Make Your Offer
A successful startup knows what products to offer its target market. Stay focused on top profit opportunities with these tips.
Opinions expressed by Entrepreneur contributors are their own.
Many businesses offer too many products and services, to toomany different types of customers, at too many prices and in toomany markets. This leads to diffusion of effort, increased expensesand reduced profitability. Success in business, though, requiresthat you develop absolute clarity about the products and servicesyou're going to offer.
Entrepreneurs tend to be optimistic and ambitious. For thisreason, they become enthusiastic about offering more and differentproducts and services to more and different markets. They'reeasily distracted by new profit opportunities and often fail tofocus on those areas where the greatest business success ispossible for them.
Every business has a driving force that determines its strategyin the marketplace:
- A product-driven driving force requires that you focus all yourefforts on selling more of a particular product to as manycustomers as possible.
- A market-driven driving force means that you develop whateverproducts or services are required to satisfy a particularmarket.
- A method-of-sale driving force means that you select productsand services that can be sold with a sales methodology that youhave mastered.
- A technology-driven driving force means that everything you dois determined by a special technology of your business.
- A profit-focused driving force means that you offer any productor service to your market where a specific level of profit ispossible from sales.
The keys to success in business and in life are contained in twowords: focus and concentration. You should continually define anddetermine your core business. Your core business will account for80 percent of your profits. Concentrate on becoming excellent inyour core business and protect your core business from competitionby continually improving in that area.
Divide your products and services into four strategic businessunits:
- Cash cows are those products and services that sell well andare major suppliers of cash to your business.
- Stars are products and services with the potential to generateexcellent sales and cash in the future.
- Question marks are products and services that are neither cashcows nor potential stars.
- Dogs are money losers and users of cash, with no real futurefor your company.
Whenever your business and sales slow down, or if there is adrop off in your sales, retreat to your most profitable productsand services. What products yield the highest profits per unit ofsale? What products would you not get into again today if you hadto do it over? If you were starting your business again today, whatproducts would you keep? What products would you drop?
The most effective way to grow a business is with logicalproduct extensions. Each product should be an extension of yourexisting product and be something you can sell to your existingcustomer base. It should be an extension of your existing expertiseand fit into your existing product or service mix.
Always carefully analyze your company and your market beforeadding a new product or service:
- Do you have the necessary money and resources to produce andmarket the new product?
- Do you have the necessary people to produce and sell the newproduct?
- Only introduce new products and services where it is possiblefor you to become a market leader.
- Only engage in those activities that you can do in an excellentfashion.
Conduct a regular profit analysis on every product, service andactivity in your business. Determine exactly how much of theproduct/service you're selling today; exactly how much it coststo produce and sell that product or service; and the profitabilityof every product or service, from the highest to the lowest in yourbusiness.
You can earn profits from focus and concentration on a singleproduct or service, on something that you do in an excellentfashion. You can also increase sales and profitability by offeringseveral products and services, each of which lead to more sales foryour other products and services.
Your ability to continually analyze your product or service mix,and to work toward achieving the highest levels of profitability inyour business, will be key to your success.
Brian Tracy is the "Success Secrets" coach atEntrepreneur.com and one of America's leadingauthorities on entrepreneurial development. He's producedmore than 300 audio and video learning programs that cover theentire spectrum of human and corporate performance.