Quality Standards and Competition

Many people today wonder why even traditional businesses find it so difficult to survive. How many times have we heard about the number of bars, restaurants, and shops that close year after year? And increasingly, these businesses are passing into the hands of large business groups that take charge of managing them. Behind this reality, there is an explanation that goes far beyond simple economic crisis or lack of customers.

One of the main reasons is that quality standards have increased exponentially compared to previous decades. It is evident that quality has grown much more than new businesses with innovative needs or services have been generated. No matter how much innovation exists, thousands of completely new businesses are not created every day, thus prospering entirely new sectors at the same pace. However, the greater financial capacity of large companies has significantly raised quality. This is natural: when there is strong financial muscle, greater efficiency is sought, and along with technological advancement, customers have become accustomed to very high quality standards.

This situation is somewhat counterproductive because it is increasingly difficult to compete, especially for those who want to start from scratch. Customers are already accustomed to a certain level and it is very difficult for them to lower it. Economies of scale have allowed large companies to offer products and services at relatively low prices, which makes it extremely difficult for new competitors to enter. For an entrepreneur to approach those quality levels, the investment of resources is increasingly higher, and therefore the associated risk as well. A classic example would be wanting to open a traditional store to sell products, which means competing directly with companies like Amazon, among others. The solution involves innovating more than ever and adapting using different strategies, and even taking advantage of these platforms' own services for online sales.

The same thing happens to some extent in the restaurant industry. More and more business groups are acquiring traditional family restaurants, either because the descendant family does not want to take charge or because the returns are no longer what they used to be, making the reward less attractive after great sacrifice. And it is crucial to understand that today more than ever, things must be done exceptionally well on multiple fronts. In a restaurant, it is no longer just about having a good culinary level, but aspects such as the interior design of the premises, proper raw material purchasing and price control, control and general analysis of business numbers, marketing and digital presence, personnel management, among others, are highly relevant.

Managing large-scale premises can be a headache, especially if you are not a group and do not have strong liquidity and business knowledge. Some groups even take one or two years to obtain profitability, but they can afford it thanks to their liquidity and a solid business plan, in addition to readjusting different aspects during that time until they find the key. These premises usually need to be largely full to ensure expected profitability, which represents a considerable challenge.

The phenomenon repeats in numerous sectors. We could also use the example of wood carpentry, which has been eclipsed since businesses like IKEA emerged. Economies of scale have allowed these large companies to sell products of acceptable quality at very competitive prices. A carpenter has a very difficult time offering their services to clients of all socioeconomic levels, being forced to orient their business towards a different profile: seeking to stand out for the quality of artisanal and custom work, focusing on clients with greater purchasing power.

Today, customers in many sectors are very well accustomed and it is really difficult for them to accept lowering those standards, even with a certain level of awareness about the circumstances. The lifelong "Bar Manolo" is destined to disappear or to become more professional than ever. Becoming professional implies developing a series of business capabilities: strategic vision, training, constant work, business intelligence, and surrounding oneself with the right people, among other keys. Probably any business that opens overnight without prior study and a certain "know-how" is destined to failure more than ever.

One of the recommendations I make from Bylasesor is to take all business numbers very seriously into account. It is essential to clearly know all opening costs, as well as the operating costs of the business for at least one year, so that all that initial liquidity is available. Obviously, no one should risk all their capital on a single bet, because if things go wrong, you end up with nothing. Once costs are obtained, income forecasts must be made in three different scenarios: pessimistic, normal, and optimistic, and their associated operating costs. It should be said that to create these three scenarios we must take into account the maximum capacity of the premises and therefore relate each case to a specific number of diners. This way we would obtain forecasts about the profitability that the business would leave in each case.

It is also very important to be able to calculate what the break-even point is, that is, with what diner capacity we would cover costs, and from which we would generate profits. This way it is easy to evaluate whether achieving that average number of diners is viable or not with the established prices, also making it easier to compare with competitors' prices.

Suffice it to say that this is a very basic and summarized way of how to carry out the idea of a business of these characteristics and sector, being necessary to delve deeper into certain aspects and calculations.

In traditional businesses, it is usually really important to know how to do all this analytical work. Needless to say, the importance of location in restaurant businesses. Here two really important variables come into play, both for and against, where quality acts inversely proportional to location. If you have an excellent location, it is likely that, despite not offering exceptional quality, you will manage to have good occupancy. It is also true that the costs associated with that same location are higher, but the probability of a higher customer ratio is clear. If the location is not good, great efforts must be focused on the quality of what is offered and on certain marketing, which is what will ensure a greater flow of customers over time.

Another aspect that can improve the operation of traditional businesses is, logically, any type of innovation that can offer certain added value. For example, imagine we have a restaurant in an area surrounded by companies where many workers go to eat the menu of the day. One of the things these workers will value most, in addition to acceptable menu quality and its price, will be the speed with which food is served. A good idea could be to have an application where the customer could reserve their table at a specific time, choose the menu in advance, so that when they arrive at their table the dish is served almost immediately, without the time loss involved in seating them and taking their order. Logically, the company should also establish certain cancellation and provision policies in case the customer fails to show, so as not to harm the business itself.

In non-traditional and innovative businesses, although the analytical part of implementation costs and execution over a determined time remains important, it is more essential to study the market and consumer response to what is being offered very well. If you offer something totally new, you must make sure that the potential customer accepts it at the price you plan to offer it. Therefore, you must focus your efforts much more on marketing to obtain the necessary feedback that ensures business success. It is also not necessary to conduct a super market study that takes many months or even a year, nor to come up with a perfect product that requires a lot of time to achieve, since it is likely that even afterwards you will have to backtrack on different aspects.

What is truly important here is to achieve an MVP, a minimally viable product that some customers are really interested in, be able to offer it to them at a certain price, and improve it thanks to their feedback. This especially applies when we talk about technological products and, to a greater extent, software.

In summary, today more than ever, entrepreneurship requires a high combination of different variables to obtain a guaranteed minimum quality that is accepted by customers. Professionalization, exhaustive analysis, innovation, and constant adaptation are no longer optional: they are indispensable requirements for survival in today's competitive market.