In nearly any city, there are literally hundreds of web design firms. How do I figure out which ones are my competition?
Because barriers-to-entry are almost non-existent (“I have Photoshop and will design for food”), almost everyone is your competition… and yet few really are.
Instead of focusing on individual firms as your competition, what you should do is step back and analyze your competition as a set of distinct groups: large agencies, small agencies, local freelancers, overseas freelancers, in-house employees. Each has a business proposition for your potential clients. How do you stack up against each group? What do you bring to the table that will be unique? For which types of clients do you not match up well and does that reasonably rule out targeting that type of client? Where do you blow the competition away?
Example: for my consulting firm, I directly compete with small agencies, local freelancers, and overseas freelancers for all of my clients. I do not match-up well with the other groups, so I don’t bother competing against them. I’m less expensive and more responsive than small agencies; I’m better able to handle larger projects than most local freelancers. I’m local and speak the local language, so overseas freelancers are the least likely competition for me.
If you market your business across the world, overseas freelancers will provide more competition, since you’re entering their markets as well as they’re trying to enter your market.
Once you start this level of analysis of your business, it becomes easier to figure out how which marketing messages will be important and how to deliver them in the most effective way.
For freelancers just starting out, though, most likely you are more focused on landing clients — any clients! — and that’s smart. Your biggest business threat when you first start out is your own cash flow issues: most businesses fail in the first year because they run out of cash. If you focus on landing clients that will pay you well for the job you do and return regularly to have you do more work, you will position yourself to succeed while your competition fails.