Looking for a business? How do you know if there is too much local competition?

 Sometimes it seems like drugstores are sprouting like weeds. Or maybe in your town, it’s pizza joints or burger shacks. How can they all survive along one main drag?


Where to locate a new business is perhaps the pivotal issue for entrepreneurs. So how can you tell if there’s too much competition? When you are considering a particular business to buy, you begin to notice lots of similar businesses in your region. It’s only natural to wonder if the odds are stacked against you before you’re even out of the starting gate.

Before you get cold feet, you need to remember the other side of that market coin — demand.

The market may seem fully developed, but that may only indicate exceedingly high demand. It’s possible the existing market still can’t satisfy demand, and there are troves of eager customers just chomping at the bit for some new take on burgers, pizzas, coffee or whatever service or product you want to offer.

So how do you know? Just like every other question a budding entrepreneur wonders about, the answer lies in research. With a franchise, you’ve got a ready-made network of support to tap. To find out about competition, we suggest the following strategy.

Four Simple Steps for Assessing the Market Competition

Talk to Existing Franchisees: Start with franchises who have been operating in the region for some time. Learn from them if they think there’s more growth to capture in the market. In other words, have their businesses reached a ceiling on growth? Also talk to franchisees who have only recently opened. Ask them about their experiences starting in the current economy. Is competition so stiff it’s difficult to get a foothold?

Check Other Regions of the Country: Ask the franchisor if there are regions where this type of business has a particularly high saturation rate and talk to franchisees there. Maybe they’ll warn you off, saying it’s too tough to earn a good living with such stiff competition. Or you might learn that the range of competition creates a well-cultivated demand stream and business is great.

Conduct a Complete Market Survey: Start by looking through google and the yellow pages. Then do the old-fashioned thing, get in your car and drive the region to see what these operations look like. Is there plenty of traffic: customers going in or out, or is the place dead? You’re not only looking for quantity but quality.How good are these businesses?

Analyze the Competition: Is the competition mainly from independent businesses, franchises, or big chains? You will want to assess whether you may be hitting a different market segment. Will you be able to sufficiently differentiate yourself in this market to enable you to stand out? This question often hinges on product selection, sales skills or other type of business panache.

Some types of businesses seem to find room even in a glutted market. Take maids services, for example. These types of franchises have a very low failure rate, likely as a result of so much good marketing. Just remember, finding customers can be the easy part. The challenge lies in managing and retaining good employees.

The difference between success and failure often derives from vision and possessing the skills and work ethic to make that vision a reality. So really, there may always be room for a great operator with a first-rate business plan.


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Contact Dan Citrenbaum to help you create the career you’ve always wanted. As a franchise coach, Dan brings years of experience helping people select and buy a franchise or existing business. You can reach Dan and get his Free Assessment here. https://www.internsoverforty.com/free-business-assessment/ 

© Dan Citrenbaum 2015