Previously in our Business Improvement series, we talked about the importance of strategy, vision, and direction. Now it’s time to discuss how we make that vision a reality and determine what products or services can help you to achieve your business goals.
For each product and/or service that is offered, the business owner must ask several questions:
- What is the demand?
- Where is it coming from?
- What does the competition look like for this item (or service)?
- How does your product or service set itself apart, if at all?
A business looks at the combination of these questions and their answers to identify the best product or service mix. For example, a custom high-end cabinet maker has a different market and different processes than one who supplies higher volume and lower cost products to large condo developments. Both produce cabinets, but they need different equipment, and different production layouts to maximize their own profitability. The custom cabinet maker finds it difficult competing against a mass producer over high volume contracts, as the latter sets itself up to excel in such markets
It’s so important to know where your margins are maximized and where your customers see value. Look at what prices customers are willing to pay—if you offer small upgrades, can you charge a premium price? Or, perhaps it makes sense to offer one of your products at a loss to get customers through the door. In order to make decisions like this, doing the calculations to look at the margins of all products and services is paramount. Thereby, optimizing the overall outcome fo your business.
Have you thought about your marketing and sales strategy? Are you going after new or existing customers? And do you know what your capacity is to handle each of your products or services?
Selling too much of a product and failing to deliver, then results in dissatisfied and upset customers. It’s also a big problem if you produce too much or invest in increasing capacity without having the sales to support the increased overhead costs. At the end of the day, your products and services must match the market demand. Ensuring your business remains profitable and efficient requires internal structures to have been created properly. Most importantly, your customers have to see the value in your offerings to keep them coming back.
These are the questions every business owner should be asking:
- Do you know exactly what your customers are looking for?
- Do you know what your biggest demand is? Are you servicing that demand in the most profitable way?
- Have you analyzed your margins on each product line to determine where you are most profitable?
If the answer to any or all of these questions is “No”, or the thought of figuring these things out is a bit overwhelming, give the Rise Advisors Business Improvement team a call. An initial consultation is always free.