Why should indies place a higher value on their business?

Smaller IT resellers and independent store owners should place a higher value on their business – and a higher price tag on their services, argues Target Components MD Paul Cubbage…

We sell to IT specialists who typically sell to businesses or the public, but the danger with these guys is they don’t value themselves highly enough. They think that the only way people will choose them is if they put the price at a really, really attractive level.

So they don’t price high, they don’t value their time, they don’t value their expertise. Our advice typically to small IT resellers is to put your prices up, because you will almost certainly be too low. If you’re too high, you’ll realise, but you’ll almost certainly be too low.

What you’re actually doing with your prices is giving an indication of how good you are. Say for example you’ve got a business and I’ve got a business, and there’s some specialism, knowledge and customer care offered as part of it, all wrapped up. If I’m better than you, but I price at the same amount, I should get more business. But if I price lower than you, I’m telling people I’m worse than you. That’s what price does – and that’s what retailers get wrong.

Look at the cataclysmic change of 2004. Until then, an independent IT retailer would just have been an IT retailer, and they would attract customers by selling products cheaper than branded products.

But just like that, it changed. So, suddenly, instead of a brand premium, you’d get a brand discount. You could get an HP cheaper than a locally assembled laptop. It was bonkers. It’s like buying a Rolls Royce for less than a Datsun or whatever. That completely transformed the way these guys worked.

From that point onwards, an IT retailer still in business is in reality an IT retailer who does lots of repairs, they might even do mobile phone repairs, a bit on eBay or Amazon, business sales and support; they might even do some home support. So they’ve become multifaceted businesses.

You always want a good mix of customers, too. If you’re purely reliant on retail sales, then if the retail market is flat, you’ve got a problem as all your eggs are in one basket. If you supplement that with repairs or with business customers, you spread the risk and have more customers to attract.

However, you’ve got to be careful that you don’t do something just because you can do it. In business you do something because there’s a demand for it. Just because we can do 3DTVs, doesn’t mean everybody will want one.

If you’ve got a proposition that appeals to people, and you can deliver it, you’ve got a business. And you’ve got the potential for good business. You’ve got to understand the demand and why people want something, rather than just create it for the sake of it.

Paul Cubbage is MD of Target Components.