Never compete on price alone – Part 1
September 3rd, 2010 // 4:35 pm @ Kwame Kuadey
For a bootstrapping business, competing on price alone can be a very expensive gamble, which usually does not pay off. Over the next couple of blog posts, I am going to explain why you should never compete on price alone, especially not when you are bootstrapping.
1. Your Business Will Not Last
Your business will not last if you compete on price alone. All it takes for your model to fall apart is for a new competitor to spring up offering the same product at a lower price. Usually, this happens if the competitor has lower cost or has the financial backing to sustain lower margins for a while.
And since you were not offering your customers any value beyond lower prices, once they find a cheaper place to buy the same product, they will abandon your product and go to the new, cheaper supplier. You may never get those customers back since you did not offer them anything beyond lower prices to begin with.
I have made a conscious decision at GiftCardRescue.com to never compete on price, and that has paid off. That is not to say we are not competitive with our pricing but we are not out to win the pricing trophy. Have we lost some business as a result? Absolutely. But we want customers that appreciate what we offer as a business, which is providing outstanding customer service. Our goal is to become the Zappos of the secondary gift card market and we want our customers to know us for that.
And even though we don’t have the very best discounts, those who buy from us more often than not come back for more, which is why 80% of our business is repeat business. We like to believe it’s partly because we provide the best service.
Check out Part 2 of this series where I talk about the paranoid life of those who compete on price alone.
Category : Blog &Featured Work
Definition of Bootstrapping a Business
July 28th, 2010 // 8:43 pm @ Kwame Kuadey
This blog is about how to bootstrap your start-up to profitability. I will be sharing tips on how I bootstrapped my first company, GiftCardRescue.com to a successful million dollar business. But, before I go any further, it will be helpful to define what I mean by bootstrapping a start-up.
The best definition of bootstrapping I found is from Wikipedia, which says “Bootstrapping in Business is to start a business without external help/capital. Startups that bootstrap their business fund development of their company through internal cash flow and are cautious with their expenses. Generally at the start of a venture a small amount of money will be set aside for the bootstrap process.”
In other words, bootstrapping involves starting the business without venture or angel funding. The obvious question is why would someone choose to take the hard road (bootstrapping with personal funds) when there is an easier road (venture/angel funding) available to them? Well, the truth is that the “easier road” is actually the least traveled for most start-ups. That is because for the longest time, a myth has been perpetuated that all you need to do is to come up with the next great idea and venture capitalists will be tripping over themselves to get a piece of the action. In reality, less than 5% of venture money goes to seed-stage startups. Which means for 95% of start-ups, seed funding comes from personal resources (in my case, credit cards) or borrowing/gifts from friends and family.
The irony is that venture funding usually follows later, after you have successfully proven the model and built something of value (generating revenue, and maybe profitable, or close to profitability). So, if we can agree that the probability of a start-up getting venture or angel funding as seed capital is next to impossible, then the question becomes, how do you maximize the funds you are able to raise from personal resources or borrow from friends and family to start your business? The goal is to get to the point where the business is generating enough cash flow to fund operations, and eventually lead to profitability. That is where bootstrapping comes in.
Over the next couple of posts, I will discuss the benefits of bootstrapping to the entrepreneur, after which I will introduce in broad terms, my bootstrapping ideas, which will form the basis of this blog. Stay tuned!
Category : Blog &Featured Work
Enter to Win Amazing Prizes from GiftCardRescue.com
July 20th, 2010 // 12:13 pm @ Kwame Kuadey
Become a fan of GiftCardRescue.com on Facebook and enter to win a $100 Walmart gift card, a Kodak Digital Camera or an Asus Netbook. No purchase necessary. For contest rules, visit the Gift Card Rescue blog for details. Enter to win now, you have nothing to lose 
Category : Blog &Featured Work