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Management Tip: The Top 3 Ways to Shrink a Business

There are three things I see time and time again that hurt people?s businesses. The amazing thing is how strongly people hold onto these ideas. I counsel people against these things. Some listen. An amazing number of people refuse to do anything about them. The top 3 management tips for shrinking a business are tempting, conventional? and deadly.

1. Put Your Product or Service Ahead of Your Market?s Needs

The number on trap people fall into is putting their product ahead of their market. Here?s a simple test. Answer this question:

?What is your Market??

Stop and write it down on a piece of paper. Don?t read any further until you do it. It?s important that you have it down in undeniable form. Done? Okay.

Now put your answer in the blank of this next line to complete the sentence:

?I am going to ask _______ what they want for their birthdays? Read your sentence. Does it make sense? Can you ask ?your market? what they want? If you can?t it?s because you don?t know what your market is. Your market is not personal training. Your market is not cars. Your market is not oil companies. Your market is a group of people. If you did not write down a group of people as your market you are missing the point. Your market is also not ?everyone who wants my product or service?. That?s a cop out.

The only thing that can be your market is a group of people. If you are a personal trainer, your market might be people who want to get in better shape, or overweight people, or elite athletes. Your market is not personal training. Once you understand that your market is a group of people, the world opens up to you. You are no longer trying to pitch products. Instead you are asking your market what they want, and then doing whatever it takes to help them succeed. If you think your market is personal training, then you go around trying to convince people they need personal training. You may have some success, but you are limiting yourself. If you know your market is overweight people you can ask them what they want. If they say ?I want to be skinny?, you figure out how to get them skinny. Maybe it?s personal training, maybe it?s a diet plan, maybe it?s hormone regulation, maybe it?s liposuction, maybe it?s new friends who go walking together every Sunday, or a maybes it?s a combination of all these things and more. If their goal is really to become skinny then they don?t care which one, they just want to be skinny. You may know that personal training is a good solution for them. Great! Offer personal training. If they say no, offer them something else. Your product or service should not define which people you set out to help. Your market, the people you are trying to help, should define your products and services. This is the path to truly successful business. Products and services come and go. Markets remain.

You can make a decent business by offering a product or service. Lots of people do it. But you can only make a wildly successful business by defining your market, asking them what their problems are, and solving them. If you are married to your product, you are severely limiting your potential.

2. Try To Do Everything for Everyone

No one can do everything. Don?t try. Now wait a minute, didn?t I just tell you to do everything in your power to provide solutions to the problems your market brings you? Yes I did. But at some point you are going to have more than you can do. You cannot provide everything to everyone. If you try, you will stretch yourself thin, and no one will be satisfied with your performance. Suppose you have 10 products and ?your market? is demanding you add 10 features to each one of them. That?s 100 new features. Suppose you can only do 50. What do you do? Do you drop 5 products so there will only be 50 new features? No. Do you look for a common group of people within ?your market? who are asking for a similar reduced set of new features? Yes. You narrow your market, not your product line. If your new market tells you they only want 5 of your products, then you drop the other 5. If your new narrower market tells you they want all 10, but each one only needs 5 new features instead of 10, then you do that. If they tell you they need all 10 with 8 new features each then you need to narrow your market again. The point is that at the end of the exercise you need to have a group of people, your new ?market niche? that you can consult with, and satisfy. Many more companies have failed from trying to serve too large of a market niche than those trying to serve too small of a market niche.

If you try to do everything anyone asks, you will end up pleasing no one. When you must reduce, you start by narrowing your market niche, not by narrowing your product or service offering. The product and service offering only gets narrowed according to the needs and wants of your new market niche. If you can?t effectively solve the problems of your market, then consider narrowing your market until you can. Focus and dominate.

3. Make Price Your Main Selling Point

Too many times I see people try to undercut the competition?s price as their main selling point. If you are looking for a business life of constant struggle, then this is the strategy for you. Price is important and you need to be competitive, but using price as your main selling point is entering into the most cut-throat business there is. Anything you can do to lower the price, your competition will be able to do a few months from discovering what you are offering. Available budget is something to be discussed at the beginning so you don?t waste your customer?s time with things they cannot afford, but price is not a selling feature, it?s an order detail.

Not convinced? Take a look around at the most successful product businesses you know: Coca-Cola, Nike, Microsoft, Honda, Toyota, Sony. None of these are the low cost offering in their field. A few of them started out that way, but they quickly realized that is not where the money is and raised their quality and profile to compete on items other than price. People are willing to pay for quality and service. People looking only for the best price usually don?t have much money to spend. Does that sound like a good market to serve? If that is truly who you want to help, do it understanding they are probably buying products from China, India and the Philippines. These countries have an advantage in labor costs (that is quickly disappearing as the standards of living improve) that allows them to compete on price. Even these countries are now looking for ways to move beyond the price wars and compete on value and service. They too recognize that price is not a long term competitive advantage.

Be conscious of price. Don?t sell based on price.

Summary

There are many paths to success and many paths to failure. Three of easiest mistakes to fall into are being more committed to your product than to your market, trying to do everything for everyone, and using price as a competitive advantage. Beware of these three paths to failure. They are lined with the failed companies who tried before you.

Daryl Cowie has shared management tips with 1000s of people in over 30 countries around the world. His mission is to help you and your company turn business opportunities into business realities.

Sign up for a free business management home study course at http://FreeManagementTips.com

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