Skip to comments.Dave Says: Too Many Customers? Raise Prices.
Posted on 10/05/2013 7:07:19 AM PDT by Kaslin
I work full-time as a guidance counselor at a high school, but I bake and decorate cakes on the side. Word about my cakes has gotten around, and the demand has really grown. Now Im being asked to do weddings and lots of other big events. I want to keep my business small, and Im not sure how to handle things now.
Its great that demand has risen, but I can understand how that could also be a burden in your situation. Trying to keep a side business from blossoming into a full-time job can be a good problem to have though. It means people really like what youre doing.
Id suggest two things if youre absolutely sure you want to keep this business small and maintain it as a cottage industry. First, you need to raise your prices. Some people will decide not to be customers any longer, but thats okay. You might not have quite as many clients, but youll make more per cake.
The second thing is to be selective about the people with whom you choose to work. Even if things have picked up lately, youre still not doing a big enough volume to put up with a lot of attitude from spoiled customers. If a Bridezilla walks through the door, you can simply choose not to work with her.
Thats my advice, Jamie. Select your clients carefully and raise your prices. I think youll get more enjoymentand more moneyout of your business that way!
How do you build a personal and company mission statement?
This is a great question. First, I think you understand the importance of what youre doing. Coming up with a meaningful mission statement, one that is impactful both for you and your clients, will take some time. Its not a one- or two-hour meeting kind of thing. It is one of the most important things youll ever do as a business owner, because it will impact you, your team and how you do business.
Thats not to say that mission statement cant evolve over time. As your companychanges and grows, and as the marketplace moves, its perfectly okay, and sometimes necessary, to carefully and thoughtfully re-write your mission statement. If this happens, just make sure you take the same care and time used when you crafted your original one.
More than anything else, I think your mission statement should reflect your calling. I also believe it needs to include the following information:
·Your or your companys skills and abilities. If youve been in manufacturing for 20 years, you probably shouldnt have a mission statement that talks a lot about software development or marketing. Thats not your area of expertise. What is the thing you can do, want to do, and will do?
·Your or your companys personality traits. How do you and your team execute projects? This is your personality. Are you task- and project-oriented, or are you more compassionate and people-oriented? Maybe youre detail-oriented. Im not sure Id want an engineering firm to design interstate overpasses if theyre more about compassion and people than details. In that kind of work, the details matter more.
·Your or your companys values, dreams and passions. This is why youre doing what you do. For a company mission statement, this is where you really breathe life into the lungs of your organization.
I think this is where you go for your first mission statement, Scott.
Not sure what your point was in posting this?
Both are good advice. I run a small ‘boutique service’ business in a market swamped with college wanna-bee’s.
The only flaw in the advice is even a cottage business needs to corner their market.
But..... In Obamaville if the bridezilla is minority or perverton, get ready for biiiiig lawsuite. That goes for the advisor too. Welcome to Kenyan Empire.
Soon a couple of gays will ask you to bake a wedding cake.
You’ll refuse and the courts will put you out of business.
Keep your day job......
The cake person does not have the knowledge, confidence, etc., to be ready for business on their own.
The idea of making a “mission statement” for a business is yet another new world order hoax intended to influence the policies of businesses, for example, by spreading the idea that it’s fashionable to include “diversity” or some other cr@p in your mission statement. Which is actually an artificial constraint - and all artificial constraints NEGATIVELY impact the profitability, effectiveness and efficiency of legitimate businesses. Of course, if the business is participating in NWO criminality of relying on raiding the governments coffers for revenue, having a “mission statement” which signals that you want to partner with NWO will certainly help to gain government sales.
The cake person is doing so well at her own business that she's got more customers than she has time to serve. I'm sure many women with little sidelines like this would love to have the same problem!
Raising the prices to reduce volume while increasing the profit per unit is the obvious solution ... though perhaps not obvious to someone whose degree is in psychology or social work.
They have a business of their own, doing what they like, and may well have identified already the perfect size to maintain their happiness. Every business has a sweet spots of size (cost) versus return. Reaching for the next rung on the ladder decreases profit, and only pays off if there is a next rung, which at some point there isn't. If there aren't enough customers to support more overhead, then it is smart to tailor the business to maximize profits at its current size.
My brother has a side business as a gunsmith. He's quite good, but there isn't the business out there to replace his salary as a machinist. He had too much business, because he wasn't charging enough. It took me a while to convince him to raise his prices and to turn away business that he didn't want to do.
Business statements are good, as long as they are business focused. For example, if SEARS would have had a business statement to dominate the mail order business (and abided by it), they would have become what Amazon is now. However, their CEO got sucked into making increasing amounts from lending credit to buyers, without worrying about continued sales. Now SEARS is just another department store, mainly stuck in high cost malls.
But your point is well taken. Most business statements are HR hokum.
Warton Business school graduates with no actually experience at the salesperson level are what killed Sears.
I agree, all sounds great at this point.
I’m just tossing out a cautionary and skeptical hmmmmm, since I smell warning signs of possible problems.
In many jurisdictions, such food preparation, if in her home, would make her home classified by the local government as a retail food establishment, and either subject her to all the local regulation imposed on restaurants or be outright illegal.
IMHO, she should be fully aware of all local laws and regulations if she is a business owner and wants to be successful. In many industries there are fly-by-nights that operate under the radar successfully until they get enough sales that they start annoying the legitimate businesses in the area. It only takes a phone call to then cause the fly-by-night business to end.
This also makes me wonder if she is following all other applicable law, i.e., has she set up herself as an employee of her business, is she doing it as self-employed - is she reporting her earnings, etc.
I’ve seen a fellow operate a business where he went into debt to buy equipment, and he had sales and was making payments on the equipment, but was kidding himself because there were required things that he was not paying, and the possible revenue could not really support what his operation realistically would need. He wound up with debt.
Often with “under the radar” side businesses, you have a lot of customers because your prices seem low, but the only reason you are charging that low price is because you don’t have so many other costs that normal business have. If she had a bakery shop in a rented space - would she still have all those customers, even if she had to charge more ? Then, after her business got done paying all the expenses it would have, would she still find the resulting profit to be enough to make it worthwhile ?
She may have an arrangement with someone who has a commercial kitchen, I’ve personally known someone who did that quite successfully with their employer.
Of course, it appears that she does not want to have her own commercial kitchen and expand the business as necessary to support that. I can only assume because she does not want to leave the safety net of her school pay, benefits and most importantly, probably, school pension.
Based on my experience, sounds like a typical sideline occupation, not a real business, where the operator is in over their head in terms of general business and specific industry knowledge.
Of course, if the person made the effort to learn (so they don’t make big mistakes like unwise financing, so they learn about a realistic business p & l, marketing, local competitors, anything else they need to learn for their particular business, etc.) they could make the jump, give up their job and operate the business for real and have a chance at success. Sounds like she doesn’t want to, but I just wanna be fair, nothin’ says she couldn’t try. And hey, if she’s operating under the radar, that’s her choice, if she can make a few bucks on the side, more power to her. There can be risks to that, however.
He doubled his prices, people thought he must be the best because he could charge that much.
Got even busier so he doubled them again. Now he started getting people from out of state and other countries calling offering to fly him to their kids weddings and pay his expenses.
He raises his prices to a crazy number. Still in business. Average wedding package is 33 thousand dollars. He still busy every weekend and flys the world.
Sometimes people judge quality based solely on price. I will admit hes awesome though.
I’m sure you are well aware of all that with your background, so please don’t think I’m trying to tell you anything you don’t know !
That was a good summary of many of the issues and complications of running a small business. My family has a few small enterprises, low-exposure ;-).
If I ran a small business my mission statement could be summed up in one word - profit.
I.e. it is very costly to do business in the U.S.
People who found businesses do it to prove that they can. They believe in their product / service, and are driven to prove its worth.
If you have that passion, your mission statement should write itself.IMHO.
Mmmm, I’d say it’s on a sliding scale.
Compliance and tax costs can be reduced to a very small percentage of revenue once the size of the business becomes very large, depending on how aggressive a tax strategy the management chooses.
For small business, however, those costs tend to be much higher.
I remember my barber showing me the permits on the wall for each shampoo station. It’s just the tip of the iceberg. The government is the mafia in a very real way.
When looking at the entire iceberg, it is why I will never go into “legitimate” business for myself. No way. Not worth the headaches.
The only exception would be if it was the only way to survive.
Business owners decide where and how capital is deployed, this determines where the jobs are and who is hired; they determine company policies as well, which their employees are required to abide by. Employees, earning their living from their employer, find that their own personal interests tend to be aligned with their employer’s. If my employer wants something to happen in my state, I’ll tend to support my employer’s position rather than oppose it, as it will be better for my career to not act contrary to my employer. Employees who “go against the grain” tend to be let go.
The wealthier a person is, the more influence they can have on society and politics; the wealthy are the leaders of society.
As people abandon the idea of owning and operating businesses, they lose much of their influence on politics and society.
Instead, being employees, they must simply follow the orders of their employers; go along to get along.
It’s not impossible to deal with tax and compliance issues; as the government throws things in your path, they need to be dealt with in an efficient way as possible (for example, the modern payroll service is a business opportunity to make a profit while offering small business cheap compliance). Outsourcing of complex compliance, a situation where a person with good compliance experience starts their own business and sells their services to many small customers, allows for small business to get similar economies of scale in that regard as large businesses.
The small business owner simply needs determination, a can-do attitude and some ingenuity, along with a huge dose of skeptical realism. Every time a problem arises, one has to first roll up one’s sleeves and research what current solutions there are in the marketplace. It’s amazing what’s available today.
All the garbage thrown at small business is done to scare decent people out of business, so they remain working and paying without ever accumulating any serious amount of wealth, even working in jobs where they fundamentally disagree with their employer’s ethics.
I agree with everything in your post. However, I have chosen to “go Galt” for the same reason John Galt did.
Your post could have been written by Dagney Taggart before she realized the futility of trying to continue to adjust to the new rules.
Some just see it sooner than others or just reach their limit sooner. I saw this coming when I was in high school. I graduated in 1972. I just assumed it would not hit a breaking point in my lifetime. I didn’t understand the law of compounding then. The reason things seem to be getting more unstable by the year, then by the month, and then by the week is that we are watching this happen before our very eyes:
“Imagine a magic pipette. It is magic because every drop of water that comes out of it will double in size every minute. So the first minute there is one drop, the second minute there are two drops, the third minute four drops, the fourth minute eight drops and so on This is an example of exponential growth. Now, imagine a normal sized football stadium. In this stadium you are sitting on the seat at the very top of the stadium, with the best overview of the whole stadium. To make things more interesting, imagine the stadium is completely water-tight and that you cannot move from your seat. The first drop from the magic pipette is dropped right in the middle of the field, at 12pm. Heres the question: Remembering that this drop grows exponentially by doubling in size every minute, how much time do you have to free yourself from the seat and leave the stadium before the water reaches your seat at the very top? Think about it for a moment. Is it hours, days, weeks, months?
“The answer: You have exactly until 12:49pm. It takes this tiny magic drop less than 50 minutes to fill a whole football stadium with water. This is impressive! But it gets better: At what time do you think the football stadium is still 93% empty? Take a guess.
“The answer: At 12:45pm. So, you sit and watch the drop growing, and after 45 minutes all you see is the playing field covered with water. And then, within four more minutes, the water fills the whole stadium. This means that you think you are safe because it seems that you have plenty of time left, whereas due to the exponential growth you really have to take immediate action if you want to have any chance of getting out of this situation.”
Personally, I think we are at 12:45 p.m. right now. The amount of change that has happened in just the last two years is staggering. And the next two years will bring far more.
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