FAQs for Step 23: Prioritize and Target Customers
Q: Could you clarify what you mean when you talk about the barganing power of buyers and suppliers and how would I go about determining what it is?
Competition is a wonderful thing, in that it compels those in the marketplace to their best performance and motives them to provide the best products and services they can. Monopolies, on the other hand, can be horrid to work with. As suppliers (or any business, really) grow, they seem to internalize and become more bureaucratic, in some cases they can be less focused on the needs of small business owners. Stated differently, larger established suppliers are going to be less negotiable and will tend to require to play their way. What this means to you as a small start-up, is that you will probably have to pay up front for shipments and that you will not get to enjoy much in the way of price breaks, at least until you have proven your ability to sell products. Like so many things in the marketplace, your best insurance against abuse is to shop around.
Here are a few points on which to assess and choose your suppliers:
- Pricing, discounts for bulk purchases, payment terms.
- Shipping (practices, timing, costs).
- Guarantees, return and refund policies.
- Product selection, quality, variety, new products coming on stream.
- Customer (that might be you) service, how they handle complaints.
- Experience, track records (have ya googled ‘em?).
- Does the supplier offer exclusivity?
- Do the supplier’s values fit your personal and corporate vision?
- Does the supplier have the capacity to scale up if your business grows?
Q: Your example shows your top priority including 1 million customers. This still seems huge – what’s the general business ratio between potentional customers needed to gain one actual customer?
We’re not aware of any rules of thumb or ratios between the potential customers and the actual number of customers a business obtains. This ratio would vary, not only from industry to industry, but from business to business within each industry, from niche to niche, and then other inconsistencies would pop up for each rise and fall of the economies in any given geographic or market area. Sorry, no hard fast rule of thumb for this one.
Q: Why is a bigger potential market your third priority not your first?
Our priorities were established according to the capacity and ability we had at the time (2006) to reach and serve the market. That business plan and its strategies were designed to get into the market, to begin marketing products and services to entrepreneurs. We recognized then that we still had a lot to learn, and that it would take some time before we could get to the larger, more lucrative market. While the total of those starting businesses seems large on the surface of it, it quickly begins to shrink when you consider how many people still jump into business without a business plan. For a variety of reasons, ranging from ignorance to bad advice to bullheadedness – the majority of folks still seem to plow their way into business without the benefits of doing a business plan. Of course, part of the earlier Macrolink business plan is to help change this, to get more people doing proper business plans before putting their investments on the line. While the big picture looks enticing (and it is), our real focus so far has been much narrower, on the entrepreneurs we have been able to reach – it’s only with the implementation of this membership website and the creation of the Business Plan Facilitator’s BootCamp that we have really opened our products and services up to the larger market.
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