Apprentice, episode three: Lessons for small businesses

Lucky, lucky Savoy. Episode three was a breath-taking piece of advertising for the brand. "It was Britain's first luxury hotel," announced the voiceover. "It has x restaurants, x bars, x rooms..." Less reality TV, more QVC commercial.

Opening its doors after an epic, three-year long refurbishment, how better to announce that The Savoy is once again open for business than a prime-time piece of publicity on The Apprentice?

Bet Lord Sugar got a nice little kickback from owner Prince Al-Waleed bin Talal for that one. Perhaps a penthouse suite at his disposal?

Onwards to the lessons.

The Savoy was the first in a long line of small businesses to receive a valuable slice of airtime. Lock & Co Hatters, "hat-makers to the aristocracy since 1676", appeared ten minutes in. Susan Ma, project manager for Venture, baldly stated that she would offer "a fiver" for a hand-crafted top hat. Ma hails from Croydon; the Londoner should have anticipated that a luxury boutique in St James' was unlikely to offer up many a bargain.

Hats off to Lock & Co., the staff were unmoved by Ma's plea for a discount. The price was £365. "We need it for as cheap, as cheap, as cheap as you could do it for us," said Felicity, expecting the whirring presence of the camera crew and microphones to clinch a sale.

Nick Hewer called it: "Last time I was in this world-famous shop, I saw the King of Tonga," he said. "Let me tell you, the King of Tongo does not go around looking for bargains."

The lesson: Lock & Co. are in a niche market. Felicity called the store's reluctance to drop prices "greed," but it makes good business sense. The demand for top hats is tentative at best. Each sale counts. Being based in St James is jaw-droppingly expensive. Rent and rates alone can be upwards of £1,000 a week. By compromising on price, the hatters would have jeopardised future sales. Everyone who had seen the show would expect a bargain. Lock & Co. didn't make the sale, but it got the exposure, without making a mockery of its pricing.

Team Venture did evertually secure a hat for £349.99 but the hat-maker was equally inflexible on price, almost as though all the industry heads had held a symposium on obstinate pricing. Ma managed to negotiate just a penny off the asking price.

Meanwhile, in Mayfair, Jim displayed the negotiating skills of a Jedi knight. The butcher at Allens of Mayfair didn't stand a chance. The price of 7lbs of fillet steak was gradually sliced down to £170 from nearly £250.

The lesson: Allens of Mayfair is a high end butchers supplying the best cuts of meat to some of London's most prestigious restaurants. The PR value of appearing on The Apprentice is a plus, but the inconsistency of the store's pricing strategy knocked the firm's credibility. Michael declared that £180 was his final offer, while Bob (the accountant) accepted £170. In any small business, decisions must be consistant and upheld across the board. I wonder, in the aftermath of last night's show, how many of Allen's customers now demand to speak to Bob when negotiating deals.

But the prize for ultimate business howler, the blunder of the whole programme, has to go to the Rare Tea Company. Founder Henrietta Lovell met with Venture personally, hawking a nondescript box of chamomile tea. The asking price? £990.

Rare the tea may be, but it must be harvested by elves, snipped with diamond scissors and grown in gold-dusted soil to warrant that price. Lovell was obviously trying to sell a large quantity at the standard mark-up, allowing no reduced margin for the bulk order. Ma's team were shocked. More than that, they were down to their last £410.

The lesson: Lovell accepted their £410 offer, despite the fact that it was under half of her asking price. Either she was selling at a loss - unlikely. Or she had massively inflated the price of the tea. Either way, the sale made a total mockery of her pricing and her professionalism. Her firm became the subject of ridicule for the rest of the programme, with Lord Sugar admonishing the winning tea not to "order the tea" on their celebratory night out.

There are my three lessons from The Apprentice, epsiode three. If you spotted a tip - or caveat - for small businesses in the show, please share it below.

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