Anyone running a business should understand, with laser like clarity, the customer problems their business solves. Not only will this mean the business will be focussing on the right activities, it will also be the single greatest determinant of the business owner’s wealth.
There’s a coffee shop (restaurant really, that also does a nice coffee) overlooking a lake near where I live. When I have a new client to meet, and it is convenient for them, I suggest we meet there. For me, it’s a pleasant, neutral venue in lovely surroundings, where I can hear the founders’ story, what they want to do with their business, what they have ‘got’, and if I can help.
The customer problem the local cafe solves for me is that, as I work from a home office, I don’t want to invite the business into my own home, and I don’t necessarily want to pile out to their office (if there’s a second meeting, we can meet there), so I need a ‘third place‘ (as made famous by Starbucks) to meet.
Once the order for coffee is taken, I also want to be left alone to have a conversation with the client. I don’t want to be ignored, I don’t want to be pestered. I don’t want to feel we have overstayed my welcome just because we have finished my coffee (ooohh, how I hate that).
My local cafe understands this. They are friendly, attentive, chirpy even, and seem genuinely pleased to see me. I frequent the place so much they guess that the person at the front counter peering inside is probably coming to see me, or if I have arrived after the client, they point me to who it probably is.
In this way, they are going above and beyond, and they will have my business for a good while yet. In fact, the place is so thriving, that visitors usually remark ‘Wow, this place is a gold mine‘ or ‘What a great place.‘ Some come back on their own volition later on.
Contrast this to a cafe I used to visit. They seemed genuine and friendly at first, but as soon as your cup was nearly finished, they would pounce and whisk it from you asking ‘Anything else?‘ (which was plainly delivered to mean ‘Can you leave now!?‘). Staying any longer made you feel uncomfortable. I would barely stay 30 minutes, and after a while, never went back. At my local cafe above, I stay an hour per visit, and often have 3 meetings there in one day. I like my coffee. And I like it there.
The second cafe seemed to be focussing more on solving their problems (getting as many customers in and out of the place), than paying attention to their customers’ problems (a third place to meet, a catching up place, a filling in time space, or whatever). By focussing on the wrong things, and taking a short term view, the ‘cafe-I-never-visit-anymore’ lost my business, and I wonder how many others? I passed it the other day and it had shut down. Meanwhile, my local thrives.
Now I am not a restauranteur nor am I well versed in running cafes – I often do a rough calculation of revenues at the place, notice the high number of staff and wonder how they make money – but if I was to run a cafe I think I would realise that the third place concept was well established and understood by now. Customers are not flocking there for the wonderful coffee, or even the view, but for a service that provides them that place other than home or work (even if it is nothing more than to catch up with old friends or fill in an hour reading the paper.)
If I was running a cafe, I would like to think I’d train my staff to appreciate what the third place meant. I would provide free wifi. I would encourage local business people to meet up, linger, and ‘become members’ (a simple loyalty stamp card would suffice). Yes, I would make more money from the evening meals served with alcohol, but if I am to open during the day, then I would encourage more and more to attend and keep the tills ringing over. The more that come through, the more will be enticed by the carrot cake and muffins, or to have lunch, or to come back one evening for a nice meal, give me nice reviews and to spread the word.
It’s the funnel concept of selling – tip more in at the top, and more shall be returned to you down the bottom. Tweak the conversion rates, and off you go.
In the end the value of any business – and the wealth it creates – comes down to one simple question: how well do you understand and then solve the customer problem?
For, as I have said many times before, only if you solve a customer problem (the person who pays you for your product or service) will you create value; only if you create value will they pay, and only if they pay will you even have a business.
And… if you rinse and repeat this enough over a period of time, your revenue will grow, as will profits (as long as you control your costs) and the business will be worth a pretty dollar or three. This could ultimately determine your own wealth.
If you are not born into money, or have not made it in property or mining, then probably the best way to build wealth is to create a business you own, build it up and sell it (or live off the wonderful dividends it provides). The recent Australian Rich List (self made under 40s) all made their money in business, with 42 of the 100 in tech or online business of some sort. Only 6 were in resources, and 1 in property. The next generation of wealth creators have understood the process well.
Meanwhile, enjoy the coffee.