Strategies for Success

How do you build a small business? Where do you start? How do you grow into a medium sized business? What do you focus on first?

What’s holding you back?

• Is it?angst?...you think you don’t know much about business theory
• Intimidation?... you think its really complicated and getting into that area makes you nervous, or
• Imposter syndrome…you think you're in over your head

Well, at Tinderbox , we believe the ingredients of small business success can be achieved by combining;?

• basic common sense
• simple arithmetic
• and the knowledge and application of some simple key ideas and business principles which are universal.

Let me set out a few of these key principles & ideas to illustrate what I mean;

1. Understanding the 5 key parts of every business
2. The 'Iron Law of the Market’
3. Pricing and methods of pricing
4. Ways to increase revenue (or turnover) which is of course the key part of growing a small business

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The Five Parts of Every Business

Any business can be defined as follows;

• It creates or provides something of value
• That other people want or need
• At a price they are willing to pay
• In a way that satisfies the customers needs and expectations
• And provides the business sufficient revenue and profit to make it worthwhile for the owners to continue operation

Take away any of these things and you have something other than a business.

Take away...

• value creation and you have a hobby
• demand and you have a flop
• selling the value created is a ‘non profit’ company
• not delivering what is promised is a scam
• making sufficient profit and the business will soon close

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The ‘Iron Law of the Market’

This is simply – if you don’t have a large enough group of people who REALLY want what you have to offer, your chances of sustained business success are slim. It’s a bit like throwing a party and no one turning up. This is where market research comes in. It’s the business equivalent of looking before you leap and is often missed or a short cut taken because the owner or entrepreneur is so emotionally wedded to their idea that they are convinced it’s the next ‘big’ thing. Neutral and objective market research is priceless.

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Pricing and methods of pricing

Everything has a price! What is that price? How do you set the price and how do you maximise it without being too expensive or uncompetitive? How unique is your offering? Who are your competitors, what do they offer and what do they not offer. Is your offer highly differentiated, can it command a price premium, or should you follow a low price / high volume business model?

Have you conducted this analysis?

The price set in the end has to be supported by the reasons why it is what it is. You often hear the phrase – are you comparing ‘apples with apples’. If you are not comparing the same thing, then pricing could be justifiably different between 2 offers. Competitor and market analysis is very important in understanding not only if you have something of value, but then how to price it to optimise profit and turnover.

So how can you be confident you are setting the right price – a price which sufficient numbers of customers are willing to pay? Well here are 4 ways to set price;

• Replacement cost plus margin – if you had to replace this item how much would it cost, including a sensible margin.
• Market price – what do other things like this sell for and adjust from there, depending on your offer.
• Discounted cash flow or NPV – How much is this worth in the future if it can bring money in over time.
• Value comparison – who is my product or service particularly valuable to? Target that market and set the price accordingly.

Imagine doubling your prices. If you would lose less than half your customers, then this may be a good idea?

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Increasing Revenue

Believe it or not, there are only 4 ways to increase revenue. The first two are obvious and self explanatory;

1. Increase the number? of customers you serve or supply – this involves raising awareness, enhancing reputation, getting a referrals system working, increasing convenience or making it easier for customers to buy from you, creating desire, etc.
2. Change your pricing – we spoke about this above.

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The next two are less obvious, until you think about where you see it in day to day life;

1. Increase average transaction size – upselling and cross selling – for example offering necklaces, scarves and shoes to go with a dress
2. Increase the number or frequency of transactions per customer – like hospitality venues tempting you to visit more regularly by enticing you with loyalty offers, theme nights or live music.

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There is also a note of caution to watch for…………….

Not every customer is a good customer – some will sap your time, energy and resources without contributing further to your business. These customers need to be avoided.

Ideal customers buy early, buy often, spend the most, spread the word and are willing to pay a premium for the value you provide. Your business needs to be geared towards these customers and offers can be specifically tailored to do just that with a little thought. Make your customers feel special and important – the impact on your business will be significant.

Tinderbox Ltd works alongside SME's, helping business owners be more successful!

How?

By undertaking a thorough analysis of the business and its people, we develop an implementable action plan that enables the owner to lead their team to make the business successful, or more successful.