Jason Fried

July 10, 2023

You only compete with one thing

There's so much chatter and advice out there about how to handle "the competition".

How much should you worry about them, what you can do to beat them, how much should you pay attention to what they're doing, how you should respond when they release or say something new, what you should say when a customer compares you to them, etc.

Essentially, lots of they's and them's.

Of course you exist in a market with multiple options, but that's not your real competition.

Your real competition are your costs. Yours, not theirs. You, not them.

You ultimately stay in business when you make more money than you spend. The amount you make depends on a number of factors, many surprisingly far outside your control.

But one of the few controls you have in business is cost control. Bills don't materialize — you amass costs, you put yourself on the hook. Whether it's hiring and salaries, software and subscriptions, infrastructure and hardware, office space or not, marketing/advertising or not. The market may determine the prices, but you determine the costs. What are you willing to pay for, and how much, is your call, no one else's.

Make your economics work, and you're going to stay in business, no matter what they are doing.

This is why the number of customers you have, and your market share, doesn't really matter when it's compared to another company's market share or customer count.

Take Asana. It would be fair to say Basecamp competes with Asana, in a traditional sense. But in 2021 they lost $285,000,000. In 2020 they lost $210,000,000. And in 2019 they lost $118,000,000. And they're on track to lose even more with over $370,000,000 in losses booked for the trailing twelve months. That's closing in on a billion dollars in losses over the last four years. Check the numbers for yourself.

You may have seen their ads in the airport, sponsored posts in your Linked In feed, or their logo front and center at a conference, so it would be easy to say they're "winning".  We aren't in the airport, we aren't buying ads on Linked In, and we aren't sponsoring conferences. You so you might say we're losing.

Except that we're profitable. In the competition against our costs, we're coming out ahead. We have enough to run a successful business and serve our employees and customers well. It doesn't matter what Asana (or Monday, or Click Up, or any other company in our space) is doing. We're doing what we need to do to win against losing. We're running a stable business our customers can count on, improving our product for those customers every few weeks, and maintaining a long-term track record of corporate health.

Or take HEY. HEY has tens of thousands of paying customers. For us that's a win. For Google/Gmail it would be a huge failure. They need a whole lot more to make something worth it. We need a whole lot less to make it a spectacular success. HEY has tens of thousands of users. Gmail has a billion. So are we "losing" to Gmail? Or are HEY and Gmail both doing great, given their respective positions and requirements? The latter.

Bottom line: Make your own business work. It doesn't matter what everyone else is doing.

Of course your position in the market, and the perception of your brand, influences customers' purchasing decisions. And of course you need to be in the arena to compete, so you can earn customers who provide your revenue. But you can give yourself a better chance by staying small, keeping costs in check, and building a larger margin buffer. The lower your costs, the fewer customers you need to come out ahead.
More heads down, less looking around. The competition is your spending.


About Jason Fried

Hey! I'm Jason, the Co-Founder and CEO at 37signals, makers of Basecamp and HEY. Subscribe below to follow my thinking on business, design, product development, and whatever else is on my mind. Thanks for visiting, thanks for reading.