I think a lot about business. What makes a business bad? What makes a business great? Why do some businesses fail while others are so good that they can be run by a cheese puff and still thrive? This is the stuff floating around in my head all day. As Charlie Munger says, “read enough and think enough, and eventually you won’t have to work.”
Lately I’ve been thinking a lot about local businesses and how a business can become a great local business. I’ve come up with the following list. Five things you can do to create an economic moat for your local business.
Moats are good. They protect your castle from invaders. They protect your business from the competition and sometimes they give you a degree of pricing power. Do the following five things and you’ll be well on your way to creating an economic moat for your local business.
1. Never Stop Marketing
This file is licensed under the Creative Commons Attribution 2.0 Generic license. Author: Rob Young
McDonalds, Coca-Cola, GEICO… the list goes on and on of great businesses and brands that never stop marketing. If these business giants never get to sit back and stop marketing, then why should your local business get to stop marketing? If you want to create an economic moat in for your local business, never stop marketing.
Invest a percentage of your operating profits into your marketing efforts every month. Continue to increase the marketing budget as your profits increase. Pound the market with your message and benefits over and over and over. Do this month after month, year after year. Use your market share to raise marketing prices and squeeze out smaller competitors. Make marketing in your area unaffordable for your competition.
Every great business has to market itself, and it never ends. Your local business is no different. Instead of getting so big that you can stop spending money on marketing, your goal should be to continuously grow profits so you can continuously grow your marketing budget.
2. Blog, Blog, Blog
Never stop blogging. Whether or not local businesses realize it yet, customer acquisition for local businesses is starting to become dominated by the Internet, and specifically Google. Running a value-adding, useful, and interesting blog is a great way to continuously grow your reach across the Internet. As your blog and website grow, the reputation of your website will get stronger and stronger, both in Google’s eyes and real people’s eyes. Your blog and website will become more powerful as your blog grows, and your blog will bring in more and more business.
It’s a vicious cycle, and you want to be on the winning end of that cycle. Someone’s business has to show up in those first 10 search results. It’s either going to be your business or the competition. Running a great blog and continuously growing it is a great way to ensure that over the long run it’s your business being found on Google and not the competitions’.
3. Serve And Use The Local Media
Some things never go out of style. And local media is one of them. Technologies change; one day it’s newspapers, the next it’s websites. But the core content stays the same. Local media is something that’s been part of America since the days of the Colonists, and it will never go away. We love to read about ourselves, we love to read about our friends and neighbors, and we love to read about our cities and local businesses.
Cultivate mutually beneficial relationships with your local television news stations, your local newspapers, and your local blogs. Ask for coverage of your business events. Make yourself available for quotes on stories related to your industry. Write opinion pieces. Doing things like this, for years, will help your business gain name recognition and build trust with your community. Your continuous mentions in the local press will help your business stay “top of mind” and will provide positive social proof. Potential customers will automatically seek out your business when they are in the market for your products or services.
This one is such an easy, no-brainer. Use the local press to promote your business in a cost-effective way. But remember, it’s a two-way street. You have to make yourself available for quotes, you have to write articles, and you have to put on business events (like giving free services to a local school or charity) that are worthy of coverage.
4. Use Technology Early And Often
Local businesses are notoriously late adaptors when it comes to technology. They figure out a way of doing business that makes money, and they stick to it until the wheels fall off. The problem is that the wheels usually fall off at some point.
Be different. Be better. Adopt to new technologies early and often. Sure, you’ll make some mistakes along the way, but over the long run being an early adopter will increase productivity and profits. Pass on those productivity gains to your customers so you can better serve them. And reinvest those increased profits back into the business so you can grow and crush the competition.
5. Create Loyal Employees
Employees make money for owners. It’s a great thing to have talented, motivated, and productive employees working for you. But it’s a two-way street. You have to earn those qualities from your employees. Be a boss that people want to work for. Create a company that people want to work at for life. Create opportunities for people that have them jumping out of bed in the morning excited to get to work.
A lot of local businesses are services companies. And there’s nothing that can create an economic moat in the service industry like a company full of motivated, dedicated, and talented employees. There is no doubt that this is the toughest item on the list to accomplish, but if you can get talented, motivated, and loyal people working for you then it will be very difficult for other companies to compete with you.
