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Back To Basics

Wednesday, January 06, 2010
NASE Members Find Ways To Make Old-Fashioned Business Basics New Again
By Jan Norman

In the not so distant past, a business needed only a few basics to ensure success. A good location, decent customer service and an advertisement in the local newspaper was just about all a micro-business really needed to attract customers and keep sales coming.

But what about now, in 2010? Has all of that changed? Yes. And no.

NASE Member Julie Corbin says her type of business wouldn’t even have been possible 20 years ago.
Her company, Americanhumvee LLC in Solsberry, Ind., sells parts and accessories for humvees and Hummers. Customers include consumers and the military. Corbin says 95 percent of her company’s sales happen over the Internet.

“If the Internet was not available or if this was taking place years ago, I don’t feel Americanhumvee could exist,” Corbin says.

In a strict sense, Corbin is wrong. Auto parts stores have existed and succeeded in the U.S. almost since Henry Ford introduced the first mass-produced car, the Model T, 100 years ago.

But Corbin is also correct. Humvees—short for high-mobility, multipurpose, four-wheeled vehicle—have been around less than 20 years. And the Internet has been around less than 27 years, even though its predecessor, ARPnet, dates back to 1969.

So, while some basics about running a business have seemingly undergone a revolution in recent years, other things have changed more slowly. And still other basics seem to never change. For example, a business must:
  • Provide something customers want badly enough to pay for
  • Turn a profit over time
  • Let customers know it exists through advertising and marketing
  • Deal honestly and fairly with customers, suppliers and employees
  • Have a plan for organizing and running the operation over time
However, many of the tools, techniques and markets that help business owners accomplish all of those goals do change. Some are fads that fade. Some, like the Internet, truly transform how every company from Wal-Mart to your own micro-business functions and succeeds.

Companies large and small that enjoy success over the long term learn to identify new, more effective ways of doing business. But they also understand the value of retaining the tried-and-true fundamentals. And as NASE Members have learned, the most successful companies find ways to merge the two in almost every aspect of managing and growing a business.

Business Planning
To understand how old and new are blending into success for today’s micro businesses, consider what traditionally has been a fundamental for business success: the business plan. The argument for writing a plan always has been “how do you know where you’re going if you don’t have a roadmap?”

Business plan expert John Seelinger, a member of SCORE volunteer business counselors, says, “I do not think the basics of the business plan or its formats have changed that much. The financial projections need to clearly demonstrate adequate equity cushions as well as definite break-even points. Lenders are looking for management’s industry expertise and a solid marketing program.”

One fairly recent change is the availability of software to guide the preparation of a business plan that will not only satisfy lenders and potential investors, but also help the micro-business owner lay out a clear path to growth and success.

And for many micro-businesses, planning must now take into account more and different sales channels. For example, a gift shop might sell from a Main Street storefront, an e-commerce Web site, an online auction site such as eBay, a catalog and other outlets.

Coordinating all of those avenues requires even more planning than in the past. But it can also lead to a wider customer base, greater geographic coverage and ultimately more sales.

Financing

The need for a solid business plan points out another fundamental that hasn’t changed over time, which Corbin describes as “You have to have money to make money.”

She says Americanhumvee has been fortunate to have a private financial backer so that the company wasn’t caught in the credit freeze that started in the fall of 2008.

“Without [an investor], our inventory would have only been half of what it is today,” she says. “Financial institutions are great to help you get started or even to help you upgrade in the future. If you need some smaller purchases, business credit cards can be very helpful also.”

Many micro-business owners are like NASE Member Jerry Maestas, owner of Jerry’s Photography, a freelance photograph and film production service in Mansfield, Mass. He started so small that he was able to self-finance his startup in 1983.

“I didn’t need investors or any financial backers,” he says.

That approach, called bootstrapping, has been the most common way to finance a new business, perhaps back to the Middle Ages. And it hasn’t changed much either.

But new ways of financing have evolved.

For instance, entrepreneurs who need small amounts of money to fund their businesses now have access to microenterprise development organizations (MDOs). These groups typically lend from $100 to $35,000 and assist with business management training, market identification, e-commerce training and more. You can learn more online at www.microenterpriseworks.org.

The U.S. Small Business Administration (SBA) has expanded its loan programs over the years to provide capital to more entrepreneurs. Take the SBA’s America’s Recovery Capital (ARC) Loan Program, for example.

The program was initiated to help small businesses that were having trouble meeting expenses during the economic downturn. ARC loans provide up to $35,000 in short-term relief for viable small businesses facing immediate financial hardship. Each small business is limited to one ARC loan. The loans will be offered by some SBA lenders for as long as funding is available or until Sept. 30, 2010, whichever comes first. You can find out more about ARC
loans at www.sba.gov.

Customer Service
Another business fundamental tweaked by new techniques is customer service.

Longtime small-business advisor Rieva Lesonsky, head of GrowBiz Media in Irvine, Calif., says focus on customer care is more important than ever.

“Are you offering your loyal customers what they’re looking for, at a price they’re currently willing to pay? Value-conscious customers have left their brand and business loyalties behind in search of a better deal,” Lesonsky explains.

Americanhumvee owner Corbin agrees that “excellent customer service is very important. Treating your customer with friendly and knowledgeable service is huge. Without our faithful customers who keep coming back, we would not be able to make it.”

To meet that need, a micro-business owner must do what might have been considered off-limits in the old days, which is build friendly relationships with competitors, Corbin says.

“Frequently they will call us and we will call them,” she says of her competitors. “We may swap knowledge or products. There are very few businesses like mine around. The more knowledge you have in your field, the easier it is to sell your item and answer customer questions.”

Photographer Maestas says, “Networking is very important. With networking to develop good working environments with clients, they are more willing to send work to a good individual or company.”

But the means to develop that good working environment is changing because even micro-businesses are becoming 24-hour-a-day, seven-day-a-week operations, says Mitch Goldstone, owner of ScanMyPhotos.com, who advises photo industry professionals worldwide.

His own business started as a traditional film processing shop with quick turnaround times. To survive, he has moved most of the business to the Internet.

“We now get orders from all over the world so we had to set up a 24-hour, live help desk for people,” says Goldstone. “My staff and I take turns on the middle-of-the-night shifts. I don’t have a toll-free phone number anymore because people don’t use it.”

So while top-notch service is still a tenet of small-business survival, ways of delivering first-class customer service have evolved and changed. And embracing changes can mean the difference between success and failure.

Technology
Few businesses have been untouched by technology. At the least, most now use cell phones and computers. But high-tech innovations can alter businesses in unexpected ways.

NASE Member Maestas says his business has been impacted by the shift to digital photography.

“I still use film because the clarity is better as the image is enlarged,” he says. “But I’m losing business to the fact that many clients are not using film any more. They have some secretary take pictures with a digital camera.”

There’s no doubt that advances in technology have impacted certain industries more than others. For owners whose businesses are forever changed, adopting new technologies and introducing fresh products is the key to keeping up.

But while technology has changed the way businesses operate, its greatest impact has been on another basic business operation: marketing.

Marketing
“Newspaper and magazine ads may work well for [some businesses], but Internet advertising, having a Web site, etc. can just reach so many more people,” Corbin says.

Much of Internet marketing is a high-tech twist on old-fashioned ways of keeping in touch with customers.

For example, micro-businesses can distribute discount coupons by Twitter, e-mail, cell phone text message and even on their Facebook page. They can receive customer feedback and suggestions through their Web sites rather than a suggestion box at the checkout counter.

But one of the most valuable features of Internet marketing is the ability to target exactly the people you want to reach, people who are interested in your products and services, and then to track the results of that marketing, says Bill Morland, a member of SCORE.

Morland handles e-mail marketing for the workshops presented by SCORE’s Orange County, Calif., chapter. And SCORE’s experience with e-mail marketing can be a good case study for micro-business owners who are trying to figure out how to use the Internet to build their companies.

In 2007, the chapter started using e-mails to alert business owners about upcoming workshops. The alerts were sent to business owners who had given their e-mail addresses to the SCORE chapter. Initially, the SCORE chapter sent one e-mail every two weeks with a list of all the workshops. Attendance in 2007 increased 23 percent.

Then in 2008, the chapter started sending a separate e-mail for each workshop and sent each message twice.

“Borrowing from direct mail advertising, we put the most important information at the very top: topic, time and place,” Morland says. “Instantly workshop attendance jumped 30 percent to 40 percent.”

Recipients can ask to be removed from the e-mail list, but less than a tenth of 1 percent has done so, and spam reports are even rarer, he says.

The Orange County chapter now gets more workshop attendance in a year than all nine SCORE chapters in New Jersey and all three chapters in metro New York, Morland adds.

And because of bigger attendance, companies such as American Express, IKEA and Sam’s Club are coming to the chapter to cosponsor events.

“If it works for us, it will work for small business,” Morland says. “Their biggest barrier is that they don’t have an e-mail list, so they have to start building one by asking customers for their address. It doesn’t do any good to buy a list because the e-mails will just get caught in a spam filter.”

One of Morland’s restaurant clients sent out 92 e-mails, and the e-mail software indicated that 42 of the e-mails were opened. As a result, the restaurant received several dinner reservations.

That is a new means for tracking the results of marketing that traditional tools couldn’t match, Morland says.
So while the fundamentals of marketing for business success haven’t changed, the means of getting the job done and measuring the results have evolved.

It’s all part of performing the old-fashioned basics in new ways, with new tools. And the combination can lead to success.

Over the past 21 years, writer Jan Norman has interviewed thousands of small-business owners to find out what makes them succeed. Visit her blog at http://ocregister.com/jan.


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