Starting a business is an uphill battle. Depending on how you count it, in the United States, approximately 70% of startups between years two to five will fail.  Ecommerce and tech startups are particularly vulnerable, failing a staggering 80% of the time. The reasons why startups fail are complex, but it’s often a combination of poor market fit or inadequate marketing and sales strategies, two categories where big companies can press their advantages.

But it's not all bad news. Startups can win if they focus on their unique strengths as a small firm. In my case, my co-founder and I bootstrapped our business to a $40 million exit – and our market was full of enormous and even publicly traded companies. In fact, at the end of our tenure I was more worried about new market entrants as opposed to the “big guys”.

Small SaaS companies have a number of superpowers that allow them to both compete and win against established market competitors – and they’re not as obvious as you think. If you’re struggling to compete in a market with established competitors then consider the strategies below to help you grow your business, defend your market, and push upmarket towards considerable profitability.

Go Niche or Go Home

Founders are often given this simple piece of bad advice: that you need to focus on a huge TAM (total addressable market) to improve your chances of reaching significant revenue. Sure, you want to be certain that your market can pay for your product, but focusing on big TAMs fundamentally misses one of the biggest opportunities for small firms: the ability to tolerate niche markets and build extremely loyal customer bases.

Peter Thiel, member of the “PayPal Mafia” and entrepreneurial genius nails this in Zero to One,

“The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors. Any big market is a bad choice, and a big market already served by competing companies is even worse. This is why it’s always a red flag when entrepreneurs talk about getting 1% of a $100 billion market.”

If you’re trying to serve an enormous and competitive market with your product, consider tightening your focus and product offering. Don’t be afraid of small market opportunities; they are often ignored by the big companies or may be serviced by ineffective competitors, particularly if the issue you’re solving is a tough one. Solve a difficult problem in a small market and you may be able to extract significant profits while delighting your customers.

Scale the Impossible

Small companies must be quicker to adopt, understand, and employ new technology in the market. This “technological agility” makes small companies more likely to find ways to use new tools (think AI, for example) to scale systems previously thought to be unscalable and move towards market disruption. By contrast, many big companies are reluctant in adopting new technology because they don’t want to accidentally disrupt their own market.

Reid Hoffman, billionaire entrepreneur, VC, author, and podcaster, writes in his book, Masters of Scale, if you can take something that doesn’t scale and make it scale, you’ll be an enormously successful entrepreneur. Put a different but similar way, if you can take something hard and make it something easy, you’re more likely to be successful.

Don’t compete with big companies on their terms. Find ways to use cutting edge tech to innovate your product and effectively displace the “old ways” of doing things. I address this in my book, Startup Different, “The key to this is understanding that hard or impossible problems are relatively difficult. That is, they were hard or impossible in the time they were assessed, but new technologies unlock doors that previously weren’t available.” Use technology that big companies didn’t have at their disposal and that they won’t be quick to adopt to displace them in the market.

Publish Code Every Day

Yep, every day. Maybe even multiple times a day. Let me explain.

First off, a “speed to market” mentality is required for all startups, but particularly SaaS firms. Your business needs to be faster than the big guys to meet market needs with your product. Wow your customers by frequently publishing small changes to your software based on patterns in customer feedback. Ultimately small companies have a potent combination of being able to code quickly, willing to code quickly, and not having much tech debt.

It’s worth mentioning too that most code should be developed for the purpose of winning new business. Yes, you should have an idea of what you’re willing to do so that you don’t overly “future sell” your offering, but it’s exceptionally important that your development and sales groups work together to drive new business. It’s not publishing for the sake of publishing; it’s publishing code often to win more deals.

There are other benefits here too. Publishing code often avoids “big bang” launches and gives you the ability to roll back in the case of an oversight. It also keeps your development group motivated as they’ll be able to quickly see the impact of their work.

Still, don’t cut corners. Release the smallest incremental product improvements at a rapid rate, while making sure you’re completing all appropriate testing and quality control. Before long, your team will be comfortable with the process, and launches won’t be intimidating.

The best part of launching code frequently is that big companies just don’t.  Established businesses make decisions slowly because they’re overly bureaucratic and they’re generally averse to custom code. They are also likely working through massive tech debt, and making changes to anything could have unforeseen impacts. Their only way to manage innovation like this internally is to create “skunk works” that operate like startups, separate from the mothership.

Customer Service is a Product Line

Yes, you read that correctly. Customer service is a product line, requiring the full investment and respect of any other product your company delivers. Most founders probably start their business hoping they won't need customer service. But that’s the wrong take: you will have customer service so make those lemons into lemonade.

My experience and research confirm that effective first responses to support tickets have the twin benefit of satisfying the customer quickly while keeping costs down, thereby improving profitability. Because of my company’s exceptional service, my co-founder and I had customers asking for more of our “stuff”, setting the table for additional and otherwise inaccessible revenue.

The reality is small companies can afford to lean into over-the-top customer service because they have fewer customers. Big companies need to scale their support to a larger customer base, and this generally results in low quality experiences for customers (have you tried calling an airline lately?!) You absolutely must do support better than established competitors; it’s too valuable to overlook as a cost centre.

Trickle Down Empathy

I know, there’s a ton written on empathy these days, but the data supports that empathy directly impacts your startup’s profitability. A recent survey from a global nonprofit that helps build better workplaces for women found that:

• 61% of people with highly empathetic senior leaders report often or always being innovative at work
• 76% of people with highly empathetic senior leaders report often or always being engaged
• 86% report they are able to navigate the demands of their work and life – successfully juggling their personal, family, and work obligations – when their manager is empathetic.

Empathetic leadership unquestionably makes your company better. As a founder you need to move away from the stereotypical “manager of resources” to a “coach of people”. What I found was clear: the more we invested in people, the more they invested in our business.

Interestingly, it turns out that leading with empathy is something that “trickles down” to the rest of the business. We started growing exponentially year over year, we deployed better code faster and we got more compliments on our customer service than ever.

These are your small company’s secret weapons against big competitors. Improve your odds of success by, combining all these lessons into your business strategy: Scale a difficult problem while frequently publishing code to win deals, and emphasise exceptional customer service as you lead empathetically in a niche market.

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