As the geopolitical tension escalates in the world, I decided to de-escalate the tone in my columns, after a couple of pretty heavy ones. This week I am going back to talk about small businesses.
Lower the overhead
This is the single most precious business lesson that I have learnt in my life. In any industry, at any point in time, keep your fixed costs low. Fixed costs are those that have no impact on the sales. For example, renting an expensive office is a fixed costs, unless the business consists of sub-letting office space. In that case, rent would be a variable costs, as it could be factored in the price of the service sold. But when I am talking about overhead, I mean all costs. Keep all costs low. For example, if you are running a marketing agency, you might not need to hire all of the service providers as in-house full timers. Especially at the beginning you could resort to outsource some of the services. In particular those that can be performed anywhere in the world.
Build a network of partners
When you are running your business as a single entity, you tend to need an extraordinary effort in marketing products and services. Offloading some of the tasks to partners could make life much easier. When I used to run training centres, for example, I always partnered up with other training centres around the world. When our speciality was in the field of Visual Arts, we partnered up with other training centres specialised in other disciplines. That gave us more courses to promote under our umbrella, and at the same time a marketing partner promoting our courses in other geographies or industries.
Find ways to offer more services
Products are great. But services are better. Something that I could say I have learnt in the past 20 years. Products can malfunction, break, expire, etc. The likelihood of something going wrong with services is much lower. Of course it greatly depends on the field, but as an overall concept, if you are selling products, find opportunities to sell services as well. For example, if you are selling food in your restaurant, try to offer home delivery. If you are selling software, offer training. If you are selling games, organise tournaments. In short, find a way to sell “time”.
Given the 3 strategies above, here is a suggestion for our reader Mrs. M. who runs a boutique selling garments and accessories in a mall. First, she could reduce the overhead moving to a non-prime area. A quiet neighbourhood with plenty of parking. That could reduce sales, sure, but less sales, with much less costs, means more profit proportion.
Then she could consider placing some of her products in boutiques that have indeed a higher overhead. If she moves out of the mall, she could still place some products to some independent boutiques that decided to stay.
Lastly, she could offer services such as tailoring. If she wants to be even more creative, she could offer photo shootings as well. A friend of mine launched her own fashion business in Singapore. When she sells garments to her clients, she offers a premium photo shooting for Instagram.
Send me your questions for more of such tips.
