Most founders I talk to have a clear mental picture of their competition. There is the well-funded startup getting press, the established player with the bloated product, maybe a couple of others. They go into positioning exercises with this list in hand. And then they build their entire positioning around it.
This is the most common positioning mistake I see. And it quietly undermines everything that follows.
What you think competition means
Here is how most people think about competition: it is every company offering a product that could solve the same problem yours does. If you build project management software, your competition is other project management software. So you go and research the feature lists, pricing tiers, and ratings of those companies. You figure out where you win and where you lose, and you build messaging around that.
The problem is that this view of competition is almost always either too broad or too narrow. It describes the market in theory. It does not describe what is actually happening in your sales conversations.
The question that changes everything
The right place to start is not “who competes with us?” The right place to start is: what would a customer do if our product did not exist?
That question surfaces the real competitive alternatives. And the answer is often something that does not show up on any competitive intelligence report.
For a lot of early-stage B2B software companies, the honest answer is: the customer would use a spreadsheet. Or they would hire an intern. Or they would cobble together a workflow using the limited functionality buried inside their existing CRM or ERP. These are not glamorous competitors. They do not have a press page or a Series B announcement. But they are the thing standing between you and a signed contract.
In enterprise software, somewhere between 20 and 30 percent of deals are lost not to another vendor, but to “no decision.” The customer looked at the problem, looked at the cost and friction of switching to a new solution, and decided their current way of doing it was good enough. That is the status quo winning. And if you have not built your positioning to beat it, you are leaving a large portion of your market on the table.
Two categories to focus on
When I work with companies on positioning, I think about competitive alternatives in two buckets.
The first is the status quo: what the customer is doing right now. Spreadsheets, manual processes, an internal workaround, or just doing nothing. This is almost always your toughest competition in the early days, because switching costs are real and the familiar feels safer than the unknown.
The second is whatever else lands on their shortlist when they are actively evaluating solutions. These are the two or three options a prospect is comparing yours against right at the moment of decision. Not every solution that could theoretically compete with you, but the ones that actually show up in deals. Your sales team knows who these are. If you want an accurate read on your real competitive alternatives, stop asking your product managers and start asking the people running your demos.
The phantom competitor trap
One mistake I see consistently is what I call phantom competitors: companies that could theoretically compete but never actually show up in deals. Founders include them in their competitive analysis because they exist on the internet. But their prospects have never heard of them.
Positioning yourself against phantom competitors wastes your precision. Every claim you make to differentiate from a competitor your prospects never considered is a claim that fails to move them. You dilute the positioning by spreading it too thin.
Your positioning should be a sharp, clean argument for why you are the best choice versus the specific alternatives your prospects are actually weighing. That sharpness only comes from starting in the right place.
The 0-1 version of this
When you are closing your first ten customers, you almost certainly do not have a well-known competitor problem. You have a status quo problem. The prospect is asking: why should I change anything? Why is this worth the disruption?
That means your positioning has to make two arguments: first, that the current way of solving this is costing them more than they realize. Second, that your way of solving it is sufficiently better to justify making a change.
Neither of those arguments is about a competitor. Both of them are about the status quo.
Get specific about what the current workaround actually costs. Is it three hours of manual work per week? Is it a spreadsheet that breaks down once the team grows past ten people? Name it exactly. Then build your differentiation from there.
That is positioning that wins deals. Not against an abstracted field of competitors, but against the actual alternative your customer is weighing this week.