Colonel Sanders has a trade secret. His special blend of herbs and spices is supposedly the secret formula that makes his chicken taste the way it does. When Pfizer releases a new drug, they spend considerable effort to protect their manufacturing process and are even more secretive about particular formulations that they are testing in their R&D division. Yes, when most of us think of company secrets, we think in terms of these types of proprietary information.
The only problem with this line of thinking is that it may be limiting your small business because in your desire to protect how you company works under the umbrella of trade secrets – you may be missing a golden chance for transparency that can transform your business.
In the social media era, you often hear advice telling you to be more transparent. Real transparency involves taking a bit of a risk and sharing something that you may have previously thought of as your own secrets. On the surface, this likely seems like a naive suggestion – what business owner in their right mind would willingly give up their secrets and competitive advantage?
If your business does involve the secret formula for the world’s best tasting rice cake, I’m not suggesting that you give that up.* Doing this right, however, can put your small business in a position of power and authenticity. Wondering how? Here are a few tips and examples for how sharing your secrets might be the best thing you could do for your business.
Tip #1 – Share how much are you making.
For many businesses, one of their most closely guarded secrets is how much money they are actually making. Not necessarily in annual revenue, but on particular deals. The hidden margin is rapidly becoming a business process of the past. Media agencies now share more directly with their clients what commission (if any) they are making on media buying. When a developer creates an app and launches it in the iTunes app store, they know exactly how much of the revenue from people purchasing that app will go into their pocket and how much Apple will keep. Thanks to the Internet, many car buyers now go into the dealership armed with specifics about exactly how much a dealer is making on their car purchase. The point is, hiding your margin is becoming harder and harder – so why not come clean and share it directly with your customers? The upside of this is that it will also give you permission to share more directly what your hard costs are – so you can really prove to a customer that is squeezing you on price whether you actually stand to make any money from the deal.
Tip #2 – Share where you don’t make money.
When you walk into a McDonald’s and buy a meal, most of their margin comes from the drink and the fries. At a movie theater, the margin comes from selling the popcorn and snacks. There are good reasons why you wouldn’t want to call your customers attention to the places you aren’t making much money (not the least of which is that you would invite your customers to only interact with you on those low margin purchases). Instead, why not make the facts of your business and where you are NOT making money a strength for your business? Most coffee shops now advertise that they offer FREE wireless internet access. Are they making money on this offering? Not directly, but obviously keeping people in their shops to buy more coffee makes sense, and the expense of paying for wireless is justified. If you are footing the bill for something similar for your customers, make sure they know about it. If you do services based consulting on a fixed fee, tell your customer how much time you ACTUALLY spent so they see the added value you have offered. Telling your customers about all the places where you are subsidizing the costs of doing business with them can help to shine a light on all the little secret things that your business does everyday which your customers aren’t charged for.
Tip #3 – Share the real size and skills of your team.
There is a temptation in most businesses to overestimate what you can reasonably deliver with your current staff. In some cases this may lead to overpromising something to a client, or you may work hard to hide the fact that your business is actually only run primarily by yourself and your spouse – even though your customer assumes you are much larger. The ideal way to think about this tip is the same as when you go on a first date. You may not volunteer right away that you live at home with your parents, but eventually the truth with come out so you may as well be more upfront about it and deal with it proactively. It doesn’t have to be something to be ashamed of, though (and not that there’s anything wrong with living at home with your parents either!) A customer who knows you are upfront about your capabilities and your intention, perhaps, to grow your business in response to a new relationship will help them to see you as an honest and upfront partner committed to success.
*Sidebar – If you do, in fact, manage to find a way to make something as cardboard-esque as a rice cake taste remotely palatable, you have a trade secret worth patenting.
This post is republished from the original article on the American Express Open Forum website. It is part of "Small Business Friday" on this blog – a featured series on ideas and marketing techniques for small businesses.