When you’re a new company trying to capture market share, it’s easy to feel like David going up against Goliath. Your older competitors have droves of employees, huge warehouses full of the same products you sell, and a solid customer base. When you’re starting small with just a handful of customers, this difference can seem like an insurmountable obstacle.
But believe it or not, these qualities are what make it possible for you to gain new customers and increase profits faster than your older, bloated counterparts. You just have to know how to keep your costs down as you grow to maintain competitive pricing.
Strike the Balance Between Low Prices and High Quality
Everybody loves a good deal, and as a new company with little overhead, you’re in a position to compete with larger companies when it comes to pricing. This can earn you new customers and increase the visibility of your brand when you’re starting out.
But competing on price alone will only get you halfway there. You also have to show your customers that you offer the best quality for what they’re paying through outstanding customer service and high-quality products. So before you drop your prices dramatically, ask yourself a few questions to ensure that you can strike the right balance between low prices and high quality.
- What are your competitors doing? Carefully analyze your competitors to find out what they’re doing and what they’re capable of. What products or services do they offer, and how does that affect their price? You don’t need to undercut all your competitors; you just need to be able to offer a lower price than those that offer the same products and services.
- What does the end user want? Interact with customers to find out what they value most in your type of company. This will tell you what options you need to keep and what you can cut.
- How efficient is your company? Your company has low overhead in the beginning, but that doesn’t mean it can’t be improved. Examine the structure of your business and the roles of your employees to see where you can cut costs without sacrificing the customer experience.
Stay Lean as You Grow
Low prices are easy to maintain when you’re small, but as your company grows, so do its expenses. If you want to keep your prices low, you’ll have to stay lean as your customer base expands.
Here are some ways to structure your new company to help keep expenses down:
- Cross-train your employees. Rather than creating separate departments, make sure all your employees can handle important tasks, such as customer service, sales, and logistics. This can reduce the number of employees you need and help you maintain the culture of a small, close-knit team.
- Develop solid purchasing strategies. Your profits don’t come from selling your product; they come from purchasing your stock at the lowest prices possible.
- Save on office and warehouse space. Trendy areas are nice, but the cost of real estate only increases over time. If your company doesn’t rely on foot traffic to get sales, look for low-cost locations for your office and warehouse.
- Invest in technology to keep your workplace efficient. Re-evaluate your company’s structure and procedures on a regular basis to see how they can be improved. Think about where your company will be in three years and whether you’re equipped to meet those challenges.
- Don’t be afraid to outsource. Hiring outside firms for marketing or other specialized functions can save you money on personnel and training. As long as you constantly monitor the firms you hire, you can keep costs down while reaping the benefits of professional expertise that would be hard to replicate in-house.
When you’re entering a new market, you automatically have the advantage of a lean workforce and efficient procedures that allow you to pass on cost savings to your customers. However, as your company grows, a consistent effort is necessary to stay lean. If you can manage to keep your costs down while delivering a quality experience, you can maintain your competitive edge and come out on top.
About the Author: Evrim Oralkan is the founder and CEO of Travertine Mart, a boutique online flooring company specializing in premium-grade travertine pavers, tiles, and pool coping. Until Travertine Mart’s founding in 2007, travertine could only be found in brick-and-mortar shops. Travertine Mart has provided a cost-effective solution that brings high-quality travertine straight to your door. Travertine Mart was named to the Inc. 5000 list in 2012 and 2013 and was a nominee for the 2013 Edison Award.