Don’t lose track of your market

Author: Jason Daniels | Director | HFB

I once had a client who was so obsessed with developing his product that he never brought it to market. Every time he was on the cusp of going commercial with a water cooler he had developed; he would ring me and say he needed a little more time to get it absolutely right.

After nearly three years of delays, we parted ways – and he has gone out of business without earning a single dollar of real revenue. Although this is an extreme example, it’s a pertinent reminder to anyone introducing a new product that there must be a balance between development and commercial reality. Too often, in my experience, innovative people forget the latter. I find this particularly common in software development and technology-based companies where it’s easy to keep developing your product and adding new features. It’s worth remembering that you can continue improving the product once it’s on the market, with the advantage being that you have cash flow to support future development.

Another common mistake is to overestimate your revenue and how quickly you will receive it. It’s just as easy to underestimate the costs. It’s easy to lose track of costs, especially if you’re in business for the first time. Typically, it’s not the big costs such as rent; these will be handled by bank transfer. It’s the small costs that can get out of hand. Make sure you install – and know how to use – the right software system to capture all revenue and costs from the day you start developing your business (and this will be well before you have opened the doors).

Then there’s the issue of pricing. You believe your product or service demands top price, but do your potential customers? In saying this, I’m not suggesting you immediately undercut your competitors on price. It depends on your position in the market.

I have one client who is buying a gym, and as part of the business will be offering the services of personal trainers. The trainers set their own rates and it’s quite instructive to see how the trainers’ hourly rates differ, and what impact this has on their business. Some are charging up to $80 an hour, others $35 an hour. Yet it appears those trainers charging $80 an hour have more clients. People are prepared to pay for something they value. The other thing to remember with price is to be flexible. In many instances the product or service you’re offering will face competition, and other businesses are not going to sit idly by and watch you take market share as you grow.

It is important that you decide on the message that you want to take to your market and that you maintain that message consistently while responding to your competitors’ actions in your market.