It doesn't take a MBA-like focus to think "Gee..only if we had more margin, we'd pay more".

This entire thread is totally out of touch with reality.

>It doesn't take a MBA-like focus to think "Gee..only if we had more margin, we'd pay more".

It does take razor-sharp focus and constant innovation to work out how you can increase margin, though. You can't just arbitrarily raise prices without offering any additional value and expect your business to stay alive.

And yet that's precisely what lots of businesses do: raise the prices, cut the wages, drop the product quality. Oh no, the customers start losing the brand loyalty and go to the competitors, why on Earth, those ungrateful pigs!

It seems to be especially popular in the street food business and food industry in general over here: someone thinks that surely one can produce decent <insert whatever here> at reasonable cost and earn some good profit from it, and indeed they can, the customers are happy, the business is growing a-a-and then something happens and the market self-corrects: the price grows to the level of the competitors', and the quality drops to the competitors' level too, now the "playing field" is level again (all products are more or less equally mediocre and equally expensive), wait about a year for another entrepreneur to rinse and repeat this cycle.

There must be some objective reason why that happens though I am really not sure what it is. But whatever that reason is, it seems to have been working pretty much without exceptions for the past ten years at least.

Small businesses already have a razor sharp focus otherwise they'd disappear. Literally their margins are their bread. I find your take slighly condescending but I want to give you a benefit of the doubt - what makes you think small businesses aren't focused on optmizing their margins? Just like you, I am a small business partner and know many small business owners. If you put an MBA-educated person in charge, the opposite would happen. Reading HBR doesn't make you a qualified for optimizing a restaurant business. Neither does having an MBA degree.

>Reading HBR doesn't make you a qualified for optimizing a restaurant business. Neither does having an MBA degree.

I think I understand the miscommunication now. Sorry for that!

I didn't mean to suggest that you need an MBA to run a small business, just that you need to be constantly optimising, innovating and focusing on raw numbers. I don't have an MBA, but from what I understand this is how MBAs are taught to think.

>I find your take slighly condescending but I want to give you a benefit of the doubt - what makes you think small businesses aren't focused on optmizing their margins?

Maybe it's the people we talk to? I definitely do know guys that are creative and sharp, but for every one of them there are 3 or 4 people who stubbornly refuse to adapt to changes in the market, fail to capture even low hanging fruit in terms of margin (big one is eCommerce businesses that make no effort to minimise postage costs), spend huge amounts of time on activities that bring in minimal value to the business and make no effort to expand into new product categories/markets or make use of new technology. It's just not how many people think.

Is it possible there's multiple types of small business owners, and you're talking past each other? Because I'm sure some owners know where every dime goes, like you say. But the small business I work at currently doesn't work like that.

The small business I worked at previously was closer, but the owner worked longer hours, possibly for less pay, and absolutely had more responsibilities, than I ever did working there. And I assume that led to a divided focus, and in turn, not being able to focus solely on optimizing every dollar.

To be clear, you’re arguing that companies pay more when they increase their margin? The rest of this thread is out of touch for thinking otherwise? I don’t know, that definitely sounds like MBA-brain to me.

I read it as “in order to pay more, we’d need to find a way to create more (gross) margin” (often because net margins are already slim).

What's exceedingly common is an focus on what they think is efficiency (or really, what they see as "waste") which they think makes them a shrewd, smart, savvy business owner.

Distrust in their employees coupled with excessive monitoring on consumables and the like, I think is the most common.

I've patronized, worked at, or know people who worked at places where the employees are doing everything they can to keep a business running despite the owner....often doing what they can to keep said owner from getting their hands too deep into daily operations or in contact with customers.