Top Problems Facing My CEO Clients – Part 3 Market Positioning

E,ploteeI consult with dozens of CEO’s from start-up’s to 20 years old small businesses, many of them have the same problems.

  1. How do I get access to capital? (click here to review)
  2. What do my financials really mean to me? (click here to review)
  3. How do I position myself in the market?
  4. How do I grow my revenue?

One could say that all businesses have more than one of these same problems. True, but small businesses make up the vast majority of the US economy and their issues tend to carry a huge weight on our daily lives. According to surveys 99% of US employers have less than 500 employees. Most of my established businesses have less than 20 employees and generate less than $2,000,000 in annual revenue. As a SCORE Mentor and Chapter Board Member I help my clients deal with these issues every week.

In this article I’ll just discuss Problem #3 – Market Positioning.

Whether businesses are in start-up mode or established and trying to re-invent themselves they typically have a challenge with Market Positioning. What kind of business do I want to be? What will be my “brand”, how will I be different? Almost like asking a college freshman, what do you want to be when you graduate?

Usually by the time we get to the market positioning stage of a consulting engagement, the CEO/owner generally knows the product and service that will be offered.

Here are some common discussion points that are typical problems:

  1. My business will be the cheaper/lower price provider, since I’m just getting started I can afford this as my market entry tool. I hear this most often, it is usually the worst strategy available. If you are going to launch a business as the low selling price competitor you are going to fail. You just can’t play the pricing game long enough to beat the “low cost” providers. You are going to sell a commodity price less than Amazon and Walmart, really?
  2. My business will provide a wide range of products and services, not very well defined. This too is a poor strategy. Competing with who? Most small businesses don’t have a lot of “bandwidth” in skills. Doing a little bit of everything, but nothing really well just won’t be successful.
  3. My business just wants a small piece of the large pie. This could be viable as a strategy but you must find a key differentiator or do a market study that show an unfulfilled need.

Here is what you can do, become unique, specialize, research:

  1. Instead of being the low selling price provider, become a “highest value” provider in a niche. Consumers will pay a premium for something that is both unique and an overall value.
  2. Do something highly focused, really, really well that other don’t do as well. Customers will pay a fair price for a better experience. Well defined boutiques can do well.
  3. Do your research, many franchisors do this quite well. For example, they have experience that shows when a new exit is built on a major expressway that a gas station and restaurant will generate good income and higher margins than the same businesses located 5 miles further down the road, in a less traveled area. If there is a growing population area, with a high traffic communing road, a dry cleaner might be a good business. Maybe the next available dry cleaners is 5-10 miles away. If you offer dry cleaning, add on alterations and drop-off for shoe repairs.

The last component of Market Positioning, might actually come before any of the above items come into play.

What kind of business do you want to be when you grow up?

  1. Build a Payroll Substitute In this business the owner is really looking to replace his previous pay check and enjoy a “life style” business. The owner doesn’t want to grow, manage and take the risk of a shooting start business, He/she would trade high growth for more flexible time, more company paid benefits, “business trip” vacations etc. Maybe even bring the kids and relatives into work there.
  2. Build a “feel good”, Socially Responsible These businesses are fundamentally a way to give back to the community. Doing good is just as important as making a lot of money. Many people don’t understand that a not-for-profit business can have administrative fees, and these can include substantial salaries for the owner. There are various guidelines involved, but these are not necessarily volunteer organizations.
  3. Build a Substantial Growth business, maybe even with a “sell the business” as an end goal. In this model, the owner is willing to take calculated risks, invest more money and bring in a higher level of talent right from the start. This CEO needs better business and financial plans along with the desire to work a huge number of hours to get the job done. Many time this business is the founders 2nd or 3rd business and he/she knows exactly what to do.
  4. Just Buy a Business. Keep in mind that the fastest path to achieving your goals might just be to buy an existing business. Sometimes the existing owner will be willing to work out a payment system instead of all up-front cash. There could be tax advantages.

The bottom line is that it is important that CEO’s of small businesses understand the Market Positioning and type of business they want to start or transform into. In the last article of this series I’ll cover the final topic, How to grow my Revenue.

You can research our Florida SCORE chapter here: https://pascohernando.score.org/

 

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