Hi there, everyone. Im j. J. Ramberg, and welcome to your business, the show dedicated to giving you tips and advice to help your Small Business grow. To make that growth possible, every entrepreneur has to decide how to price their product or service. Make things too expensive and youll lose customers, make them too cheap, and youll lose money. So how do you figure it out . You have to know your customers, think about their needs and understand the competition. Everybody in the industry always talks about service, service, service. But really, the underlying theme for most consumers is really pricing. No matter what anyone says, he believes your Small Company must always compete on price. If the pricings not there, people are just going to i like the store, i like what you have, but theyll quietly go down the street where they know its at a better price. His staff knows it too. I have actually had customers come to the register and say, really, thats what youre going to charge for that . The owner of north meridian hardware says understanding your pricing is the reality of doing business. People are watching dollars. Because 5 saved here, 15 saved here, 20, you know, that adds up. With so many clients doing their research, keith and his staff have made it their mission to get the best prices for popular items like paint and hammers. Its nothing unique im doing. Its the structure and foundation of how a lot of businesses work. North meridians goal is to keep the pricing competitive. Were not trying to be the cheapest or most expensive, but we want to have fair pricing thats relative to the industry. What keith has learned is that pricing is more fluid than people may think. A roller coaster. Thats about the best way to almost describe it. Things are erratic because pricing fluctuates daily, weekly. And thats why keith knows where his supply is coming from and why. Weve fortunately been tied in with distributors that have been helpful before we started which helped set the foundation to be competitive on the pricing. He even does Comparison Shopping of his own. If youre buying at a higher threshold, you cant compete. If theres a fluctuation, we may call a distributor and say, hey, we see such and such is selling here. And so thats how we are able to keep things in check. Unlike big box locations or Hardware Stores affiliated with larger brands, keith can exercise some independence in his buying. Theres no coop here. This is 100 ownership by myself. So theres no guidelines that i have to go by. If were moving outside the scope of where the suggested price is with typical coops, we would have to go through certain approva approvals, we dont have to do that. That means theres room for negotiation. We can say, hey, can you look at this and see if maybe we increase our quantity of what were ordering for this specific person, can we get a better price on it . Being small presents keith with a unique challenge. He cant stock his shelves with too much stuff. He must know what products could be a waste of time and money. Even though we have a 6,000 square foot store, the big boxes have 300,000 items. So you cant carry it all. We find the mainstream of what people tend to buy the most and that mainstream is where we have put the most concentration on being most competitive. North meridian also has a smaller staff, which helps customers at the cash register. We have a couple of managers, we have keith the owner and maybe three or four Staff Members and thats it. Even after products hit the shelves, keith says he has to be flexible. His Pricing Strategy isnt perfect. Sometimes the shoppers say prices are too good to be true. Theyll come and say do you know such and such is charging 2 more for this. You might want to look at this price. Other times, clients are wary to make a purchase. Well look at what competitors are doing and if we have the room, well bring it down a little bit. The key for north meridian will know who locally is charging what for certain items. Long before it opened its doors, the stores competitors were under the microscope. We studied within about a three to fivemile Geographic Area of all the competition. Small, some other small retail Hardware Stores, other big boxes. And that trend continues today. Staffers will walk through the competitors doors to check out the numbers. And we have went to neighboring stores and kind of wandered through and said, you know, we got that, what are they pricing it at . One major advantage for north meridian is its location. Its the only Hardware Store in downtown indianapolis. Theres roughly about 54,000 cars that go by daily here. And for many commuters, its the convenience that counts. Our busiest time tends to be roughly about almost 11 00 to 2 00 or 3 00. Because a lot of people who are downtown want to pick up stuff before they go home. While many customers are willing to pay for the convenience, keith doesnt want to be greedy. You want to leave some things on the table, but dont want to leave too much, but you dont want to also gouge. Hes happy customers are taking notice and spreading the word. When i have my shirt on, ive seen people ask, ive seen that store, you guys got good pricing. And keith knows the only way to keep the clients coming in is to keep doing what hes doing, stay competitive. I think people on average will look at that price difference and then judge for themselves time, value, and then convenience. Thats where they make an internal decision. These are all quiet things that people dont really talk about. In this digital age, consumers are doing more homework before buying and that makes competitive pricing more important than ever. Not always easy for a Small Business when they have to go up against competitors who deal in volume. Kerry smith is the founder of a company that makes ceiling fans for industrial, commercial and residential spaces. We profiled the business here on the show. And colleen debase at entrepreneur. Com. Great to see both of you. I remember in the piece a few years ago, you said people always smile when they say the name. And i noticed as i was reading it, i couldnt help but smiling. But you are in the business of selling things people can sell cheaper. I found the idea of this piece fascinating because we always talk about how you cant compete on price. Youre not going to beat out walmart. Youre not going to beat out lowes. You cant ignore price. You cant ignore price if youre selling something that everybody else sells. If its a commodity, you have to Pay Attention to price. And at a Hardware Store, most of that stuff i agree with that. But i do think that theres some things that might be done. In terms of the Hardware Store, theres all sorts of interesting tools that the Big Box Stores simply will not carry and conceivably thats what they could do here. And he can be cheapish, but he cannot be the cheapist. Cheapest. No, and this is what we always say a Small Business. Its very hard to compete on price. And i would argue that maybe you dont want to always compete on price. If the general rule with pricing is that, you know, you either have to be cheaper or better than your competition. And i think with Small Businesses often do, they can be better. Especially a Hardware Store that can give you knowledgeable service. You can have a real convenience. Hes in a perfect spot. Convenience, enjoyable experience. I love going to a local Hardware Store as opposed to a big box. I guess his point, also, hes not trying to be the cheapest, but needs to be within the range. He does, again, on those things. If youre sell iing nails, im probably going to look at a big box as well as his store. But again, when they go to the stores, the bigbox store, and look at what is it that these fellas dont sell. They dont sell it because theres not that much of a demand. So thats, i think, what you have to concentrate on here. For example, instead of selling, you go to bigbox store, you have gloves, they always have jersey gloves, those brown gloves, the white gloves that cost 1. 99 Something Like that. Dont sell those gloves, theres an infinite number of gloves. Theres gloves for gardening, for construction work, theres gloves for manufacturing. Theres all sorts of gloves. Theres all sorts of niches. And thats as a Small Business owner you should find the niche and exploit the niche. Right. He also talked about how pricing was a roller coaster, a science, well, not even a science, going up and down and checking things and changing prices. Maybe thats a little bit he also said about how much he pays attention to what his competitors are doing. And of course, thats smart to do, but at the same time, you can go a little crazy if youre constantly focused on what your competitors are doing. And that can be the roller coaster. So i think in a lot of situations, Business Owners can better benefit themselves by keeping the focus on themselves, what they can control, and giving, you know, the best quality, the best product, the best service possible. Yeah, and it does sound the piece didnt cover this so much. It does sound he concentrates on those two things, service and quality and clearly as we talked about before, he was in a very convenient spot. Well, thank you so much for discussing this piece with me. Guys, please stick around, were going to bring you back to the elevator later on. All right. Thank you. Are you getting all the marketing benefits of twitter or are you doing the bare minimum . If you want the most out of your tweets, check out the website of the week. Followerwonk. Com is the site for optimizing your followers list. You can track distribution of followers and the hours your specific followers are most active so you can be strategic of when and what you are tweeting out. Every penny counts when it comes to your Small Business. So here now are five of the worst offenders when it comes to typical Small Business ripoffs courtesy of allbusiness. Com. One, leasing a credit card payment terminal. Most processors rent out systems for a monthly fee, but youre better off buying your own hardware. Two, buying an extended warranty. If a products going to break, its more likely to break right away when its still covered by the manufacturing fee or after the extended warranty expires. Three, overusing an ink jet printer. They require pricey ink cartridges and are necessary when printing. But for plain old text files, its a waste. Consider an entry level laser printer, instead. Four, employee expense account abuse. Implement an online expense Management System like concur or certify to keep better track of employee spending on the company tab. And five, overpaying for your mobile service. Check out Services Like bill shrink which will analyze your companys monthly mobile bills and recommend the least expensive Service Option based on your needs. When youre looking for money for your company, it could seem like any money is good money. And the more you can get, the better. But the truth is, finding investors and an injection of capital comes with issues, as well. So best to go through the process with your eyes wide open. Joshua coates is the founder of two companies he later sold, now the ceo of instructure, hes got experience having raised about 80 million for these businesses. Great to see you. Hi, how are you doing, j. J. . We talked so much about how do i get money, how do i raise money . Youre saying, wait, hold off a second. Before you ask for money, think about the strings that come with it. Well, its understanding who youre getting money from and what theyre receiving in exchange for that money is important structurally. Typically, a C Corporation exchanges preferred stock for cash. Right. Once you raise that money, i think what happens is a lot of times you think, hey, we made it. But thats just the beginning. One of the things is money can cloud your judgment and its so true. Think of 1998 in the dot com era when people had so much money throwing lavish parties, doing these big ad campaigns when they had no business doing that. If they were sort of boot strapping it, they might have made smarter decisions. The first money i raised was at the peak of the dot com era in 1999 and ive raised a lot of money over the last 15 years from a lot of different Venture Capital firms for a handful of businesses. And i can tell you when you raise a lot of money, you tend to spend a lot of money. Its just a natural process. If you have your business figured out, thats great. If you dont, danger, very dangerous. Right. Its almost better to think how would i do this without any money . Right. Youll be more creative. Next you talk about how investors, then, develop unrealistic expectations. Well, yeah, when they give you money, sometimes they expect you to take that money and grow your business really fast. If you havent figured out your customers and your product and your market and gotten your fundamentals understood, its hard to put that money to work in a smart way. And your investors, hey, they wrote a big check to you, theyre showing up to the board meetings and they want to know what youre doing with their investment. Theres a lot of pressure. You have this pressure to grow even though maybe you still need some time to figure out where you should go. Exactly. Makes it so experimentation is something you start to hesitate about. You think, oh, gosh, should we run this experiment to see what happens . Well, those experiments can be more expensive because you can afford them to be more expensive. But when they fail, they fail bigger. Right. A lot of pressure from investors to be successful. When you raise money, make sure youre raising the appropriate amount at the appropriate time. Typically with tech companies, theres a series a, b, c, a d, a mezzanine and you go public. And each one of those stages has different expectations attached to them. Make sure youre appropriate with the amount you raise and be realistic about what stage your business is in. When you go raise money, you want to tell the investors, hey, were going to take on the world and were really prepared, we know exactly what youre doing. You know be honest. Be honest with your investors. This next point you make, it creates the illusion of success. And i think this is very interesting. A v lot of times we hear about companies and say theyre so successful, they raised 40 million. When actually, it means they raised 40 million. Exactly. The company im with right now, we closed a 30 million round of funding, but we have 90 million in contracts. Im raising a bunch of money, but what do i have backing it up . You probably dont want to raise well, means were successful in raising money, doesnt yet mean your company is successful. If your core competency is raising money, you might want to rethink your business. Once you get a lot of money, you talk about leeches. Oh, gosh. How do you watch out for those . If youve raised money from a top firm, you get emails come out of the woodwork with everybody with their hand out saying, you know what, i think you need my service and and suddenly you have money to pay for it. Exactly. People come to look to take that money from you. And some of them it can give you an opportunity to connect with some really sophisticated highvalue people. But most of them are looking to make a quick buck because they know you have deep pockets and know youre under pressure to perform and look bigger than you really are. So watch out for that. Theyll come out of the woodwork. For every decision, think about what you would do if you didnt have this money. All right. Josh, its so great to see you. Thanks so much. Thanks. When we come back, how do you say no to a client . And our elevator pitcher is on a roll with his freedom cycle. Im a hard, hard worker every day. Im a hard, hard worker and im working every day. Im a hard, hard worker and im saving all my pay. Small businesses get up earlier and stay later. And to help all that hard work pay off, membership brings out millions of us on Small Business saturday and every day to make shopping small huge. This is what membership is. This is what membership does. Todays elevator pitcher was a bike rider when he suffered a back injury. He developed a solution that gave him the freedom to pursue his sport. Nice. My name is gary webster, im the president of American Eagle cycles. Im the vice president. The freedom cycle is the ultimate recreational tricycle that allows adults of all fitness levels to get moving and explore the world. Its designed for people who can no longer ride a traditional bicycle. We have three models available. This is the freedom classic, and we have several more in the concept stage. American eagle cycles was formed in 2011, in less than a year, weve sold five cycles with minimal marketing and advertising. We completed our first round investment and now we are looking to raise 450,000. This money will be used to create a new commercial website, also to buy marketing materials, some advertising and working capital to help us launch the project. The bicycle industry is changing. We are in perfect position to take full advantage of that change. And we are looking forward to becoming very successful in the marketplace. Well, its a really unique idea. And it is changing. Ive seen so many other different kinds of bikes or contraptions on the road. So thank you so much. Lets get to the panel and see what they think. I was curious if there was a bell. Nice, i like that. Perfect. Did you think they got everything in that pitch . Yeah. Because when you first rolled in. My biggest question was who are you marketing this bike toward . Just at first glance, i was thinking this isnt really a hipster bike. Maybe it could be. But you said this is for people because of age or injury can no longer ride a traditional bike. That part spoke to me. No, and i think the fact youve got the boomers coming on and the fact there is an awful lot or ive seen an awful lot more tricycles recumbent cycles that youre actually addressing something thats very interesting at a time. Would you take another meeting . Personally, i think its interesting. I think theres some things that need