What makes some businesses thrive while others struggle to survive? How can comparing your company to competitors reveal critical insights about your success?
Evaluating your business model requires identifying your competitive advantages and weaknesses. In his book Getting Everything You Can Out of All You’ve Got, Jay Abraham explains that this critical assessment provides a clear picture of your market position.
Read on to learn how to evaluate a business model and transform how you view your business operations and competitive landscape.
Evaluating a Business Model
You can understand your company’s current level of success by comparing your business model to your competitors’. Abraham writes that you should evaluate every aspect of your business model to identify what you do better than your competitors and where you fall short. He offers two-fold advice for how to evaluate a business model.
Evaluation Part 1: Create an Overview of Your Business Model
To evaluate your business model, Abraham suggests that you first outline what you sell (your product or service), who you sell it to (your customers), and how you sell it (your marketing and distribution channels). For example, you sell a skills training app to busy professionals through app stores and social media advertising.
(Shortform note: Alexander Osterwalder and Yves Pigneur (Business Model Generation) advise completing this outline for every customer group you serve. Your customers fall into different groups if you need to create different products and services to meet their needs, reach them through different channels of distribution, develop different types of relationships with them, or adapt your pricing structures to accommodate their needs. According to Osterwalder and Pigneur, examining each customer group separately helps you clearly define how you’ve tailored your products, channels, relationships, and pricing to meet their different needs.)
Evaluation Part 2: Compare Your Business to Competitors
Once you’ve outlined your business model, research what competitors in your market are offering and how they operate. Abraham says that this process will clarify the similarities and differences between you and your competitors, providing clues as to why customers might choose you over competitors—or vice versa—when making purchasing decisions. For example, your research might indicate that customers choose your app because it offers bite-sized, interactive lessons, while competitor apps offer longer, more academic-style courses.
(Shortform note: Like Abraham, many business experts argue that knowing how you fare against competitors in customers’ minds is key to understanding your market position and forming a successful business strategy. They suggest that you can understand what drives customer decisions by learning more about your competitors’ customers in addition to your own. To do this, conduct surveys and interviews or review customer feedback and social media sentiment, keeping an eye out for what customers value and where they feel dissatisfied.)
Exercise: Evaluate Your Business Model
According to Abraham, before attempting to improve any aspect of your business, you first need to evaluate how your business model compares to your competitors’. This exercise will help you do that.
- Describe your current business model. What specific products or services do you sell, who are your target customers, and what channels do you use to reach them?
- Consider your competitors’ offerings, pricing strategies, and distribution methods. Write down at least one area in which you outperform them and one area where they have an advantage over you.
