What’s the value?

I think 2011 will be a real challenge for many companies.

Although the recession is officially over, it is still difficult to get financing and customers in most sectors continue with their belt tightening exercise. With further govenment cuts on their way, anyone who deals with the public sector in particular, will find life increasingly hard. And this is all in a backdrop of increasing inflation.

So what can you do to ensure your business survives, and even flourishes, in this environment.

I think that for anyone who sells their expertise – business coaches, accountants, lawyers, web companies etc. – the key is VALUE. What value do you give your clients? How do they perceive the service you offer?

If you can identify what your clients really value, and ensure you really deliver in these areas, they will love you and tell all their friends. The problem for many of us is to determine what that is. It may often not be what we think is the most important part of our service.

Take an accountant, for example. If you talk to some accountants they believe that their USP is that they do a cracking good job of preparing a set of accounts. If you talk to accountants’ customers they take it as read that they will get a cracking good set of accounts. What adds value to them is having their accountant available to discuss their business issues with (without getting over charged!) and for this key advisor to be interested in them and their business.

It you just offer the service your competitors do why would your customers stay with you? They would be better off going for a cheaper option if the service they will get is the same!

If you really connect with your customers so  they see you as an integral part of their team,  and recognise the value you bring to their business, why would they go elsewhere? And how do you find out what is really important to your customers? TALK TO THEM!!

I am probably preaching to the converted, but I know that many business owners are not asking their clients exactly what they value. The reasons are complex. We Brits are not very good at talking money, let alone putting ourselves on the line by asking our customers what they think of us. However, the act of doing so shows our customers that we care what they think. That we want to provide the right service for them.

Getting to grips with the value proposition can ensure you don’t have to drop your prices to win work, or retain customers.

One last thing, we all know it is much cheaper to retain a good customer than to win a new one. So I see spending time with my customers to cement the relationship as part of my marketing activity.  It’s a win win situation! They get an advisor who is interested in their business, available to discuss their concerns when they need to, and some one they are confident knows them and their business well. I get to better understand my customers businesses so I can give them the best service I can.

Fiona 🙂

Bringing up baby!

In the last couple of days I have become an auntie and it got me thinking about how similar the early years of a child and the early years of a business are.

When  a child is born, sensible parents involve professionals to ensure the birth goes smoothly, but fairly quickly it becomes obvious, once the baby has arrived, that the ball is very much in their court. They have the sleepless nights, the relentless duties of feeding, nappy changing and burping, and the endless worry that they are doing things wrongly. However, there is help out there from family and professionals if asked for.

New business owners are the same. They may start by getting some financial help from their bank (although less so in recent times!) and advice from organisations such as Business Link, but very soon they are past the excitement of the business launch. Within a year they are often bogged down by long work days, the huge list of jobs to be done, and the endless worry that they are doing things wrongly! But there is professional help out there, if looked for.

For the stay-at-home parent life can be insular and lonely. The same is true of the business owner. However, for both there are networks of people going through exactly the same teething pains – it’s just a case of finding the right support network to tap into.

As their children grow, parents start to feel they are losing control of their child’s development, as external forces exert more and more influence over their offspring. At the start the parent has almost complete control over the environments their children are exposed to. But once they start school friends, teachers and the outside world in general are increasingly significant influences.

The same is true in growing businesses. At the start, when the business owner is the only person working in the business, he/she has control over every aspect of company policy. But as the business grows and employees and advisors come on board, the business owner may start to feel that they haven’t got the same level of control they once had – and this scares them.

However, in both scenarios having a set of clear principles and values can be invaluable. Children may be exposed to lots of influences outside of the family, but if parents have instilled a clear set of values that can help their children make informed decisions, they can be confident they have given their children the best start they can. Similarly a company which has a robust and clear set of values, and which is driven by a common purpose, is well placed to tackle the day to day issues thrown at it by the outside world.

Fiona 🙂

To increase or not to increase?

When the VAT increased on 4th January how did you handle it?

If your customers are other VAT registered businesses any increase in VAT has little impact on them, because they can claim it right back. In this case an increase in the gross selling price of 2.5% has no impact on the actual price they are paying.

However, if your customers are members of the public who, by definition, are not VAT registered, the matter needs to be given more thought. Clearly the increase in VAT has just made you 2.5% more expensive than you were before. So, do you just put the extra VAT on your prices or absorb the increase so your customers see no difference?

Here is my take on the problem:

If all your direct competitors are increasing their prices there should be no impact to your competitiveness if you follow suit. So do so!

If your competitors have decided to absorb the increase I think you need to consider hard before you follow their lead.

Firstly, you would essentially be discounting your price, which means that to maintain your overall level of profit you would have to increase business won by 3-12% (depending on your gross margin).

On top of that, the underlying level of inflation is running at around 3-4%, with fuel inflation likely to be much higher. This means that if you absorb the VAT increase and do not increase your prices this year, you could see a net reduction in profit of between 6 and 15%. This is a huge amount for just doing nothing!

Secondly, you need to know how affected your sales volumes are by changes in price. If your customers tend to be higher earners they will be relatively unaffected by any small increase and it is unlikely they will look else where because of it. Customers with lower disposable incomes will be much more affected and are more likely to shop on price.

Having said that everyone knows the VAT price is going up and are expecting it. This means that, as long as you are offering a great product/service, most customers will expect your prices to go up with the change.

Overall, you know your customers and your business. It is vital you look at both before you decide NOT to put the increase in VAT into your prices.

🙂 Fiona

A new year, a new resolution?

Happy New Year!!

Now, traditionally the start of a year is a time for new resolutions. These resolutions often cover things we have been struggling with in the previous year. However, the problem with such resolutions is that they are often unrealistic and by the end of January have gone by the wayside.

But the biggest problem is that just because it is the start of a new year, does not mean that it is the right time to commit to a change in behaviour. For example, losing weight is a great idea, but January and February, when the weather is cold and the days dark, is not a time to eat salads and light food.

From a business perspective I find I am most motivated when the weather improves and the days lengthen. I spend more time outdoors, which makes it easier to think problems through. This means that spring/summer is the best time for me to start something new or review business issues.

If, like me, the new year is most definitely NOT the time to commit to change, cut yourself some slack and delay making your resolutions until the Spring (perhaps an Easter resolution would be better). Then give yourself realistic targets designed to change behaviour in the long term and not just for a couple of months.

Fiona 🙂