What can we do to improve the deadlock of your company? You can only make two big decisions: either increase margins or reduce overhead costs. We have spoken with financial experts and they have made us the following recommendations and, beware, the following warnings:
1. Raise your prices. The first 'manual' strategy is to raise the price of your product or service. Always, of course, that your product or your service has sufficient differentiation to do so. Before making a decision, analyze what was the pricing policy of the companies that are already operating in the sector in which you want to enter (and that will be your competitors) and what were the results they obtained: Did they start a war of prices? How did the public respond to your prices? Study how the consumer behaves in your sector and how important quality is for him: Is this the main element of judgment at the time of purchase? You can increase the price and reduce distribution costs, as Apple does, whose battle is not so much in the price as in the quality of the product.
Do not do it if: "In your sector the price prevails over quality."
2. Make fewer discounts. If you have a quality product, you don't have to start your business with a pricing strategy based on an aggressive discount policy to attract customers. Design a discount strategy that is very selective with your customers, rewarding only those customers who are loyal to you with lower prices and opportunities from day one. Replace discounts with loyalty cards. Trust the quality of the and focus on making it known better. Mercadona, for example, when it opens a new store, does not discount, and only relies on the weight of the brand and the location of its supermarkets.
Do not do it if: "You will not be able to invest money in advertising."
3. Differentiate your product. This is a 'add and go' strategy: you have to have a good product first, but you also have to differentiate it as much as possible from the offer in your sector. It's about making your product less price sensitive. To do this, before entering the market, in addition to offering a good product or service, even if you have a competitive price, it is a good idea to make an extra effort to further differentiate your service or product. Product diversification would also come in here, redirecting your product to different specific niches.
Don't do it if: "The sector has a rigid cost structure."
4. Bet on marketing. Many entrepreneurs leave marketing and advertising 'for September'. In the event that you cannot lower the price of your product in order to be competitive, a strategy recommended by experts is to invest from day one in marketing or advertising (depending, of course, on your possibilities). From the start, you get to publicize your product, while allowing you to give your brand some values to differentiate them from your competition (before they consume your product, they will already have an idea of what they are going to find).
Do not do it if: "If advertising is a strategic asset for the leaders of your sector."
5. Improve the conditions of your suppliers. The objective is to lower rates or achieve better delivery times from suppliers (by improving the service conditions or expanding it, you can save indirect costs, or at least save time for your own staff). This strategy will depend on the relationships you establish with the companies that are going to supply you with products or services.
Don't do it if: "You are not willing to pay them more when things go well for you."
6. Outsource what you can. From business areas in which you are not an expert (such as administrative management, communication or logistics) to traditional fixed expenses such as office or computer equipment or a fleet of vehicles (through rentals, renting and leasing formulas, etc.) or labor (through collaborators or external consultants for certain areas of your business), through the production of certain processes of your product or service (inside and outside the country).
Do not do it if: "It is an activity that you should control, even if you save."
7. Invest in Human Resources. Be careful with the selection processes, the experts warn. Sometimes the fact that you make the selection yourself to save money can give you many headaches in the medium and long term. For micro-SMEs, it is recommended to outsource all personnel selection and management. Management, for the obvious reasons of cost savings; selection to make a good choice of professionals for your business. A high turnover ends up having a direct impact on the quality of the product, in addition to causing the anticipated disbursement of money (compensation, etc.).
Don't do it if: "You can't find a company you trust."
8. Weave alliances. You can study different formulas for business cooperation: alliances, franchises, joint ventures ...
It is about looking for partners to be able to reach investments or strategies that you could not reach with your own investment and in which both costs and risks are shared, in most cases, equally. It is not just about forging strategic alliances when offering your products or services outside of Spain, but about reaching agreements to attract consumers or to offer them some added value. Other times you can offer your services to another company for free in exchange for theirs.
Do not do it if: "The other company does not add value to you."
9. Eliminate unnecessary processes. Dispense with processes and intermediaries that do not add value to your product or that can be substituted by other suppliers. In the publishing industry, for example, many processes that increased the total cost of printing presses have recently been eliminated. A good selection of providers plays in your favor here.
Don't do it if: "Quality will suffer."
10. Be patient. Whenever you are going to consider investing in a fixed cost, calculate your breakeven point again. Perhaps a new machine has come out with which you could produce more, but are not prepared to produce more. When in doubt, bet on variable costs.
Don't do it if: "You do not have a sufficient volume of production to assume the new cost ”.
Fountain:
http://www.emprendedores.es/
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