Dissecting the woes confronting start-ups

The Life: Simon Hodges, chief executive of the Alchemy Network Middle East consultancy, discusses how small enterprise owners can better cultivate customer relationships to boost business.

SMEs should "focus on communicating the benefits of their product, rather than think of the attributes", says Simon Hodges. Lee Hoagland / The National

Starting a business can be daunting. Simon Hodges, the chief executive of Alchemy Network Middle East, a business consultancy, shares his perspective.

Why do small and medium enterprises (SMEs) often struggle with their cash flow?

The fundamental reason is because they don't have enough customers buying from them regularly. SMEs [often] run out of cash because they don't attract sufficient numbers, and then they fail to convert prospects into profitable customers. When they've done so, they let their current customers slip away to competitors.

How much more difficult is it to find new customers than build sales among existing ones?

Research shows it's seven to eight times harder. For those companies that have marketing budgets, and [want to know where to] spend their hard-earned cash on their business, they should at least consider their existing customers and make them last longer.

Some research shows many SMEs have just a few big customers that provide the bulk of their sales.

It's not just enough to do a small number of people. You have to attract a sufficient number of qualified prospects.

How?

Have a clear understanding of the market you're in - whether products or services - and each business must create its own unique selling proposition. An example: one company said "we're number two; we try harder." The one I was personally involved in building in the UAE was Jumeirah [Group's] "Stay Different". That was very much an attempt to differentiate ourselves from the big international chains.It doesn't have to be pretty expensive, but think of what your customers want.

What should smaller businesses do to entice new customers?

Focus on communicating the benefits of their product, rather than think of the attributes. Also, start moving away from discussion over price. If you're only going to go on price, you're in a losing market because you cannot win against the bigger ones on price. But you'll always win on improving service levels.

You argue there are three reasons that customers do not buy from a company. What are they?

The first is they don't want or need it. The second is they don't have the money to pay for it. [Third], they do not trust the company from which they're thinking of buying. There's really not much you can do for the first two; in fact, you don't want to talk to those people from a marketing standpoint. The third reason you really have to work at. As an SME, it's something you can do much better than a large company.

* Neil Parmar

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