How to Shake Off Small Business Fear in This Economy

How to Shake Off Small Business Fear in This Economy

This is a scary time. Everyone you know knows at least one person who has gotten downsized and new jobs are scarce.  People are scared to start businesses and they’re scared to invest in their existing businesses right now. Part of it is that in an economy like this, mistakes are even more costly than before. And part of it is that people are just plain scared to lose anything right now. What you need to know is that the surest way to lose and make mistakes now is to NOT invest in your business. The only way to win right now is to face your fear and keep moving forward in the right way. Today, I’ll give you a few suggestions for how you can move ahead and steer clear of costly mistakes.

As with everything else, realize that the current economic conditions are temporary.

I’ve said it before, but it bears repeating. The first thing to do is remember that economic conditions like we’re currently experiencing are temporary. Virtually every financial expert and publication has said that the recession won’t last forever. So when you start to experience fear about the economy and what it means for you, first and foremost, realign your thinking so you’re thinking about it as a temporary condition that will eventually resolve itself.

Keep investing in yourself and your business.

In this economy, a lot of business owners are cutting corners. I can’t tell you how many people I’ve talked to who are cutting out key professionals, reducing their marketing budgets, and eliminating continuing education. What these business owners fail to realize is that it’s absolutely crucial that you continue to invest in yourself and your business to keep things moving in an upward trajectory. But be smart and invest in the right things. This leads me to my next point.

Cut costs, but cut the right costs.

When you cut costs, know which costs to cut. Analyze your business expenses and make sure you’re tracking everything. Look for ways to save. For example, if you’re low on printed material like your marketing flyers or business cards, you may be able to find a printer that charges less, but offers the same quality as your old printer. This extends beyond products you use for your business. Examine your business relationships. Are there some service providers you aren’t happy with? Now’s the time to make a switch to someone who will provide you with better service at a better rate. In this economy, you can get great service at a much more affordable rate than ever before. ..and you should.

That said, don’t cut the essentials! You need to continue learning and improving your skills, so cutting back on continuing ed is a mistake. You don’t need to go to every workshop and seminar, but you shouldn’t eliminate these opportunities to learn, network, and increase your visibility altogether. And don’t start doing your own graphic design or having your son’s best friend design your web site. Cuts like this can result in catastrophe — web sites that don’t function properly, brochures that look unprofessional, and the appearance that your business is small-time, unsuccessful, or fly-by-night. And none of these are words you want applied to your business.

Learn from Pareto.

Another place you can save in your business is by applying Pareto’s 80/20 principle to your client list. The 80/20 rule says (in a nutshell) that the bulk of your business comes from about twenty percent of your client roster. That means you may be expending a great deal of effort and expense marketing to and serving the eighty percent of your clients who aren’t producing very much of your income. So why not go through your client list and do some weeding? You’ll save money in marketing costs and you’ll have more time to cater to your most-productive and profitable clients.

Another way to implement Pareto’s 80/20 rule is to look at your current products and services. Which twenty percent of your products and services generate eighty percent of your profit? Concentrate on improving those and developing more products and services like them. You may even eliminate the products and services that aren’t generating enough interest.

Marketing, marketing, marketing.

One way you can guarantee that your business will fail is if no one knows you exist. So don’t stop marketing your business to save money. That’s the wrong cost to cut. Instead, keep up your marketing efforts, but like your client list, examine which efforts are providing the biggest pay-off. Cut back on the ones that aren’t bringing in clients and beef up the ones that are drawing attention. And, consider implementing more PR methods into your business so you can garner some good press for free.

If you’ve been using direct mail as a marketing tool, check the quality of your list. How long have you been mailing marketing materials to people who haven’t responded? Pick a cut-off date and eliminate anyone who hasn’t responded since that date, and you’ll dramatically reduce your printing and postage bills without losing the people who actually respond to your marketing efforts.

Once you’ve got ‘em, wow ‘em.

It won’t do you much good to acquire clients if you can’t serve them and serve them well. So once you’ve drawn them in with your PR and marketing, you’d better make sure you wow them. It’s about more than doing a good job. It’s about doing a great job. Deliver at least on time, if not early. Delight, surprise, and overdeliver. Make sure your clients and customers know you appreciate their business. Always thank them.

Also, survey the clients who’ve stayed with you for a long time. Find out what you’re doing right and amp up those efforts. Andfind out what you could do better, and improve on that, and you’ll see your client retention rates improve even more.

Save money by hiring experts.

Hiring the right experts can actually save you money in your business. Imagine all the mistakes you’ve made in your business history. Recall all the professionals you hired who didn’t work out – the web developer who charged a ridiculously high fee for every single update, the assistant who didn’t do her job, the graphic designer who charged you a fortune for a logo you now hate. Remember how much each of those mistakes cost you? Hiring a business consultant who has a Rolodex of professionals who can do that work at the highest quality, but at reasonable rates, can save you a lot of money in the long run, and in the end, the savings more than offset the price of the consultant. Plus, that same consultant can help you avoid other, costly errors, and make suggestions for other ways to optimize and save.

But beware: “consultants” are a dime a dozen out there. So find someone you can trust and someone who can really deliver, otherwise you’ll spend much more than you’ll save.

In this economy, it’s only natural that there’s a lot of fear. But knowing it’s temporary, conducting your marketing in the smartest way, continuing to invest in your business in the right way, and building a team of experts who you can trust to deliver can keep your business growing and minimize your fear. Stay strong – this won’t last forever!

Know Your Worth: Pricing Strategies

Know Your Worth: Pricing Strategies

Setting an appropriate price for your product or service is both one of the hardest and most important aspects of running a business.  Most entrepreneurs don’t have any idea what they should be charging.  As strange as it may sound, they are probably more likely to undercharge for their services.  Apparently, they are either passive negotiators or don’t know how much they are really worth.

There are a number of pricing strategies that I learned in my MBA program, but I found them too archaic to be useful.  Instead, I think the following feedback will serve most entrepreneurs better.

Price is something you need to address from the very beginning.  There are a few reasons why selling too low will end up costing you in the long run:

• Obviously, you can make less in sales (although not always, as you may sell in larger volume)
• You operate on a minimal profit margin and incremental expense increases can ruin you
• You establish yourself as inferior company with an inferior product

Throughout the recession, many companies have tried to compete by cutting their prices.  As their competitors responded, they cut them further.  Their profit strategy turned into a survival strategy, which eventually turned into their Chapter 7 bankruptcy application.

Following competitors’ movements is one of the biggest ways to lose your own identity.  If you are charging more than your competitors, you can simply convince your customers that you are worth more.  Isn’t that what you want to be doing anyways?  Convincing your customers that you have a better product but are selling it for less is likely to give them mixed messages.

Pricing strategies should never be based on competitors.  They are supposed to be based on your customers and what they are willing to pay.  Granted, your competitors fit into the equation, but only because they influence your customers.  You simply need to put in a little more effort to influence them as well.

You also need to think about how you engage and negotiate with your clients.  This involves how you structure your sales program and negotiate with your clients.  If all sales go through a form on your website and your customers are not purchasing anything, the problem may not your price.  You may need to change your sales process so that your customers can engage with you and you can justify your prices.  If necessary, you can leave room for negotiation in case the price really doesn’t work.

One of the biggest mistakes I have made is letting customers drag me into the “I’m thinking of a number game.”  They ask me to propose a quote and I have often wondered what they were thinking of.  I didn’t realize that I was undercharging myself until one client said that she usually paid a little less than what I suggested.  This was not a problem, because the price she proposed was still fair.

Then I started thinking about all of the clients who never complained.  They probably had a number in their head for the very beginning and were waiting for me to bid lower.  It was a win-win for them.  If I bid too high, they could simply assert their terms.  On the other hand, if I bid too low my modesty was a few more dollars in their bank account.

After this epiphany, I asked them up front what they were willing to pay.  If I thought a price was unfair, I would state my mind and what I felt my services were worth.  I would not be offended if they didn’t agree.  Rather, I would politely decline and say I hoped there were no hard feelings.  Negotiating is really a game of poker.  You need to be careful when you show your hand.

Choosing the wrong pricing strategy can ruin your business.  It pays to be one of the few entrepreneurs who can get it right.