Owen really was telling the truth. His business wasn’t working. In fact, he had closed it down only months after opening, having spent hundreds of thousands of dollars, and a couple years of hard work setting it up. Oh, yes Owen had a great idea; in fact, it was disruptive. It was going to change the way an industry worked. He had a great model and lots of interest. Owens’ company had won awards for innovation, he had garnered local and national media recognition, but here he was less than a year later, his mind in shambles as to what he had done wrong.
Owens problem is common with lots of business start-ups and business owners. We have a great idea, we are experts in our area of knowledge. Owen, in fact, had an MBA, and advanced degrees in technology, yet still had struggles. Owen’s challenge, and the challenge of many business owners starting up, is that they are unsure about how business really works and what it takes to make it successful. The product or service that we are selling is just one part in the process of ensuring that we have a successful business.
Of course, it must be awesome and it must different from your competition to give your customers a reason to come and buy from you. Owen had a business model that was different. The problem with Owens business was that it was radically different. He wanted people to change their way of thinking about a problem and use his solution. Nothing wrong with that, but Owen needed to realize that this was going to take time.
Owen gave up after only running his business for a couple months. He failed to get sales, laid off his staff and closed his doors. Running a successful business takes determination, and success usually doesn’t happen overnight as Owen was expecting. When we are running a business, we have to be clear about all the reasons why someone would choose our product or service over that of our competitors. We need to know the value of what we do and be able to set prices correctly to reflect the value in the customer’s minds.
Owen had difficulty establishing pricing that would work for his potential customers. His service model had one fixed pricing with no options, customers either took it and a chance on his new technology or moved on to other options. In the short time that Owen was open he was unable to establish a customer base that could sustain him.
They say that most businesses fail because they run out of money or are undercapitalized. The truth of the matter is that most companies fail to understand how to relate to their potential customers in such a way that they customer will see value in what they are offering and take a chance on them. In other words, it’s generally a shortage of customers, not money. This can be combined with improper pricing models and weak margins, which then results in a failing business.
Business can be tricky and generally unsuccessful if we don’t have clarity on how to price our product and how to attract the customers we need. While some business owners are successful despite themselves, in tough market places, we need to be creative in reaching customers and getting them to understand our value proposition. We need to be clear about what the customer is going to get out of the deal and how they are going to benefit. We also need to realize that converting customers to buy from us is usually going to take time and hard work and be prepared to put in that effort.
Troy Media columnist David Fuller, MBA, is a certified professional business coach and author who helps business leaders ensure that their companies are successful. David is author of the book Profit Yourself Healthy.