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Ask HN:How much is too much competition to enter a market?

3 points by justin0469 ↗ HN
Competition is good but how much is too much competition to enter a market?

I had an idea for a business with a relatively small number of barriers to entry and knew of a couple competitors. In doing more research, there are 5 national competitor with big contracts already. Sure there's nothing like it locally but why would someone take my product over that nationally available product once they realize it's available?

I've talked to many random people and they love the idea and have no idea about any competitors. is it ok to work on a product and investor pitch making it clear the plan is to be bought out by a competitor?

EDIT: we're having some good comments here, can we get this out to more people? I greatly appreciate the feedback so far.

16 comments

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codegeek
What is your target market size in general ? I mean are you are going after a specific niche where you expect to get about 1000 paying customers total OR you are looking at a consumer app where you want millions of users ?

I would not worry about too much competition. I would rather look at how much piece of the pie is potentially available (depending on the answer to the question about market size above). For example, you say that there are 5 national competitors for that particular idea you had but locally, there might be opportunity. So why not start local and talk to your potential customers ? Again, depending on what your target audience is and their market size, it could be very likely that there still is a big piece of the pie left for you.

justin0469
The target customer are mid to large restaurants and bars. So, it could be a local idea but long term would be national. Seeing the same device/software at whatever restaurant you go to might be important and make it harder for me to have a piece of the pie.

My biggest concern is how important is it to differentiate myself? The competitors have had a working and refined product for months or years so chances are they'd have a better product. They charge monthly with no upfront hardware costs and have small trial contracts with Applebees, Chilis, etc.

I realize there's 100 companies that make toilet paper and most survive, I'm just not sure if that is an appropriate analogy.

peterxy37
IMO, without differentiating yourself from competitors, you have very less chance of success. Probably you can provide product/service cheaper with same quality. As you are starting local, you could probably differentiate with better support..

toilet paper industry and software industry works differently . They have very different dynamics. You can not conclude anything in general from traditional industry for software industry.

justin0469
I agree and that's the reason for my hesitation. Yes, I have ideas that would make it better than theirs. They just have a lot of time and money in their favor already.

That being said, I know personalized and better support is worth a lot.

Is it OK to flat out say that the plan is to be bought out by competitors because the products are similar?

AznHisoka
You are focusing too much on what to tell investors.

Focus instead on your messaging to potential CUSTOMERS instead.

duiker101
If you really think you can do better than them, go for it. If you have something of value then users will choose what they prefer.
justin0469
I do believe in the end I'd have a better product but they have months or possibly years on me when it comes to design and money. How hard is that uphill battle? When is there TOO much competition?
duiker101
Way too much competition is when you want to make another Twitter client or an RSS feed.
AznHisoka
"I've talked to many random people and they love the idea and have no idea about any competitors."

I would recommend not talking to random people. Talk to people who are in your target market instead. And don't just ask if it's a good idea. Ask them if they would want to pay $X per month for it.

justin0469
I suppose I should clarify - my paying (target) customers would be the restaurants/bars but their patrons would be the ones using it. So, I'd consider anyone who goes out to eat to be the users.

I do recognize there are two perspectives: 1. what the paying customers wants (restaurants/bars) 2. what the users want (patrons of restaurants/bars)

AznHisoka
the users should then be 10% of your concern, since they aren't the ones buying the product. What the restaurant wants should be the focus. Satisfy their needs and you'll satisfy their customers as well, since they just want to make their customers happy in the end.
justin0469
True, thanks for the insight. I appreciate all the comments so far, helps me feel out what's next.
justin0469
Sounds like most people think I should keep going. I'd appreciate any other comments people have...