started, choosing to be cheapest may be a good strategy for gaining clients and building up experience.)
Create a point of difference. With a differentiation strategy, you set out to differentiate yourself in some way other than price. For example, an electrician could seek to make response time and punctuality a point of difference (‘We’ll arrive within 30 minutes of the agreed time or the first hour is free’), or could make availability a point of difference (‘24-hour call-out service, 7 days a week’.) Ideally, if you choose differentiation as your competitive strategy, you want to find a synergy between this differentiation and the strategic advantage you identified earlier in this chapter. For example, maybe a strategic advantage for this electrician is that his partner also has a trade license. Between them, they can offer a 24-hour service without worrying about leaving the kids unattended at home, and they don’t have to pay the penalty rates that other businesses would normally have to pay if sending an employee out on a job in the middle of the night on a Sunday.
Find a particular focus or niche: With a niche strategy, your aim is to serve a specific market segment rather than deal with the whole market. In We Are All Weird, written by Seth Godin and published by Brilliance Corporation, Godin argues that people are seeking choices more than ever, and that this competitive strategy is an increasingly smart pathway for business.
DON’T BE AFRAID TO PIKE OUT
I sometimes find that when people do an honest appraisal of their business idea and the competition, the resulting business proposal is found to be quite weak. Sometimes this is because the person starting up in business has limited skills or minimal capital; other times, the demand for their proposed product or service may not be strong enough. Other times again, it can be too hard competing against established players.
If you’re starting to question the strength of your business idea, don’t be afraid to pike out. Stopping at this stage might save thousands of dollars, not to mention months or even years of your time.
If you’re unsure whether your business idea is as strong as it could be and whether you should continue, what becomes relevant is measuring up the risks. If starting (or continuing with) this business means little capital outlay and a few lost weekends and holidays, you don’t have much to lose. On the other hand, if this business involves your entire retirement savings and/or the threat of a failed relationship if things go wrong, the risk may well be unjustifiable.
Connecting your competitive strategy to your strategic advantage
You may be feeling a little muddled as to how the concepts of strategic advantage, competitor analysis and competitive strategy interrelate.
But interrelate they do, with each concept triggering off one another. As shown in Figure 2-1, the process of identifying your strategic advantage, comparing yourself against competitors and choosing a competitive strategy is a continuous cycle of honing your business idea.
The trick for you is to pick a competitive strategy (focusing on cost, differentiation or a particular niche) that complements both your strategic advantage and any opportunities you’ve identified in the competitive landscape.
FIGURE 2-1: Using your strategic advantage, competitor analysis and competitive strategy to continually improve your business idea.
SO WHAT’S SO SPECIAL ABOUT YOU?
Are you ready to take the challenge? Imagine you’re stuck in an elevator and someone has just asked you what your business is all about. You reckon you have about 30 seconds to convey what your business concept is, what you do, and what makes you so damned special.
Click the Record button on your computer or smartphone, have a quick look at the clock, and record your reply in 30 seconds or less. Tick, tick, tick … stop. How did you go? Listen back and rate yourself out of 10.
Did you remember to include your name, your business name, what you do that helps others, and what makes your business different from others?
This 30-second ‘elevator pitch’ is surprisingly demanding. In this first stage of getting your business off the ground, keep in mind that practice makes perfect. Say your speech aloud when you get in the shower, turn the ignition of your car, or make yourself a cup of tea. Your family may think you’re a little bit potty, but that’s a small price to pay.
Chapter 3
Starting from Scratch, Buying a Business, or Joining a Franchise
IN THIS CHAPTER
Iam often torn when people ask me whether I recommend they buy a business or start one from scratch — or perhaps consider a franchise.
One of the trickiest questions, if considering whether to buy a business, is figuring out how much a business is worth. Occasionally, business owners are prepared to sell their business for a song, especially if they’re seeking a quick sale. More often, owners overvalue their businesses, and the unwary buyer can end up paying far too much.
Another challenge is weighing up the risks involved. On the one hand, buying a business involves a greater financial risk in the short term because you have to pay for goodwill. On the other hand, the long-term risk is probably less, because (hopefully!) you’re buying a business with a winning formula and long-term security.
