When it comes to small businesses with physical locations, these are the 7 big “Do Nots” that will help you to grow sustainably.
#1: Grossly Underpricing Products and Services
The most common reason why small businesses fail is when their customers don't spend enough money per visit.
I have seen this too many times to count...
Underpricing is potentially the most dangerous of the sins, because it takes zero time and zero effort to underprice yourself.
When the price is low, the margin is low.
When the margin is low, the employees’ pay is low.
When the employees’ pay is low, you will have a customer churn problem.
This means you will need to acquire new customers quickly in order to pay the bills.
#2: Creating Confusion in the Store
The clock starts ticking the moment when someone walks into your store. You must create clarity for your customers BEFORE they reach the point of purchase.
I call this "The Clarity Clock".
If your customer lacks clarity, they will buy less whenever they visit and they will not visit you frequently… People need to know what they want before they reach the point of payment, otherwise they will feel rushed and will become risk-averse.
There is a significant percentage of your customers who are picking the safest and cheapest option because they lack clarity and therefore they lack CONFIDENCE.
A clear and confident customer is a highly profitable customer.
#3: Zero Social Media Presence
Every person's mobile phone is also a TV, a Radio and a Newspaper.
Technology is being democratized and demonetized, and as a result, the cost of paid advertising has plummeted.
Right now, you could pay Facebook a few dollars per day to advertise within a 3-mile radius of your location.
This would mean being visible to EVERYONE in this radius for only a little over $1,000 per year.
This is a no brainer.
It is basically a free attention considering that you could easily pay for that advertising using your own tip jar.
To create a strong reputation that leads to sustainable revenue growth, I suggest increasing the number of "Non-Transactional Communications" that you are having in the marketplace.
The only way to have these types of interactions is creating digital content and distributing it on social media.
Delivering valuable content to your community on a regular basis will drastically increase your lifetime value and it will greatly determine your long-term cash flow.
#4: No Strategy to Turn Pedestrians into Loyal Customers
You are already paying for the traffic that passes your location every day!
I suggest turning your storefront as your "best hostess". If you would like to find new customers that pay more and stay longer, then your storefront must do 3 things;
- Get attention.
- Make it obvious that your highly profitable products are "The Things to Get" at your location.
- Invite every pedestrian to come inside by using an "Irresistible Offer".
#5: Understaffing and Underpaying to "Save Money"
This is likely the mistake that will cost you the most money over the next 5 years.
Keeping your team together will lower your costs and simultaneously multiply your revenue.
Pay your best team members more and fulfill their needs. Your customers have to see the same friendly faces when they visit again.
Fact #1: If you always have to find new employees, you will always have to find new customers.
Fact #2: If you have low employee turnover, you will have low customer turnover.
Reinvesting into your team, to deliver more value to your best customers is so basic, yet not doing it is the #1 Reason why companies stop growing and eventually fail.
#6: Never Testing Referral Systems
I have NEVER seen a great referral system used in small physical locations.
It’s quite astonishing to me.
Your best customers know friends and family who will spend similar amounts of money, so make it easy for them to bring new people.
The best way to make this really easy is to gift "Group Experiences" to your best customers.
You may very well have a 20% segment of customers who are creating nearly 80% of your revenue.
If this is true, then gifting the right "Group Experiences" to these people will multiply your revenue and increase your profitability.
There is an incredible power to great referral systems because they achieve 3 things simultaneously, that no other customer acquisition strategy can.
- They get you new customers FAST.
- They get you new customers for CHEAP.
- And they get you new customers that SPEND FAR MORE.
I really can't stress this enough.
#7: Offering Either A Weak Loyalty Program or None at All
The most common loyalty program that you will see in the United States is the "10 punch card"...
"Buy 10 coffees and get your 11th free!!!"
Are they serious?...
Do they want us to spend $40 on coffee to get one for free?
That coffee costs them less than $1 to make…This is not making me want to visit more frequently and the entire purpose of a loyalty program is to give your customers a reason to visit more frequently.
So why always 10 punches?...
Well, we count in increments of 10 so the number always seems convenient to us.
Very arbitrary.
Everyone copied each other, and this is how we have ended up with a bunch of useless loyalty cards floating around every café in America.
What would you greatly appreciate as a customer? And what would give you a reason to visit more frequently?...
Ask your team members the same question.
If you create an incentive system for your customers that appreciates their value, then their value will appreciate.
About the Author
Kalim Aull is a Sustainable Growth Evangelist.