Letting The Inmates Run The Asylum

There are times in running your business where you need to make some strategic decisions that may not be popular with your customers and partners.  When these instances occur it is from my experience one of the hardest things you’ll ever have to manage.

There are two things that you’re effectively dealing with:

1) The impact of the changes you’re trying to make in your business; and,
2) The perception and response from customers and partners.

Let me share with you an example from one of my own businesses a few years back.

When we started our content creation business, we set the prices too low.  It was a mistake and as a result, all of our production capacity was consumed very quickly.  Our partners saw the quality of our work, looked at the pricing and just bought as much as we could sell.  Our actual direct customers really didn’t get much of a chance because every time we had spare capacity, one of our partners would buy it all up.

Not only that, but our pricing was so low that we weren’t able to get the kind of ROI we wanted on doing the work.  That was our fault, we made a mistake, but that said it wasn’t sustainable so we needed to change.

Our options were pretty simple:  we could lower the quality of the content we were providing allowing us to find more writers at cheaper prices and increase capacity or we could increase our prices and maintain our quality standard.

The simple answer was that we decided to increase our prices by over 400%.  We knew that this would result in some of our partners not continuing with us and maybe even see us lose a ton of business.  The risk was worth it because the business was teetering on the edge of failing through low margins anyway.

I wrote an email to all of our partners and a separate letter to all of our customers and prospects.

The partner letter spelt out that we were removing preferential partner pricing and increasing the prices fourfold.  I explained the rationale and the logic and told them that we would be honouring all existing orders but future orders would be at the new price.

The customer and prospects letter talked about how we’d been overwhelmed by the response, didn’t have the capacity to fulfil requirements at the low price point and that we felt out service was underpriced and worth more.  We said we expected to lose a lot of customers but that would open up capacity and so people who were interested in buying content at the new pricing could join a waitlist.

The responses to those letters were fascinating.

For the sake of this email, I’ll filter out the stuff cheerleader emails and the people who were pissed off about the price increase and focus on the “advice” I was given.

Most of it was nonsense.  Let me be clear about that right off the top.  I received a ton of unsolicited advice from people about how to run my business better and most of it was steaming garbage.

I remember thinking how the stupidity of some of the harebrained ideas were so silly that implementing them would make things considerably worse.  It was crystallising for me because I realised that I was on the right path.

That may not sound logical, but here’s the thing… Most of your customers and business partners don’t have clue one about how to successfully run your business.  In fact, they have less than a clue.  They have no experience and no context so their feedback is generally uneducated opinions based on a murky understanding of what is going on.  Most of the time their opinions are emotive and based on their own wants.

I get advice all the time on how to do something better or about other things I should do in my business.  I read all of it and give it some thought.  That may sound counterintuitive based on what I just said, but I’m certainly not arrogant enough to think I have a monopoly on good ideas.

You never know when someone is going to share with you an absolute gem of an idea.

However, I dismiss about 99.5% percent of all the ideas and suggestions people send me because for the most part, they’re not great ideas.

You need to run your business in a way that suits you and delivers on your requirements ahead of everyone else’s.  Yes, you need to serve an audience, solve a problem and offer value to people, but that all has to be done in the context of that being in your mutual best interest.

When you allow the inmates to run the asylum, you have crazy people making decisions and that never works out well.

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