Understanding this truth can make a big difference in how you approach your business.

Let me give you an example, last weekend my wife and I decided to go to one of our higher end restaurants for a date night. The waiter was friendly and helpful. He actually did a good job and we were pleased. However, the prime rib I order was not so good. The thing I remember most about this evening, besides having a great time with my wife, was the meal, not the waiter. If they had served a good meal, we would have been telling others to try it out. Would we go back? Probably at some point, but I would be sure to order something different. We would go back only because we’ve been there before and the meals were great and the service was excellent.

The restaurant business is very competitive and any successful owner will tell you the secret to success is providing quality food with excellent service, consistently. It only takes one bad experience to turn people off. People are more likely to return to the same restaurant where they know they will have an enjoyable experience. People will remember the service.

This principle applies to every business. If you have a quality product with well-trained, knowledgeable staff, customers will pay more. People buy what they want, not what they need. Your job is to find out what people want. Don’t assume you know what they want, you need to ask them. Then when you’ve found out what they want, you need to market to them better than the competition and over-deliver on service.

Because people remember service before they remember price, you can charge more if you deliver exceptional service. Not everyone is looking for the lowest price, and trying to compete on pricing never works anyway. People are willing to pay more if they know the product/service they bought will satisfy their want. They want to know they made a good purchase and that they can trust the business to stand behind their product. They want to feel good about their purchase.

Getting to a place where you can charge more for your products/services just doesn’t happen. It takes planning. The first step is to ensure you have quality products. You may have different pricing depending on the products you carry. However, you don’t want to sell cheap products. Next you need a good system in place, with well trained staff, to ensure the customer receives the product/service they expect. Do this well and consistently and people will pay more for it.

People today are use to poor service, so when they come across a business that provides good service, not even exceptional service, it stands out. Where do you think you could take your business if you provided excellent services that over-delivered on your customer’s expectations?

It doesn’t matter what type of business you’re in, people will remember service before they remember price.

“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.” William Arthur Ward

I was reminded of this brilliant principle last week when I spoke to one of my business coaching clients. There can be no doubt that we are living in interesting times…. the global financial crisis has impacted overall spending and consumer sentiment – and this has hurt many small businesses around the country. It’s no good hoping that circumstances will change – in order to survive we all need to dig deep and find creative ways to work smarter not harder.

Jim Collins, in his book, “Good to Great,” talks about this very interesting paradox that he calls “The Stockdale Principle”. According to Collins, “you have to be realistic about your current situation and yet, stay optimistic about the future”.

General Stockdale was the highest ranking American prisoner of war in Hanoi, Vietnam. Over the years he began to notice an interesting phenomenon – optimism could in fact be a liability. His fellow prisoners (who were the eternal optimists) constantly set themselves up for disappointment. They set huge milestones – “we will be rescued by Christmas” – but those milestones came and went year after year and with it… their will to live.

Conversely, the prisoners who looked at the painful day-to-day reality they were in and channeled their energies to the right places survived. This is not to say that the second group were pessimists but rather realists that maintained an unwavering faith in the end game, and a commitment to survive despite the brutal fact of their incarceration and torture over a period of years.

Here’s how Stockdale put it in his own words:
“I never lost faith in the end of the story. I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade.”

How many of us would look back on seven years of detention – with regular torture, dismal living conditions and an uncertain future – as an experience we would not trade? Do you regard the greatest obstacles or challenges in your life as the defining moment that shaped who you are today or do you choose to look at them as an excuse or reason why you have not achieved more?

Have you ever sat back and thought how this distinction between optimism versus reality could apply to your business/career or your life in general? Where in your life are you ignoring reality in favour of being optimistic and missing a crucial opportunity to take action?

Take for example my business coaching client that I mentioned above. She has an employee who doesn’t take responsibility for her actions, doesn’t pay attention to details and is often defensive and reluctant to take direction and feedback. This employee is negatively impacting the entire work environment as everyone gets caught up in the drama of it all. My client doesn’t want to let the employee go and is resisting doing what she knows that she must. She hopes that it will somehow improve without any action on her part – she is now learning the distinction between reality and optimism. When she sees the difference for what it is, then and only then, will she become decisive and take action.

Another area where it’s easy to be blinded by optimism is in the financial arena. Do you have detailed financial reports, KPIs and cashflow forecasts in place to drive your decision making or are you simply relying on your optimism instead of reality? Failure to effectively plan in this area (especially in these tough times) could lead to a cash crunch and the demise of your business.

Take a moment today to examine your relationship to optimism, pessimism and realism. Success belongs to those who operate from both sides of the Stockdale Paradox. The key is balance – knowing when to accept reality and take appropriate action AND never losing faith in the end of the story. If you can walk this delicate line of balance and responsibility, you increase your odds of making good decisions and this will lead to your inevitable success and breakthrough results.

In life, we will all experience setbacks, disappointments, loss and challenges. What separates successful people from the rest is how you deal with those inevitable struggles. This is a very important distinction and it is what divides the winners from the losers. You must never confuse faith that you will prevail in the end – which is something that you can never afford to lose sight of – with the discipline to confront the brutal facts and reality of your current situation, whatever that might be.

By Michael J Greenwood

1. Affordable office space
There are many affordable places to start a business. If you chose an up and coming place to base your business at then your overheads will be less. Many technology business for instance can work from anywhere because the majority of their services can be provided over the internet.

2. Gain expertise from experts
Business mentoring is absolutely key to the success of the entrepreneur. You don’t know everything and so need experts around you to aid you. A common mistake that young businesses make is trying to do everything. They secret is to kind other people to compliment your own weaknesses.

3. Networking events
Network events allow you to find work and other businesses to compliment your work. Valuable leads can be found at both the free business networking events and the more specialized fee based business events.

4. Cashflow is key
You’ve heard about profitable businesses going under right. This is because they ran out of cash. They had got enough leads and business but could do the job because their cashflow can dry. This is because they didn’t plan properly.

5. Planning
You’ve heard of a business plan. Well, you need one. The business plan isn’t a static document either. It changes throughout a businesses life cycle. If you fail to plan you plan to fail.

6. Pricing
Your price must reflect your experience. As your experience grows so will your earnings. At first work may be scarce but try not to deviate from the specialization. It is ok to do the odd job which is not par of your specialization but stay focused on your business plan.

7. Marketing
You must get word out that your product or service exists. But more importantly you must use your available resources informing the right people that your product or service exists. This is where market research comes into it.

8. Sales
So you’ve started to get interest in your services but you’re having difficulty closing that sale. Are you asking the right questions? Don’t push too hard. Make friends with them. Ask them about there business. Find out what they want.

9. Quality
Do a good job and deliver your product to a high standard and your customers will refer their associates to you. Do a bad job of inferior quality and your ex-customers will tell their associates not to use you.

10. Get paid
If you don’t get paid then your Cashflow will suffer (see 4), if should be part of your business plan (see 5) to maintain your cashflow. If you don’t get paid then you will fail.