The downturn in the economy and unpredictable market has made long-term planning more complex and forced business owners to make some hard decisions.
Decisions such as cost reduction through staff pay cuts, downsizing and increasing prices to survive in the market in most cases do not offer permanent solutions.
The best solution for any business is revenue generated from sales of its products in a sustainable manner. Sustainability here means the cost of getting customers and retaining them should be affordable to business in terms of marketing costs.
In most cases, the success of a business does not lie in cutting operation costs or the price of its products to woo customers. It lies in creating value to customers so that they keep buying and using the products to better their lives.
One of the common mistakes most business owners do in tough times is to think of increasing revenue streams. The advice of expanding business by diversifying should be taken with a pinch of salt, especially for a startup that is on growth phase.
Theoretically, it sounds very good but practically it hardly works. This is because resources are scattered when they need to be concentrated and focused to propel growth.
It is a myth that to be successful you must have several income streams or wide product range. In fact, most successful businesses are focused on a very small area and offer one or very few products. However, they do it so well that they are able to position themselves in the mind of customers as experts or specialist in that field.
In hard times is when you need to focus all your resources and energy doing one thing that gives you maximum returns.
A good farmer knows that when water and nutrients are scarce it is time to prune fruits trees so that they can yield more and quality fruits.
Likewise, most entrepreneurs can do better in the market if they dropped some of their products or activities so that they can focus on few. This may be tough and unpopular decision that requires courage to make.
The starting point is to look at your business and analyse every activity, expense and product to see where your bread is battered on.
This will help you to decide what to prune and what to nurture. This way you will be able to elevate yourself to the position of an expert in your field.
The biggest benefit of focusing on a small area rather than being a jack of all trades and master of none is your ability to improve your product and create more value for customers.
You will have more time to do marketing to establish what customers want and how they want it and communicate the same through effective models.
Ultimately, customers have to see business value to part with their money. Once you give them value they will have no problem paying a premium compared to what others are offering in the market.
Therefore, in a tough economy you must strive to increase value, not to reduce the price to woe customers. That is what customers are looking for – value for their money.
Mr Kiunga, Author of ‘The Art of Entrepreneurship: Strategies to Succeed in a Competitive Market