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A Model for Small Business Development

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With few exceptions, small businesses operate in a competitive environment within mature industries. Barriers to entry are low, meaning new competitors continually enter the market and more often than not, the new entrants establish a market presence by offering lower prices.

The cost structure of most businesses in mature industries are relatively similar. (Obviously larger businesses have more costs but they sell more units, meaning costs per units sold are about the same.)

There is an average price per unit of product or service sold, and an average profit. In order to earn more than the average profit, a business must either reduce its costs relative to competitors, or charge a higher price.

 

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Large businesses are able to obtain cost advantages and thereby earn more than the average profit. A small business has to charge more to earn more than the average profit. Owners are usually reluctant to charge more. However, charging more is the correct strategy.

This blog, and the ProfitSurge programs, will focus on delivering strategies to small business owners that will help them to earn profits in excess of the industry average, while working fewer hours.

To achieve this clients will need to charge more. That means they must deliver more value to their customers. They will need to build a business development strategy based around sound pricing strategy; a customer service system; a people development system; a sales and marketing system; a financial management system; and a customer selection system.

ProfitSurge will deliver training, tools, advice, and support in each of these areas and I encourage clients to work more closely with their accountants and business advisors.

The ProfitSurge programs require the business owner to decide what they want the business to achieve for them, what type of customers they want to work with, and what products and services they wish to supply to their customers.

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Select the customers you want to work with and then attack your rivals’ strategic weaknesses

In competitive, fragmented industries, characterised by low barriers to entry, (the landscape small businesses operate in) the strategic weaknesses of your rivals are dictated by the very nature of the competitive landscape. When you read about those weaknesses you are most likely going to say to yourself, those same weaknesses exist in my business.

That should not stop you from taking advantage of the situation!

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