What’s your business worth?
The value of your business’ service or product may not be as fixed as you believe it to be. We’ve all seen those daytime TV programmes where people go rooting around someone’s attic, a car boot sale or auction site and acquire some god-awful bit of tat that you would more than likely be happy to chuck in a skip as opposed to retain for any feasible purpose. However, when they go to sell this item on, they make a ridiculous amount of profit. This is because the value of the item is subjective. It is worth what someone else is willing to pay for it and the same is true in business. Your product or service has exactly that value; it is worth what someone else is willing to pay for it.
Sometimes businesses become complacent about the value they believe their customers place on them. In recent times, many businesses previously perceived as successful have fallen prey to this mistake. Look at companies like HMV, Blockbuster and Borders. These companies were once spotted on practically every major high street in the country, and yet now, I would be hard pushed to find a store in a 50 mile radius.
It would be easy for us to blame the downturn in their successes on the changes in technology that mean books, CDs and DVDs are not as popular in their hard copy forms as they once were; that perhaps these businesses couldn’t do anything to have prevented their fates and maybe this is true to a certain extent, but it is also true that the value that their customers once placed on their products and services was not as fixed as they had assumed. Look at companies like Apple; they have been the trend setters and set the pace at which technology moves forward in the smart phone industry, yet the android market is on the up and in order to be able to continue to compete and take the lion’s share of the profitability in this market, they will have to find new and innovative ways to ensure the i-phone maintains its value in the eyes of its customers.
A mistake often made here is that people believe value is achieved by offering a lower price. This is rarely the case. In fact, if your price is too low, you run the risk of alienating clients because they will resist being associated with what they perceive as a cheap and low quality brand. If your product or service is the best on the market, customers expect to pay for that quality. Value is striking the balance between quality and a price that realistically reflects the worth of the product or service provided. It has very little, if anything, to do with being the cheapest on the market.
There are many examples of successful businesses that offer value, but refuse to compete on price; the Disney, John Lewis, any number of designer label brands of clothing and so on, but I want us to consider Virgin Atlantic as a specific example.
Not so long ago, there was a wave of so-called budget airlines that happened into being and many airline companies felt the pressure to compete with low cost flights in order to stay afloat. Virgin do have an economy flight service, but even this is not a no-frills flight to a booze cruise destination in The Med. Virgin refuse to compete on price. Their slogan is, “flying in the face of ordinary” and, if you take a look at their website, you will see they not only sell flights, but “The Virgin experience.” They add value to their product/service through exceeding expectations and turning the flight into an indulgence rather than just a means of transporting to and from your destination. A Virgin flight may cost much more, but people are willing to pay it.
If you would like some concrete evidence of Virgin’s success, how about the fact that in 1999 Sir Richard Branson sold a 49% stake in the company which valued Virgin Atlantic at a minimum of £1.225 Billion. Or, in the last two years, Virgin have collected a plethora of awards for their service including Best Cabin Crew, Best Airport Lounge, Best Airline for travelling with Children, in groups and for disabled passengers, Travel Brand of the Year and even Brand of the Decade.
Value is transient. So what do you do in order to increase the value your customers place on your products? How do you ensure that they are willing to pay you a profitable price for your service? How can you increase your worth?
Thoughts on the value….
“Differentiate with value, or die with price.” Jeffery Gitomer
“Try not to become a man of success, but rather try to become a man of value.” Albert Einstein
“Only customers create the cash flow that eventually keeps a company in or out of business.” Anne C. Graham
“What is a cynic? A man who knows the price of everything and the value of nothing.” Oscar Wilde
“In business you get what you want by giving other people what they want.” Alice Macdougall
“Forget about the sales you hope to make and concentrate on the service you want to render.” Henry Bullis
Business Performance Coach