Posts Tagged ‘competition’

I know of four small business owners, all of which have had the same problem this week – their plans failed to be achieved.

All four business owners recently launched new products, or services or made business plans with all the right details; numbers of leads, number of customers, price paid per customer and total revenue per year – all good stuff.  The problem was that when they compared the actual numbers to the plans, the targets were never reached.

But before I get too judgemental, I have to confess – one of these four small business owners with the over ambitious plans is me.

All four of us were guilty of the same fault – of getting too carried away with our ideas which lead to over estimated numbers.  After all, we all created good products, good sales stories, all with good USPs.  So why weren’t the masses beating down the doors and handing over buckets of cash?

It’s a common mistake – especially when launching a web product.   You create a web site, do all the SEO you can, launch it, index it and then…. Tumbleweed.   You look at the number of visitors and see 2 blimps of 2 visitors over 2 weeks, and you suspect those visitors are you, checking on your own web site layout.

Of course, it’s hard not to get excited about your own products, but as I fight with my own low visitor count, I have learned from this mistake.  My plans have been updated to a new pessimistic view which ultimately is much more achievable.  We are all being bombarded with sales messages, calls to action, and demands for our money – so any sales message we send out will be diluted.

So when you make your own plans, consider what the impact will be if the plans aren’t achieved.  What happens if you only get half the sales, a quarter, or a sixteenth?  Does the investment and business plan still work?

Over the weekend I was chatting with another freelancer and he was asking my advice regarding the concept of the USP – the Unique Selling Point.   Despite reading my other advice on creating a USP for his freelance business, he was stuck.   He commented that Everybody else was doing the exact same thing as he was, so where was his USP?

Actually, I explained, if everybody was doing the same as him (which I doubt they are anyway, but I let that pass), the answer was staring him right in the face – do what they won’t.

Regardless of the business type, there are things that we all have to do to make business and money.  Most of the time, these are all bolt-on’s to the main service.  Now whilst there is good money to be had for charging for these services, if you are really struggling to create a USP, why not make these items part of the service?   So ideas may be:

• If others charge travel time, travel expenses (a few pence per mile) and meeting time, include these in your prices
• If others charge for the initial consultation and meeting, include these in your prices
• If others ring fence their service and wont touch certain things (“I don’t do user documentation”), make yours a full service and do the other work
• If others refuse to meet with clients, go to the meetings
• If others don’t like to do handover visits or user training, make the effort and make this your USP
• If others take all the money up front, make yours invoiceable at the end of the project, 30 days net – so time to pay
• If others lock source code, SQL procedures and other products to retain copyright, offer an Intellectual Property Right Transfer
• Where others don’t make the effort, go the extra step, and make this your USP

Careful thought and budget/pricing management is required to get your money for the work, but a USP does not have to be the latest wiz or bang – it can be just doing something that others won’t – and so saves somebody a headache.

Of course, as a small or freelance business gets more customers and so a stronger story, the USP can evolve to be more about your products and skills.  But when stuck on the initial USP, the ‘can do’ attitude is a good starting USP point.

Freelancing and IT contracting is in a fairly depressing place.   As with most industries, it is suffering from the continuing downturn in the global recession, but on top of that, the value of quality is dropping.   You only have to look at the glut of FREE applications available for the iPhone or Android to see that people expect more for less, cheaper and cheaper (or free), and they want it all now.  This is reinforced by the growth of opensource.  Being a writer or systems analyst is no better, with many web sites allowing overseas suppliers to cut throat each over in a price war which means for freelancers, making a decent day rate is getting harder and harder.

So if you’re a freelancer/IT contractor and need to increase your day rate, or even just keep it the same, what can you do?

I am coming to the view that trying to win on price is a fools game – overseas or part time freelancers will beat you down on price.  Keeping up to date with the technical skills is of course a must, but trying to be the most skilled person in your field (software development, document creation, whatever) is another lost battle – there are people who are going to be on the cutting edge who will be better than you, and will people pay a premium because you know the beta version of the next Visual Studio product?

Instead, where we are all heading is to be experts, to have experience, to be able to advise and direct.   People may want a freelancer who can come in and create web sites or a 1 page sales brochure, but they will pay very little for it and everybody ends up loosing.   Instead, when I take a look at contract pricing sites like UK contracting, it is clear that the high day rates are for people who can manage, who can direct and can bring the expertise.  Who can take a situation, and replicate what has worked before in a very niche situation.

Yes, it will always be very useful to write code, know how to put a good article together or how to do SEO on a web page, but when all of these can be done by students working from home or a far off land at half your rate, building up a level of expertise in a specific area is where the smart money is.

So you have your products and services – check.  You know your price structure – check.  You have your web site in place – check.   Now who are your potential customers?  Who are you targeting?

There are any number of right answers for this, depending on your product, service, offering and competition.  But there are two very wrong answers to this question:

Everyone
Take a product we can all relate to – shoes.   Almost everyone needs shoes, but clearly, a target market place of Everyone is too vast to communicate to.  When you cast your net as wide as needed to capture everybody, you end up capturing very little, as your message is too dilated, distant and ends up relating to nobody.  Even shoe shops know this, which is why you have premium shoe shops, discount shoe shops, shops just for kids, etc.

A subset of a subset of a subset
On the other hand, another wrong answer is a sub-set of too many subsets.  Lets take an example where you develop a piece of software to track running distances for fitness, but because of technical knowledge, it only runs on Windows Mobile software, and has a fixed screen resolution of 480 x 300, and only works in English.  Well yes, you have a nice specific target market, but Windows Mobile devices are loosing a lot of ground to iPhone and Android devices, so the markets already small.  Now for users of these devices, you are only interested in runners (say 4% of Windows phone users), and they have to be in an English speaking country (say 10% of the 4%), and have a high resolution screen (say 20% of these).  The result is your target is now just 800 devices of every 1million windows mobile phones in the world.  Of this, you may hope to sell to 2% of the users, which is a sale quantity of 16 per 1million users.

A lot of very good marketing books talk about knowing your market, and when you start looking at target markets for a service, its can be a very complex task to find the right balance of finding the right segment to have potential customers, not too large so that you can target them effectively (through a web site or material that pulls them in), but leaves sufficient scope to make sales profitable.

Back when I was a regular employee, with a permanent job, working for somebody else, I used to have a boss who lived and died by the moto “Get Big, Get Niche or Get Out”.  

Its one of the motos I also keep in the back of my mind with every business decision I make.   After all, no matter what type of business you are in or service you provide, there will always be somebody else who can do it faster, cheaper, closer to the customer or a dozen other reasons why the work should go to them and not you. 

At the same time, being a small business owner/manager, you cannot possibly have the economies of scale or the corporate presence that major corporations or retailers like Oracle, Microsoft, PC-World or Amazon has.  Their publicity pound, Euro or dollar goes a lot further than yours.

You cant (and shouldn’t) try to beat the chap in the far off land who is willing to work for a stupidly low rate, neither can you try to complete with one of the big boys, who can bring 12 executives to each and every meeting simply because they can afford to.   So where does that leave you?

Well that leaves the 2^nd option – to get Niche. 

Niche is finding your own Unique Selling Point (USP); the thing that you can do that others cant, the product that you have that very few other people can offer, the service that is better than the big or cheap boys because you care or it’s the only area you work in, or the extra value that you add which Mr Cheap or Mr Big wont want to.   Without that Niche aspect, you are another fish in the feeding frenzy, and there is always a bigger or quicker fish than you.