What Can Small Business Learn From Starbucks?
Starbucks CEO, Howard Schultz, announced they will close 600 stores in response to the economy and some poorly conceived business strategies. Starbucks lost sight of the original vision; the aroma of freshly ground and brewed coffee and other corporate strategies for increasing profits at the cost of limiting individual experience.
These are very competitive times for business. Customers do not have as much ready cash or free flowing access to credit and that will not change in our foreseeable future. How does a small business survive in these times? Here are some ideas gleaned from the Starbucks example:
1. Acknowledge current economic realities (from both your business and the client perspective) and adjust for sustainability. Consumers are looking for value and durability. Answer these questions from a client’s perspective:
- Are these goods or services something I need or want?
- How am I going to pay for it?
- In order to do this will I have to give something up?
- How long will the benefits of this purchase last?
2. Schultz stated that it was a mistake removing the coffee aroma from the stores. Too much focus on the efficiency, cutting costs, and increasing profit margins ended up stripping out the perceived value to the clients. Drive through windows made it easy for fast food competitors to mimic the experience at lower cost to the customer. Think about:
- What is the added value in doing business with me or my company?
- How can the experience be enriched?
- If my goods and services cost more than some competitors am I communicating the added value to the client?
3. Starbucks has made clear they intend to survive and thrive, essentially:
- Take one step back for survival
- Learn from experience
- Position for future prosperity
4. Affordable luxury (double shot frappachino) or back to basics (cup of coffee), it’s important to understand the impact of current economic times in order to survive and prosper.
- Look closely at business expenses, use the tool Cash Flow Plan By Priorities And Categories to itemize your business expenses and figure out what to cut without compromising opportunities and service.
- Cash for affordable luxuries like $5 coffees consumed on the run may not be available. But, a morning event at a coffee house may continue to be good use of $5. Purchasing a new car every two years has already become history. But, repairs and maintenance to keep our cars running has become more important.
Ask yourself, how does my business help clients in efforts for a more sustainable long term plan? The economy continues; sometimes businesses need to hold on for survival and sometimes businesses need to adjust their business plans.