Speaking of Business: Focus on customer value, then profits will follow

Q: Why do businesses fail? I hear 90 percent of businesses will not make it past five years.

A: The following statistics list why some businesses fail:

o 82 percent have poor cash-flow management skills/poor understanding of cash flow.

o 79 percent start out with too little money.

o 78 percent lack a well-developed business plan, including insufficient research on the business before starting.

o 77 percent fail to price properly they fail to include all necessary items when setting prices. Plus, they fail to point out what added value the company is bringing to the table.

o 73 percent are overly optimistic about achievable sales, the money required and what needs to be done to be successful.

o 70 percent do not recognize what they dont do well and dont seek help in those areas.

o 64 percent minimize the importance of promoting the business properly.

o 63 percent have insufficient relevant and applicable business experience.

o 58 percent have the inability to delegate properly – micro-managing work given to others or over delegating and abdicating important management responsibilities.

o 56 percent hire the wrong people they tend to hire clones of themselves rather than people with complimentary skills, or they hire only friends and relatives.

o 55 percent do not understand who their competition is or ignore the competition.

o 47 percent are too focused and reliant on one customer/client.

So, what do you need to do? You need to get a workable plan you can follow. You cant “wing it” and expect a big payoff when its time for you to leave the business. You need to change the way you think about doing business. You need to think differently if you are going to have a different fate then most businesses.

You need to stop viewing what you sell as a commodity. If you let what you sell become a commodity, you devalue it to the point that only the lowest price makes sense. A brand program should be designed to differentiate your product or service from all other products and services in the industry. If you do view what you sell as a commodity, be sure you have the lowest price because that is the only way to make the sale.

You need to focus on adding customer value. This is key in doing business, and it is what customers expect. But the focus should be on what customers value the inherent value not what the business owner thinks is important.

You need to not overemphasize profits.

There is nothing wrong with the word profit. It is what business is all about. Not surprisingly, most business owners and managers put making a profit as the reason for being in business. You should focus on establishing conditions that produce profits, such as creating and cultivating customers so they believe that doing business with you is in their best interest. Those who are convinced that they have made the right buying decision become loyal customers who buy because they believe in you and your company and not because of price. And, customers who buy produce what every business needs profits. It all starts with investing in creating customers.

You need to stop constantly pushing sales. It sounds almost subversive to suggest that getting more sales can be a treacherous business objective. To take it a step further, pushing for sales generally leads to price-cutting and tarnishing the brand. It can produce short-term gain along with the long-term erosion of market credibility.

You need to lose the focus on price. Most of us make the assumption that the only thing that will grab the customer is the lowest price. More often than not, it is the salespeople who lead the customer to focus on price. If there is no value added, what is left for the customer to focus on? Price, of course. Or, if we assume that price is all that the customer cares about, then we fall into the price trap.

You need to stop adopting a “just do it” attitude. While this is a good attitude to have to accomplish tasks; without a plan, a process, and accountability for implementation, “just do it” does not get it done. With this mindset, we launch lots of projects, programs, and campaigns with great fanfare, but most end up with a whimper. The problem does not rest with the activities themselves. Failure is in the execution!

In summary, the one central theme with raising a successful business is to remember the customers satisfaction should always be your primary focus. The customer is your boss!

Windsor resident Russell Disberger is a founding member of Aspen Business Group, a Northern Colorado-based specialty consulting and venture-capital firm. He can be reached at (970) 396-7009, or by e-mail at russell@aspenbusinessgroup.com.

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