Being asked with how a business thrives seems easy as you think, but the fact is, many entrepreneurs and businessmen are confused and don’t know how to respond to this question. Some of them are wondering what makes their business flourishing. Hence, you have to explore more about how businesses work as well as provide answers to questions that are related to your field.
- Your pricing structure
Whether you hold the best product or service, your business would be affected if your price is not realistic. If your price is too high, you won’t get business and if it’s too low, you won’t make any profit. So, what should you do?
Clearly, the best solution is a balance. However, since finding the right pricing point is difficult. There are a few tips that could make the process easier.
- Look at your competition
The best place to start is to look at your competition. See what their prices are and if they are basing their strategy on a particular area of the target market. Also, see what type of value they are providing.
- Utilize your local resources
Next, you should utilize your local resources. If your community has a pricing standard for your type of business, you will find out more in these resources.
- Obtain feedback from your customers
The only way to truly find out how your customers feel about your pricing structure is to ask them. You can do this by handing out surveys or by talking to them directly.
- Evaluate supply and demand
You should evaluate the supply and demand of your products or services. If you are selling a low-supply, high-demand product, chances are, you could charge a higher price than if you were selling a high supply, low demand product.
- Conduct market research
The more you find out about your target market, the better you will be at providing for their needs. If you conduct market research, you will know if you should broaden or narrow your focus.
- Calculate your own costs
Before you can decide on a price for your offerings, you must consider business costs such as materials, labor, and transportation. Once these costs are covered, you need to make sure that you are also making a profit.
- Determine your break-even point
How many units of products or hours of service do you have to sell to cover your costs? Following these five steps will help you figure out your break-even point. It’s the key to determining your pricing and profitability.
- Determine the per-unit selling price and direct costs of the product or service you provide
- Calculate your contribution margin in dollars per unit
- Calculate your overhead costs
- Determine your break-even point
- You need to recalculate your break-even point on a regular basis
- Retain key employees
The most important resource for your business is talented people. However, finding that talent can prove to be extremely difficult with the 35 to 45 age group rapidly decreasing in size while demand for their skills and experience rapidly increases. Most CEOs spend a good amount of time finding the right talent but have difficulty in retaining them. In the future, employees will come and go. By focusing on key players who truly make or break your business, you can get the most leverage from your employee retention efforts.
Following these steps can help you retain your key employees:
- Identify key employees and positions
- They usually have something to do with your core competencies
- They are uniquely valued by customers
- They have real power in the company because of their product knowledge, expertise or influence over others
- They are very difficult to replace
- Find out what motivates your key employees individually
To retain key employees, get rid of the notion that you can persuade them by talking about broad categories of benefits and reward programs. Instead, focus on those dearest to your organization and understand one employee at a time on what you need to do to retain them.
- Provide a deferred compensation plan
To hold onto your key employees, consider making a compensation plan for key employees that meet three essential criteria:
- The compensation is deferred
- Vesting in the plan takes place over a number of years (but not so long as to reduce its attractiveness as an incentive).
- The key employee has a substantial amount of money at stake (at least 50% of one year’s compensation)
- Monitor and manage key employee performance
Know what kind of job your key employees are doing. Create a performance rating for each of them. If someone scores a nine or 10, your role is to defend and keep them by making sure the salary administration and performance feedback match their performance. If someone scores a six or a seven, you should develop them into nines or tens.
- Make key employee review an annual process
At least once a year, review your key player “inventory.” Bring your HR manager and supervisors together for a half-day meeting that has the following objectives:
- Conduct a performance review, written or verbal, on all key employees
- Create a key personnel action plan that identifies what you want to accomplish over the next year with your key players
- Your funding
Today’s businesses exist in a new economic landscape that requires creativity and thinking from different perspectives when it comes to financing. Small businesses have traditionally been the key driver for economic recovery when it comes to hiring, but hiring requires capital, and capital can be hard to come by. You need to be creative and find different ways to fund your business and make it stable enough to be successful in the long run.
- Know your competition
Every business plan must include information on competitive analysis, even when you’re just doing an internal plan but especially when outsiders will read it. Usually, you hire different agencies to do the researches for you. There are a few things you can do on your own if you want to:
- Shop from your competition
- Talk to their customers
- When competitors are local, take a look at the Yellow Pages of your local phone directory
- Purchase mailing lists and directories
- Small or not, local or not, check your competitors’ websites
- Do a good search on the internet using your favorite search engines
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Alex is a former budget manager turned entrepreneur. He works mainly at home on his credit score advice website and writes a financial blog on the side. He hopes to expand his business into a full online lending company for bad credit as soon as he gets enough investors.