Year two was pretty similar to year one in many ways. The prospects still didn’t look promising. More competitors joined in the fray. I was still drinking non-chilled bottled water just to save 10 cents. I was still eating cheap meals or plain bread when I can’t stand the hunger. However, there were three events that I believe altered the course of my entrepreneurial life.
I made friend with a contact’s brother, P. He was an insurance agent but was always looking for better business opportunities. I guess my business intrigued him. He had expressed interest in my business so we met up. During our meeting, I told him honestly that it had been difficult for me to get clients. I showed him my business model and told him the selling price of my product. He told me as my concept and product was new, I needed to relate my product to its most similar existing product. Also, he asked me to raise my price based on the similar product. Before I met P, I was marketing my product in a totally different angle (website design and hosting). After I met P, I was essentially still selling the same thing but repackaged my product and was promoting it to the potential clients from a new angle (advertising) which they can relate to and understand. Because of that, I was able to raise the selling price of my product to 3 times the original selling price but it was 50% cheaper than then comparable product (print advertising).
Initially, I was very skeptical. How could I sell my product at the new price when I had tremendous difficulty selling when it was 300% cheaper?!
P also taught me to use Powerpoint for presentation. When I was working as an engineer, I hated powerpoint presentations. I thought powerpoint presentations were very pretentious, ‘wayang‘ and a total waste of time. I thought it was something the suits dreamt up to make themselves look busy. :p
Anyway, P gave me a few pointers regarding the preparation of my presentations. It needs to contain facts and figures like market potential, what my product can do for them, how it compares to current similar products, advantage of my product compared to the similar but non-online products.
P verbally indicated interest in becoming a partner of my business and he promised to join me when I meet potential clients. In the end, P only joined me in one meeting and he just quietly disappeared from my business venture after that. I guessed he figured that my business was not going to be profitable and he has thus lost interest. I didn’t call him. If he was no longer interested, there wasn’t any reason for me to pursue the matter with him. Lesson learnt: No one is more interested in your own business other than yourself.
However, unknown to me at that time. It was fortunate that he recommended that I increase my selling price by 3 times. If not, I would have to sell to 3 times the current number of clients that I have to generate the current level of revenue. Assuming that I’ve 33% market share now, it means I would need to have nearly 100% of the market to have the same revenue which is impossible. If I didn’t increase the price to the current rate, my business model would not have been sustainable.
The powerpoint presentations also helped. It made my presentation a lot more coherent and the clients were able understand more. It was a lot more convincing than before since I’ve included data and facts. This had helped to clinch some deals for me. There were still very little confirmed clients but it was a mark and definite improvement.
Note: This event has made me realised, many years later, that selling cheap is not the only strategy. In fact, competing by price alone is one of the worst marketing strategy.
Met KL, an ex-hostel mate from university. At that time, I still wasn’t sure if I should adopt the new (increased!) pricing strategy. I shared with him my uncertainty. Then he told me about his own entrepreneurial experience. He told me there was a time when his business was going to cease as his company has introduced a totally new web service to the Internet for free. The web service was so popular that it constantly ate up their bandwidth. It was so popular that users from all over the world were using it. When the monthly fix amount of bandwidth he and his business partners bought from the Internet Service Providers (ISPs) were used up, they had to pay more to increase their bandwidth. However, as soon as they bought more, the bandwidth was used up again and their website will be inaccessible. They also realise that it was impossible for them to keep using their own savings to pay for the bandwidth. Their savings were limited. They finally decided that the web service would no longer be free. Subscription fee would be required. They realise that all the users may abandon them and stop using their service. To continue providing their service for free, it means a definite end to their business; but the alternative, even though it may end their business, at least there exist a fighting chance. Based on this bleak scenario, the obvious choice was to choose the path that offers a slim hope, no matter how small.
They were surprised that many users were actually willing to pay for their unique web service. Not only did it help to avert the financial crisis, they became highly profitable! Just do the maths, they have users from the world, and they charge a subscription fee, estimate their revenue. 🙂
After hearing that, the decision became obvious to me too.
To this day, KL and I are still in constant contact. We’ve shared many business experiences and remain firm friends.