One of the dangers of operating your own business is that daily operations keep you so busy that it's tough to keep track of what's happening with the competition. However, just as you needed to analyze your competition prior to opening your business, you need to monitor what the competition is doing so that you can respond effectively — before your customers start shopping elsewhere.

If, for example, a competing business launches a major online catalog for its products, you'll need to assess whether you should follow suit. Will the competition's catalog fulfill your customers' needs more efficiently than your bricks-and-mortar store, for example? Or are there ways to let your customers know that you can provide better service for them in the store than they'll get online?

The Big Picture

There's a bigger issue when it comes to competition, too: You need to monitor what's happening in your industry and in the local economy — the big picture. If a major employer is pulling out of your area and taking a significant number of jobs with it, the customer base might no longer be able to support all of the competing businesses. You need to take steps to ensure that yours is one of the businesses that survives.

Charge What You're Worth

Charging a rate for your goods or services is related to your competition. If you price yourself significantly lower than the competition, you may be sending the message that your products are lower in quality. Price them too much higher, and the competition will consistently gain the customers who are looking for better value. You need to find the middle ground where you're charging what you're worth but also keeping pace with the competition.