Doug Richard's School for Startups

Prices Are Discovered

Doug Richard — Tue, 09 Mar 2010 14:35:17 +0000

This morning, we posted an article by Doug called “Successful Startups Almost Never Compete On Price”. Due to the popularity of the article, within hours, our website started to receive an unprecedented amount of traffic.

Naturally, this tells us we’ve hit upon a key issue that faces most entrepreneurs.

We thought it would be helpful to post a video clip from our S4Stv library entitled “Prices Are Discovered” with Doug explaining the thinking behind pricing, turning around some of the more commonly held assumptions.

Here is Doug in action:

What are your views on pricing for your business? Tell us what you’ve learned by commenting below. You can also register here or continue the discussion in our forum.

Successful Startups Almost Never Compete On Price

Doug Richard — Tue, 09 Mar 2010 09:30:54 +0000

by Doug Richard, founder of School for Startups

I have counseled and supported many thousands of entrepreneurs over the years, and something that never ceases to amaze me is how many initially enter the market with the intent of competing on price. Since I have an extensive background in sales and marketing, and since I’ve managed more than my fare share of sales teams, the idea of maximizing the number of low margin sales a business makes just seems completely insane. Startups rarely have the returns to scale or the marketing and sales efficiency to do large volumes of business profitably at a low price.

I believe this problem is caused by a fundamental misunderstanding about how prices are set, a lack of insight into why people buy what they buy, and no formal education on what other meaningful qualities products can compete on. This article reviews some fundamentals that every entrepreneur needs to know.

The Process of Perfect Pricing

Prices are insanely slippery numbers. They are defined by what one person will pay another for a given product or service. They are not defined by what a product cost to produce or what profit margin a producer would like to have.

For example, all the ingredients in a litre bottle of Coca Cola, the bottle itself, and all the branding painted on it, costs less than 10 pence. The Coca Cola company feels no need at all to price its products at a few pence per bottle. Sometimes this truth is explained away by pointing out how much the company spends on advertisements, maintaining its brand, etc. But the truth is that if customers decided they were only going to pay 15 pence a bottle, Coca Cola would change its branding and all other elements of its business model to keep profits high while meeting that requirement or they would stop producing the product.

The price people are willing to pay for a product or service can be derived from many factors. Which factors people use to make their decision will vary from person to person and from day to day. A man trapped in the rain on the way to a business meeting will spend quite a bit for an umbrella. Someone who buys airplane tickets online will almost always want to spend less than someone who buys tickets from a travel agent.

Factors people may take into account when figuring out how much they will pay for something include:

•   The cost of the problem a product or service solves
•   The revenue owning or using a product or service can generate
•   The status derived from owning or using a product or service
•   The improved perception of self derived from owning or using a product or service
•   The cost of the crisis a product or service prevents
•   The price of substitute products and services
•   The price people pay for related products and services
•   The location where the product or service is being provided
•   Who will be using the product or service
•   Customer service provided post sale
•   Pre-sales support leading to a better solution for the customer.

Sales and marketing professionals can choose to target customers based on any of these characteristics. They can target their marketing materials and their marketing efforts on customers who do relatively little in the way of comparison shopping. In many cases this will require the business to adjust the products and services they offer to address the needs of these less “price sensitive” customers.

For example, the price of a tow truck to pick up a car may be just £20. But a service that guarantees they will rescue a stranded daughter in the middle of the night on a dark road may be worth £80. If your objective is to sell tow truck services, you should obviously consider modifying your business model to provide the more profitable solution. After all, many people purchase towing service plans but few use them even once a year. In fact, this is a demonstration that sometimes the number of people willing to pay more for a service is much higher than those willing to pay less.

Good pricing requires good market research. You must look for and find people who are ideal customers for your product. You must come to understand them well and you must give them what they need. When you can do that, you won’t need to compete on price. You’ll be able to compete on everything else.

Update: Watch Doug’s exclusive video “Prices Are Discovered“.

Looking for More Help?

School for Startups offers support and practical instruction for UK entrepreneurs through online events and face to face courses. For more information, please visit www.schoolforstartups.co.uk or follow us on twitter at @s4startups.

Secrets to Marketing & Sales on the Internet, London, April 6th

Shash — Mon, 08 Mar 2010 17:54:14 +0000

Fast & Easy Steps to Really Grow Your Business

Bring your computers because this is a hands-on day. It’s a new class from School for Startups specifically focussed on what you asked for: how to increase you marketing and sales for your business leveraging everything new on the net.

This isn’t a lecture. It isn’t a dry powerpoint. We will walk you step-by-step through an introduction to key techniques to drive more prospects to your site and more sales through your doors.

It will be hosted and taught by me, Doug Richard, with help from some of the leading experts in web sales and marketing.

We will work with Twitter, Facebook, Linked In, Blogs, You Tube and key tools to track your progress.

If you own or run a business and you haven’t been sure where to start or how to make it work, all you need is one day, a notebook computer and an open mind. We’ll supply the rest.

At “Secrets to Marketing & Sales on the Internet” you will learn:

• Find and communicate with customers through private messages and online posts
• Define your brand and promote your products online to a worldwide audience
• Establish long term & trusted relationships with customers old and new
• Find out what your customers really want
• Create online forums and chat for great customer service
• Become an industry spokesman using clever social media techniques
• Approach individuals through these tools who can help you achieve your sales and marketing objectives

What’s included?

• 6 hours of business tuition with one of the UK’s leading entrepreneurs
• Access to online resources and materials, including membership of VentureNavigator
• Accreditation as a Graduate of School for Startups (web-badge)
• Free refreshments reception

Who should attend?

• Owners & managers of growing businesses who want to get started making their business grow
• Marketing and media professionals who want to learn new techniques

Ticket Information

• Online bookings policy – We only accept online bookings with a credit or debit card. Unfortunately we do not issue invoices for future payment or allow attendees to pay on the day. Anyone who has not paid for their ticket in full before the event will not be granted access.
• Standard Entrepreneur Ticket
• Student Ticket – We only offer reduced price tickets for full-time students who can prove their status with a valid ID card.
• Refunds and changes to ticket details policy – Unfortunately we cannot offer refunds or change the name on the booking once tickets have been booked.

Event Information

• Registrations starts 12:00hrs
• Event starts 13:00hrs
• In conjunction with The British Library

Travel Information

The nearest tube stations to the British Library are Euston and Kings Cross St Pancras
For more information see our full Terms and Conditions

Money-Back Guarantee

We are confident that you will be completely satisfied by this event. If you are not completely satisfied with the event, we will issue a 100% refund, no questions asked. Requests for refunds must be made via email within 24hrs of the event taking place.

Start Here! Starting & Growing a Successful Business, Brighton, Jun 15th

Shash — Mon, 08 Mar 2010 14:45:20 +0000

Following the huge success of our seminars around the UK, Doug and the School for Startups team are taking their nationwide tour to Brighton. A must-attend event for any budding or established entrepreneur, “Start Here! Starting and Growing a Successful Business” is hosted personally by Doug Richard and is the cornerstone of the School for Startups curriculum.

At “Start Here! Starting & Growing a Successful Business” you will learn:

• The key questions every entrepreneur must be able to answer before starting or growing a business
• How to write the perfect business model
• How to identify your product and your market
• How to start an affordable marketing campaign to increase your sales leads
• How to treat the recession as an opportunity, rather than a threat
• How to make money and secure investment

What’s included?

Ticket Information

* University of Brighton Ticket – These tickets are for anyone affiliated to The University of Brighton. Set discounts available at the universities discretion.
* Standard Entrepreneur Ticket – These are for anyone outside of the University
* Student & Staff Discounts – students & staff using discount codes must show their ID at registration, failure to do so will result in none entry to the event.
* Online bookings policy – We only accept online bookings with a credit or debit card. Unfortunately we do not issue invoices for future payment or allow attendees to pay on the day. Anyone who has not paid for their ticket in full before the event will not be granted access.
* Refunds and changes to ticket details policy – Unfortunately we cannot offer refunds or change the name on the booking once tickets have been booked.

WHO SHOULD ATTEND

* Anyone with an idea for a business
* Owners of small businesses that want to grow
* Students interested in starting a business

EVENT INFORMATION

* Registrations Starts: 12:00hrs
* Event Starts: 13:00hrs
* In conjunction with NACUE & The University of Brighton

For more information see our full Terms and Conditions

MONEY-BACK GUARANTEE

You’re Not Dead at 50: The Best Entrepreneurs are Silver

Nancy — Mon, 08 Mar 2010 08:51:15 +0000

by Doug Richard, Founder of School for Startups

While those under fifty often give starting a business serious consideration, many fifty and over think entrepreneurship just isn’t an option for them. No matter how much they may have wanted a business in their youth, somewhere around fifty they arbitrarily decide that they are far too old to have one.

Some think that working to get paid more in their current job must be easier than starting a new enterprise.
Some believe that finding a new job that pays more will be easier than starting a completely new business.
Some consider it wise to have a job that offers retirement benefits, even if it doesn’t pay well and the projected retirement benefits will be insufficient to pay bills in years to come.
Others simply have no idea how they would go about founding a new enterprise and think they are far too old to learn.

If you are over the age of fifty, and you are letting age alone stand in the way of starting your own enterprise, I suggest you reflect on the following.

People are living longer than ever. Someone in good health who works hard to remain healthy, may expect to be fully functional into their eighties. Changes in medical technology may extend your lifespan even further. Spending almost half your life in idle retirement is a bit insane.
Having a business, and the daily pressure to remain mentally acute and physically active, is good for you. Studies show that mental and physical exercise stave off most of the ill effects of old age. So allowing yourself to have a business may actually help you live longer.
A good business provides value to your family as well as to you. If you increase the number of years you are productive, you may build resources that benefit people after you are gone.

Starting a business isn’t rocket science, and all other things being equal it is easier for those over fifty to create a successful enterprise than it is for the younger set. Older professionals have business, financial and personal life experience to draw on. They tend to be more pragmatic and better connected than their younger brothers and sisters. They also have fewer personal distractions since they rarely have infants and small children at home.

It’s Not All Roses

Older entrepreneurs do have some important issues that should address very directly before they start new enterprises.

They should give the enterprises they plan to start serious thought before they invest significant time or money in them. Not all businesses are created equal. Some are just better than others. I have 20 questions I use to vet businesses I plan to start, because I know that businesses that pass my test make more money faster than those that don’t. Youngsters can work long hours at minimum wage to build an enterprise based on a bad business models. More mature business professionals should be smart enough not to.
They need to frankly assess their health and their requirements for exercise and reasonable levels of stress. Whereas younger workers can afford to burn the candle at both ends, adults must make sure they do everything they need to do in order to remain fit. A healthy body and mind are always a good investment, and they are the single most important asset an older professional can give to their business.
They need to be realistic about the financial life cycle of their business. Though I never tell people to start a business with a firm exit plan in mind, I do think older entrepreneurs need to give some thought, as they develop their enterprises, into how their businesses can run without them for periods of time and how they can monetize any equity or value they build in their firms when they decide to cash out.
They must renew their personal and professional relationships. The most significant advantage that most mature entrepreneurs have over newcomers is the depth and breadth of their contacts. This is particularly true when multiple over-50 entrepreneurs find a way to collaborate. This opens up access to early sales and prompt financing on a very significant level.
They should refrain from dumping their life savings into their business. They should avoid acquiring a great deal of debt to fund their business. Businesses are supposed to make money. If a business model is well considered, and it’s implementation strategic, it can almost always launch and become profitable with very little investment. Younger entrepreneurs can make the mistake of believing that financial success can be bought. More mature entrepreneurs must know better.

Ready to Get Started?

If you are over fifty and want to give serious consideration to starting your own business, here are some steps you can take to get started.

Start by making a list of all the assets and experience you can bring to a business. It may seem strange to start with a list of what you have rather than what you want, but creating this list throws off the tunnel vision that having a job and raising a family give most of us. By the time you are remembering what you did for a living when you were twenty, and which courses you enjoyed in school, you are also remembering who you know and what you know, and that’s an important thing for you to do. Writing this information down is also important. What we remember and ponder is ephemeral. What we write down is concrete and easy to reference.

Make a list of the things you enjoy doing. Good businesses are based on passion. Enthusiasm and expertise are your most important sales tools because most people enjoy working with folks who care, deeply, about doing something right. Don’t think about what’s possible, what’s rational, what is wise or what is practical. Think about what activities you enjoy day to day, minute to minute. Make another list of things you don’t like doing. You may hate accounting, but it’s a part of running a business. The necessary parts of a business that you don’t want to do must be undertaken by others. You have to know what they are so you can shop for help.

Start writing down business ideas. By the time you’ve completed the previous two operations, which will take days or weeks, you’ll have ideas noodling around in your head for things you might like to do that make money. You’ll have come up with ways you can be of service to others, and you’ll have some notions of people who might be willing to help you. You’ll be aware that some of your business ideas are things that won’t take much time and will make money. You’ll also have some larger ideas, requiring more of an investment and providing more of an income. By the time you’ve got twenty or thirty ideas on paper, you’ll have some you like better than others. Those are the ones you can begin to explore. Exactly what would it take to get started with those businesses? Can you find customers? Do they want what you have to sell them? I mention in passing that our School for Startup’s “Start Here!” classes are designed to help people who want to know how to vet business ideas before investing time or money into them.

The process may seem strangely loose and intuitive, given that business is always characterized as such a cut and dried thing. But the truth is that starting a business is about equally art and science. There’s no point starting a business you will loathe running. The best outcome from that kind of thing will be that you go out of business quickly so you can get on with something that you enjoy more that pays just as well or better.

As a very happy entrepreneur over fifty, I encourage my peers to join the entrepreneur revolution required to keep the UK wealthy and prosperous well into the next century. Innovation, invention, insight and good implementation can build a good business at any age.

You Don’t Know Anyone: How to Hire in Perfect Ignorance

Doug Richard — Fri, 05 Mar 2010 11:00:21 +0000

By Doug Richard

Last week I began a story about how, with my nominal time management skills, my overflowing inbox, a small business with no offices, more opportunities than we can manage and which we struggle to prioritise, a current business model that has not yet proven itself, and a conscious unwillingness to say “no”; I temporarily lost my composure and decided that, if I just had a shadow, I would be immediately more productive.

It was not a rational response to my irrational issues. But then perhaps an irrational response is what an irrational issue requires. So I tweeted.

I tweeted that I wanted a shadow; someone who would follow me around dealing with the management of the consequences of my actions. Every meeting I attend spawns emails, follow-ups, commitments to make introductions, documents, proposals and other worthwhile stuff. Every phone call has the same effect. Sometimes just sitting on the train to London, or in a Cafe Nero will deliver an unexpected opportunity. And many of them do not get attended to. Some of them shouldn’t be attended to. Most of them do not need me attending to them.

Thus, my shadow. I calculated that there would be some person out in the world whose self interest would be served by meeting my world, learning what I know by osmosis and taking on a series of increasingly more complex and challenging tasks culminating in a level of accomplishment that they had not possessed. I figured that the value was such, if I found the right person, that they would also have a value to me that was equal or greater. In theory, the quid pro quo would be such that I didn’t have to pay them.

But people don’t work for free for me, even when they offer to. It doesn’t work. So I set the pay at minimum wage, which is currently around £800 per month. Hardly a draw in itself, thus assuring myself that no one would take the job for the money.

As I mentioned last week, I received many enquiries. Because I was already overwhelmed, I chose to speed read their responses and filter them on first impressions, correctness of spelling and whatever personality leaked through the twitter or subsequent resume and letter.

It is as good an approach as any. Because the one thing I do know, having hired thousands of people and let an equal or greater number go over the course of my career, is that however good your instincts, whatever your gut tells you, no matter what interview methodology you use, you actually have no idea who the person you are talking to really is.

We are strangers until we are not. We can work side by side with someone for a decade and not know the first thing about their private life. They may harbour secret passions or secret lives or unusual interests. They may be kleptomaniacs stealing supplies steadily over the years until their garage has more inventory than the local Staples. They may be part of a witness protection program who have been relocated to the next cubicle and re-named Hazel because no one would ever think that Hazel saw the gruesome gangland killing in the first place.

And their resume is not the place you will find out. In the land of CVs we are each solely responsible for any success that happened nearby us whilst we were there. Every success has many parents, and cousins and brothers too.

We won’t find out in the interview which is more like a kabuki play or a Greek tragedy where the outcome is inevitable and our greatest weakness is our perfectionist instinct and our insistence on over-working.

We won’t know by first impression because sociopaths make great first impressions.

We can’t know from references because they are only references because they are prepared to say good things about us.

We remain strangers until we cross some invisible line and through the alchemy of friendship or collegiality we slowly begin to know and understand someone else.

The good news is that we don’t need to know someone to hire them. We merely need to enjoy their company and be willing to set goals that they can meet and which we can measure.

We merely need to ensure that, if they are better at selling themselves to bosses than working with peers, we have a means to hear what our employees are saying and be perceptive enough to remember than all business processes depend on the cooperation of groups of people.

As it happens, a fellow came along in response to my tweet who was wildly over-qualified for the job but who, as I had hoped, saw that it was in his self interest to shadow me. The fact that he was a successful 31 year old trial lawyer from California, with all the analytic, organisational communications and life skills that implies was not lost on me. And by virtue of his wife getting a great job in the UK he had precipitously decided to drop his career and start over in a new country in a new profession. He figured shadowing me would get him out of the house and into the company of interesting people and give him an accelerated course in business development, however iconoclastic an approach I might take.

So he got the job. And he negotiated what he wanted. (But the he would wouldn’t he). And I hired him.

Thus it was all the more disappointing when he was offered a job the next day doing what he aspired to do after working for me for six months. Like any smart person he took that job. My loss.

As it happens I also interviewed a number of other wonderful people. In fact all five of the people I interviewed would have done a good job at the job. But I have been so busy that I haven’t even had a chance to get back to them. Though now that I’ve written this post I feel even more urgently the need to provide closure on this.

Oddly enough, we also found a new employee. Not my shadow; she’s got too much talent in other areas for that. She is a natural marketer, a social media intuit and meshed with the team in a heartbeat. So we hired her for a position that didn’t exist as an apprentice. That is, assuming she continues as she started, she shall become a member of our full time team at the end of her apprenticeship.

I, on the other hand, still need a shadow.

The Naked Business: I hired from Twitter

Dragon’s Den star says now is the perfect time for startups

Shash — Wed, 03 Mar 2010 14:47:56 +0000

The Hull Daily Mail has covered School for Startups’ Start Here! Growing a Successful Business event at the University of Hull.

To read the full story online, click here.

Startup TV Digital Magazine Issue One

Shash — Wed, 03 Mar 2010 14:41:28 +0000

Doug Richard has been featured in the debut issue of Startup TV Digital Magazine. The new digital magazine is aimed at the startup community and covers expert advice, tips and interviews from high profile entrepreneurs. In this issue Doug talks candidly about topics such as getting fired, being lazy, finding success and speaks about his thoughts on the business life-cycle.

To read the magazine and view exclusive video interviews click on the cover below:

The Rape of Aspiration: Never Run Your Company This Way

Doug Richard — Wed, 03 Mar 2010 10:57:44 +0000

By Doug Richard

The other day the “Equality” Chief, Trevor Phillips said the following:

Labour’s equality chief has called for a revolution to strip power from the ’sharp-elbowed’ middle classes. Trevor Phillips said there should be ‘positive action’ to stop them ‘jostling their way’ to better education and jobs. Mr Phillips, who heads the Equality and Human Rights Commission, said: ‘We need to kick-start a new equality revolution. ‘The most blaring and substantial thing that best predicts disadvantage is class and place: who your parents were, what they did and where you grew up. ‘At the moment there is too much advantage given to people who shout loudest and have too much knowledge.‘

Marketing’s Critical Dual Role: Acquiring Customers & Keeping Customers

Nancy — Wed, 03 Mar 2010 02:02:15 +0000

Most new businesses work very hard to acquire new customers. They carefully identify their target markets, place thoughtfully considered advertisements in magazines, invest in trade shows and send out bulk mail. Online they develop attractive websites, create, test and deploy “more information” registration forms, run ads in search engines and publish SEO press releases. Those who sell products through distributors and/or resellers carefully choose their partners to ensure their products are presented to those customers most inclined to buy.

From a time and money standpoint, the cost of acquiring new customers is very high, yet few startups and small businesses invest much thought or care into keeping those customers once they have been acquired. The failure to make this investment is one reason many startups and small businesses fail to thrive.

A customer who has purchased one of your products in the past has proven they have money and they have proven they are willing to give it to you. Given the opportunity, they are more likely than most to purchase more from you in the future.

The cost of “re-acquiring” a customer you have lost contact with may be as high, or higher, than the cost of acquiring a new customer. While some customers may have just forgotten you, others may have been left with some slightly negative impression of your business. They may lead them to turn to one of your competitors in the future.

The cost of enraging a customer, through poor performance during and after a sale, is extremely high. Some studies show an unhappy customer will tell an average of nine people how much they loathe your business. These days, an unhappy customer who takes to the Internet can cost a business thousands of sales. An unhappy customer is a dangerous “anti-ad” for your business.

There are many ways to maintain a good relationship with a customer after a sale. Not all of these methods are appropriate for all customers in all industries. Working with your customers you can identify which options they like best and which meet your economic requirements as well.

Send customers information on the product or service they purchased shortly after a sale. Make sure they know all the benefits of their investment, and that they understand how to get support when things don’t work as advertised. When you buy a printer, it is nice to find a URL for a video that shows you how to install paper and an ink cartridge. Its also nice to have a link for any drivers you may need to download.

Send customers information about related products or services in the months after a sale. This information may be “added value” in the form of discounts on things they need to go with their first purchase, or additional resources that are likely to be of value to customers in their market segment. Parents who buy an expensive stroller may be interested in new seat covers and padded bumpers six months later. If they can get them at a substantial discount, so much the better.

Send them information on products and services from your strategic partners when they are likely to be of great value. People who buy expensive sports cars may need car covers and enhanced car security systems.

Send them information on moderated user support forums and fan forums they can turn to as they use the product or service you’ve provided. People who buy Star Wars memorabilia are likely to find a link to a well moderated and active Star Wars fan site maintained by your business of great interest.

If you sell products through distributors and resellers, things become more complex, because although your product was purchased by someone, they are not yet your customer. They are the reseller’s customer. To make them your customer, there must be a path they can follow from your product to your business.

When appropriate, imprint a URL directly on your product.
Use mail-in and online warranty forms, maintenance agreements, and enhanced service agreement to initiate direct customer contact.

Include product packaging that offers free or deeply discounted prices on a related product. You may make no margin on the first sale, but you’re probably spending less than you normally do to acquire a new customer that purchases from you instead of your distributor.

Connecting directly with your customers enhances your position with your distribution and resale partners. You can use the data you collect to drive traffic to their storefronts when it makes financial sense for you to do so.

Provide Multiple Methods of Contact

Customers vary in how they want to be approached by those they have purchased from in the past.

For some customers, email works well, although it is increasingly difficult to ensure that email you send to your customers will be delivered. Some customers will not use an opt-out link at the bottom of a newsletter to terminate a newsletter subscription. Instead they simply identify your email as spam. When this happens enough times, your sending email address, and sometimes your IP address and URL, is used to route all the emails you send directly to the spam folder on most email networks.
Bulk mail of advertisements to customers is rarely justified unless it is subsidized by an investment from industry partners.

Telephone contact is appropriate to follow up with customers who have made a major purpose with which they may not be satisfied. Scripting the calls so it is clear these calls are designed to ensure customer satisfaction and not to sell something is critical. Timing calls so they don’t annoy customers is also absolutely necessary. You may want to add a question about when you should follow up with a given customer to the order form they or a sales rep fill out during the purchase process.

Twitter and SMS texting are acceptable for commercial communication to many customers at the moment. Customers seem to like that they can remove themselves from a Twitter feed at any time. They will allow the occasional SMS text message for a commercial purpose as long as it is possible to text a “stop code” to stop messages when desired.

In a perfect world, customers take the initiative in maintaining contact with your business after a sale. A good, well moderated, friendly website or support forum can make this a reality for many businesses. As long as customers find real value in visiting your site, they will keep coming back.

Smart startups and small businesses must ensure customer satisfaction and customer retention is a priority because pound for pound, it the best marketing investment they can make. Catching customers over and over again only to let them go will cost you your business. Your most successful competitors will not be making that mistake.