Conversation with Small Business Owners – We didn’t want to be seen as greedy

This is my conversation with a small business owner who isn’t ready to disclose their business’ identity for this article. This is meant to give you a fly in the wall view into the minds of how a business consultant thinks vs. how an entrepreneur thinks and operates. Any lessons you take away are your own, framed by your mind and context, and not the intention of this article.

Q: So how did you decide to open a hair salon when there are so many out there? (I know from my previous research this market is so crowded and fragmented with not even chains with >10% share of market)

A: That is what I trained for and I really enjoy beauty works. After my training I worked for others first but I guess I got tired of working for others and my husband supported me to start my own.

Q:  … but how did you know people would come and the investment was going to pay off?

A: I don’t understand what you are asking. People always need haircut.

Q:  How did you know this was the right thing to do?

A: You just know. I had the skills.  I am very good at it.  So I knew I can do this too.

Q: So about your price, how did you set it?

A: I saw how high priced the place I worked before charged. People are afraid of such high prices, most of them, mostly men, come once and they are gone.
There are too many $8-$10 places around here that give bad haircuts. So I set a price that will not look too cheap or too high.

Q: I see you have several packages, simple haircut to extras added … how did you arrive at what packages to offer and their prices? (I bet it is not based on ay conjoint analysis)

A: That is easy. Most places charge similar price for extras, you simply add for each extra and set a price.

Q: And do you know how your different packages are doing … are customers taking up these over simple haircut?

A: Mostly people come just for haircut.

Q: You have 3 other people working for you but I see them mostly idle, why?

A: People ask for me all the time for appointment. I am working non-stop. People call and book appointments weeks in advance for me. Others, they will get busy soon, if not they move on.

Q: If you are in such high demand why do you charge the same price for all 4? Shouldn’t you charge a higher price than the other 3?

A: This is crazy. How can I tell customers it is $18 for one and $23 for another. They will be confused and will not like it. They will see me as greedy.

Q: Why would they? Don’t they see more value with your skills and seek after you? You are simply charging for that value.

A: It is too complex. What if I lose business because I am too expensive?

Q: You might lose a few. But don’t you cover that from higher profit from others, from sales to your employees, more free time for you to run the business or enjoy with family?

A: I don’t know.

Q: Do you keep track of how occupied 4 of you are? Say for 50 hour week, how many hours is each one busy and what is the sales per person?

A: I think it is in the computer when we ring up. But what will I do with it?

Q: Finally, you recently raised your prices. Why and how did you know to do it?

A: I didn’t want to raise. My rents went up. I had to manage the increase. We didn’t want to be seen as greedy. I still wanted my price to be below $20 because that is the magic number. After $20 people think it is expensive. So we decided to increase to just below $20. and still cover our rent increase.

3 thoughts on “Conversation with Small Business Owners – We didn’t want to be seen as greedy

  1. I see nothing wrong with this kind of approach. Not every SMB’s need to do huge things. Most of them want to stay ‘low profile’ and do what they like to do. As long as they can manage they bills it’s ok for them and now one have to ‘make them happier’. Let’s show them a little respect for their day-to-day duties.

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  2. Rags,

    While your conversation is anecdotal, it reveals something about a certain type of entrepreneur: they become risk adverse the moment they reach some level of success. Those who truly embrace risk are the ones who may go on to create big things. Those that cannot embrace risk rarely rise to the top. And this occurs with entrepreneurs of all size companies.

    Recently I was engaged to create an adverting campaign for a software company that makes a suite of products for a specific industry, an industry that has been fairly and often unfairly beaten up in the press. And this provided an angle that led to a ad campaign concept that resonated highly with my client’s audience. My client’s software enabled users to do things that larger and more well-known software companies could not. And they’d already sold their software to hundreds of companies in this sector, and attracted several top level executives from the competition. But the founder and CEO of my client’s company had become risk adverse. He acknowledged that my campaign would get the attention his company needed, but he was used to doing things a certain way and that included running adverting that looked just like his competitors’.

    I understand the founder’s dilemma; it’s not easy to risk more when you’ve finally got something. It’s just too bad when they’re holding themselves back from their own success and aren’t willing to test new ideas in a limited way before making a final decision.

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  3. Wow – really interesting the lack of business basics! This biz owner needed education, much of which could have been self taught if they read a few books and online resources. Tabitha needs to get in there, “kick some butt” and show them how to run thier business the right way!

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