Why do you work at a loss and how to fix it

Remaining in the same row with those who are trying to lure customers with prices, together with them you are going nowhere together. What to do? How to get out of the circle of doomed businesses? Says business researcher Pavel Maestro.

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The main mistake of businessmen

One of the most important mistakes that businessmen make is to work by lowering prices. This is indeed a disaster for 80% of all entrepreneurs, although the remaining 20% also encountered it, but successfully coped with it. Such business conduct is the result of two beliefs that are by no means on the surface. Often it is very difficult or even impossible for an entrepreneur to see them, since the essence of these two beliefs lies deep in the head of a businessman.

The first conviction: “Business is a buy-sell scheme.

Understanding entrepreneurship is critical to maximizing profits. In principle, all entrepreneurs can be divided into two types. The first type is those who are engaged in the resale of goods and services and do not produce anything. These people proudly call themselves businessmen, although the essence of their activity boils down to buying a product cheaply and also selling it inexpensively. 

They are of little interest to the needs of customers and the customers themselves, but such unfortunate businessmen multiply very quickly, constantly playing at lower prices and thereby harming each other. The second type is those entrepreneurs who do business to create new products and services that bring maximum benefit to customers. 

They are manufacturers, and in the first place they have a client, his needs, his study. Often, such work takes a lot of time - you have to try and test many options. But this, in my opinion, is the essence of entrepreneurial activity: any entrepreneur must first of all be a manufacturer. And such entrepreneurs always win, while those who are set up for the “buy-sell” scheme constantly suffer from competition and often ruin themselves or others.

The second belief: "I agree to make a small profit." 

In fact, your business is bad, because once you agreed to receive less profit. Yes, that's right: long before you started lowering prices, you made a fateful decision, which later played the role of a gray cardinal in the development of your business. The first question that you once asked yourself, without noticing it yourself, was: “Do I agree to work for less profit?” And, most likely, you gave yourself this answer: “Yes, I’m ready to work for less money, what - while the business is not untwisted. " The first thing that came to your mind then was to lower the price a little, at least a ruble less than that of a competitor. “After all, it is so simple and immediately leads new customers!” - you decided. The words "action" and "sale" seemed like a lifeline that would help you stay afloat at least for the first time, "well, after that we will heal!" 

However, over time, you began to understand that without constant discounts and sales you can no longer work. Moreover, your stocks never end, they become eternal, and customers come to you only because you have the lowest price. As soon as someone offers a lower price, you will never see your customers again, so you continue the endless race of price reductions. Depriving you of your profits, discounts and sales from a life buoy turned into a heavy load that pulls your business to the bottom. 

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This happened because once you agreed to a small profit and, thereby, doomed your business to perish. That is why it is so important to ask questions at the very beginning: “How to sell as expensive as possible? How to get the maximum profit? ”Attempts to answer these questions will set your brain to work properly and to search for optimal solutions for the development of your business.

Why prices will not save you

Work to reduce prices in the current situation does not make much sense. Yes, and trying to compete in price with large chain stores is a bad job. Once you enter a price war with these giants, consider that your business is doomed: in this battle, the networkers will definitely win. But then, how and why do many companies manage to prosper and successfully conduct business? Why are they not affected by the price pressure of networks? The answer is simple: many people want and are ready to buy goods more expensive. Some people hate chain stores, others want personal communication and advice, others just can't find anything to their taste in stores designed for the masses. And if you put all these people together, it turns out that there are much more of them than those for whom only the price is important: according to Western studies, only for 10% of consumers the price is a purchase criterion. 

This suggests that the remaining 90% make a decision, guided by other criteria. This key point should be known, understood and actively used by any entrepreneur, because in our time building a successful business is impossible without it.

What then will bring you profit in a crisis

Today, all consumer markets are crowded. Selling is becoming more and more difficult, and price competition is constantly intensifying and tightening. The consumer felt himself master of the situation. He can dictate prices, demand discounts, do anything with sellers. This is a sad situation, but it will be even worse: 80% of businesses will balance on the verge of life and death, and only 20% will be able to withstand the dictates of a spoiled buyer and develop successfully. 

There is only one thing that the consumer still recognizes and that can make your business profitable. This is the added value, that is, the value that the buyer acquires in addition to the product itself. An added value can be an excellent service that makes the buyer smile, the feeling that he helped someone with his purchase, a sense of unity with like-minded people, and in general everything that cannot be bought for money, but what you can feel when buying a product. 

Value added is the motive that tells the consumer where to buy goods and where not to. Most entrepreneurs never think about what value added is and why it is needed. Such entrepreneurs are doomed, because without added value they have long had nothing to make them different from competitors. If you want to sell expensive and want to get the maximum profit, you need to learn how to create added value for your goods and services. Once you start doing this, you will see that people are actually ready to buy expensive. They are not interested in the low price. Yes, they generally do not care about the price! It’s important for them just what they will feel after making a purchase. They need extra value. Therefore, if you really intend to create successful businesses, you first need to learn how to invent and implement additional values ​​for your goods and services. 

The simplest example of added value can be personal consultations, gifts, guarantees, participation in events, maintaining constant contact with the client, caring for the client. All this has a much greater impact on the buyer than the price. Yes, it will take time and even money to develop and implement the added value of your products, but it will definitely pay off. Perhaps in a few months you will become proficient, and a very important understanding will come to you that the product is secondary in the sale. Consumers first of all buy value added, and only then - goods. And if everyone has the goods, and this added value is only yours, your business will live.

Pavel Maestro - Entrepreneur, business researcher and founder of the consulting company Magic Marketing. It is guided by the principle "business is a game for money with its own rules and risks, where the consumer is the judge." Opponent of gray marketing methods and methods of “pairing”, believes that clients should be “done” for the sake of clients, and in business there are an infinite number of opportunities for creating something new that can be useful to people and makes them happier.