You started a small business, or you manage one today. You know everything there is to know about it. Or do you?
Let’s explore three aspects of your business that you may have not thought about. These are: who you have become in your clients’ perception, who your real competition is and whether your cost structure is the same.
Who have you become?
While you are busy working, every three to five years your business is becoming something else to your clients. These cycles are determined by your growth efforts (or failures) and they affect how you are perceived by your market. You may think you stayed the same as you are still doing what you have been doing, so it looks like nothing much has changed.
For example, you may have become less concerned about the initial offering of the business, as you narrowed down on what worked for you and discarded some areas that your first clients requested from you. Or your price structure has changed, or perhaps you are no longer as available as you used to be. Which makes it either easier or harder to buy from you.
Your real competition
As a consequence of your growth cycles, who your direct competition is changes with the same speed as you do. Your past competitors are no longer there or they themselves have evolved into something else. Or your clients do not compare you to those you expected, or in the way you expected. The fact is every five years you might no longer know who your competition is.
There are two types of competition. Let’s call them direct and alternative competition.
Direct competition is whoever competes with you for your existing clients by offering more or less the same thing at a similar price. Most entrepreneurs have an idea who they are. When you started the business, you looked around and decided that X type of company is like yours, researched them a bit, decided how you were going to be different, and went ahead without giving it a further thought. They may still be, but chances are they have changed too. Have you checked whether they are still there, where you thought they were?
Alternative competition is more relevant for your business. It is also more dangerous as it is difficult to find out. Alternative competition is revealed in the answer your clients give you to the following question: ‘if you did not solve your problem with our service/product, how would you solve it, if at all?’ Attention: not ‘who else would solve it for you’, but ‘what other alternative solution are you thinking of, including not solving it at all.’
For example, you may be surprised to hear that your clients will look for an internal solution to solve the problem and they don’t even take your direct competition into account. They may say they would replace you with an automated system, so that is your future challenge to solve. They may say they would not solve it at all as they think what you offer is completely unique and the need is not crucial.
Your costs have multiplied
Your cost base has increased. I don’t mean as a result of inflation i.e. same things are more expensive than they used to be. That is a given. What I mean is that you spend on more things than you used to because you have new needs, or you are a victim of others’ marketing efforts and you think you have new needs.
Like any household, once you have become a bit more stable, you have started to spend on things that you did not know you needed before. Think designer watering cans, when a simple recycled bottle would suffice to meet the need: to water the plants.
Once you start spending on those extras, they become a necessity. Examples of things that you did not know you needed in the past but are now part of your regular costs? Cloud storage, social media marketing, and mobile wi-fi access. You used to run your business without these additional costs. Now it seems you can no longer do that, even if your clients do not necessarily want to know where their stuff is stored, they don’t care if they cannot see you frequently on one of the multiple social media channels, nor are they concerned whether you are ‘on the road’ or at your kitchen table when you have a conversation with them.
If you were one of the wise entrepreneurs who regularly enquired how they are viewed by their clients, you would also be able to spot the difference and the likely causes. You would then be able to control such changes in perspective and not be surprised by a sudden loss of clients or being approached by clients you would not think may be interested.
Ask your clients for their view on who you are now. Ask your clients for their view on who or what you are really competing against. After you find out the answers, take a look at the multiple things you are spending money on because ‘we must have that’ and, if they don’t fit with how your clients see you and do not enhance your competitive advantage, ditch them.
Any of the above answers can indicate whether your price war against your peers makes sense as your clients take something else into account when they look at your price. Whether you have decided on extra costs as a result of an internal brainstorming or you met a very persuasive salesperson, you need to review them in light of what your clients tell you about your business and your competition.
If you want some ideas of useful questions to ask your clients, or a review of your costs, contact us.