how can a small business compete with the big-box stores? for one hardware store, it's beating them on price. find out how they're able to do it. and a unique bike called the freedom cycle. time to get rolling and make money coming up next on "your business."

hi there, everyone. i'm j.j. ramberg, and welcome to "your business," the show dedicated to giving you tips and advice to help your small business grow. to make that growth possible, every entrepreneur has to decide how to price their product or service. make things too expensive and you'll lose customers, make them too cheap, and you'll lose money. so how do you figure it out? you have to know your customers, think about their needs and understand the competition. >> everybody in the industry always talks about service, service, service. but really, the underlying theme

for most consumers is really pricing. >> no matter what anyone says, he believes your small company must always compete on price. >> if the pricing's not there, people are just going to i like the store, i like what you have, but they'll quietly go down the street where they know it's at a better price. >> his staff knows it too. >> i have actually had customers come to the register and say, really, that's what you're going to charge for that? >> the owner of north meridian hardware says understanding your pricing is the reality of doing business. >> people are watching dollars. because $5 saved here, $15 saved here, $20, you know, that adds up. >> with so many clients doing their research, keith and his staff have made it their mission to get the best prices for popular items like paint and hammers. >> it's nothing unique i'm doing. it's the structure and foundation of how a lot of businesses work. >> north meridian's goal is to

keep the pricing competitive. >> we're not trying to be the cheapest or most expensive, but we want to have fair pricing that's relative to the industry. >> what keith has learned is that pricing is more fluid than people may think. >> a roller coaster. that's about the best way to almost describe it. things are erratic because pricing fluctuates daily, weekly. >> and that's why keith knows where his supply is coming from and why. >> we've fortunately been tied in with distributors that have been helpful before we started which helped set the foundation to be competitive on the pricing. >> he even does comparison shopping of his own. >> if you're buying at a higher threshold, you can't compete. if there's a fluctuation, we may call a distributor and say, hey, we see such and such is selling here. and so that's how we are able to keep things in check. >> unlike big box locations or hardware stores affiliated with

larger brands, keith can exercise some independence in his buying. >> there's no co-op here. this is 100% ownership by myself. so there's no guidelines that i have to go by. if we're moving outside the scope of where the suggested price is with typical co-ops, we would have to go through certain approva approvals, we don't have to do that. >> that means there's room for negotiation. >> we can say, hey, can you look at this and see if maybe we increase our quantity of what we're ordering for this specific person, can we get a better price on it? >> being small presents keith with a unique challenge. he can't stock his shelves with too much stuff. he must know what products could be a waste of time and money. >> even though we have a 6,000 square foot store, the big boxes have 300,000 items. so you can't carry it all. we find the mainstream of what people tend to buy the most and that mainstream is where we have put the most concentration on being most competitive. >> north meridian also has a

smaller staff, which helps customers at the cash register. >> we have a couple of managers, we have keith the owner and maybe three or four staff members and that's it. >> even after products hit the shelves, keith says he has to be flexible. his pricing strategy isn't perfect. sometimes the shoppers say prices are too good to be true. >> they'll come and say do you know such and such is charging $2 more for this. you might want to look at this price. >> other times, clients are wary to make a purchase. >> we'll look at what competitors are doing and if we have the room, we'll bring it down a little bit. >> the key for north meridian will know who locally is charging what for certain items. long before it opened its doors, the store's competitors were under the microscope. >> we studied within about a three to five-mile geographic area of all the competition. small, some other small retail hardware stores, other big

boxes. >> and that trend continues today. staffers will walk through the competitors' doors to check out the numbers. >> and we have went to neighboring stores and kind of wandered through and said, you know, we got that, what are they pricing it at? >> one major advantage for north meridian is its location. it's the only hardware store in downtown indianapolis. >> there's roughly about 54,000 cars that go by daily here. >> and for many commuters, it's the convenience that counts. >> our busiest time tends to be roughly about almost 11:00 to 2:00 or 3:00. because a lot of people who are downtown want to pick up stuff before they go home. >> while many customers are willing to pay for the convenience, keith doesn't want to be greedy. >> you want to leave some things on the table, but don't want to leave too much, but you don't want to also gouge. >> he's happy customers are taking notice and spreading the word. >> when i have my shirt on, i've

seen people ask, i've seen that store, you guys got good pricing. >> and keith knows the only way to keep the clients coming in is to keep doing what he's doing, stay competitive. >> i think people on average will look at that price difference and then judge for themselves time, value, and then convenience. that's where they make an internal decision. these are all quiet things that people don't really talk about. in this digital age, consumers are doing more homework before buying and that makes competitive pricing more important than ever. not always easy for a small business when they have to go up against competitors who deal in volume. kerry smith is the founder of a company that makes ceiling fans for industrial, commercial and residential spaces. we profiled the business here on the show. and colleen debase at entrepreneur.com. great to see both of you.

i remember in the piece a few years ago, you said people always smile when they say the name. and i noticed as i was reading it, i couldn't help but smiling. but you are in the business of selling things people can sell cheaper. i found the idea of this piece fascinating because we always talk about how you can't compete on price. you're not going to beat out walmart. you're not going to beat out lowe's. you can't ignore price. >> you can't ignore price if you're selling something that everybody else sells. if it's a commodity, you have to pay attention to price. >> and at a hardware store, most of that stuff -- >> i agree with that. but i do think that there's some things that might be done. in terms of the hardware store, there's all sorts of interesting tools that the big box stores simply will not carry and conceivably that's what they could do here. >> and he can be cheap-ish, but he cannot be the cheapist. >> cheapest.

>> no, and this is what we always say a small business. it's very hard to compete on price. and i would argue that maybe you don't want to always compete on price. if the general rule with pricing is that, you know, you either have to be cheaper or better than your competition. and i think with small businesses often do, they can be better. especially a hardware store that can give you knowledgeable service. you can have a real -- >> convenience. >> he's in a perfect spot. >> convenience, enjoyable experience. i love going to a local hardware store as opposed to a big box. >> i guess his point, also, he's not trying to be the cheapest, but needs to be within the range. >> he does, again, on those things. if you're sell iing nails, i'm probably going to look at a big box as well as his store. but again, when they go to the stores, the big-box store, and look at what is it that these fellas don't sell. they don't sell it because

there's not that much of a demand. so that's, i think, what you have to concentrate on here. for example, instead of selling, you go to big-box store, you have gloves, they always have jersey gloves, those brown gloves, the white gloves that cost $1.99 something like that. don't sell those gloves, there's an infinite number of gloves. there's gloves for gardening, for construction work, there's gloves for manufacturing. there's all sorts of gloves. there's all sorts of niches. and that's as a small business owner you should find the niche and exploit the niche. >> right. he also talked about how pricing was a roller coaster, a science, well, not even a science, going up and down and checking things and changing prices. >> maybe that's a little bit -- he also said about how much he pays attention to what his competitors are doing. and of course, that's smart to do, but at the same time, you can go a little crazy if you're

constantly focused on what your competitors are doing. and that can be the roller coaster. so i think in a lot of situations, business owners can better benefit themselves by keeping the focus on themselves, what they can control, and giving, you know, the best quality, the best product, the best service possible. >> yeah, and it does sound -- the piece didn't cover this so much. it does sound he concentrates on those two things, service and quality and clearly as we talked about before, he was in a very convenient spot. well, thank you so much for discussing this piece with me. guys, please stick around, we're going to bring you back to the elevator later on. >> all right. >> thank you. are you getting all the marketing benefits of twitter or are you doing the bare minimum? if you want the most out of your tweets, check out the website of the week. followerwonk.com is the site for optimizing your followers list. you can track distribution of followers and the hours your specific followers are most active so you can be strategic of when and what you are tweeting out.

every penny counts when it comes to your small business. so here now are five of the worst offenders when it comes to typical small business ripoffs courtesy of allbusiness.com. one, leasing a credit card payment terminal. most processors rent out systems for a monthly fee, but you're better off buying your own hardware. two, buying an extended warranty. if a product's going to break, it's more likely to break right away when it's still covered by the manufacturing fee or after the extended warranty expires. three, overusing an ink jet printer. they require pricey ink cartridges and are necessary when printing. but for plain old text files, it's a waste. consider an entry level laser printer, instead. four, employee expense account abuse. implement an online expense management system like concur or

certify to keep better track of employee spending on the company tab. and five, overpaying for your mobile service. check out services like bill shrink which will analyze your company's monthly mobile bills and recommend the least expensive service option based on your needs. when you're looking for money for your company, it could seem like any money is good money. and the more you can get, the better. but the truth is, finding investors and an injection of capital comes with issues, as well. so best to go through the process with your eyes wide open. joshua coates is the founder of two companies he later sold, now the ceo of instructure, he's got experience having raised about $80 million for these businesses. great to see you. >> hi, how are you doing, j.j.? >> we talked so much about how do i get money, how do i raise money? you're saying, wait, hold off a second. before you ask for money, think about the strings that come with it. >> well, it's understanding who

you're getting money from and what they're receiving in exchange for that money is important structurally. typically, a "c" corporation exchanges preferred stock for cash. >> right. >> once you raise that money, i think what happens is a lot of times you think, hey, we made it. but that's just the beginning. >> one of the things is money can cloud your judgment and it's so true. think of 1998 in the dot com era when people had so much money throwing lavish parties, doing these big ad campaigns when they had no business doing that. if they were sort of boot strapping it, they might have made smarter decisions. >> the first money i raised was at the peak of the dot com era in 1999 and i've raised a lot of money over the last 15 years from a lot of different venture capital firms for a handful of businesses. and i can tell you when you raise a lot of money, you tend to spend a lot of money.

it's just a natural process. if you have your business figured out, that's great. if you don't, danger, very dangerous. >> right. it's almost better to think how would i do this without any money? >> right. >> you'll be more creative. >> next you talk about how investors, then, develop unrealistic expectations. >> well, yeah, when they give you money, sometimes they expect you to take that money and grow your business really fast. if you haven't figured out your customers and your product and your market and gotten your fundamentals understood, it's hard to put that money to work in a smart way. and your investors, hey, they wrote a big check to you, they're showing up to the board meetings and they want to know what you're doing with their investment. there's a lot of pressure. >> you have this pressure to grow even though maybe you still need some time to figure out where you should go. >> exactly. makes it so experimentation is something you start to hesitate about. you think, oh, gosh, should we run this experiment to see what happens?

well, those experiments can be more expensive because you can afford them to be more expensive. but when they fail, they fail bigger. >> right. >> a lot of pressure from investors to be successful. when you raise money, make sure you're raising the appropriate amount at the appropriate time. typically with tech companies, there's a series a, b, c, a d, a mezzanine and you go public. and each one of those stages has different expectations attached to them. make sure you're appropriate with the amount you raise and be realistic about what stage your business is in. when you go raise money, you want to tell the investors, hey, we're going to take on the world and we're really prepared, we know exactly what you're doing. you know -- >> be honest. >> be honest with your investors. >> this next point you make, it creates the illusion of success. and i think this is very interesting. a v lot of times we hear about companies and say they're so successful, they raised $40 million. when actually, it means they

raised $40 million. >> exactly. the company i'm with right now, we closed a $30 million round of funding, but we have $90 million in contracts. i'm raising a bunch of money, but what do i have backing it up? you probably don't want to raise -- >> well, means we're successful in raising money, doesn't yet mean your company is successful. >> if your core competency is raising money, you might want to rethink your business. >> once you get a lot of money, you talk about leeches. >> oh, gosh. >> how do you watch out for those? >> if you've raised money from a top firm, you get e-mails come out of the woodwork with everybody with their hand out saying, you know what, i think you need my service and -- >> and suddenly you have money to pay for it. >> exactly. people come to look to take that money from you. and some of them it can give you an opportunity to connect with some really sophisticated high-value people. but most of them are looking to

make a quick buck because they know you have deep pockets and know you're under pressure to perform and look bigger than you really are. so watch out for that. they'll come out of the woodwork. >> for every decision, think about what you would do if you didn't have this money. all right. josh, it's so great to see you. thanks so much. >> thanks. when we come back, how do you say no to a client? and our elevator pitcher is on a roll with his freedom cycle. ♪ i'm a hard, hard worker every day. ♪ ♪ i'm a hard, hard worker and i'm working every day. ♪ ♪ i'm a hard, hard worker and i'm saving all my pay. ♪ small businesses get up earlier and stay later. and to help all that hard work pay off, membership brings out millions of us on small business saturday and every day

to make shopping small huge. this is what membership is. this is what membership does. today's elevator pitcher was a bike rider when he suffered a back injury. he developed a solution that gave him the freedom to pursue his sport. >> nice. >> my name is gary webster, i'm the president of american eagle cycles. >> i'm the vice president. the freedom cycle is the ultimate recreational tricycle that allows adults of all fitness levels to get moving and explore the world. it's designed for people who can no longer ride a traditional bicycle. we have three models available. this is the freedom classic, and we have several more in the

concept stage. american eagle cycles was formed in 2011, in less than a year, we've sold five cycles with minimal marketing and advertising. >> we completed our first round investment and now we are looking to raise $450,000. this money will be used to create a new commercial website, also to buy marketing materials, some advertising and working capital to help us launch the project. the bicycle industry is changing. we are in perfect position to take full advantage of that change. and we are looking forward to becoming very successful in the marketplace. >> well, it's a really unique idea. and it is changing. i've seen so many other different kinds of bikes or contraptions on the road. so thank you so much. let's get to the panel and see what they think. >> i was curious if there was a bell. nice, i like that.

>> perfect. >> did you think they got everything in that pitch? >> yeah. because when you first rolled in. my biggest question was who are you marketing this bike toward? just at first glance, i was thinking this isn't really a hipster bike. maybe it could be. but you said this is for people because of age or injury can no longer ride a traditional bike. that part spoke to me. >> no, and i think the fact you've got the boomers coming on and the fact there is an awful lot or i've seen an awful lot more tricycles recumbent cycles that you're actually addressing something that's very interesting at a time. >> would you take another meeting? >> personally, i think it's interesting. i think there's some things that need to be worked out. the distribution. because this looks like it's rather bulky. it would be difficult to sell this directly, to go directly to

the consumer. so i think you'll have to have a number of distributors selling it. >> so there's a couple things more they need to address in the pitch probably for you in order to get -- >> i think, indeed. i think, indeed. >> colleen? >> i'm always the optimist. i would definitely take a meeting. >> you guys, thank you so much for coming on the program. congratulations with all your success so far. and good luck going forward. does it move backwards? you can move out of here now. if any of you out there have a product or service and want feedback from our elevator pitch panel on your chances of getting investors, the address is yourbusiness@msnbc.com. please include a short summary of what your company does, how much money you're trying to raise and what you intend to do with the money. you never know, somebody out there watching the show may be interested in helping you. time to answer some of your business questions.

the first one is about giving someone a piece of your business. >> what percentage would an individual be given in a business if they brought nontangible items to the table other than financial? >> it's interesting, it's not an easy question to answer. but how do you figure out ownership? >> well, it's also always relative. for a situation like this, depends on what the person is bringing to the business. if it's a super great reputation or maybe this whole network of contacts, that can be quite valuable. so in that case, they might get a sizable stake in the business. but this is -- this is one of these things if you're trying to figure out whether to give someone a big stake of your company based on the reputation rather than cold hard cash, you want to put a lot of conditions on that and maybe a vesting period. >> right. >> and i think, too, they need

to value that. i know it costs a little bit of money, but they need to go out and get a valuation of the business. because inevitably, what the person that's selling thinks and the person buying, two totally different things and they're unrealistic to imagine they're going to align. and finally, when you do make that decision, make sure you've got a good, tight contract because that's -- that's just a whole kettle of fish you don't want to get into. >> the worst is to give someone a piece of your business, have them contribute nothing and then you're just kicking yourself forever. >> oh, yeah. >> exactly. >> i think the vesting part is incredibly important. >> i agree. let's move on to the next one. this question is about turning down a customer. >> how do you know when to say no to a client? and what is a nice way to say that? because it's really what i find is that people take things very personal. and if it's not a good fit for your business, how do you know when to say, sorry, you're not a

good fit? >> i love she added the second part of that question? because i think it's as important. your exit from somebody can change everything. they may still recommend you. how do you know when to say no? >> well, i don't know how you know when to say no, but there are situations where it's just not a fit. and i think that people appreciate you telling them that right up front. there's nothing worse than to be dragged along with something, well, i don't know, i don't know. and it's not a good fit. and these guys, i know these guys, they're very interesting. their whole concept, the whole kid engineer. it's very interesting in what they're trying to do in terms of teaching children to become engineers are making it easier for them to become engineers. >> said, if you're going to turn someone down -- he talks about firing customers -- and he said tell them nicely and refer them to somebody else so you're not leaving them in the lurch. >> well, yeah, what you said,

tell them nicely. this is why manners were invented, you know. and this is something that maybe people overlook in these times but this is where you use your manners, your tact, your diplomacy. sounds like a company that kids are involved. probably the people she has to say no to are parents. you be gracious about it. you can say, oh, your child is remarkably talented, but right now we don't have space in our program for you or your child. >> how do you know? it's scary to turn down business. >> yeah. >> you don't think it's scary to turn down business? >> that's a nice position to be in. >> well, i think you know because you can see it's going to take an inordinate amount of time to solve their problem and you're not going to give it your best because you can't give it that much time. from my perspective, it's better to say, sorry, we just aren't able to work with you. but i think it's important to do as much as you can to find the

solution for that customer. >> thank you, guys so much. appreciate everything for today. we got a lot of great advice from kerry and colleen early on. so if you have a question for our experts, go to our website, the address is openforum.com/yourbusiness. ask the show link to submit a question for our panel. that website is openforum.com/yourbusiness or e-mail us your questions, your comments too, the address is yourbusiness@msnbc.com. and besides questions, we also ask our viewers what they've done to help their company succeed. so now let's hear these great ideas from small business owners like you. >> taking advantage of outsourcing as we outsource customer service, we outsource fulfillment, outsource social media. allows us to stay focused on the things to grow our business, things like product protection, brand recognition and things like product development.

>> my tip for entrepreneurs is you are not your customer. please stop trying to entice what you would want to buy or what you would like to provide, focus on your customers and that will lead to your success. >> one tip i have for small business is to hire bright, energetic, young, college graduates. they're smart, they're excited, they're enthusiastic and most importantly, they're eager to learn and willing to take on any task. for us, that's been something that's been very beneficial as we grow. learning from them as well as us teaching or giving back. >> to learn more about today's show, all you have to do is click on our website, it's openforum.com/yourbusiness. with more information to help your business grow. and you can follow us on twitter. it's @msnbc yourbiz.

next week, with a population of 2,000, the town may be small, but there's nothing small about the entrepreneur struggling to make it. >> survival of the fittest. if we don't adapt and change, we ain't going to survive. >> the margins are very thin. very thin. but, i've got to do it. >> we take you to alabama to find out how small businesses are surviving on main street usa. till then, i'm j.j. ramberg, and remember, we make your business our business. is like hammering. riding against the wind. uphill. every day. we make money on saddles and tubes. but not on bikes. my margins are thinner than these tires.

anything that gives me some breathing room makes a difference. membership helps make the most of your cashflow. i'm nelson gutierrez of strictly bicycles and my money works as hard as i do. this is what membership is. this is what membership does. thanks, chris. thanks to you for tune anything. tonight's lead, devastated. that was the reaction from trayvon martin's mother when she heard the stunning admission from juror b-29 who said, "george zimmerman got away with murder." and today, two weeks after the verdict, sybrina martin's pain is still there.