10 Steps for Setting Up a Side Hustle - Step #4 What makes you better?
It's a big world out there, and these days it seems everyone has a side hustle. Sure, you can get business from your immediate community. Still, if you want this business to fly, you've got to do some planning and consider ways to make your business stand out from the others. A quick review of what you're offering and what your competition is offering should make it clear what makes you different?
Ask yourself some questions and answer honestly
- What do you bring to the table?
- Why would someone prefer your product/service over someone else (and "because you're her grandchild" isn't enough.)
- Sure, someone will give you a try, but what will keep them coming back?
- What can you promise that is better than the rest?
To market your business well, you need to go beyond awareness. Convenience is a strength that will bring in a few clients. But if yours is an industry with a low cost of entry, meaning it doesn't cost much to get started, what's to stop the person next door from doing EXACTLY what you're doing? And then why should someone pick you over them? That's the heart of the matter.
Determining your competitive advantage lies in understanding what it is you have that your competitors do not or would find it difficult to copy.
- It could be your winning personality, or it could be a secret ingredient.
- Maybe your way with words makes you the perfect writer for a business.
- Maybe your location makes you the best option around.
- Perhaps you have high-end equipment or an education/certification that isn't easy to come by.
- Are yours a set of talents that are a unique combination, difficult to find?
Get a feel for these answers as they relate to your business. But at the same time, do you know your competition? What are they offering? To build on your competitive advantage, you need to know the who, what, and why of those businesses. And you need to know what your competitive edge is. Can't find one? Then you've got some work to do.
What kind of questions should you ask yourself about you and your business?
Medium.com offers a great set of questions to ask yourself to learn about your competitive edge, including questions about:
- Your skill sets and combinations of skills
- Your relationships and networks
- Access to resources
- Unique experience(s)
- A specialization that's hard to find
- Great pricing model (isn't that what people look for? "competitive pricing")
- A well-known/recognized brand
- Unique process
I don't have a competitive advantage, now what?
Maybe your side hustle has just landed in your lap. You started helping out friends and neighbors, got asked to work on a project, and it grew from there. Great. But at some point, if you want things to continue growing, you've got to do some homework. Take yourself and your skills seriously to possibly turn this side hustle into your primary source of income. Not saying you have to do that. A side hustle with no mandates but something you enjoy doing is not a bad thing. But it's a hobby, not a business. Wondering if you're good enough? Maybe you skipped Step 2 Am I good enough? If you think it's time to "go pro," you've got to take the time, take yourself seriously, and do some planning. If you can't figure out your competitive advantage or think you don't have one, that's your next assignment. In general, there are four primary paths to gain a competitive advantage: cost leadership, differentiation, defensive strategies related to existing advantages (or disadvantages), and strategic alliances.
Cost Leadership – maximizing profits while providing the best possible product
According to The Balance-small business, cost leadership is probably the most straightforward concept for competitive strategy. Still, for small companies, it can be a challenge. It includes work on the following areas:
- Source research – are you getting the best pricing and quality?
- Vetting vendors – are the ones you work with the best you can afford?
- Managing shipping, inventory, and storage costs – don't waste money for efficiency
- Taking advantage of payment terms offered – pay on time or early to save
- Analyzing to predict trends – don't invest in products/services that aren't in demand
- Ensure you're squeezing value out of every penny spent
Cost leadership can also support the idea of starting small and streamlining processes to keep overhead and production costs low, reduce waste and improve efficiencies.
Differentiation – What does your target market value? Do they care?
Differentiation is not just a matter of color or size. While those things may matter, depending on your product or service, in the end, it's more about the value placed on the things you differentiate. Some things that may matter:
- Cost or options for buying small or large quantities
- Unique uses for your product
- High touch sales support and brand awareness
- Unique format (virtual, DIY options)
- Varieties available
- Unique connection to the audience
- Proven reputation
The list could go on and on. But whatever method(s) of differentiation needs to be valued by your audience. If your buyers don't care about it, no matter how different it makes you, it will not benefit your business.
Strategic Alliances – Collaboration, Cooperation, and Getting Ahead
Small businesses frequently have to deal with limited capital, equipment, personnel, IT infrastructure, etc. According to SBA.gov, pooling resources, sharing bulk purchase opportunities, and even sharing a market can boost smaller businesses. This shared approach allows you to leverage technology, take advantage of the global and now virtual economy, and expand your overall abilities through working with partners.
It sounds scary, I know. Maybe it even feels like "giving up" your edge. But working complementary businesses can provide learning opportunities, access to technology, and more significant opportunities you wouldn't have on your own. It's also a great way to expand your network. Attending conferences, training, and industry events, and community events can put you in touch with others who may be looking for the same thing. Try not to consider it as "giving up your edge," but instead growing strategic alliances that will benefit all businesses concerned. It may not work for your particular business, but it's a strategy that works for many.
If you're going to entertain this strategy, you need:
- A solid understanding of what you're offering in return for the other business's collaboration. Why would they want to work with your business?
- Complete your due diligence on any potential partner, including philosophy, culture, reputation, etc. Make sure it works with yours.
- Understand the other business's socio-economic market. Do this potential partner's target mesh with yours? Who is your market, and should you expand it, or is it very clearly defined?
- Get it in writing. Outline goals, objectives, and scheduled reevaluations of the arrangement.
- Talk to an expert and get legal advice for your joint venture. Business and profits are involved; it shouldn't be a handshake and good to go.
- Have a clear, documented exit strategy and discuss this with your partner(s). It may not work out, or you may reach the goals you set, or it may just no longer be necessary. This partnership is a business arrangement and needs to be handled as such.
Partnerships can be beneficial, or they can go the way of a bad relationship and drag everyone down.
Defense is essential – Don't let your competition beat you at your own game, but don't let your own business get in the way of your success.
Once you've been in business a while and you have a solid edge against your competition, it's time to get moving. Remember, no successful business stands still. Those other businesses are watching the field and looking for ways to compete against you. You've got to stay fresh, stay relevant, and build on your reputation. Wikipedia defines Defensive Strategy as ".. a marketing tool that helps companies to retain valuable customers that can be taken away by competitors." While the three strategies listed as "defense" may not be needed for a new small business, it depends on how long you've been floating with your business. The following defensive strategies are more a way to step back initially before possibly moving forward.:
- Retrenchment - Give your business a pause to reset. Take a step back and decide what is needed to make yourself more competitive. You may need to reduce overall expenses. Maybe you're offering too many products or services. Taking just a step or two backward can allow you to position yourself more strategically with new services or products.
- Divestiture - Get rid of assets to increase returns, providing more funds to make long-term improvements. Indeed, this is when you decide to sell things off to give yourself the flexibility to grow. It could mean selling equipment to upgrade, closing down, and selling off locations or equipment, all to give yourself room and funding to change directions.
- Liquidation - Let's hope your business is not at this point. If it is, you're looking at closing down. Not a place to also be considering making a side hustle a primary source of income.
A competitive edge is what keeps your business running successfully and competitively. The front runner is the business that customers return to time and time again. It's the business that never worries about becoming top-heavy, or obsolete, or going under. If you're starting out, these kinds of worries should be far down the road. If you run it right, you and your business may never have to worry about these problems. Understanding your competitive edge is one more important step on the way towards turning that side hustle into a full-time career.
Ready to set your goals and monitor your progress? Check out Step 5 - Setting Goals
« Return to "Money Talk Blog"
- Share on Facebook: 10 Steps for Setting Up a Side Hustle - Step #4 What makes you better?
- Share on Twitter: 10 Steps for Setting Up a Side Hustle - Step #4 What makes you better?
- Share on LinkedIn: 10 Steps for Setting Up a Side Hustle - Step #4 What makes you better?
- Share on Pinterest: 10 Steps for Setting Up a Side Hustle - Step #4 What makes you better?