Wednesday 26 July 2017

Problem solver: How do I get back into profit after cutting prices to beat recession?

 

Q: I run a beauty business which was initially badly affected by the recession. As a strategy to retain my customers, I discounted my prices heavily. While this worked, I am now finding it extremely difficult to make a profit in the business. Do you have any advice?

A: Like you, many businesses were forced to take drastic action almost a decade ago when the economy took a tumble. The action you took obviously worked as you are still in business today, and had you not taken these steps, you might not be sending this email.

Times have moved on and while we are not in the middle of any major boom, there is certainly evidence that consumer confidence and the amount of available disposable income have both improved slightly.

The first task I would suggest you take is to conduct a survey of every competitor you have in your area. You may well find that your prices are below that charged by others.

Next, look at the service you are offering and satisfy yourself that there are unique elements of this which your competitors can't or don't do - are there specific treatments you offer or new technologies which others have not embraced?

When you put these two assessments together, it will give you a reasonable indicator as to whether there is some traction in the prices. I am not suggesting that you put every single price up, but perhaps look at the less-sensitive prices or indeed prices for services which others simply cannot offer.

I recently met a café owner who is located in a tourist region. Like you they had slashed prices many years ago and could not make a profit. Before last year's summer season, they reviewed prices of some key items like a main course dinner. When they conducted the analysis on it, they found that the price of the main course had to go up by €1.

Fearing a backlash from customers they implemented the increase and by December last year, they had one complaint.

Don't take this story as a licence to put everything up, but part of being a good business owner is knowing the market well and managing your price policy so that you end up with a profitable business. You will get no thanks from your customers or your staff if you end up having to close the business because of lack of profitability.

Q: I run a small business and I have never taken in work experience students in the past. Is this something I should be considering?

A: During my Superquinn journey, as a general rule, we always tried to support local schools, colleges and other placement programmes, especially those where the intern might have had some personal challenges.

Our managers took a personal interest in these placements and very often acted as a mentor for the intern.

There are a number of considerations though before you look at taking in an intern.

If you have very limited resources, or perhaps are on your own within the business, then you do have to think about the significant workload the intern places on you. This is especially true if the internship is short in duration. You are likely to have to put a lot of effort in to upskill the person in the first number of weeks, only for them to be gone again in the third or fourth week. If however the internship is from one of the colleges that run them for 12 or 16 weeks, then there could be a benefit to both you and the student.

You will still have to put time and energy into upskilling the student, however in turn they will have plenty of time to share their skills and support your business.

I would also add that you need to think about payment.

I don't agree with free internships as I think it is unfair to the student. At the very least I would encourage you to pay a weekly allowance which would cover bus fares, lunches, etc, for the student so that at least they are not out of pocket. Of course if your business is in a position to pay the intern, that is even better again.

Q: I have a small flock of 200 organic hens and I sell eggs to the local shops. Many store owners simply tell me they have organic eggs already and I am not sure if my approach is correct.

A: What a great story you have. Yours is the very story many customers are eager to find on a daily basis.

Yes of course I am sure every supermarket in the country sells organic eggs, however the majority of them come from large farms in many cases which are located a fair distance from the shop they are sold in.

Nothing wrong with any of that, however personally I would far prefer to be supporting a local farmer just up the road who is rearing his birds in the most traditional way possible.

You must ensure that your pitch to store owners makes it clear that you are local and you are small in scale.

You also need to ensure that your packaging and any other marketing material tells the same story.

Without this you will simply be categorised the same as everyone else. Be sure of what you stand for and tell everyone what you do.

Send your small business questions to himself@feargalquinn.ie

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