Soundpoint Consulting Newsletter
News and Views 
July
August, 2014:  Volume 20
 
  
Welcome to the Soundpoint Consulting Newsletter.

 

We use this newsletter to share our perspective on topics and share illustrative case studies that we believe are relevant to business owners and leaders.

If you would like our viewpoint on a topic, please shoot us an email. If you like what we have to say, please share it with a friend.

Many smaller businesses are not clear on their position in the marketplace. Understanding this brings focus and helps drive decision-making. Here are some thoughts on the subject.    
 
Enjoy!
 
 
The Price is Right

 

I was recently working with a manufacturer helping him crack the code on profitability for his business. One thing that struck me was the dual marketing strategies he was deploying within his smallish business. It was a challenge for him to deploy both strategies effectively. Here's why.   


Broad Market

Whether you are small business or Proctor and Gamble, you have the option to position your products and/or services to reach a broad market. Businesses which compete in this world have similar offerings which are not substantially differentiated. They compete primarily on price. 


Margins are generally low on a per unit basis so higher volumes are required to make a profit. Efficiency, cost control and skilled quoting are also all required; a poorly executed job, bad pricing or defective product run can cost the business lots of money.   


The most successful businesses in this realm have access (distribution) to a large market and are able to take advantage of economies of scale. Smaller businesses can succeed using this strategy if they compete on a local level and maximize efficiency within their shop.


Often these products are considered to be staples. Consider an undifferentiated donut shop, an H&R Block franchise, or in my client's case, a standard metal part. These businesses provide a fairly generic product which can meet the needs of a large number of people. Volume and low prices are the name of the game.

 

Niche Market

Many have found ways to produce or package their goods in a way which satisfies the unique needs of a specific market. This sets them apart from the competition. Perhaps they customize products, meet certain specifications, have deep expertise in a particular area, or simply appeal to an emotional need or desire. 

 

Whether real or not, the market perceives these businesses as offering something unique - and they are willing to pay for it.


Higher prices and margins are the hallmark of this strategy. Large volumes are not required to make a profit. 

 

But realize, these businesses have often invested more up-front - in education, technology or capital costs, to name a few. And, production costs are often more, as a more highly skilled workforce, smaller runs, advanced technology or a premium showroom can be needed. 


Drawing on the examples above, consider a "hip" donut shop, a CPA specializing in Family Limited Partnerships or a part machined with zero tolerance.  These are specialized products or services which satisfy the needs of very specific markets.


Don't Try Both!

I think it is fairly self-evident that it is difficult to do both strategies well simultaneously. One requires specialized target marketing while the other needs to reach a broad diverse market.  One requires mass production, economies of scale and standard products while the other relies on smaller quantities of more customized product, specialized training or higher capital costs. 

 

Trying to do both well often results in higher costs, lack of focus and confused messaging. So don't try it.  First, understand your product offerings, determine what you do well, then align it with the needs of your target market and price accordingly. 


If you would like to assess which of these strategies might work for your business, give me a call.  I'd be happy to help. 

   

Until next month, Point Your Business Where it Needs to Go! 

 

Best Wishes,

 
Kelly


2014, Soundpoint Consulting, LLC

Sound Consulting. Solid Results


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Soundpoint Consulting is a business consulting and valuation firm serving small and mid-market companies in the Seattle and Puget Sound region. We focus on helping high growth and transitioning companies grow profitably by performing deep financial analysis, translating insights into impactful operating initiatives, and backing those recommendations with execution support. 

We provide business valuations for purposes of developing an exit strategy, gift and estate taxes, divorce proceedings or a potential acquisition. 
Kelly Deis, Turning Point Financial

Kelly Deis,

President

Strategy and Operations: from turnaround assistance to efficiency improvement and growth strategies.

  

Finance: from benchmarking to cash flow projections and product line profitability
 
Business Valuations: for purposes of divorce, estate and gift tax, to transactions and long term value maximization

 

 

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