We witnessed the decline of a successful business first-hand. Some details have been changed to protect the guilty.
Listen to this post! Click a player to hear George & Mary-Lynn on The BIGG Success Show Podcast. (Runtime 5:15)
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It was a one-of-a-kind, upscale restaurant in our area of approximately 300,000 people. Business was good, but the owner thought she should be doing more.
She ended up making a critical mistake. She changed to a more mainstream menu and reduced prices.
Unfortunately, this move put her squarely in competition with a number of other restaurants, including several chains.
As in most areas, the restaurant business is highly competitive in our area. We’ve been ranked near the top of dining out per capita consumption. But we’ve also been ranked way up there in terms of number of restaurants per capita.
So when the owner made the changes, she went from being one-of-a-kind to being one-of-many. The result was that she ended up closing the restaurant.
You see this all the time. You can miss the boat when starting a new business. You may get it wrong when running your own business. It’s a critical key to success in business.
Popularity versus profitability
You must keep in mind the huge difference between popularity and profitability.
You can be a success in business without being popular.
But you can’t be a success in business without being profitable.
Profit is not a dirty word! It’s a necessity.
Without profit, you won’t be able to sustain your current level of sales in the future.
You need profit to repay any loans you have.
Profit provides the capital to grow your business.
Without profit, you won’t be able to give your people raises and other perks.
Without profit, the BEST you can expect is to remain stuck right where you are.
As humans, we have a desire to be popular. We want to fit in. We want to be admired and respected. There’s nothing wrong with that per se. But this emotional desire for popularity may kill your business!
Let’s talk about three ways that may happen.
This desire to be popular may keep you from honing in on your ideal customer.
The restaurateur we mentioned earlier had an upscale crowd. She wanted more customers so she toned it down.
Unfortunately, she lost her best customers chasing after customers who didn’t spend as much.
A lower average ticket, coupled with lower profit margins, killed her business.
You can and should love your customers. You want your customers to love you. But you want the right customers to love you.
Wanting to be popular may lead you to charge too little.
We’ve already hinted at this. People are smart. They like a good deal.
If you price your products and/or services below your total cost, you will be popular. You’ll also find that, the more popular you are, the more money you’ll lose!
It’s far better to have fewer customers who gladly pay you what you’re worth.
Provide what a select group of customers want or need and you’ll create more value for them. Then price your product and/or service accordingly.
You may not be as popular, but you most certainly will be more profitable.
The desire to be popular may keep you from making tough internal choices.
For example, entrepreneurial leaders can’t afford to make personnel decisions based on popularity. You must make choices based on who is best suited to help you get to your destination.
It leads to BIGG success!
Want to maximize your profitability? Maybe we can help.
Direct link to The Bigg Success Show audio file | podcast:
http://traffic.libsyn.com/biggsuccess/00793-032212.mp3
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