Lack Of Anticipation - A Huge Business Mistake

July 30, 2008

When I announced that I’d sank a business, I promised I would share some of my mistakes. Lack of anticipation was a huge one.

Dig Deep - Then Dig Some More

When we launched our plumbing business, I anticipated a drop in the housing market. And I figured this wouldn’t matter to us, as we were mostly targeting domestic customers, not house builders. This was a huge mistake. I didn’t dig deep enough. Can you anticipate what might happen if there was a decline in your market? Think about it carefully. Don’t just look at the obvious, as I did.

What Would Your Competitors Do?

If you’re thinking about starting a small business, you need to be smarter than I was. You need to think about what may happen if there is a decline in your industry. But you also need to think about what your competitors would do in that situation and aim to do something different and better yourself. Put yourself in the shoes of your competitors. What do you think they may do if there was a decline in your industry?

Thinking You’re Different And Better Is Not Enough

I was foolish. I thought we were different and better. Not only were we happy to tackle the small jobs other plumbers wouldn’t touch, we could do it at lightening speed. And of course, we had to charge premium prices, to enable us to offer this service 24 hours a day.

Other plumbing firms were busy doing larger, more lucrative jobs on building sites. So it didn’t occur to me what might happen when folk stopped building and the lucrative work dried up.

Of course some of those businesses did go bust. But others did what most of us would do. They went after what work they could get - the small jobs - the type of work we were doing. What would you do if your competitors expanded into your niche and began to undercut your prices? Is there something you could offer that would be virtually impossible for your competition to offer?

What About Customer Loyalty?

When there’s a credit crunch, people spend less money. And no matter how much they love your service - when there’s heaps of people out there available to do it for them - at a much lower rate, they’re inclined to forget all about loyalty. What can you do to encourage customer loyalty if there’s a credit crunch? Could you offer special incentives to your existing customers? Is there anything else you could do?

Can’t You Just Undercut Everyone Else?

I’m not a huge fan of undercutting to get business. And it’s impossible to pay wages and other overheads when you’re competing against folk who are working on their own and not paying taxes, insurance etc. What could you do to compete when competitors are cutting their prices, without cutting your own? What message can you use to ensure that potential customers don’t just want the lowest price. How can you get that message to potential customers?

Think about the industry you’re in, or thinking of going into. Who are your competitors? What do you think they might do in an economic downturn? What could you do that is different to what they’re doing? How could you protect yourself?

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Comments

11 Responses to “Lack Of Anticipation - A Huge Business Mistake”

Barbara Swafford on July 30th, 2008 4:56 am

Hi Catherine,

Being prepared for the unexpected is SO important in business. In the States I look at the predicament the car manufacturers are in. They kept cranking out the big trucks and SUVs, while companies like Toyota were producing fuel efficient and hybrid vehicles. Now that gas prices are $4 a gallon, many are switching to economy cars, and the US car companies are in the hurts because they didn’t see it coming. Thank goodness they had a few small cars to keep them in the market.

Barbara Swafford’s last blog post..NBOTW - Blogging - No Age Requirement
Vered on July 30th, 2008 5:05 am

These ARE important questions to ask.

I wonder how many business owners do their homework before starting a business.

Vered’s last blog post..Wordless Wednesday: Vintage Computers
Barbara Swafford on July 30th, 2008 5:32 am

Hi Vered,

Probably not enough. We’re seeing evidence of that now with the housing crunch and how it’s affecting construction. Plus the high gas prices seem to be affecting a lot of businesses, as well.

Barbara Swafford’s last blog post..NBOTW - Blogging - No Age Requirement
Robin on July 30th, 2008 5:57 am

In our fledgling business (which is basically just Frank doing freelance sound engineering work and me helping things along), we feel we are truly, really offering a unique service. There simply aren’t people around who provide the service we do - so it’s just a matter of becoming known, which is what we are doing.

We focus on drawing in more work without it being too overwhelming - and things are expanding most of the time. I don’t think this kind of work could ever bring in true wealth, but I really think the excitement and creativity generated CAN lead to something that can lead to wealth (e.g. he might write a song that does well, or something)

Robin’s last blog post..Is Living Like Today Might Be Your Last A Good Idea?
Davina on July 30th, 2008 7:45 am

It really is important to do market research… and personal research too.

If the business isn’t a good fit for your personality, chances are it might not be successful. Lack of experience and clarity in that area was my downfall. I focused more on the business and less on who I was in the business. Both need to be looked at.

A good exercise to help expand a person’s perspective if they are planning on starting a business is called SWOT.

Reflect on the existing and potential Strengths, Weaknesses, Opportunities and Threats (in that order) that you see for the business. It helps to lay the structure for a good foundation.

Davina’s last blog post..260+3 Blog-to-Show ? How Did You Choose?
Brad Shorr on July 30th, 2008 11:36 am

Cath, You raise many interesting questions. With regard to price, if you had a lot of potential for repeat business, and your competitors were likely to do a good job, I would have tried to hold on to business at any price, because it’s hard to get back. There are ways to reduce price without simply cutting it - extended terms, rebates, discounts on future work, free merchandise (maybe $100 gas cards), referral fees, perhaps a sliding rate scale depending on the work deadline or the quality of the parts you use. Some combination of the above might have made a difference, maybe not.

Brad Shorr’s last blog post..Guest Post on Middle Zone Musings
Barbara Ling, Virtual Coach on July 30th, 2008 12:57 pm

Brilliant post! I lost big time with my one of my projects this way - I wrote the best-selling book in Internet recruiting back in 1998 (The Internet Recruiting Edge, only resource to garner 5 stars from Inc. Magazine back then), and then took the concepts to real estate (The Real Estate Pro’s Internet Edge).

Problem was….most relators are NOT computer savvy. It became a Product Pick for the National Association of Realtors…but never did take off as I would have liked.

Lesson learned! Barbara

Barbara Ling, Virtual Coach’s last blog post..SURVIVING the Circle of Love (and smashing your fears to teeny tiny bits)
Al at 7P on July 30th, 2008 5:04 pm

These are some pretty fundamental questions for a business. The answers unfortunately require predicting the future at some level, so it’s good to hedge.

I think it’s good to hedge both ways: what happens if the market is tougher than expected - what will our response be? If it continues, where is the breaking point, and what is our exit strategy?

On the flipside, what if the market is better than expected? What is our contingency if we get too much business?

Al at 7P’s last blog post..Jump Right In!
Elaine B. on July 30th, 2008 8:03 pm

This post is amazing! You know your first bullet is the most important. No business owner can afford to conduct business the same way always. Anticipating the next “thing”, fad, needs, target audience is crucial to stay afloat.

Elaine B.’s last blog post..Life gives you a head fake
Marelisa on July 30th, 2008 8:45 pm

Cath: Everything you say here makes loads of sense. This is why you need a business plan even if you think it’s all worked out in your head, and you should show the business plan to a few people whom you trust and who are business savvy and get their input. If you find a way to differentiate yourself from your competitors you’re way ahead of the game.

Marelisa’s last blog post..Morning Ritual: A Buffet
John Hoff - eVentureBiz on July 31st, 2008 1:59 pm

Hi Cath,

Like Al said, to some extent what you’re trying to do is predict the future and plan.

Obviously this is tough to do. I think a BIG key to success in any market and in any economy is showing a sense of urgency (so the customers will actually buy what you sell) and then show your company value.

The questions above made me think. I think the answers lie in what value can you provide your customers?

John Hoff - eVentureBiz’s last blog post..How To Buy A House Like A Real Estate Investor: Part 9 - Becoming A Problem Solver For Sellers And Showing Them You’re Here To Help