Ghost competition

March 14, 2011

They come out at night. They come out during the day. They come when you are awake. They come when you are asleep. They come when you are at work or at play. They are always there. Lurking.

There are four of them; like the four horsemen of the apocalypse. They ride down on you. You can’t fight them so you need to be vigilant and get out of the way. They seem harmless or well meaning. But, beware!

Who are they? Your worst nightmares, your ghost competition.

1. Government

2. Non-profit and tax exempts

3. DIYers

4. DNAs

Government

You’ve heard the saying, “I’m from the government and I’m here to help.” And, they can and they do. They can also turn your world upside down if you find yourself in competition with them.

When Carole Keeton Strayhorn was Texas’ Comptroller she often talked about the “Yellow Pages Test”, that state government shouldn't be doing anything that's available in the Yellow Pages, since businesses supposedly have those things covered. I truly think she tried to live by that. Other government officials have tried but not succeeded, some haven’t even tried and they are really ghost competitors.

Recently, Austin Mayor Lee Leffingwell organized a small business summit. I wrote about it in a post entitled, 4 Concerns about the City of Austin's March Small Business Summit on my blog. About forty of us attended. I think it was a good first step and I hope there will be more dialogue.

I was part of the White House Conference of Small Business and Congressional Summit on Small Business. In the White House Conference, after a week of deliberation, we voted on our recommendations and sent the top 60 to President Clinton. I think that a summit can be a useful form of focus group. And, some of our recommendations from that Conference and Summit, including the Paperwork Reduction Act, were actually implemented. But some of our recommendations from this Summit would be competition to some of the attendees if the City government provided them by insourcing (doing it themselves).

This is a fear I have for the Austin summit. You can read the list as assembled by City staff. You can also read the most recent directive by our City Council to our City Manager, Mark Ott . Like other cities, we have a budget deficit. But, he is directed to respond within 120 days to these summit recommendations with what the relevant City departments will do to fix, offer, change what we suggested in our one forty minute session.

The City of Austin does a lot of good things, but I have the feeling that some businesses will wish that this summit had not taken place; especially those that provide training, financial support, consulting etc. to small business. These businesses have a new ghost competitor, the government their taxes support. It’s hard to compete against free or the reduced fee that is usually part of the benefit this ghost offers.

Non-profits/Tax Exempts

This ghost, like the Government ghost, is not only hard to fight but a business that has them as a competitor is on the defensive, at war with themselves. Non-profits do good for others. “Do I really want to take clients and money away from them because they do such important, wonderful work?” for-profits ask. It is next to impossible to fight motherhood and apple pie. Non-profits are important, are special.

And, they are big, fat ghost competitors. I can always tell when the economy is in trouble. More of these ghosts appear and in guises that are not part of their mission but appear in a way they see to make the money they desperately need. That is not wrong. But, it is a competitor and must be viewed as such.

I have to admit that I think this can be unfair competition because of other advantages they have that for-profit businesses do not especially in terms of taxes, mailing privileges, and media access. There have been many articles written about this ghost competitor for example “Commercial Nonprofits, Untaxed Entrepreneurialism and "Unfair Competition" by Glenn M. Gomes, James M. Owens; Journal of Small Business Management, Vol. 26, 1988.. They maintain that there is “neither a clear theory of unfair competition nor a precise generally accepted definition of the term”.

This ghost is very much alive and well and there are later articles as well on this subject, especially for the last two years. Just Google “unfair competition and non-profit” and see what you come up with. I like this earlier one because it does present both sides – a “pros and cons” ghost story, you might say.

There is even an organization, the Business Coalition for Fair Competition, that is a watchdog on this issue. To get a picture of what this ghost looks like, read James T. Bennett’s Unfair Competition: The Profits of Nonprofits . It was written in 1989 but it makes a fair case about the issues that keep coming up year after year.

One of the most notorious ghost stories involved computer retailers and universities. This ghost competitor was alleged to be selling computers at “student” prices to anyone, student or not. There was even federal testimony on this case. Another involved the YMCAs and fitness centers.

DIYers (Do-It-Yourselfers)

This ghost appears in consumer sales and business-to-business sales. The potential client/customer always has the option to do it themselves or try to do it themselves.

I was recently putting together an RFP (Request for Proposal) for a large contract for a client who was new to this kind of sale although they had been in business for awhile. I had to remind the owner that this client had been doing it themselves and could take a look at the bids of those who responded and decide to keep on keeping on. This is a ghost that gets overlooked. Don’t make that mistake. It is hard to fight also. Partially it’s hard because Americans sometimes think we really can do it all for everyone, everywhere. Our optimism as DIYers can get us in trouble or we can use it to accomplish what seems impossible. Not much middle ground here.

DNAAs (Do Nothing At All)

For my money, this is the one that is the saddest ghost competitor of all. Every body does this. Government kills goods and services requests; businesses and non-profits “postpone” contracts, consumers just wander away never to be seen again.

Sometimes doing nothing is the right answer. Sometimes it is chosen for the wrong reasons: fear, a sense of being overwhelmed, too busy, too lazy, . . .If you spot this ghost, RUN DO NOT WALK to the closest exit. You really can’t win this one and there are plenty of other “good fish in the sea” to quote Gilbert and Sullivan’s Mikado.

My advice: look again at your list of competitors. Make sure these four are included. Then, plan what you will do when you spot one. Just keep your running shoes handy.

I am collecting ghost stories. If you have one to add or advice or a comment, please send it to me at triplett@bscusa.com. I know I will be writing about this again, real soon, as we say in Texas.

Topics: Sales, Featured, Articles

Jan Triplett

Business Success Center

Jan Triplett, Ph.D. is the CEO of the Business Success Center (BSC), a City of Austin certified green business. It provides sales and financial strategies and advice to owners of product and service businesses. It received a Small Business Administration (SBA) five-star national award and the Austin Business Journal named it a top 20 management consulting firms. Triplett is a national and international speaker, author of A Networker’s Guide to Success and Thinking Big, Staying Small. She published The Networker ” and moderated KUT radio’s “The Next 200 Years”. She was co-creator of the award-winning “City Management Academy” and the “Owners MBA. She owned and ran the Entrepreneurs’ Association and a business accelerator and hatchery. She is a small business activist, serving as a White House Conference on Small Business and Congressional Summit delegate. She was on the Mayor’s Task Force on International Infrastructure, initiated the Northcross IBIZ District and recommended portions of Austin’s Big Box Ordinance. She was a founder of the Women’s Chamber of Commerce of Texas and the Greater Austin International Coalition. The SBA honored her as Texas’ Small Business Advocate. Triplett is a member of Central Texas Association of Guaranteed Government Lenders and an NCRC Certified Technical Advisor. She volunteers for the Austin Farmers Market and the Austin Humane Society and serves on the advisory board of Students Involved in Free Enterprise.
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