And this is really the features that the competitor actually um has within their business. So we're going to pull the products and services out, we're gonna look at specifically how they, what they bring to the marketplace and what features they have, and it could be specific to The way they deliver their product or service. It could be the way their um their employees deliver or how their employees are structured. It could be a lot of different things, but those are the features that we're going to want to to start to break out in the competitor's business. The second step, which is a little difficult, and I just want to stress this, it's difficult sometimes to find information, but we want to find what we can find relative to the market share percentage. This really will help to identify your main competitors in your market in your market. And what we don't want to do is we don't want to exclude larger competitors completely as they have um a lot going on and we can always glean a lot. So, and so say we have a very small percentage of the market share, um, it makes sense to, to make sure you know who your largest competitors are, as much as the ones you're just kind of, you know, really close behind. One of the areas that I would say looking for this information is economic development organizations. They have a ton of industry data, they are measuring job growth, housing starts, other types of metrics to determine trends so that they can predict and help their economies grow. Industry, industries have different trade associations, so that's a really good source of information if you don't have the trade association information, definitely doing research in that area with obviously the internet is going to be helpful. Market share, when you look at what market share is, it's calculated by measuring the percentage of sales or percentage of units a company has in the overall market. So if I have, for instance, a, I'm part of a market in In a certain state, and I have in that state, there's uh say $100 million of sales that happened. And my sales are $10 million. Well, I got 10% of the market. So, so that kind of is the way that it's typically portrayed. And the difficult part of that is, hey, how do I define my market? But as you go through it, I think it's, it's, it's going to, you're gonna do something, but just put the, the way you've defined the market and the way you define your market share. I think it's, that's gonna be helpful. The third thing is pricing. Pricing is difficult because it's hard to get sometimes, but the, the more we can get information on other companies' pricing, you know, maybe you, you have somebody call or or get a quote. Um, we, we're trying to figure out within the pricing is, is really two things, and this is going to come back to economic, you know, if we start off with the basis of pricing in econ 101. We have inelastic pricing and we have elastic pricing. So if you remember that from, from long ago in college, it's basically the inelastic are the products and services that I simply can't live without. So for instance, gas, I can't have to have gas to drive my car. So whatever the price of gas is, I'm gonna pay it. I might drive a little less, but I still I'm gonna have to drive at the normal, you know, minimum to get to my job and to do the things I'm doing. Some people that are addicted to cigarettes or alcohol, that becomes an inelastic, um, good in, you know, as a, as a product. Um, so some things that you have to have and CPA firms have the, the, you know, what do they say the death and taxes, because of taxes, you got to file your tax returns. Now, you can always use TurboTax, but certainly, you know, when we start thinking about the tax legislations and the different tax codes, the more difficult that becomes because you really don't, you have to at least know something about tax, um, to make sure you've taken advantage of all the different options. So that could be an inelastic service. If you're in a legal battle inelastic Services, hey, I have to hire an attorney to work through the illegal battle. So, so the nice thing about business, when you can become, when you have a product or service that's on the inelastic side, when, when you're on an elastic side, those are things that you really could do without. You don't really need. Um, that's that boat you bought recently, um, that you're using just for fun. Um, could be the travel or the trips that you're having, it could be, um, hiring a marketing consultant where you think that's more of an elastic service. Um, certainly products like soft drinks and, you know, fashionable clothing or, or, you know, fancy different things that you, you buy in the marketplace like cars, those are elastic, they don't necessarily, you don't necessarily have to have them. So it's important to think about your product and service in relationship to the competition as falling into one of these different categories. And then you start looking at what is my competition competition doing relative to pricing that I'm not doing. And I think the difficult part for companies that are in a very highly competitive environment where they feel like they can't do anything to improve their pricing. Then I think it's important just to, to understand that, but also then be very aware of what's happening around you, as others might be able to improve their pricing by using other ways. So, for instance, it may be Let's just take like a long time ago, you know, a, um, or not a long time ago, but not too long ago, the, the Yeti cooler example. So if I had a, a normal cooler from Coleman, who produced a ton of coolers and I go put my ice and My uh drinks in there. It's great. Um, I love it because it works. But what Yeti did, and they started off with the with the cups and then they went to the the coolers, is they were able to charge a lot more for cups and coolers, because their product worked so much better. And there, I don't have a Yeti cooler, just so you know, but I do know that they last so much longer. So, so understanding the competition might be coming into the marketplace and having a different pricing model, but their product might be far superior in that, and they've, they've went through this idea of a blue ocean type of strategy, which I'm going to do a podcast on this. This is a book that was written. Um, a while ago, and it really is about um taking out the competition in a way that, that your product or service becomes so superior to others that nobody can touch you. So all that being said, model out your, your pricing with your competitors to gain some insight along those tracks. Marketing, what is your competitor doing when it comes to marketing? What is their marketing strategy? How do they employ, what is their social media presence? How do they employ SEO strategies? What's their taglines? Do you, you know, objectively, do you think it resonates with you as a person? Those are all important to document how they're approaching the marketing place or the marketing strategy. What are, what are my competitors' differentiators? What are they doing that makes their stuff unique? And this is a tricky area because it's, it's sometimes difficult to know what's behind the curtain, but what you can tell from how they're going into the market, um, do they have a specific niche, a niche, I love that word. Um, do they have something that they're doing that you're not doing and, and documenting that is very important. Do you have, as you, as you start thinking about it in comparison, do you have any differentiators that size up for that? So, so don't get too lost on this one. It's just trying to figure out what they're doing from a unique standpoint. As I mentioned before, documenting the, the SWOT analysis, so now you're gonna go back to the SWAT in the past, but you're gonna try to, to pull out of that anything that is, that are strengths and weaknesses. So some of those might have already been discussed within the differentiators, but anything that you can see that are are specific to their businesses and they may be outside of the marketing or outside of some of the other things we mentioned. The next is really looking at the geography, like, where are they? Like, what are their, is their footprint? Is it global, is it, is it national? Is it regional? is it state? Is it local or county? Where do they, where do your competitors stack up? How important is the geography to the business itself or the market share? Would it make sense for some companies as you start looking at their geography, is that how they've attacked the competition, um, by becoming closer and closer to their clients and different customers in different areas? What is the culture of your competitor? How do you evaluate your competitors' objectives, their employee satisfaction, their company culture? So looking at that, that's difficult. And some of this, I'll just tell you, sometimes when we interview people as a business, we interview people that have worked for a competitors. So what a perfect opportunity to ask those questions. And say, what was it like to work for, say, for us as a CPA firm, we're a local independent CPA firm, and we value a life, you know, a quality of life balance between work and our families. So we asked the question for somebody that has worked at a much larger firm, what was it like for you? And some of the things they say are, hey, we've worked, we would work um 80 hours a week, every week for the entire year, maybe we'd get maybe 2 weeks of vacation and, and that was it. And so the culture of that competitor, we can kind of glean from that interview that there's definitely um You know, a different, a different type of culture and I'm not saying ours is better. I do believe some people, you know, want to work less and have a little more um free time with their family. Some people want to work more and have a career with, you know, maybe global aspirations. So it's not about what's right or wrong. It's about what is their culture and how does that stack up, stack up because then this is, we're not just competing for customers anymore. We are competing as Businesses for employees and we're competing for the best talent we can not just hire, but we can retain and build our businesses with that. One of the major issues that we all have as business owners is how do we manage our people um in terms of our talent to make sure that as we go forward in the future, um, that we have that kind of talent and as an ESOP company, I wanted to make sure that we understand this point. It's very important. One of the, one of the main parts of becoming an ESOP company is that you're an employee stock ownership plan. The first word is employee. So we want these companies to be staffed really well, and we want the talent to stay. We want to not just retain that talent, but we also want to motivate them. So company culture is very important. So if you see that, hey, there's a company there that that you're competing with, and they have an awesome culture, it may be time to look at what you're doing and honestly, you know, ask the questions of, of what your culture looks like to somebody outside looking in. And then the the final thing I want to mention, and we covered a lot of ground here. And so keep, keep in mind that there's a, there's a lot of detail within each one of these categories, is customer reviews. What are the customers saying about the, the competitor's business? How do you get that information, um, looking at, you know, maybe some of the testimonials or looking at how they actually market themselves is maybe a good way to do it. When you interview a prospect and you know that, that you're talking to a prospect that's working with that competitor, I think that's a really good place to get information. And you can ask and how, what was the experience like, and you can't take too much from this because that's one, maybe one prospect, but I think over time, you know, being prepared to ask that question, what was your experience like, you kind of start to build a little bit of a repertoire of, oh, OK, that's how they do business. And this is really, you know, they're really good at this or they're not as good as that. So sometimes, Com uh you know, competitors post reviews, um, or our customers post reviews on the competitors different sites, um, like on Yelp, if it's a restaurant, that can be a way to, to gain some information on where the, where the customers are looking at, um, how they're looking at the companies. So help that really might help you to figure out like if they're, if the customers are really happy with that company, then what are they doing and maybe, maybe that becomes a primary. Um, instead of a secondary competitor because you really want to evaluate that. And I wanted to make that point because I think sometimes as we put everything into a box, I want, you know, this thing can move and, and change over time and it's, it needs to be something once it's built, that can be updated and to be leveraged and utilized in all kinds of different ways. And so knowing that things are always gonna change, build your competitive analysis tool. To be a model that can be continually updated as you go through, you know, year after year. So the, the main takeaways on this are really understanding as you start thinking about your competitors' business, what are their features, what's their market share, how, how does pricing work? How does the marketing strategy work? What's different about their business, what's unique, where are their strengths and weaknesses come into play? How does their geography fit, um, their culture, and then really the, the customer reviews. And when you put all that together, I think you're gonna, as you evaluate all that, you're going to have some insight as we, as we talked about at the very beginning. That ties back to really what Al Pacino was saying in the movie, that is going to give you the details, and these details absolutely matter. So, and I, and I really will stress this at the end, the more informed you are, the more options you have. So if you've, if you've never done one, I, I really encourage you to do a competitive analysis as you get ready for 2021. And with that, I wanted to say thank you so much for listening. Please share this with a friend if, if you think it would be helpful, and rate and review the podcast if you're an Apple subscriber. And we're looking forward to seeing you on our next step in this journey.