PRIMARY KEY TO BUSINESS SUCCESS
If you are ever going to succeed in business, it starts with this concept.
On a piece of paper, the size of a smartphone, you should be able to write down 4-5 brief “one liner” key business differentiation strategies that describe:
- Why am I going to succeed where other fail?
- How am I going to differentiate myself?
- What am I doing that they are not?
Remember, generics like “Good service” do not count as they are a given. i.e. Preferably each of these should either create barriers to entry or be difficult to copy. If you “truly” get this right, you will always be a winner, even in an oversupplied market, firstly because you are doing whatever “it” is, better than the other 95% and finally because you are doing it better than the leading 5%, simply because you have created distinctive identifiable advantages. Bottom line, in these times of rapid change, if you are an innovation leader you should succeed, whereas you are always at risk if you are a follower.
Obviously, generics like good customer relationships, low overheads, good cost and loss controls, etc. cannot be ignored.
When I bought my Rare Coin business, I concluded that the demand for rare coins was declining and it would be better if I got into Krugerrands. Accordingly, I looked at the key drivers of the Gold Bullion Coin market, which especially included:
Over time I/we adopted the following strategies:
- Security: Other dealers had fancy offices in posh neighbourhoods at well-established/known locations, which also meant anybody could watch their customers leaving / arriving with cash and/or valuable coins. In my opinion this was bad for security. Therefore, we moved to new premises that were in an industrial (not office) complex 200m from our supplier, with a great view of a huge paved area in front to enable easy security checks before customers departed. Our reasoning was nobody would expect to find a flourishing KR business in an industrial complex and, therefore, this would be good for security. We also set ourselves up as a Generator business, as a front, with a pickup driving same generator in and out as if we were selling and bringing in stock. e. Nobody could tell we were dealing in Krugerrands. NB! Barrier to entry – difficult for established dealers to move. Customers were told to ask for “the generator business” at security (red herring) as a security precaution;
- Security: I removed the old address and did not put the new address on the website and did not change it with suppliers, so they thought I was still at old premises. e. The website showed only a phone number. My reasoning was that all dealers had their addresses on the internet, which is bad for security;
- Security: We ceased dealing with small customers who could be “scoping” the business, so if anyone wanted to buy/sell one or two Krugerrands, we would refer to the dealer closest to them. e. We only dealt with customers buying in bulk and first-time buyers were told to first put their money into our account (often >R1.5m / >$150k), where-after we would reveal the address. We met any objections with an elaborate explanation of all our precautions that were for customer security & told them to consult with our suppliers for references. We never lost a sale and this provided a real sense of security to customers;
- Privacy/Confidentiality: Other dealers wanted addresses, phone numbers, e-mail contact details etc. for future marketing. I consulted with our accountants and established that since I was doing a cash sale – same day payment in exchange for goods, I could give a cheap cash slip with no names etc. e. I collected no personal data. This gave them a great sense of confidentiality;
- Trust/Security: Other dealers would only release coins three days after the transfer was made. Customers’ did not like this. I checked with banks and confirmed that if real time transfers reflected in my account as “free and clear”, they could not be reversed. Accordingly, we used to release coins the same day as the transfer was made. Customers even made the transfers in our office with our computers. e. They did “real time” transfers, then we checked that the money was “free and clear” in our account and we released the coins minutes later. Customers absolutely loved this;
- Risk – hedging against price fluctuations: We only did “Back to Back” transactions in that we quoted against the replacement price, so that we knew our profit margin before we sold, and immediately replaced any coins sold, so that we had no exposure to Forex or Gold Price Fluctuations;
- Marketing: I was the first Coin Dealer on Google AdWords, which gave me a huge marketing boost. At first, I doubled my turnover every month;
- Security; We had 6 safes with some “false – gold plated” coins in each and many coins in multiple excellent hiding places to reduce risk in the event of a burglary – eventually my greatest risk was transporting the coins the short 200m distance from supplier to my shop;
- Security: We did not use Coin Security companies as their low paid staff would then know that we received a lot of coins and/or banked a lot of cash daily and could leak this info, so we did our own collections/banking – no-one knew when and where. We later stopped accepting cash – transfers only;
- Security: This was proven to the point of where every company that suffered losses was reimbursed – over a period of 5 years, 5 of the 22 registered dealers were burgled by their security companies – who put the system on maintenance and broke in. To thwart this, we had 3 alarm systems installed and an additional confidential alarm to my number only so if one tried to diddle me the others would catch them. We also installed pepper spray sensors that would make burglary almost impossible – I triggered it once by accident and we could not get into the building for over an hour.
Such precautions and a few more, helped us grow the business more than 40 fold in 2 years to become the biggest KR dealer in South Africa within a few years.