When starting off business you really have to consider how you will be targeting your potential clients. Having a high quantity of clients is great if you’re offering limited services and depending on your industry this strategy might actually make sense. However you get what you pay for and that holds true here. It is critical to anticipate the amount of effort and work every client will take before a pay day comes. Finding Unicorn clients is tough and keeping them is tougher but once you find those clients ensure you hold on to them because these clients are low cost/high profit. Additionally you might feel to genuinely go the extra mile for them. #Dedication
Clients today want the biggest bang for their buck which is understood but it is commonly not acknowledged by a new business person that every client carries a cost. Let’s look at McDonald’s for example each customer that drives into McDonald’s drive-thru carries a cost of $1.68 in advertising costs. If the customer only buys a Junior Chicken, McDonalds just lost money but they know you want a “combo” and their profit margins jump up by 600% #Strategy. In order to maintain healthy profit margins it’s critical to calculate the cost of a client by taking your cost of goods sold, hidden servicing costs plus your margin. Don’t just come up with an arbitrary price based off competitors as all these elements need to be embedded in your total cost of servicing.
The real pickle is when your competitors across town offer the “same” services/goods you are at a lower price. The client poses a valid question being why they should choose you? You need to be prepared to answer this question and no answer is better than explaining the value you bring to the table. Clients who appreciate value are more likely to remain loyal than those that are price sensitive. Learning to build and sell value is the best thing you can do for your business. Value is not tangible and this is when marketing really ramps up to help you stand outside the shadow of the price warriors in the market. Don’t sell yourself short as selling on value is a far better strategy to compete on than on prices.
It might appear that you are generating profits but once you add those hidden costs the story might change. If you think you signed a bad deal that’s okay! It happens just remember to cut your losses short and move on. Remember, Numbers don’t lie so believe what they say and make your decisions to stop the bleeding. Experience is an accumulation of many errors, learn from them and plan your next chess move.
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- The Capex Team