Valuing Customers

In this week’s lesson we learned about the importance of valuing customers. There are two ways in which business owners can show that they value their customers:

1. Give them good customer service
2. Determine the financial value of each customer and strive to increase it

Giving good customer service is essential to running a successful business. Two of the best ways to increase revenues is to either increase your number of customers or try to persuade your current customers to buy more product with each purchase. Both of these can be more easily achieved when you provide your customers with good service. If you don’t, chances are good that those customers will take their business elsewhere.  Individuals can provide good customer service by politely acknowledging customers, providing helpful assistance, and giving each customer as much attention as they desire. In doing these three simple things, customers will feel valued by the company. When customers feel valued they are much more likely to make a purchase and become a repeat customer.

The best way to determine the financial value of each customer is to calculate your revenue for each week and then determine your regular customer base. After doing this, divide the weekly revenue by the customer base. This number will tell you the financial value of each of your customers. In viewing your customers in this way, you are financially valuing your customers. Once you know the financial value of your customers you can determine the best course of action to increase your revenues.

Learning about the importance of valuing customers has made me think about how I am going to apply this knowledge to both my $100 Challenge business as well as my Big Idea Company. I know that in placing an emphasis on providing great customer service I will be more profitable than I would be otherwise. 

$100 Challenge Update

This week I finalized my logo and packaging. In addition, I made my first batch of hot chocolate mixes that are now ready to be sold. I plan on beginning to sell my product starting next week.   

Suggestive Selling

In this week’s lesson we were asked to read a paper about suggestive selling. I found the article to be really informative, and provided me with some ideas that I want to implement in my own business for the $100 challenge. One of the techniques of suggestive selling is bundling items. When you bundle items you combine related products and offer them to your customers as a package deal that is cheaper than if they purchased the items individually. 

In an effort to get customers to make a larger purchase than they may have originally planned on, I am going to bundle my hot chocolate mix bags for the $100 challenge. Each bag of hot chocolate mix sells for $5. However, if a customer would like to purchase 2 bags I will sell it to them for $8. Any additional bag will also only be $3. I think this is a really smart idea because without it I don’t know that I would get many of my customers to purchase more than one bag of mix. The additional revenue is worth discounting the price of my product by a little.

$100 Challenge Update – Carolyn’s Cocoa Cups

This week I purchased the necessary ingredients to make the first batch of hot chocolate mix. I also started working on making the logo for my business as well as creating the packaging. My original plan was to sell the hot chocolate mix in little plastic treat bags with enough mix in each bag to make three cups of cocoa. However, after giving it some more thought, I realized that my competitors (Swiss Miss, Nestle, Land O’ Lakes) package their hot chocolate mix in single servings. So I purchased small plastic containers that fit one serving size worth of mix in each container. I plan on putting three of these plastic containers in each plastic bag. Deciding to change the packaging costs me an additional $0.20 per bag, but I think this additional cost will be worth it in the end.  I also decided to change the name of my business from Carolyn’s Cocoa to Carolyn’s Cocoa Cups to reflect the change in packaging.

Work Hard, Sacrifice, and Make Due

One of the takeaways that I got from the lesson this week is the value of working hard, sacrificing, and making due with what you have. This week we were asked to read an article called Startups on a Shoestring. In this article, one of the entrepreneurs said that he built his company for “$100 and 100,000 hours.” Companies can be successful even if they don’t start out with a large amount of capital, but it is going to take a lot of hard work and sacrifice to be successful. The entrepreneurs mentioned in the article went years without taking a salary, and all of them worked a second job to help fund their business.

In the same article it also stated, however, that about half of all start-ups don’t make it even five years, and this is mostly due to a lack of capital. This just goes to show how much time, energy, and dedication it takes for all entrepreneurs to be successful no matter the size of their financial backing.

$100 Challenge Update

This week I raised the $20.00 of capital to support my business. After speaking with my husband and walking him through my business plan, he and I agreed that we would invest our own money into the start-up of Carolyn’s Cocoa. This week I also determined how I plan to spend the initial $20.00 of capital and figured out that I will be able to purchase all necessary supplies to make a few batched of the hot chocolate mix, but will also need to purchase more supplies shortly after I start making a profit.  

Common Startup Mistakes

This week we were asked to read an article titled Richard Branson on How to Avoid Common Startup Mistakes. Richard Branson is a very successful businessman and investor who is well known for being the founder of Virgin. In the article, Richard Branson listed four of the most common mistakes that new entrepreneurs make. These mistakes include not staying on target, not being realistic about the costs of starting the business, hiring people you like rather than people you need, and not knowing when to say goodbye to the company as CEO. Out of all of the mistakes that entrepreneurs make I found it really interesting that he mentioned those four. I liked the advice that he gave regarding being realistic about the start-up costs. He said that it is important to keep expenses as low as possible, but that doesn’t mean that you should undercapitalize your business. Branson said, “The playing field is littered with undercapitalized start-ups that were doomed from the outset.” This is something that I want to keep in mind when I start my photography business. It is important to make sure that I am realistic in estimating what the true cost will be of getting things up and running, and to not shy away from trying to obtain that money. I also liked his advice about making sure to hire people that are smart and know the industry, rather than just hiring friends or family members because you enjoy spending time with them. It is important to surround yourself with smart people that have business know how and who will be able to help your company see long-term success.

$100 Challenge Update

This week I finalized my idea for the $100.00 business challenge. I have decided to go with creating a homemade hot chocolate company called Carolyn’s Cocoa. I also worked on creating a business plan to help guide me over the next several weeks. In the business plan I included a vision statement, mission statement, objectives, strategies, and plans for the company.

Entrepreneurs and America

“Silicon Valley’s most valuable export…is the idea of Silicon Valley itself.” – Simon Cook, DFJ Esprit

The most meaningful part of this week’s lesson for me was reading through the Special Report on Entrepreneurship in The Economist.  The reading took me a little while to complete, but I did not mind at all; I was wrapped up in the analysis of the world of venture capital and entrepreneurialism.  What fascinated me the most was the focus on why entrepreneurialism succeeds in various parts of the world, and why there is not a robust entrepreneurial spirit elsewhere.   The thought that America is the hotbed of innovation because of the unique culture of American individualism and optimism really stood out to me.  I had never really given much thought to why innovation seems almost second nature in this country, but it makes sense that a nation founded on blazing trails, being a pioneer, and living by the sweat of one’s own labors and ingenuity would be incubator of so many creative and successful ideas.  

The articles in the reading carried this forward to the next step: where else has entrepreneurialism succeeded, and why has it thrived?  Israel, Singapore, and India were all highlighted as examples of places where innovation is beginning to thrive.  These places have only been able to do so when people have been given the freedom and incentive to take risks without fear of punishment for failure.  As economies have become more liberalized, and as governments have taken a step back to allow individuals to take risks, these economies have been able to mirror some of the success of America as a whole—and Silicon Valley in particular.  

My final takeaway from this week’s lesson is that if an entrepreneur is going to succeed, he can’t be afraid of taking risks.  He should be building a network of close friends with whom he is willing to work hard to solve a problem, and he should educate himself in a field for which he has passion.  Modern tools exist to facilitate the growth of a start-up, and the entrepreneur should take full advantage of their availability. Entrepreneurs are pioneers who want to make the world a better place, and where they are encouraged to take risks there tends to be growth and prosperity.

$100 Challenge Update

This week I identified my top 5 ideas for the $100 challenge. I then looked into what the start-up costs would be and posted about my ideas on the group discussion board for suggestions. I received some great feedback and I think that I am going to go with the idea of making homemade hot chocolate mix and selling it in little bags.