Get To Know Your Competition

April 13, 2006

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If you are serious about being a subcontractor and selling your company's products or services to a prime, you'll need to know how and why your competition has been successful at getting sub-opportunities.

Besides knowing the customer (the prime) and understanding your capabilities, you'll also have to research your competition.

Your goal here is to gather as much intelligence as you can about these companies, including the type of work they are doing for prime contractors, how much work they are getting, how they work with a particular prime, what they do best, etc.

However, getting this information is easier said than done. In your initial contact with the prime company, you can try asking about these issues. If the prime is not forthcoming with information, drop it and do some detective work on your own.

There's an element of practicality that needs to come into play here since all the answers about your competitors will probably require considerable time and effort. If you're looking at a big opportunity and it really does feel like there's a good fit in there, you might want to do as much as you possibly can. If it's not that type of a situation, we recommend you spend less time and effort. Do what you can, but consider rate of return on investment when you decide how to spend your time.

Are you competitive? As long as we're on the subject of competition, we'd like you to consider another important issue: How competitive are you in the marketplace? Are your products or services priced "right"? Are your prices competitive? Do they reflect your true overhead costs or do they just reflect some kind of average overhead rate that "seems" right? Could your prices be more competitive? Are you sure?

The hard fact is that unless you know what your true costs are, you can't control them. You can't ever know for sure what your overhead is, or whether your prices are "right," or whether you are being as competitive as possible.

If you don't really know what your costs are, we strongly recommend that you look into some type of activity-based costing, in which you look at everything--from your lights and heat and wages and unemployment, etc. to the costs of each activity, like sending out an invoice or preparing a proposal--and put a cost on it. Only then can you know your true costs and only then can you be sure about your pricing and about how competitive you can really be. (For more details on the ABC method, see our discussion on pricing.)

You can look on the Internet for information on average rates, average salary information, etc. In addition, the U.S. Census Bureau has business statistics that you can use to gauge such things as whether you are salary-competitive with the industry. You can also obtain general average-rate information with regard to your industry from a consultant perspective from the SBA's Business Information Centers (BICs).