Over my 25+ years of working with small business owners, I have seen a lot of successes, failures and everything in between.
Starting and running a small business today is not for the faint of heart, but it can be one of the most rewarding endeavors you will ever take on in your business life.
Here are some basic facts you should consider when asking yourself “Am I crazy to start a small business now?”:
Small businesses comprise:
• 99.9% of all firms
• 99.7% of firms with paid employees
• 97.4% of exporters (280,496) • 46.8% of private sector employees (61 million)
• 43.5% of gross domestic product • 39.7% of private sector payroll
• 35.6% of private sector receipts ($13.3 trillion)
• 31.6% of known export value ($460 billion)
Source: SUSB, NES, ITA, SBGDP
The 2016-2018 two-year survival rate for young employer establishments (2-3-year-old firms surviving to at least 4-5 years old) was 71 percent.
Source: BED, BDS; Office of Advocacy calculations
Now that you see these statistics, I hope you have come to the conclusion that you are NOT CRAZY to think about starting a small business, especially now after recent world events.
What IS crazy is not creating and completing a thorough business plan to ensure that your business has ANY chance of success. Included within that business plan is a marketing plan which is a key element of whether your business will survive and grow or not.
Given the number of new online businesses being formed during the pandemic, it is critical that you first answer the following three marketing questions:
1.Who is my target Audience for my products / services?
2.Who are my competitors and why should potential customers choose my business over theirs?
3. How should I package / price my products /services?
After working with hundreds of small businesses, I will say that the answer I get most to the first question is “I want to sell to everybody in the country / world”. This is not a practical response for many reasons, the most important being that no small business could afford to strategically market their products/services to everyone, which is why the first question is probably the most important to understand, and the one that so many small business owners get wrong from the onset.
Depending upon what you sell, your target audience might be niche or broader. For example, if you were a t-shirt vendor your target audience would be broad, since men, women and children all wear t-shirts. On the other hand, perhaps you specifically sell “Justin Bieber” t-shirts. Then, your target audience would be more niche – teen girls between the ages of 12-18 who have expressed an interest in his music.
This is why it is so important to define and understand your target audience in order to determine what messaging will resonate with them and what marketing channels to use to reach them.
Answer these few questions to help you narrow down your target audience:
- Who would benefit from your offerings?
- Who engages with me on social media?
- Who is my competition targeting?
Knowing who your competitors are and what they offer can help differentiate your products, services and marketing efforts from theirs. Ask yourself “what is different or unique about my offerings?” Doing so will enable you to set your prices competitively and help you clarify your marketing messages to your target audience.
You can use the following resources to determine your local competitors:
- Internet searches for similar products or services in the areas you sell your products/services
- Local business directories
- Customer feedback
- Local trade fairs
- Printed and online marketing materials and advertisements
The key here is to learn as much as you can about your competitors. Look for articles or ads in the local or mainstream publications. Go to their website and their Google Business page. If they are an online business, sign up for their email lists to keep aware of pricing and promotions that may affect your sales and services. Regarding their website, review the site to see if you could improve on it for your own website.
This is a very complex topic to cover and there are no simple answers. It depends on a variety of factors as well your offerings. Many small business owners use cost-plus pricing as it is one of the simplest pricing methods. You simply calculate the cost of producing/offering the product or service and then add on a percentage (profit) to that price to arrive at the selling price. This gives a small business owner a way to calculate how much profit you will make.
Product bundling is a marketing strategy that involves offering several products for sale as one combined product. Packaging your product for the consumer is an area of marketing that is as important as pricing your product as it can help differentiate your offerings from your competitors.
Another pricing strategy used by small businesses is competitive-based pricing. This is when a business sets a price for its goods based on what competitors are selling a similar product for.
One advantage of competitive-based pricing is that it avoids price competition but at the same time, you will need to attract customers in other ways, since the price will not grab the customer’s interest. This selling price may also barely cover your costs which limits profits.
In summary, there are many strategies and methods for starting a small business in today’s business climate, and not having answers to the above three basic marketing questions will hamper your success.
Spend the time and effort to research these questions before you make the decision to move forward with your new venture and consult with others whose experience and backgrounds can make your decision easier and clearer.