In the world of business, competition comes in different forms; from friendly counterparts to the giant competitors who dominate the market. In order to make more money in business, these forces must be overcome.
And if you want to make more money in business, I suggest working closely with the first group, those who pose no threat to you, nor you to them. This strategy was solely responsible for changing the direction of my business – from a total disaster to a rousing success. The process worked because my friends and I served different markets and were therefore not a threat to each other. Putting your heads together to analyze the competition and compare marketing material can solve mutual problems, with no conflict of interest. It’s like a partnership but without the negatives that legal partnerships can pose.
In my case, collaboration brought unexpected and massive benefits. Here is why:
- Different people bring different experiences, skills, and viewpoints to the table.
- By sharing knowledge and resources, you can avoid reinventing the wheel.
- Pooling resources can make it possible to tackle problems that would be too expensive or difficult to solve alone. One example is marketing. Me and my friends shared our ads and marketing pieces, as well as the marketing methods that our major competitors were using.
- Brainstorming and collaboration can spark new ideas and innovations.
- Sharing information about market trends, customer behavior, and industry challenges can help everyone make better decisions. It also saves time and work.
- By sharing information and resources, you can reduce the risk of making costly mistakes.
- Running a business can be challenging. Collaborating with others can provide a sense of support and camaraderie.
So collaboration has many benefits. However, while in business, I sometimes acquired vital information from my most successful adversaries in my own back yard. But you may well ask; Why would this group of heavyweights help someone who is a potential threat?
Being upfront and honest may get you in the door. It could be as simple as saying, “Hey Doug, I’ve been following your business, and I really admire what you’ve built. I’m just starting out and frankly, could use some advice. My treat, of course!” If they hesitate, emphasize that you’re not seeking trade secrets, just general suggestion and perhaps an opportunity to explore collaboration on projects down the road.
But the question remains: “Why they should help you?”
On occasion, a business owner may offer advice because they simply like to brag. At other times, they will share their successes because they may want to hire you as an employee. And well-established businesspeople will occasionally be willing to provide help to a newbie, especially if you’re totally frank with them. At other times, they may be so successful that they will not consider you a threat. And there are those who will help because they just can’t help themselves. They’re nice people and are simply generous with advice, particularly to newcomers who are transparent about their intentions.
You’d be surprised what information a competitor will give you in casual conversations over lunch – where a relaxed atmosphere, a good meal and drink might loosen tongues. Yes, offer to pay! Consider the miniscule cost of a lunch as compared to the cost of marketing your product. Consider how much more money you will make by listening to an expert’s advice.
These are two way to compete in the crowded marketplace – through collaboration, and by learning directly from those who’ve mastered it.
If you’re a small business owner, this statement may sound preposterous to you. But if you want to make more money in your business, you can’t afford to ignore this seemingly miniscule factor.
While this method won’t apply to every business, in the month prior to writing this article, I talked to two small business owners who were oblivious to this simple technique – suggesting it’s not uncommon. One is a small enterprise consisting of two industrious young guys who do window and gutter cleaning. The other is a DJ, an individual who plays recorded music for an audience, such as at a party or wedding.
When the window/gutter-cleaning crew approached me for my business, they quoted $500 to do the work. I agreed and the work was completed satisfactorily the following day. When I asked for the bill, it was exactly $500. I noticed that taxes were included and told the young guys that while I appreciated a lower cost than I had anticipated, they had just lost an easy $25 (5%) for no reason. And, if they did three similar jobs in a day, and absorbed the taxes in the same fashion, the amount lost was $75 in a day, $375 in a five day week, and $18,700 over 50 weeks! And the higher the price for the average job, the greater would be the loss and conversely, the potential benefit. Clearly, this is not the way to make more money in business.
While the pricing would be different for the DJ I had mentioned before, the overall proportional impact of 5% would be identical. The higher your sales volumes and taxes, the greater your benefit and the more money you will make in your little enterprise.
The reason I had said that the window/gutter cleaning crew had just lost an easy $25 is because typically, whenever a price is quoted for a product or service, taxes are virtually NEVER included in that price. In other words, if they had added those taxes to my bill, I would have been equally satisfied – because consumers assume that taxes will be in addition to the price quoted. Therefore, I would have been just as happy with the larger bill as with the lower one.
In Canada, taxes for the different provinces range from 5% to 15%. In the U.S. state taxes range from 4.5% to 7%. This means that the lost income could potentially amount to three times as much as I’ve calculated here. And I’ll eat my shirt if a deal was lost due to not including the taxes in the quote.
So in this real example, we have two businesses which could be generating additional profits of $18,000 to $50,000 a year by simply adding taxes to the cost of the job quoted – which is standard business practise. And all because they didn’t realize that they did not have to do it that way.
This shows that acquiring business knowledge can be profoundly simple, and that the implementation of the process can be as easy as pie. If making more money in your business is your goal,
Underpricing – The First Step to Closing the Doors
Did you know that over 50% of small business start-ups fail within five years, and a staggering 60% of existing enterprises are unprofitable? The reason? Most do not generate sufficient profits consistently to survive and prosper. Making more money in business is not an optional extra. Without it, your business may starve.
Warren Buffett famously said,“The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.”
How does your small business stack up? If you’re content with your business’s current state, this message isn’t for you. But if you’re losing sleep over bills and just scraping by – or just fed up with mediocre results – read on.
Being conservative in pricing is understandable. Competition is everywhere. But there are simple solutions to the pricing quandary. And they can all lead you to making more money in your small business.
For example, have you called a number of your competitors’ businesses lately to obtain a quote for a typical job or product, or examined their website for clues to their pricing? What if you did and found that your prices were, on average, 15% to 20% less? Maybe you want to be priced cheaper, believing that factor will get you more sales. But even then, is it necessary to undercut the competition by a massive amount? Making more money in your business is more important than simply increasing volumes.
I live in a city where there are lots of automotive body shops. One is a one man shop run by an experienced owner who charges $40 an hour – for quality work. The others charge an average of $75. Why doesn’t this business charge the going rate? I can only guess that it’s fear. He’s afraid that raising prices will cause him to lose business.
If you believe that you’ll get more business by charging a substantially lower fee, you may have a price inferiority complex. And you’re in the terrible business category that Mr. Buffett was talking about. Remember that making more money in your business trumps higher sales.
Here is another pricing story. There is a specialty cleaning business I know of which has raised its prices by 10% -20% during the past year. But its prices are still at least 20% less than the competitions’. Why? The answer is likely the same – FOLB – Fear of Losing Business! It doesn’t seem to make sense.
BUT, you may believe that increasing prices to a point that is still well below the competitions’ may make some sense, especially for a new business. At least pricing lower ensures that no business is lost due to the pricing factor.
But you can do much better. This gap in pricing can be easily overcome by raising prices over the next few months in 5% or 10% increments until business volumes start to be negatively impacted. In this way, the risk of losing sales is greatly minimized, business risk is reduced, and profits are boosted. This is a simple way to maximize profitability without jeopardizing sales – a win-win situation that takes the guesswork out of pricing. And your business will be happy because it’s making more money instead of starving to death!
And following this protocol means you won’t have to have a prayer session before increasing your prices!
My book The Robin Hood Method – Raiding and Poaching Strategies to Enrich Your Small Business, is jam-packed with both unconventional and proven ways to increase sales and profits. And, as you can see, some can be implemented virtually overnight. Plus, the book is ridiculously cheap – $9.99 – about the cost of a coffee and a croissant. Buy it now and forget about the costly and time consuming trial and error method, and start making more money NOW.