A much more comfortable place to be is to have a business that adds value. The more value you add with your business, the bigger your profit margins.
One example of a commodity business vs. a value-added business is in the farming sector. Most people’s idea of a “farm” involves big tractors and long rows of crops. This is the “commodity” side of the farming business – you need vast amounts of land, lots of expensive equipment, and you sell massive volumes of corn, wheat or soybeans for a small profit margin.
But recently, there is a growing trend for smaller-scale farmers to grow organic crops using more environmentally friendly farming methods. The organic foods that these farms produce are able to command a higher price, enabling these smaller farms to be successful without as much land and capital investment. This is an example of adding value to a “commodity” business.
Most small businesses are an exercise in finding a way to add value and avoid becoming a commodity. If you’re running a small business, chances are you want to be more like an “organic farm” than a large-scale “commodity crop farm.” Small business success is all about carving out a niche where you can be profitable, and competing on a different playing field than the big players and “800-pound gorillas” in your industry.
How can your small business “add value” to your product or service? How can you do a more pronounced job of leaving your customers in better shape than they were when they found you?
Adding value is all about giving people something that’s worth more to them than the money they’re paying you. What are some ways that your business adds value? What are some ways that you could add even more?
Here are some ideas for how to think about the ways your business adds value for customers:
- Save money: Can you help people do something more cost-effectively than they’re doing it now? This does not mean your business should try to “compete on price.” It’s OK if your product or service costs more than the competition, but you need to save so much money for your customers that it’s worth it to them to pay the extra cost.
- Save time: Can your product help people do something faster or more efficiently? Can your service free up the time of a high-value executive, enabling them to generate more money for the company? “Time is money,” and the same consideration applies. At CorpNet, part of the value that we offer is to save people time in handling their business filings. How can you show your customers that you are helping them save time and making their lives easier?
- Deliver an exclusive experience: People love one-of-a-kind experiences. Can your travel company deliver an unmatched level of personal attention, helping people find sites and experiences that they never could find on their own? Can your restaurant deliver a signature dish that no one else in town can top? What if your consulting firm only took on one new client per month? Sometimes simply limiting the availability of your product or service can make it seem more valuable to customers – who will then happily pay more for it.
- Deliver the “wow” factor: Customers love the “thrills” that come from working with a really amazing organization or a really impressive professional service provider. Sometimes business is almost like a performance art. What are you doing to impress and “wow” your customers?
If you can stay focused on the unique ways that your business adds value for customers, you’ll never need to worry about becoming a commodity.