Starting a business? Take a hard look at the people who are already there.

Researching your rivals is a vital step for entrepreneurs entering a market. Finding out how much revenue they bring in, what they pay their workers and how they deal with their suppliers can show you what you need to do to stay competitive—and what missteps to avoid along the way.

Yet too many small companies don't do that homework. "Entrepreneurs have a tendency toward overconfidence, and can underestimate what they can learn from their future competitors," says Clifford Holekamp, senior lecturer in entrepreneurship at Washington University in St. Louis's Olin Business School. "The competition offers a free glimpse into seeing how different ideas work out in actual practice."

Here's a look at some strategies for finding out what you need to know about rivals.

Ballpark Their Sales

It's important to get an idea of how much money your competitors are bringing in. That not only helps you set expectations for your own business but also lets you recognize "potential opportunities, partners, acquirers and threats," says Jed Carlson, co-founder and president of, a marketing and promotion platform for independent bands.

What if those numbers aren't public? Do some triangulating. Get information about the size of your industry from trade groups, analysts and consulting firms, then look for clues that let you size up competitors. For instance, says Mr. Carlson, you might find out from one source that the size of the whole market is $1 billion—and another source might say a certain company has a 20% market share. You could then peg Company X's revenue at $200 million.

The Lowdown on Salaries

Something else you can find online: how rivals pay their employees. "This is huge, because recruitment efforts must be competitive and in line with market rates," says Jared Franklin, president and founder of Chase Technology Consultants, a staffing and recruitment company in Boston. "I wouldn't have a flying chance at recruiting the best staff if I hadn't budgeted and planned for how much those individuals were going to cost my business."

Job sites can be a tremendous source of information, he says: Just plug in a job title in your field and geographic area (such as electrical engineers in Manhattan) and see what the competition is doing.

But it's not just about salaries, Mr. Franklin says. For instance, if a competitor offers benefits such as extended vacation time and he doesn't, he can address that when interviewing candidates and offer alternatives.

Get Face Time

But you can't find out everything on a computer. It's important to talk to people in the know, says Angelo Santinelli, an adjunct lecturer at Babson College. Pump anyone you can for information about your rivals, whether it's customers, suppliers or employees.

"Some people will talk to you because they have a need for recognition and will get on the phone when they shouldn't," Mr. Santinelli says. They might also like to gossip or complain, he says, such as a supplier who doesn't like the way a company is behaving.

But, Mr. Santinelli warns, "Represent yourself honestly. Don't lie."

Joe Giacalone, owner of Arch Painting Inc., often uses conferences and trade shows to speak to suppliers.

"If I know how much of a certain product my competitors are buying, I can gauge their sales volume or what they specialize in," he says. "I can ask about their reputation from the supplier's standpoint."

Likewise, he says, "if I win or lose a project, I ask why they made their decision. What did we do better, or what did my competitor do."

Some entrepreneurs also say that you can learn a lot when interviewing job seekers who used to work for the competition. Don't make phony offers just to glean information, they warn, but take advantage of opportunities when they arise, learning all you can about a rival's quotas, sales and revenue.

"A lot of gold comes out of those conversations," says R.J. Lewis, founder of eHealthcare Solutions LLC, which sells ads for health websites, and co-founder of Ad-Juster Inc., an ad-operations software business.

Go Straight to the Source

You can also learn a lot by talking to rivals themselves. For instance, when he founded a chain of podiatric medical centers, Mr. Holekamp of Olin Business School personally visited the competition to see what choices they made and how they operated.

Sometimes he went in anonymously, and other times he introduced himself as someone prospectively joining their industry. More often than not, he was surprised by how helpful and forthcoming they were.

Once again, though, tell the truth. "The ethical line is crossed when you misrepresent yourself in order to seek access to information not readily available to the general public," Mr. Holekamp says.

And, of course, be personable. "If you take a friendly approach, most competitors will be happy to share experiences and tips," says Mr. Giacalone. If all goes well, you might even "trade leads that better suit each other's companies."

Don't Lose Your Focus

As you do your research, though, keep some perspective. A rival's suppliers and former employees may have an ax to grind. Information you get from trade associations and job listings may be outdated.

Above all, don't forget that the most important issue you face is whether customers will or won't buy your product, not what your competition is doing, says Steven Gold, senior partner for entrepreneurship at Babson College.

Dustin Wells, chief executive officer and founder of custom software company Headspring LP, learned that the hard way. In 1999, he formed a startup that let parents monitor their children at child-care centers using feeds from on-site cameras. His plan was based on very little research—he visited one or two websites with similar business models. He didn't talk to potential customers until after investing in equipment.

"We trusted the perceived success of our competitors," Mr. Wells says. "Our competitors failed, and so did we, because parents and child-care centers simply don't have the money or enough incentive to pay for these services."
