When you are starting a business, it is very easy to get to become obsessed with innovation and focus too heavily on what you should be doing differently. As I have pointed out earlier in this podcast series, you just need to focus on getting going. Once you are up and running, then you need to increase the pace and tempo of your business. It is through this process that you can scale your business, employ talented individuals and tweak your formula. It is during this time you will see your business evolve and transform.
When I started my telecoms business in my bedroom, I had no idea how to do anything technical when it came to routing, IP addresses and so forth. However, once I had decided on a product offering and found the first client, the focus was on repeating this over and over again. By doing that I was able to build up a recurring income stream that covered the first employee, and then the second, and then the next one. Within six years I was invited to Buckingham Palace to accept an award on behalf of the company from the Queen for innovation. That innovation did not come from me but from my brilliant team and our vision. Had I set out to achieve that on day one, I’m not sure I would have been having tea with the Queen.
Now that you’re repeating and growing you can look at small efficiencies and changes that you can make where you can immediately measure the success, or failures (!) of those changes. In the podcast I talk about my window cleaner moving his business to a filtered water technology. He is still cleaning windows but by investing in some upgraded technology, with the understanding of his business and his customer needs, realised he could increase the number of homes he could cover per day. My point in this episode is to focus on small incremental improvements. Not only will this improve the quality of your product but potentially reduce your costs as well.
At this stage in your business journey it is also a great time to be able to think about scaling. How do you get more customers and how do you deal with them? Lots of conversations I have with budding entrepreneurs revolve around the franchise model. Whilst I have never done a franchise, the idea is a good one but not necessarily one you have to do literally. The key component of it is letting someone else replicate what you are doing, with your support and understanding and letting them take a big share of the profits for the new business they generate. This principle is still something you can evaluate even if you are not formally ‘franchising’ and enables you to scale the business through engaged partners.
Likewise, discounting isn’t something I would focus on. However, offering promotions focused around gaining volume is something I would support at this point in your journey. Jeff Bezos, founder of Amazon, was all about getting big and quickly. By reducing margins and focusing on large volumes he was able to build a global business. The ability for it to make money and survive in the low oxygen levels of discount retailing was due to this focus right from the beginning. His main reason for doing this was that there was little competition. Established businesses didn’t want to compete with him as they would have damaged their already lucrative business models.
So how do you offer value and increase volumes without discounting? For me the answer is in rewarding good behaviour. If a customer repeats custom, recommends a friend, buys more than one item at the same time, then they should see a reward. This enables you to keep the value of the standalone product or service while offering value to those customers that help you out. Coca-Cola does this every time they sell a multi-pack – the price per can is lower than if you buy it individually. Buy more and you get more value. If anything, keeping the individual product or service at a higher price helps you demonstrate this value more effectively.