How to raise prices and not lose business

If there’s one worry that dogs business owners, it’s the problem of having to raise prices. Inflation is part of every business’ reality, and sooner or later you will have to up prices in order to keep the margins. But as long as customers see value in your product or service, raising prices is not going to sound a death knell for your business.

Here are some tips on how you can increase prices and get away with it:

Your business must differentiate itself sufficiently. Being the cheapest in the business is not a sustainable USP. Competing on price alone, sooner or later, some rival will undercut you. Therefore you need to make sure that your product is perceived as being different from that of your competitor, by your customers.

If you manage to set yourself apart, you will carve a special place in the customers’ mind and consequently a specific niche in the market. When you gain customer loyalty, you will find that the demand for your product will not fluctuate with price.

Focus on delivering value. Most discerning customers will look for maximum value for their dollar, rather than rock bottom rates. With value, you can always win over price.

Target the right people. Don’t chase the entire world when trying to sell. Especially in B2B businesses, 80% of revenue comes from 20% of clients. Focus on developing high value buyers, as they are less likely to be swayed by increasing prices.

Invest in your customers. Don’t forget to build and sustain relationships. That is what draws your customers back to you time after time. A good product must be backed by exceptional service, because that is what secures loyalty.

Time it right. Don’t put off the decision until it reaches flashpoint. If the competition is raising prices, take the bait and follow suit. It is best to increase rates with the herd, rather than lag behind and then stand out for being the only one to do so.

Ways to manage the business cycle

Managing the business cycle is one of the biggest challenges that entrepreneurs can face. And there is no escaping it.

Given the globalized nature of business, events in far shores can make a big impact on your business, let alone the more predictable seasonal variations. The recent sub prime crisis in the United States is an example.

Not being prepared to withstand such vagaries could well mean the end of the business. Therefore, for a business owner, it is very important to learn this lesson early on, lest he or she is forced to do it the hard way.

Here are some ideas on how a business can be better prepared to handle the ups and downs of its business cycle.

One must learn to anticipate, although that is easier said than done. Many businesses have been caught unawares by an “unexpected” recession. Since businesses are highly interwoven, even developments in far flung corners have a way of creeping up on you.

It is very important to stay abreast of major economic trends, track regulatory changes and stay clued into the goings-on within your industry. If you can afford it, and your business justifies it, hire someone who can forecast.

Rethink capital expenditure – that does not necessarily mean cut back. In the face of a downturn, the conservative may defer capital investment; the proactive may go ahead in order to gain a first mover advantage when the economy recovers. Naturally, the decision depends on your actual circumstances.

You will also have to devote careful thought to how you will manage inventory closer to a recessionary period. Being saddled with piling inventory is no joy, but neither do you want to be caught with no product to sell when demand picks up. The inventory decision will also be influenced by the nature of the product (perishable/ seasonal) and production compulsions (minimum run). If you can store your product, it may be worth negotiating better terms with vendors in return for maintaining off-take in tough times.

Continue to advertise. This is the first casualty when business is slow. Sadly, most decision makers forget that advertising is an investment that can help maintain your business in the customers’ field of vision. During recessionary times, advertising rates go down too, so you can secure better visibility for your money.

Reassess your staffing needs – again, we don’t necessarily mean downsize. Obviously, employee headcount will vary with the business cycle. However, do remember, that during off season, the labor pool overflows. If you have been struggling to find the right people, you might get lucky during the slow season.

Market your small business at low cost

Starting a new business in India costs a bit as it is, without taking into account the resources needed to market it. So what is it that you, as a small business owner, can do to get the word out about your services, without burning a hole in your pocket?

Although it may seem improbable, there are indeed a number of low cost ways to market your product or service. Here’s our top 10 list.

1. Leverage the support of your friends and relatives to create favourable word-out-mouth. A simple tactic is to mail your acquaintances announcing the new business venture. Even if they don’t need your services, they may well know someone else who does.
   
2. Enrol in trade organizations or groups which could give you the opportunity to connect with others in your line of work. Seek to participate in any publicity event, presentation and demo.
   
3. Supporting a cause or charity event that reflects your company’s values can create a very favourable image for the business.
   
4. Once your business picks up speed, ask satisfied customers for referrals. That costs nothing yet is worth everything.
   
5. Use the Internet to spread awareness about your line of work, not just your company. The way to do this is to contribute useful and high quality content to sites that fit your business’ end user profile.
   
6. Again, be part of the online community, whether it is by way of blogging or being in a discussion forum. We reiterate that the trick is not to oversell - no one wants a hard sales pitch in a friendly chat room.
   
7. Use signature files at the end of all your e-mails. Keep them short but precise.
   
8. You can even do some low cost or free advertising on the Net. Check out Internet sites that offer free classified advertising space.
   
9. If your business has a good website, look to link it with others. Placing in-bound links from popular sites will push up your website’s search engine ranking.
   
10. Use traditional media, like press or local radio to spread awareness. An advertorial which is part informative, part commercial can get you much needed recognition.
    

An Online Storefront That Sells

It’s the festive season and a busy time for most business owners in India. Retail stores are wearing a new look in a bid to attract customers. If your business has an online storefront, it’s the right time to ensure that it’s squeaky clean, shining and a place that visitors will want to buy at.

Just as a brightly lit department store entices passers-by to step in, your online storefront should look nice and inviting. If your site hasn’t changed in years, now is the time to overhaul it.

Design it like you would any physical store, paying attention to both form and function. That means easy navigation, a professional display with all relevant information and photographs and a look that is stylish and consistent with the image your company wishes to project.

Getting the shoppers in is only one part of the good news. Now you have to make sure they buy.

Remember that convenience is one of the biggest motivators of online shoppers. Therefore, ensure that the purchase process in your online store is hassle free – an obstacle ridden storefront is equivalent to an indifferent sales force.

Some of the must-dos:

• List out all the important commercial details such as total price inclusive of delivery & taxes, lead time and refund policies. For third party products, mention warranties and service networks.
• Cap the number of click-throughs to a maximum of three in order to complete a purchase. Use a reliable payment gateway like PayPal for credit card purchases.
• Slow download speed is the electronic equivalent of a long billing queue, and that is where a number of customers can drop off. Choose a reliable web hosting service, so that you are not ridden with server related problems. The same goes for your phone lines.

The sales process is consummated only when you complete delivery to the customer’s satisfaction. Therefore, remember to spruce up the back-end as well:

• Inventory management is super important. In a physical store, if a product is on the shelf, it’s there to be bought. In an online environment, the fastest way to lose a customer is to get back a week later with the news that the product is no longer available. Also, tie up with a reliable logistics partner who can keep up delivery standards.
• If you’re selling third party products, be careful about who you represent. At the end of the day, it is your store’s reputation on the line, so make sure that the products are not shoddy.

All done? Happy selling.

Making a budget for your small business

Budgeting is not just an art, it is a learning process in itself. A well made budget is critical to the survival of any business. It tracks the flow of finances and provides insight into those areas where there is excessive expenditure, thereby allowing an opportunity to make corrections.

A small business can make budgets at different levels – one for the business as a whole, or for special projects, for example, a marketing campaign. Budgeting is a complex exercise, and is always subject to revision since it has to reflect ground realities. Therefore, it must be looked at as the first step towards understanding the financial position of the business and not a be-all.

The following tips may come in handy for a small business owner about to embark on his or her first budgeting exercise:

Err on the side of caution. Keep revenue expectations low and overstate costs. Remember, there will always be that odd contingency that will suck extra funds from the system.

Favor business growth over cost control. There will be times when you need to spend more than what you initially intended on a specific activity. If that is going to contribute to the enlargement of the business, go for it. A budget must not limit the prospects of your business; however, use this as a learning to be more accurate in your future estimates.

A budget, however well made, is good as naught if not monitored closely. When expenses come close to the pre-set limits, act quickly to see whether they need to or can be contained.

Watch the cash flow, which is even more important than profit. A business that spends more frequently than it collects is heading towards a tight spot. Therefore, while making revenue projections, bear actual credit terms in mind. It is worth closing a contract at a lower price on cash and carry basis, versus a high price-long credit option.

Budget for contingencies, and keep adequate liquidity to meet those emergencies.

Finally, be realistic. Costs will go up, some customers will not pay and a few orders may not materialize. A well made budget must recognize these realities, yet must not be so “easy” that it throws no challenge to the management.

Choosing The Right Franchisor

When you start a new business, you would be mostly advised to venture into a field that you either understand or are passionate about. If you are looking to grow an existing business, you might diversify into a related area. But sometimes, business owners plunge headlong into a totally new field by buying a franchise. If you wish to follow suit, choose the opportunity with care, since they’re not all alike.

Although a franchise can give you a launching pad to commence business, there’s still a great deal of groundwork to be done prior to signing up. Investigating the credentials of the franchisor has to be among your topmost priorities at this stage.

The following guidelines could prove useful when you’re negotiating to buy a franchise:

How eager is the franchisor? This will be apparent right at the negotiation stage itself. In a franchised business, the franchisor has to be the driving force if the brand is to be successful. A relaxed or complacent attitude could signal that the parent company is vulnerable to a strike from competitors. Similarly, if the franchisor is non-responsive, it could indicate that they won’t pay you enough attention after you sign up.

Look for other opportunities if the chemistry doesn’t seem right.

What are their growth plans? While you would like to ally with a brand that has an aggressive growth agenda, remember that it could be a double edged sword. Every franchisor will target the maximum number of sign-ups possible and that could work against the franchisee’s interests, since it limits territory and encourages infighting.

Will they stand by you? Since you’re entering unknown territory, you will rely on the franchisor’s support to see you through the initial period. Check out what the training and support calendar looks like. Is there a marketing plan laid out which can help you break into the market?

Some indicators would be the number of days per month that the franchisor’s staff will spend at your location and the number of people assigned to take care of your requirements. If the franchisor is short staffed, you may find that they will not be able to support you adequately in times of crisis.

What is their reputation like? Every franchisor will sell you success stories of other franchisees in a bid to sign you up. Don’t let it rest at that – find out how the parent company is faring as well, as their financial health is very crucial to the stability of the business. Don’t assume that there’s always a sound company behind a strong brand.

A fast growing franchisor may brag about how they’ve grown in recent years. Treat that as a warning signal – usually, a spate of new franchisee signups is accompanied by an equally large number of break-ups. Make sure you are not signing up with the hire and fire variety.

Be sure to speak with at least a couple of existing franchisees to get their perspective on the parent company. If they seem satisfied, the opportunity is probably worth considering.

Are the terms fair? The franchisor will have a standard agreement that both parties need to sign. Since this is the guiding document for all franchisees, you can expect that it will not be changed to suit your preferences.

Make sure that you understand the clauses fully, especially those that deal with territorial rights, financial outlay, terms of separation and dispute resolution. While you can expect that the terms will be loaded in favour of the franchisor, don’t sign something that is blatantly unfair to the franchisee.

Quite often, the reason for buying a franchise is so that the existing infrastructure can be put to better use. But it is equally important that you don’t sign up the wrong opportunity, just so you can keep the staff busy.

Time Management for Businesses

Time management is one of the biggest challenges that a small business owner faces, day in, day out. While there will never be enough time to complete everything on your list to perfection, some simple time management techniques can help you squeeze a fair bit more into your day.

Time is, beyond doubt, among our most valuable resources. And for businesses in India, keeping to a schedule can be near impossible, given the environmental uncertainties and day to day chaos. Owners of small businesses find it particularly hard to balance their numerous responsibilities within a regular work day.

But you have no choice. As an entrepreneur, you will have to find ways to improve your time management techniques so that you can cope with interruptions and unexpected developments.

This may be stating the obvious, but most often, the problem is not lack of time, but an absence of clear goals. On any project, large or small, setting out clear objectives can help one understand the processes (and hence the time) that are required in order to reach the goal.

It goes without saying, that once the target is set, the planning activity becomes crucial. To use a tired cliché, if you fail to plan, then plan to fail! Planning is required at different levels – from day to day, for the short term and longer.

A to-do list an absolute must. You can also use a 2x2 matrix in which you can classify tasks as urgent/not urgent and important/unimportant. That tells you which you must attack first – it also helps you delegate those that don’t need your personal attention. Also, keep your planner and phone book updated and handy.

Not surprisingly, one of the biggest time consumers are time-wasting tactics. Procrastination is the undoing of many a business person and everyone does it to a certain degree. The trick is to not put off unpleasant tasks till they reach a flashpoint. Spend some time each day on such matters, so they don’t build up.

If you’re a stickler for the details, remember that nothing is perfect. Often, we can get by pretty well by doing certain things “well enough” rather than spending more and more time on getting them just right. You have to know when to stop overworking something – that is as important to time management as anything else.