Sometimes you have to say “no”, even if it is to a potential customer. While most entrepreneurs, desperate for sales, want to say “yes” to anyone who wants to business with them, bringing the wrong customer into your business can actually hurt your profitability. Jay Ebben highlights this in his latest column at Inc.com.
“A common trap that many new and growing small firms run into is attempting to take on business from both sides of the aisle. For example, a manufacturer of standard-sized pallets in the Midwest began getting requests from customers for unique pallet sizes. Seeing an opportunity for growth through higher-margin sales, the manufacturer jumped on this opportunity. The problem was that the firm was not set up for custom offerings: It had a generally unskilled labor force trained to operate standard machinery, and these workers could not effectively produce custom pallets. It also had to interrupt its normal production processes to produce custom pallets, which reduced efficiency. The company did hire some skilled labor, but found that at different times they would either have skilled labor working on unskilled projects or unskilled labor working on skilled projects. The basic result was that the company was not able to effectively maintain a low-cost position or effectively meet end-customer needs, and returns suffered.”
Matching market strategy with your operational model is critical, particularly during growth. Adding more and more of the wrong customers only adds to your growing pains, and may actually lead to decreasing profitability. Focus.
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