When determining pricing, you need to know exactly what your competitors are charging. You want to identify a unique selling proposition that you can weave into your brand. What is the one factor that sets your product apart from the competition?[1] X Expert Source Eddy BallerEntrepreneur Expert Interview. 7 February 2020. It could be something simple like “great service. " Some airlines, for example, strip down service because their unique selling proposition is to have the cheapest possible fare. Others take pride in offering you hot cookies from the oven and the plushest seats. Both are unique selling propositions to differentiate from competition.
Analyze who has already bought from you if you’ve sold the product before. Otherwise, consider who would be most likely to buy your product. [2] X Research source Figure out your revenue model. This will help you define your target market. For example, if your revenue model is to sell your product entirely online, this will help you narrow the customer base to those most likely to purchase online products. Determine the customer base of your competition. However, don’t necessarily go after the exact same base. Is there a niche market they are missing? [3] X Research source Narrow your customer base by demographics (like age, gender and ethnicity), geography, income level, and personality.
Look for trends that are more general than your own specific business but could affect it in the long run. For example, social media was a new way people communicate and affected most businesses. [5] X Research source Visit local colleges and talk to students about what they are interested in. Spend 20 minutes a day reading about your field. Read magazines, newspapers, online, books - just read something about your field. This will educate you, and it will help you spot trends. [6] X Research source Start a business that builds on your own key talents. For example, if you have a background in art, don’t try to sell engineering equipment. If you have a background in writing, look for growth markets like social media where you can use your talents.
Periodically revisit your business plan because it is where you will outline your company’s strategies. [7] X Research source Measure everything. You have to keep detailed track of everything in your company, from how much the utilities cost, to labor time, to sales leads. Use spreadsheets to organize your information. The core step of any business plan is a break-even analysis. This means you want to study such things as your cash flow. You estimate expenses and revenue, and include such things as overhead and sales revenue. Then you calculate your break-even point. [8] X Research source How much money will you need to bring in as profit each month to break even? If your break-even point is too high, you might need to make changes in pricing or staff.
Write a company vision or mission statement. Make this a collaborative effort. Build your company’s core values around your personal values, but also around the personal values of key people who work for your company. Be prepared to compromise on small things for the good of your company. But never compromise on the big things, like your core values.
Eighty percent of products today are different from what existed even five years ago. [11] X Research source Your product should be able to survive being copied. Because if it’s good, someone will probably try to copy it. The way you survive imitators is to be constantly innovating your own product. [12] X Research source
Renegotiate all contracts with your business annually. You don’t want to lock into too many multi-year contracts. You want to be able to create bidding wars or have conversations with suppliers about changing costs and performance. [13] X Research source Buy overstocked products. You can get them very cheaply and test out new product lines that way. Monitor and study all office costs, such as printing and phone bills. Find energy-efficient ways to lower utility costs, such as controlling thermostat levels. Be tough. Study all of your costs and brainstorm ways to lower them. Do you need all of the employees you have, for example? Are you spending money on marketing techniques that bring in no customers? Could you get cheaper rent elsewhere? Track your expenses. You want to make sure you aren’t too optimistic in your projections. It’s always safer to spend less than you expected. If you don’t have a clear understanding of what you’re spending, you won’t be able to reduce costs.
In a profit margin formula, the gross profit represents the difference between the cost of the product and the selling price (which is revenue you bring in). Try to slowly build up some cash reserves so you can make it through lean times when your profit margin isn’t what you expect. You should have enough money to cover operating expenses for several months when you first open your business. Expect to not turn a profit right away.
Invest as much of your own money in your business as you possibly can. Consider seeking a partner or investor who can share some of the risks.
Carefully check references of all applicants. When you start your company, you should spend a lot of time recruiting the right talent. Look for team players. [15] X Research source Look for commitment. You want employees who will stick around. High turnover is not good for any company. [16] X Research source
Then, you should write a short job description that briefly incorporates all those points and that you can use to attract the right workers. [17] X Research source Be clear up front about expectations for things such as hours and duties. Determine up front which skills you consider must haves and which are optional. [18] X Research source Although CEOs can’t micromanage everything, hiring is one aspect that they should be closely involved in. [19] X Research source Some companies hire independent contractors. This means that the employee is not full-time or on staff. Make sure you follow all IRS rules for independent contractors. [20] X Research source
Be flexible about such things as family issues or emergencies. It will go a long way if you understand when an employee really needs time off. Pay employees decently. If they feel terribly poorly compensated, they will be unhappy, and it will start to show. Make the compensation plan clear up front, but make it fair. Surprising your employees with small things, like a gift for secretary’s day or an unexpected day off, really matters. They’ll work harder for you.
Conversion rate means the number of sales leads who actually buy something. Creating product videos can increase your sales leads. [22] X Research source You also want to keep track of how many transactions each purchasing customer makes in a given year, as well as the average sale price. To increase sales leads, develop a strong social media plan that takes advantage of different sites, such as Pinterest and LinkedIn. Engage with people on social media. Focus more of your money on generating sales leads than on building your brand. Visit trade shows to develop more customer contacts. [23] X Research source
If your company relies on traffic - people coming into your doors - find a location in a busy thoroughfare. If your company relies on online or telephone sales, save money by not choosing a prime location. Research the location. Study the demographics of the area, including income level, and make sure they fit your customer base. Analyze traffic patterns to make sure you will get enough traffic at that location, if that’s important to your business. [24] X Research source Pay careful attention to signage. You want it to look professional and, remember, it’s basically a free ad. Some communities will have zoning rules pertaining to signage, so contact your city, village, or town hall.
Taking the time to talk directly to customers, even if you are the owner, is very important. They will remember it. [25] X Research source Consider using customer surveys to have a better understanding of how customers are perceiving your service. Reward employees who do well. Use surveys to pinpoint strengths and weaknesses. Offer discounts to valued customers. Make it clear to them that you appreciate their loyalty. Engage with customers on social media.
Consider the power of social media advertising. Through a professional social media page, like Facebook, you can create ads that are relatively cheap but can be targeted to people using demographics, geography, and their stated interests. Look into traditional advertising, in newspapers, radio and television. It all depends on your customer base. For example, if you are trying to reach older customers, newspapers might be a better approach than Facebook. Consider guerrilla marketing. Offbeat marketing approaches can get the public’s attention and word out about your business fast. Make sure you have a professional company website, and hire someone to do your search engine optimization so you come up fast on Google.
Some local television stations have morning talk shows where you can buy time to come on and talk about your product with their hosts. You might want to write a blog that you update on your company website. You could also consider creating video tutorials.
