What Small Business Owners Should Learn from Apple

Apple earns praise for churning out cool gadgets and generating mountains of cash. The company has also created a whole industry of pundits and authors trying to tell people what they should learn from Apple. As much as I don’t want to pile on, there was a great post on Daring Fireball yesterday, Pricing and Profit Consistency and the Halo Effect, about why Apple should not and will not pursue lower margins and higher market share. Gruber notes that Apple pursues the high end of markets with great products, and forgoes low-margin markets, no matter their size. Gruber doesn’t mention this explicitly, but price is part of the Apple experience. Not that people want to pay more, but that they expect higher price and higher quality. People who don’t want to pay for that quality are not their target customers.

Similarly, small businesses without the economies of scale of larger companies need to find the niches where customers value their differentiation. Perhaps the difference is that you have a local presence, or answer the phone. Perhaps you have a subspecialty that doesn’t matter to the broader market, but is critical for certain people. If you march into a (pricing) war of attrition with a larger company, you’re not only going to lose, you’re going to be miserable.

Some small services firms have actually partnered with companies they previously saw as competitors. The small company gets increased exposure, while the big company can solve problems that include the niche they had struggled to serve.

The key is to find the niche that values you what you do. Then charge appropriately. In your communication with customers, whether on your website, in discussions, or in sales proposals, never feel shy or embarrassed about what you charge. Charging more actually increases the buyer’s confidence. Besides, if they balk at the price, they may not be in your target market, or you may be able to arrange a discount (“you can get 25% off, you give us the flexibility to complete this project at any time over the next 6 months”).

How’s the working for Apple, the company that makes most of its money on “post-PC devices”? Gruber’s post was spurred by estimates that Apple makes more money (profit– the real money) from PCs than the top 5 PC makers, combined.

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