Foundations for a Successful Business

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Foundations for a Successful Business

Starting and running a business can be great fun and deliver rewards. Having been in business now over 40 years we've see some recurring patterns that can be indicative of a business in trouble. Many new starters in business will be recommended to read some book or blog site and can get bombarded with the great business platitudes that sound great and mean nothing.

There are many foundation issues to a successful business but I would like to cover just three I think most important, Products, Markets and Customers.


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So you want to start a business and sell online?

 

Every week we have conversations with new start-ups and existing businesses about areas to improve or to consider. These conversation can be difficult sometimes as the questions are really seeking shortcuts to success. The reality is that there are no shortcuts and success is earned and not obtained by luck (unless you win a lottery). So this blog post should not be read if you think that you can start a business on no capital, put in limited effort, never deal with customers, get a great nights sleep every night and make millions. Unfortunately those people are living in a dream world and have probably read too many "get rich quick" books.

Most people that start and run a small to medium sized business know that there is some planning and good execution needed to be successful.

So back to where we started, let's discuss three of the key areas that we so often find are poorly researched or understood.

 

Know your product

do you know your product - ecorner

 

Is the product or service that you are selling important? Silly question you think!

The answer is YES it is really important. A poor choice of product can result in a business that fails to launch. There have been successful businesses (in the short term) with poor products but the costs and effort to get a "lame duck" to market can be pretty high. Over time the quality of a product and cost to market can be the inverse of one another. Meaning that a poor quality product may need high marketing costs to be successful and visa versa. So it is important that you really know the product that you are selling and I mean KNOW;

  • what it is?
  • how it is used?
  • how it is maintained?
  • what are the failure points?
  • what are the competitive advantages?

So lets consider an example. If you wanted to sell cheese, and you go out and source cheese from some manufacturers or merchant but you don't like or eat cheese. Can you be a success selling your cheese?

The first question a customer might ask is about the flavour or strength of a cheese. How would you answer the question and what happens if you get it wrong?

Understanding your product is a key to success.

Many small businesses get started online using a dropship model where products are sourced from a supplier, sold online and delivered from the supplier direct to the customer. Often the seller never sees or uses the product they sell and then wonder why customers get upset when what is delivered doesn't meet their expectation, or start asking support questions they don't know how to answer.

 

Know your market

 

marketplace-smallHow easy is it to be successful if you do not know the market that you are selling into?

The answer is IT IS HARD every market and demographic has nuances, sometimes subtle, that make it different. By understanding these differences your business can often take advantage and be more competitive in a particular market. So rather than force a square peg in a round hole you might spend a little time shaping your peg to fit. That shaping exercise might be a different approach to that market, maybe different product packaging or even a different product name. Of course it maybe that a certain product just will never work in some markets so rather than spend good capital on a poor market opportunity just go sell somewhere else.

A good example at the big end of town was Honda vehicles entry into the USA. Honda launched in the USA as Acura because they felt that a premium brand was needed and that Honda, as a name and brand, would have a struggle in that market. They were right and the Acura brand was very successful in the USA while still being sold as Honda elsewhere in the world.

Selecting the right market focus means that you need to research the marketplace and understand where opportunities exist. That often means taking a look at what opposition exists in a specific market and how you might approach the market to get a competitive advantage.

Understanding your market is not rocket science;

  • Define the market you want to focus on
  • How big is your market
  • What are the boundaries
  • What are the dependencies (e.g. language, currency, regulatory)
  • Who are the competition
  • What are the competitive opportunities

Cost of market entry is a big factor in the overall budget for your business. The cost of entry increases with lack of knowledge and distance.

 

Know your customer

 

customers-smallSo how many of us in business really know our customers?

I do not mean that you can recognise Joan voice when she calls on the phone I mean really know who Joan is and why she buys your product. There are many businesses who are afraid to know too much about the customer but reality is the more we know the easier it will be to keep our customers satisfied and returning to buy often. The cost of acquiring a new customer is believed to be around 500% higher than retaining an existing customer. A existing customer is 50% - 60% more likely to buy from you again as opposed to a new visitor to your business. So a business plan based on only acquiring new customers will need a budget 4 times larger than a plan based on long term retention.

So what do you need to know about your customer? As much as possible.

Communication is the key to understanding your customers but it needs to be meaningful not daily emails offering discounts or specials.

Start with the basics;

  • What is the core demographic (e.g. gender, age, location, married, single)
  • What did they buy and was it for them or a gift
  • How much did they spend
  • How long did it take to buy
  • What type of questions did they ask
  • What competitive products did they review

Getting information about customers can be difficult. If you have a bricks and mortar store them you can get a lot of information by meeting and talking to them. When you are online it can be more difficult but there are methods to get more information. The simplest is to just call up and ask about the experience and feedback. Many larger online retailers will send a survey out after an order and will offer a small incentive like a gift or discount on the next purchase. Remember that the survey should not go to the same customer every time they make a purchase from you. Over communication can be a big negative.

Social media is also extremely good for getting an understanding of your customer. So often a quick search on an email address or name in Facebook, Twitter, LInkedin or Instagram can deliver a lot of useful information. It is important to keep that information in a consistent format and in a place that it can be easily accessed. So look at the options available in a customer relationship management (CRM) system or the customer data base in your online store.

 

Forming life long relationships

 

You business can be thought of as a relationship, your market as your home and customers as family and friends. You don't treat everyone the same but you give each personal attention. The more you work on positive outcomes the more successful are the relationships. Whether you are starting a business, or you are running a business today, consider the three core issues of products, markets and customers. Give each of these some attention on a daily basis and you will find that your business will benefit. There are no guarantees but it is highly likely that you will find success more easily if you do your homework.

 

 


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