Last week in Small Business CEO, I read a story about a small business that was calling it quits due to “high oil prices and the economy” (my paraphrase).
Two comments in that blog disgusted me, mostly because the owner appeared to be stuck in a mental trap about the economic conditions that she felt forced her to close up shop.
The most poisonous quote was this: “Small home based businesses like mine really don’t stand a chance in the current market.”
Horse biscuits.
In the Depression, one fourth of Americans were out of work. Of course, that means three fourths were still working – but you won’t ever hear anyone state it that way. Those 75% still continued to buy goods and services. While that doesn’t make life easier for the unemployed 25%, it does mean that markets for goods and services didn’t simply disappear, even in those rough times.
The reality is, a lot of businesses got started back then, in the “worst of times”. Google “founded in 1930”, “founded in 1931” and so on.
The Greatest Generation didn’t give up because the media told them the economy was bad. They sought out and found (perhaps made) opportunity. Seventy plus years later, many of those businesses are still around.
The state of the economy really isn’t the point. Your market, your products, your clients and your prospects are. Your focus, your marketing, your creativity of thought and action are what matters.
Raise prices or quit?
The second quote from the SmallBusiness CEO article was no better: “Forced with the decision of either raising my candle prices sky high or temporarily closing, I chose the latter of the two.”
Rather than dropping their eyes to the floor and mumbling the new higher price, they chose to go out of business. How considerate of them to hold such concern for the client.
Phooey.
The problem isn’t a lack of concern for the client, the problem is assuming that your clients think exactly like you do, value things exactly like you do and folks, it simply isn’t true. If that was the case, only Ferrari owners would work on Ferrari’s assembly line. Only Porsche owners would sell Porsches. Or Belgian chocolate. Or HD video cameras.
Only the dead aren’t aware that prices are rising. Whether it’s rises in shipping, food, or petroleum-based materials, these things roll downhill to the buyer – it’s obvious.
Making the decision to stop producing items because one of the component prices went up 40% assumes that the clients don’t feel the items are still worth that much without even asking them. For all you know, your prices are 40% too low already.
While these are primarily personal issues, there are also practical ones. I’m somewhat involved in a business that uses beeswax, so this isn’t armchair quarterbacking. I know exactly what is going on.
Due to Colony Collapse Disorder, I’ve seen 40-50% increases in the price of (among other things) beeswax over the last several years. In fact, prices have risen 20-30% or more more than once since 2004. What was three dollars and something a pound back in 2004 is now over seven bucks a pound – and that’s just one of a long list of expensive to ship ingredients that aren’t available here in the Flathead.
The finished product also costs a lot to ship, which is why orders over a certain amount ship free. People will spend $50 more on something just to avoid paying the shipping. Maybe they don’t buy quite so often, but that’s fine. I don’t want them wasting their money on shipping. I want them making a profit so they come back for more.
The clients who buy those beeswax-based products not only haven’t complained, they’re buying more than ever because they value the product and they recognized that everything is rising. We didn’t make the decision for them, we simply raised prices to reflect the economics of the product line and *let them decide*.
Sometimes quitting is the right thing to do, but don’t do it for the wrong reasons. Don’t let the pundits, the media and Presidential candidates poison your mind. Very few of them run a business.
You do.
Want to learn more about Mark or ask him to write about a business, operations or marketing problem? See Mark’s site or contact him at [email protected].