One of the most common mistakes that I’ve seen in the strategy of a small business is when the owner tries to compete on price.
This is a losing proposition because the big boys always have the upper hand in taking advantage of economies of scale, which is one of the reasons that we’ve seen such a setback in small business markets overtime.
So then, how can a small business overcome this challenge?
Well, there are actually many ways to take a stand against in most industries. But out of them all, the one that has worked most effectively for me is:
To do what they cannot or will not do, and go where they cannot or will not go.
Simply put, what the giants have in both size and strength, the small business owner may have in speed, flexibility, or in the ability to operate in a smaller space.
And furthermore, although it’s great when you have all the money in your budget to spend here or there, the very nature of constraints in a small business has been the driving force behind some of the greatest breakthroughs.
So when owners are creative about how they take advantage of their constraints, they usually come up with a solid strategy and focus that is worth much more than what their money could buy.
For example, if you’ll consider my industry – as a CPA in Indianapolis – I realized long ago that I had to take action because of how competitive the market was becoming.
The tax chains – such as Liberty Taxes – could easily out spend me with their marketing budget. The larger firms had more variety in services, and then there were even bookkeepers who could undercut me. And therefore, trying to compete on either quality or price alone in this field was a quick road to mediocre performance.
So I changed it up!
For our tax strategy, we focused in on year-round tax planning for small businesses. The tax return was still a commodity – and therefore the normal market price is all we could charge. But at the same time, our clients were so impressed by what we saved them on their tax bill that they were willing to pay a premium.
And then we offered monthly profit consulting and management plans to small businesses who need that type of value, because they are usually ignored by the larger firms who typically focus on the middle market.
And finally, we approached the bookkeeping market in a couple ways. First we offered training to Quickbooks users to help them save money from not having to hire a bookkeeper – so then they naturally brought their taxes and other consulting work to us. And then, for those who still needed a bookkeeper, we allowed them to outsource that work to us for a fraction of what it would cost to hire one internally.
Notice that in all three scenarios, we made ourselves incomparable with the competition by doing what they cannot or will not do.
And I’ll admit, it was not easy to get to the point where I am able to say this, but it really started with giving attention to all those small details that might have seemed insignificant to anyone but me at the time. And in the long run, that made all the difference.
So, how will you make a difference in your business?