I experienced one of the most valuable lessons in the late 90s when I ran my first business, Quill Publishing. At Quill we had achieved the majority of our business and financial goals and had taken great strides to carve a nice niche for ourselves. Everything seemed to go exactly how I had envisioned and hoped.

Until one day…

One of our competitors invited me to his office to discuss a possible joint business venture. After finishing a lengthy discussion, as a courtesy, the owner offered to take me on a tour around his facility. Sure, I answered. That quick 10 minute tour was very revealing. I was busy running my business and had forgotten about one of the basics of running a business.

Invest time analyzing what the competition is doing.

As we walked through the office, I started noticing a few things that our competitors did a lot better than what we did.

After I flew home that night, I stayed up coming up with a list of things that we should improve upon. Some of the items were marketing initiatives we needed to consider while others were focused on customer service. Three months later, we were able to increase our revenue by an additional 25%. Besides the nice increase in sales, I learned few lessons that I keep going back to.

1. Be honest with yourself: what does your competition do better? And yes, you do have competition out there. Too many times we discuss projects with our clients and when we inquire about their competition they tell us “we have no immediate competition we are worried about.” Many business owners are either arrogant or ignorant. Sometimes they are both. They think they are the best in class. Yes, there are things you do better than competition, but why don’t you be honest. What are the main things they do better than you? Can’t think of anything? Go back to the last time you lost in head to head against your competitor. Why did the prospect choose to work with competition over working with you? Your competition might have a price advantage, they might position their product or service in a different way that better appeals to certain market segment, or they might simple market themselves a lot better than what you do although you have the better product. Understanding your competition strength is essential in crafting your own strategy.

2. Evaluate the competition website and copy: Not all copy is created equal. Web copy can tell you a lot about the type of customer your competition is targeting. Copy created for small business owners is a lot different than copy created for a VP of marketing. Navigate through their site, is it user friendly? How often do they update it? What do you like about their site design and layout? What don’t you like?

3. Analyze what sites they publish articles on: Spend time looking at what sites competitors write for, where they publish articles, and who interviews them. Assess the quality of these sites. If your competition writes for well known magazines and blogs, you have your work cut out for you. Consider approaching the same sites with article ideas. It is not always a numbers game online. It is more about relationships. Get to know to writers and bloggers and the relationship will pay off.

4. What sites link back to them? How does your competitor get their link backs? Use yahoo site explorer to create a list of blogs that link back to them. Again, you have to establish contacts with each of these blogs. Do NOT spam bloggers. Invest the time to get to know them. They will start linking back to you as well.

5. Attend their Webinars, buy their books, and download their white papers: Webinars, books and white papers will provide great insight into what the competition is doing. Keeping up with the latest in your field is a must if you hope to lead in it. Each of these methods provides new horizons and opportunities to expand your knowledge.

6. Analyze their PPC campaigns: Tools such as SpyFu will give you an idea about the different words competition is bidding on and their daily budgets. Monitor what days and ranking competitors are bidding on. These are great starting points if you are looking to create your own PPC campaign.

7. Follow them on social networks: whether it is through Twitter or Facebook, establishing relationships with your competition on different social networks they are active on is crucial. I find that people reveal a lot of information about their business on these networks. At a minimum, you will maintain friendly relationships with competition.

8. Subscribe to their RSS and mailing list: follow your competition blog by subscribing to their RSS feed. If they have a mailing list, make sure to join their list. Topics discussed on blogs and mailing lists will keep informed about your industry and can be a great inspiration for topics of your own.

You can use any of these tools to stay informed about what competition is doing. By the same token, you are better off using the same tools to create relationships with people in your field. This might go back to the heart of your business philosophy and how your run your company. But that is a topic for a later discussion.

Before we leave, tell me, do you follow what your competition does regularly? What tools do you use to follow them?