When I ask an entrepreneur what their competitive advantage is, most point to their product and say it’s better. Of course, they spend ten minutes citing anecdotal stories to “prove” it.
My definition of a competitive advantage is that it increases in revenue by 30% over the competition or a decrease in cost by 30%.
Here are five sources of competitive advantage:
–Channel access
–Recurring revenue
–Platform based solution instead of singular products.
–Network effects in action–the value of the product increases with the number of users
–Virality (not the same as network effects, users invite other users)
These advantages give your business the ability to scale. Scale comes from revenue increasing faster than cost.
In raising funding, competitive advantages can make the difference in closing an investor.
The key is to quantify the effects of the advantage in dollars. If you just say you have it then it will convince no one. You must demonstrate with numbers.
Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies