During the past year a friend started a software company that is showing great promise.

This person has already founded one successful company that is very profitable and is even more excited about this second venture.

He was so convinced that this new company would meet his expectations that he invested more than $150,000 of his own funds before seeking outside investors.

After developing his initial offering, he decided to attend an industry convention to "case out the market." It would be an understatement to say that he was shocked to find three other companies offering the same solution that he had produced.

His story is not unusual. Many entrepreneurs scrimp on the competitive research before going ahead and spending money and time bringing their products and services to market. This "competitive information dilemma" facing new businesses may be due to confusion about how to acquire the information, a fear that it may cost too much to find the information or an unwillingness to spend the time.

As a rule of thumb, look for key information from the following five sources.

. Secondary research. This includes data from industry journals, the Internet, commercial services and government data banks. Please feel free to contact me at the e-mail address listed below if you'd like some specific recommendation in any of these areas.

. Suppliers. These are distributors and wholesalers that supply products and services to you and your competitors. These companies know valuable information about what is selling, what differentiates products, which companies are doing well and what customers may be looking for in the future.

. Industry associations, conventions and trade shows. Associations may offer published information about the industry, trends, number of companies, size of market, etc. Conventions give you the opportunity to hear from competitors and consultants and to engage in conversations with industry players. Attending trade shows provides access to active competitors, their printed media and product displays.

. Competitors. Though it may seem strange to consider the option of contacting a competitor directly, the information may well be worth the effort. Some competitors may become your future partners as you offer the opportunity to expand into different geographies or to fill gaps in each other's offerings.

Competitors' Web sites are a great source of information. After visiting the Web sites, go to Google to see who links with your competitors. To accomplish this task, go to the search box, type the word "link" followed by a colon and the URL of the competitor's Web site (for example, link:www.ibm.com). The resulting information will give you a list of who links with and/or works with your competitors.

You may even want to consider buying a competitor's product. You may learn more about your competitor's products, customer service and way of doing business through a purchase than with any other method.

. Customers. Talking to the individuals who buy the products is one of the most important sources of competitive information. Not only can you create a list of competitors, but you can also find out what the customer views as the strengths and weaknesses of the competition and whether they would be willing to move their accounts at a future date.

Being smart about your competitors translates into cost savings and revenue opportunities, and it helps avoid false starts. I have never heard a CEO tell me that he regretted increasing his knowledge of the competition.