Category: Blog

Last week we talked about product and now we move to price. As a small business owner, the hardest thing I ever do is price my product. Pricing is difficult because you are trying to balance a few things: costs, profit, and customers.

1. Costs: If you are doing something as a hobby, it might be better to not count the costs of making your product. It is absolutely fine to do something on the side and do it for fun. Maybe that is knitting or photography. But if you ever want to grow it into a business, you must start accounting for costs sooner than later. Some businesses like a restaurant have lots of costs, product, labor, housing. Some businesses like mine have very few costs.

   The cost I most often see business owners ignore is his/her labor. If you make a widget and sell it for fun, counting your time is not essential. If you want to make it into a business, you should start checking your time. You will probably have more time in a product than you think and it may turn your hourly rate per product is in the few cents.

2. Profit: One of the goals of pricing is to maximize profit. A question to ask is: How much can I charge? Making a profit is a good thing but the amount of profit has a lot to do with what you are selling and how. I would suggest looking for industry standards to look at what profit margins are being generated by your competitors. But with a higher profit margin comes benefits like being able to retain talent and keep your business running smoothly. One of the biggest factors in deciding profit should be the next point.
3. Customers: How many customers do you want? Something to think about when considering pricing is how many customers do you want to work with at a time. Here are two examples: Little Caesars sells lots of pizza at a razor thin price model. A local high-end pizza shop sells a lot fewer pizzas but charge a lot more and should have a much higher profit margin. Which end of the spectrum do you want to be on? You can sell Lexuses or you can sell Fords and the volume is going to be very different but when you do that, you need to account for your profit margin. Very few people are like Apple and sell a nearly ubiquitous product and have giant profit margins.

There is a lot more to say about pricing but there are better people than me to talk about it. One source is the Businessology show, this episode in particular talks about Value Pricing.

Marketers can help you determine pricing with surveys and customer feedback. But we can also be a cost to account for in your pricing. Pricing is one of the things that should be constantly evaluated and changed based on the current situation of demand and costs.

Read on Product here. 

Promotion (coming soon)

Place (coming soon)

This week we kick-off a little marketing 101. The 4 P’s of marketing is a pretty common notion and they are: product, price, promotion, place. Many times people want to limit marketing down to just promotion but that would be selling marketing short. Phil might make the finest widgets in the world but if the customer doesn’t understand that and can’t find them, he is going to have a hard time staying in business.

This week we are going to breakdown product.

I can’t help you if you do not have a good product to sell. The product/service that you offer has to be of good quality or no one will buy it. If we went ahead and did the marketing and sold that bad product, the consequences could be worse than the benefit of the few you would sell. People could return them or spread bad word of mouth which could kill your chances of succeeding, potentially even if you fixed your offering.

A good marketing partner will help you diagnose how to improve your product/service. Now this might be difficult with some things that are more technically challenging. This is not to say that a marketer is an expert in your field, but most marketers are quick learners and bring a outsiders perspective to your business model. They do not bring the burden of knowledge to your business and can look on your offering with fresh eyes.

But keep in mind that the actual product/service is not all that there is to the product category. The customer experience of getting that product is also very important to how good a product is. This is an area where a marketer can really help you. An outsiders perspective is extremely valuable in assessing how a customers experience might be coming across.

Additionally, marketers may be able to help you improve your product by conducting focus groups or customer interviews. Who better to talk about how to improve your offering by talking to the people who buy it or the people you want to sell it to! These groups can help you to test your assumptions verse the market which can pay dividends in the short and long term.

Product is the first on the list of 4 P’s because it is the most foundational. Next week we will be back with the second P: Price.

This month I want to draw attention to a traditional media outlet using new media to create a win for its brand. The tv network, FX, has always been a bit edgy but I think this was a really smart play for connecting with this program’s target audience.

Atlanta is a new series on FX headlined and created by Troy Barnes, I mean, Childish Gambino, I mean Donald Glover. The target market for this is millennials and younger and you can see this come out in how they target the promotion. I do not have cable but this has been promoted really well all over the internet to my demographic.

The bigger point I want to show here is that they are using free things to drive people to a paid product, which will exist only with a purchased avenue. You can watch it on their app but you have to login with a cable/satellite account. Early reports look promising for Atlanta and FX.

How did they do it?

First, they put out lots of teasers. Short teasers, longer teasers that help get people interested.

Second, they put the first episode online, even straight on Facebook and Youtube, without ads, to get people to see it. What a move! They know that the lifetime value of a viewer is more important than that one episode. I think the traffic on the Facebook post is pretty amazing:

The Atlanta page boasts almost 200k likes but look at the traffic! 34k shares, and it has more like than shares. There is no contest here to generate shares, people like the content/ were excited about the content enough that they shared it. A lot. Additionally look at those 1.4mil views. We know that Facebook views are not the best stat to judge success by but it’s a pretty impressive number. It also has nearly 1 million views on Youtube.

It also did pretty well on the TV ratings near the top of the tv charts for that Tuesday night. But I do not think those include the online stats, which is where it is prone to succeed.

People are going to be motivated to either go and watch it on cable or possibly buy it on iTunes for a few dollars per episode. At the time of writing (Saturday evening) it is number 5 on the iTunes video store

This plan brings in some thought processes like are discussed in the FREE book. They gave this away, to help create secondary sales in other places. We probably won’t ever know the exact details of its success but I think we will know when/if it is renewed for a second season.

But this use of social media is a win.

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Ask questions for the next episode of the Ask Biz Show here: http://bit.ly/askbizshow

Last Thursday, was the two-year anniversary of putting in my resignation at my last ‘real’ job. While reflecting on that event, I celebrated by taking my wife out to lunch and thought of a few take aways.

#1. Bring the boat closer to the dock.

One of the most valuable pieces of advice I can give to someone who wants to start their own business is to bring the boat closer to the dock. What do I mean by that? Two things:

1. Test the market: Will someone really pay you for your business idea? Lots of people will say, “That’s a good idea!” or “I would buy one”, and never follow through. Start selling before you quit any current incoming producing activity. And sell to people you do not know. In so doing you can help prove the concept and make sure that you have pricing right.
2. Build up business: I am a pretty fiscally conservative person, so I encourage people to work like crazy and build up their side business a lot and get it close to replacing your income before you make the jump. I was not able to do this because the situation at my previous employment had become so toxic. Ideally, I would have dedicated the next few months of my free time to building up the business then making the jump. Instead, we had to dig into our emergency fund to keep things afloat while the business started generating revenue. Though we knew before Christmas that this would be successful, it really took about 6 months to cross that line for my business.

#2. The dip is real.

This is a phrase made famous by Seth Godin. The dip is the time period between excitement and success. On StartUp, previously one of my favorite podcasts, (season one is the best) they call it the “trough of sorrows”. This is a real phenomenon. The excitement of starting a business or even a giant new business deal can quickly be replaced by the reality of needing another deal to maintain that success. Some businesses like mine ebb and flow. The flow is easy to keep motivated and stay productive, but the flow times can be a more challenging. My advice, know this is coming and be ready to share those feelings with other entrepreneurs you know.

#3. “The answer is Yes”

One of my favorite quotes I kept harping to myself as I started this journey, and still do today, is my Leonard Bernstein.

“I’m no longer quite sure what the question is, but I do know that the answer is Yes.”

As an early state entrepreneur, the answer is always ‘Yes’ to your clients. Can you do this? Yes. Can you do that? Yes. Unless something is morally questionable, which has been asked of me, the answer is yes. Make yourself indispensable to your clients and you will also find more ways to make money. Sometimes you don’t know what will come of those projects. Video was something I did not anticipate being as big of a revenue generator for me as it has been. I am sure glad I said yes when those projects started coming!

Are you looking to get started with your business, lets chat.