50 Ways to Grow a Business – Part 4
Let’s get into our fourth installment of our ’50 Ways to Grow a Business’ series. If you missed the third part which discussed the 80/20 rule, focus groups, and more, click the link.
15) Get your pricing right
Many of us resist the idea of raising prices for fear that our customers will go elsewhere. We may think that price is the deciding factor behind most buying decisions, but this isn’t true. Buyers pay for a combination of value, service and convenience. So, raising prices may be an ideal strategy to improve your profitability and grow a business.
Take a look at the following chart:
A Case Study
Elizabeth runs a bakery in a small town, offering a selection of breads, cakes and pies.
During an annual review meeting with her accountant, Elizabeth focused on pricing policies and how she marked up her bakery items. Elizabeth said “I was intending to raise my prices next year, but there is another bakery in the area that is about 10% cheaper.”
She then discussed the fact that she had a loyal customer base, had some special items that were not available at the other bakery and was always being complimented on the quality of her products.
Her accountant then showed Elizabeth the effect of a 10% increase in prices and the fact that she could afford to lose 22% of her sales volume and still make the same amount of money. They also looked at the consequences of a 10% reduction in prices and how much extra volume she would need to generate to make the same amount of money. Elizabeth discovered that she would have to sell 40% more baked goods to make the same level of profit as she was already making.
Being successful is not just about lowering prices! In small businesses, it is about the value you add to your customers, as well as being different, that is important!
|Here’s what the analysis revealed: Elizabeth’s Bakery|
|Last Year||As a % of Revenue|
|Reduce expenses by||5%||Will increase profits by||£1,307|
|Increase sales by||5%||Will increase profits by||£5,146|
|Increase prices by||5%||Will increase profits by||£14,629|
|Increase prices by||10%||Will equal the same profit as before even if you lose volume of||22%|
|Decrease prices by||10%||Will equal the same profit only if you increase volume by||40%|
What did happen in the next year? She put her prices up – bread by about 10%, and cakes and pies by about 20%. The result was that she made over £120,000!
16) Break some compromises
Historical precedents within a particular industry force customers to make compromises or concessions.
Why, for example:
- Do most hotels prohibit you from checking in before 3pm? [Hotel maids generally start work at 8am or 9am. Accordingly, there are made-up rooms available by mid-morning]
- Are most car dealerships closed on weekends?
- Is it so hard to buy a used car with confidence?
- Do supermarkets not provide childcare?
- Do retailers quote broad delivery times? (“We’ll be at your house between 9am and 5pm”)
In your industry, what do customers have to put up with “just because”?
Think of the companies that have succeeded by breaking the “wait time” compromise, whether it’s roadside recovery (“in under an hour”), shoe repair (“while you wait”), cinema ticketing (“print your own”) or the punctual plumber (“paying you if they don’t show up on time”).
So break some of your own compromises to grow a business: change your opening hours, offer a pick-up service or let customers pre-order over the internet.i
What compromises could you break?
17) Offer money-back guarantees
Most companies offer an implicit guarantee of their products, while others say “our products and services are guaranteed”; but these promises do not mean much by themselves. If you want your guarantee to make a difference, make it specific and credible.
- If we don’t arrive within the time frame we promised, there will be no charge
- You may return any item within 60 days of purchase
Since your competitors may not offer such an explicit guarantee, it could be one of your key differentiators.
18) Survey your competitors
Most businesses don’t do this (believe it or not) but the information obtained can be really helpful to grow a business.
- Get your team together and complete a competitor worksheet (see next page) for each of your competitors
- Obtain your competitors’ brochures and promotional materials to find out what they think are their strengths and how they promote themselves. Look at trade journals and the internet for product comparisons and reviews
- Collect other information by researching business databases such as Dun & Bradstreet
- Meet with your customers and suppliers and ask them for their opinions on where you are better (or weaker) than your competitors
- Analyse the information and prepare spreadsheets showing comparative strengths and weaknesses
- Prepare an action plan for improvement!
Estimated annual sales
What are the most important strengths of this competitor?
What are the most important weaknesses of this competitor?
What do they do better than us?
What do we do better than them?
Who is this competitor’s CEO?
What is their business approach/strategy?
What are the next strategic moves this competitor is likely to make?
What actions should we take to pre-empt or combat this?
19) Survey your team members
Your team members should know more about what’s going on in your business than anyone else. Survey them regularly, and survey all of them.
Here’s a suggested approach:
- Prepare a questionnaire, allowing room for expansive answers
- Make it easy for people to respond (i.e. mail, email, fax etc.)
- Make it voluntary and confidential
- Use an outside facilitator – this will help you get a higher response rate
- Insist (and publicise) that the outside facilitator maintains absolute secrecy as to individual responses
Here’s a sample questionnaire for team members:
Data Gathering Questionnaire
- Identify at least three things that our business does well and, in your opinion, should continue to do
- What are three things that our business doesn’t do well?
- What have you heard from customers that concerns you the most?
- If you were in charge, what are three things you would change immediately?
- What opportunities should we be exploring?
- How can we improve communications within our company?
- What things are people not talking about openly, but which should be addressed?
- What causes you frustration about working here?
- What do you believe are the key values of our company?
- What other suggestions do you have for the owners of the company?
Count on Cardens
You’ve decided to grow a business, so let Cardens give you a helping hand. Book a free, no-obligation consultation where we will provide as much advice as we can. Alternatively, contact us on 01273 739592 to discuss your circumstances with our team.