Bake In Staying Power

Last week we talked about why always doing what’s in the best interest of your customer is always the right thing to do. Even when it costs you money in the short term.  

The most common objection to operating this way is that your company can’t afford it.

In my mind, there are only two reasons that could be true. Either you’re a greedy short-sighted weasel. (In which case I have nothing nice to say to you.) Or you legitimately can’t afford to take a loss on any sales without putting a financial hardship on your business because your margins are just that tight.

If the latter is true, I have bad news. There’s no magic marketing pill you can take to fix it. The solution will be found in your business plan.

You have to have a healthy enough profit margin that you can take individual losses without flinching.

There are a couple of two ways to do this.

1. Raise your prices. 
If you’re in a category that’s not been commoditized, you bake in enough profit that you can deliver such outstanding service or products that your customer base never questions the price.

2. Optimize your logistics.
If you’re in a category (like gasoline at a gas station) that is treated with commodity pricing, odds are it’s not realistic to raise your rates. Instead, you have to figure out how to offer the same thing as your competitors, but in a way that costs you less to deliver. Enter Walmart or Amazon.

Either way, if you do option one, two, or both, you’ll be increasing your profit margin. And a healthy profit margin is the first step to a healthy business with staying power.

– Zac Smith, VC