How entities that thrive look for dependable clients
Posted Monday, August 20 2012 at 16:53
- Various studies show that most people who start business while working ultimately either fail and close business or use their salaries to sustain business for a long time.
- The owners or managers of businesses who fail to move out of their stores and reach out to customers operate on 20 per cent of their potential.
- Entrepreneurs who ride on the goodwill of prime location but fail to reach out to clients, operate on 20 per cent of their potential.
- Reaching out does either of the two things, sometimes both: You bring customers to your premises or take your services to them.
At a recent entrepreneurs forum, Joe, a civil servant, shared a story of his experiences in business. When he started a business three years ago, he hardly expected it to take long before breaking even.
He opened his business in one of the prime locations in town, hired “the best” employees and his products were “better than most of my competitors.”
He expected that within a year, the business would be profitable to give him room to prepare for leaving the Civil Service. But to his chagrin three years down the line, the business was making just a modest profit.
This is a common experience with entrepreneurs, especially part-timers who start businesses on the side while working. Most of them get prime locations in town, buy the best business equipment, hire and stock well.
Upon doing this, the expectation is that customers will flow in and business will then grow organically. They hope to ride on the goodwill of the location, state-of-the-art equipment and superior services.
Unfortunately, this is theory. On the ground, they realise how they are ill-equipped against competition from the backstreet, upper rooms of tall buildings and even homes.
One of the key reasons for this scenario is over-reliance on walk-in business. Walk-in customers are those who just walk into your premises to buy or to shop. They usually come as a result of your advertising or by virtue of your good location.
Such customers are few in most business. It is estimated that they constitute 20 per cent of revenue. The other 80 per cent of sales must be sourced from outside.
Therefore, the owners or managers who fail to move out of their stores and reach out to customers operate on 20 per cent of their potential.
They erroneously think because they are on a prime location, have the best products, customers will flock in. Hardly.
Based on this principle, you can see why many entrepreneurs operating from the backstreet or tiny offices or sell goods from their briefcases do well.
Although they are disadvantaged by traditional business attributes such as prime location, they operate at 80 per cent of their potential. At the same time they save costs associated with prime locations.
But entrepreneurs who ride on the goodwill of prime location but fail to reach out to clients, operate on 20 per cent of their potential.
Reaching out does either of the two things, sometimes both: You bring customers to your premises or take your services to them.
If you looked at most petrol station owners, for instance, you might think motorists just drive in to refuel.