The price that you put on your products is key to success; price too high and nobody will buy them, price too low and you won’t be able to afford to create a good product. What you need to decide is whether you’re aiming for a high quality product that people are willing to pay more for, or you’re trying to attract customers that want a cheap solution and are willing to sacrifice quality for it.
The first thing to do is look at your competitors and see how much they’re selling their products for. It might seem like undercutting them is the most logical thing to do but that isn’t always the case. It’s all good and well selling for less, but if you can’t afford to match their quality at that price, customers may be willing to pay a bit more money for a better product. As a general rule, you should undercut competitors where possible, but always make sure that you’re maintaining good quality.
Outsourcing Or Hiring
If you’ve created a great product at a reasonable price and given it a name that catches people’s attention, you should start to see some sales coming in. That means you’ll need more hands on deck to help you with the extra workload. Now comes your second major decision; do you hire people yourself or do you outsource? The bad news is, there’s no right answer here and it depends on the nature of your company. If the culture of your company is central to your marketing campaign (perhaps you’ve got a big focus on customer service or environmental issues, for example) it might be better to hire people in. You need to make sure that everybody involved with the company is on message and that’s harder to do if you’re outsourcing.
Companies in industries that are highly competitive may also be better off hiring their own people to avoid sensitive information being shared. If you’re outsourcing, you have less control over company data so there is a higher chance that your competitors will find out what you’re up to.
When it comes to outsourcing, it often depends on the department. Some things that are central to the company like sales and marketing are often better kept in-house. But areas like IT, where you’ll benefit from the experience and manpower that an outside company can offer should be outsourced. When you’re trying to protect yourself online, for example, it’ll cost you a lot of money to hire a team of the best IT experts and it’s usually cheaper to outsource it.
The cost of services overseas is a big factor as well; often, you can get things done a lot cheaper by outsourcing them to another country. Some business owners don’t like the idea of doing this and would rather work more locally which is fine, but when you’re starting a new company, cutting costs is vital. You could consider outsourcing abroad to start with and then finding local solutions further down the line when you’ve got more money to play with.
If you’ve made it through the rest of those big decisions and you’re still going strong, you might start thinking about expanding the company. You can bring in more money if you have the capacity to make and sell more products but you’ve also got to consider the increased running costs. Moving into a larger office space, taking on more employees and expanding your manufacturing process is going to cost you a lot of money. If you can’t increase sales enough to cover those extra running costs, you’ll be in big trouble.
Finding the right time to expand is the key to making sure that you can keep the business going. When you’re seeing steady growth in sales, it’s tempting to think that you’ll maintain that growth so you should expand the business. The thing is, that growth may be temporary and you might find that sales drop off again after a couple of months. If you’ve already borrowed a load of money and put it into expanding the company and then sales start falling, you’ll have a hard time keeping your head above water. A good indication that you should expand is sustained sales increases over a long period. If you’re struggling to meet the demand of your customers and you’re running out of products on a regular basis, that’s a sign that it might be time to expand.
If you do decide that it’s the right thing to do, you should always be cautious. Don’t suddenly hire an office space ten times the size of your current one and bring in a load of new staff. Expand your operation gradually and make sure that you’re always bringing in enough money to cover the increase in running costs.
If you can make the right call when these decisions come up, your business will thrive and you’ll be in a good position to grow in the future.