How Your Small Business Should Handle Copycat Competitors You're busy growing your own successful business when a "competitor" comes along, copying your every move. What's a small business to do? Let's find out.

I still remember the big plagiarism lecture from high school — this was back in the early days of the Internet, and our teacher said, "If you rip a report off the Internet and use somebody else's work as your own — it's a legal violation!"

Now, when it comes to a school report, it's pretty obvious when somebody is copying you. But in business, that's not always the case, and even though there's a lot of copying going on, the legality of it is up for debate.

Sometimes, it's pretty blatant. But other times, your copycat might just be someone putting their own spin on your ideas (and maybe even doing it better). Either way, you have to figure out how to deal with copycats — whether they're illegally stealing your work or becoming legitimate competition.

Related: How to Maintain Your First-to-Market Position in a Copycat World

1. First, be flattered — then do a legal checklist

When you see someone copying your business, your first reaction is probably going to be infuriation — you've worked for years on an idea, and now someone's just swiping it? That can definitely be frustrating. But really, you should be flattered. Think about it: "Wow, someone thinks we're successful enough to copy? I should get a pat on the back."

So, if someone is copying you, be proud.

Once you've congratulated yourself, do a mental checklist to see if any actual laws are being broken. No need to call an attorney (yet) — just check if any of your filed trademarks or copyrighted graphics and text are being used by your so-called competition. You should also see if they're committing any trade dress infringement — in other words, when the look and feel of their product is close enough to yours to confuse a consumer.

In the early days of my company, Trainual, we had a competitor go so far as to copy our entire website. They were so blatant and lazy about it, their copy even used "Trainual" in a bunch of places. At this point, we got an attorney involved, and a simple cease and desist letter took care of it. And if you've got someone copying you that obviously, you should probably contact an attorney, too.

2. Is your copycat even doing a good job?

I remember a friend coming back from a trip to New York years ago with a bunch of bootleg VHS tapes he'd bought on Canal Street — tapes that someone had just recorded from their seat in the movie theater. They were horrible — blurry shots, people walking in front of the camera — the tapes were pretty much unwatchable. It wasn't like I was going to skip seeing a movie in the theater because I'd watched those bootlegs.

It's the same with business: If you've got a competitor who's essentially a low-quality bootleg of your business, they're not much to worry about. Needless to say, the competitor who copied our entire website is no longer around — when a copycat tries to sell such a poor imitation, it's not one to worry about.

But sometimes there can be cause for concern. What if your copycat is doing a good job? Or, worse, a better job than you? Now you've got some legitimate competition. Think: How are you going to compete against them in the future?

Related: Want to Turn Heavy Competition Into an Advantage? Copy Your Competitors' Best Features.

3. Setting yourself apart with a strategy

Jeff Bezos once said, "If we can keep competitors focused on us while we focus on the customer, ultimately we'll turn out alright." Meaning, if you spend all your time worrying about your copycat competition, your business will become a series of anxious, knee-jerk reactions, and you'll end up building the same products or producing the same services as everyone else. Instead, focus on your customer and what they want. In doing so, you'll set yourself apart from the people who matter most.

Take Southwest Airlines for example. When they were first starting out, they had to find a way to break into a pretty competitive airline industry. So, their goal was to become a low-cost carrier, and they looked for customers who wanted to get from one place to another as efficiently as possible.

They did this by making every seat on every plane the same — which meant they didn't need to assign seats — and could swap people out of flights pretty easily. (If you didn't know, Southwest used to be the only airline that didn't have change fees.) This tactic works for Southwest's low-cost carrier strategy, and now they have an insanely loyal following.

Other carriers, whose strategies are based on different fare types and classes of service, couldn't copy Southwest's open seating model, even if they found that people liked it better. That's because their strategy won't allow them to sell every seat like it's the same, and so the "efficient trip" customer is going to fly with Southwest. Instead of focusing on what other airlines were doing, Southwest focused on what their customers wanted. And it paid off.

Build your strategy around your customers, and copycats will always be one step behind you because they won't know what you're doing next. Eventually, your customers will recognize you as the original, and if your copycats don't differentiate themselves, they won't be around very long.