BlogSmall business, Marketing, Promotion and Web Design

Recently I was introduced to yet another small business with whole bunch of small business issues and the owner team who just don’t know any better. They, however, don’t believe it, so before this business perishes into nothing, I have a chance to study all the mistakes that were made and are being made. Here’s your chance to learn, too.

The scoop is as follows. It’s a service oriented business – think very niche cosmetic service with extra expensive equipment. It’s a startup – business isn’t even year old yet. Two non-working partners, one provides the equipment, another one is actually trying to manage the business (he never worked in this business before). Two workers, both part-time, who are only paid commissions for cosmetic procedures they perform on clients. Cell phone to take client’s calls. Company is renting a room at another salon to perform procedures.

Issue 1: Human Resources
This one is first, because it’s the most major issue in the business. Since this is a startup, everything rests upon the shoulders of people who work for business. Now, the partner who runs the business spends enormous amounts of time to watch the two people who work for him. Being technologically challenged, he calls whoever has the company’s cell phone for 20 times a day to check how things are going and if there are any appointments made. He also made a deal with salon owner to check how many clients come in every day when one of his people is working. He clearly has an issue with trusting his own employees (those who work on commissions only because business hasn’t got up on its feet yet) and doesn’t bother to hide it. This, however, didn’t prevent him from demanding that they would take phone calls on their personal phones (they declined it), that they come up with better ways for him to track their performance (they ignored it) and that they take incoming calls throughout the whole week on their personal time outside of work (they agreed because that’s the only way they can book enough appointments to make it worth working in this business). All appointments are written into the journal, so every time the shift changes (each part time employee works a few days every other week) both workers have to find ways to transfer the journal and cell phone to each other.

Of course such treatment from the managing partner doesn’t win employees’ hearts. Aside from openly despising their manager, employees don’t particularly pay much attention neither to quality of the services performed nor to a higher level of customer service. In a market where customer services is by far the most significant competitive advantage, it’s completely lost on this company. Additionally, given that employees are only paid commissions for performed procedures, they have zero incentive to work an extra minute, so they always stuff as many appointments as possible into as little time frame as they possibly can. Given that clients oftentimes don’t show up it proved to be a worthy tactics, but on the days when everyone shows up on time – it gets a bit messy.

(To be continued)

As I have shown in the previous post (Tradeoffs Small Businesses Make Are Wrong) picking up “cheap”, “good” and then “fast” is wrong? I promised to elaborate on a better answer, so here goes.

If you have any kind significant small business experience – you probably already suspected that there is no right answer. At least there is no silver bullet. What you want to do is project a right image and get the best for your business. You wouldn’t buy a hot dog from a street vendor for any price if you don’t eat hot dogs or if you are not happy with cleanliness of the spot. In other words – you always go for quality first and you are willing the price if this price is justified. When you go to a fancy restaurant – you’re not questioning the portions, even though they are noticeably smaller than any of all-you-can-eat offerings. Why? Because of the quality!

If you are not doing the same for your business, you should. Or you should quit. Quality is, in most cases, the best competitive advantage you can come up with. Features will be duplicated. Prices will be brought down. But beating quality is a long and complicated road, so if you can offer a higher quality product from the start – you should. It works the other way too – you should ask for the highest quality you can buy for your money.

That means you should start buying before you even look at the first price offering. Think of how important the product or the service is for your business, what the impact, the benefit or justification would be to having this product or service. For example, if you want a new web site for your new product – think how big is the market you want to engage and if whole new web site along with it’s promotion is worth the return you will get.

Once you are done assessing the desired outcome, you should start shopping around. This way when you are in negotiations with service provider or sales person – you know exactly what you want and how much you are willing to spend. A lot of companies are willing to give you the most bang for your buck – as long as you know what bang you want. In many cases that is what we offer our clients – give us your budget and we will give you the best we can that those money can buy. So far this approach for clients worked better than anyone else. This way we know how much we are paid and client knows what to expect for that amount – and is happy with it.

To wrap it up – the so-called “right” answer to the problem of choice is to get the best quality for the money you are willing to spend. Each time you have that urge to say “I want the cheapest thing possible” always think that some people throw food into garbage and that food is the cheapest you can find. Would you eat  it? I’m sure you won’t.

The trade-offs that small businesses are making are wrong. Well, most of them are. Look at the picture on the left and it will get obvious that you can’t just tweak one of the parameters without compromising other two.

Here’s where it gets tricky. Sometimes, during negotiations, when clients ask me how much would something cost I say I can do cheap, good, fast – pick any two. What should come to no surprise to anyone is that clients almost always pick “cheap” first. Then they add “good”. Then, after some thinking, they say “and I don’t want it to drag into next year”. It’ not just that this is “crisis” and people are short on cash. It’s the way of thinking of small business owner. Guess what’s wrong with this picture?

You think nothing? Alright, read on.

First of all – once any business you’re dealing with (and we are talking about B2B here) hears you pick “cheap” first – they think you are cheap and rightly so. What you probably missing is the departure of their train of though. If you are cheap – they better off try their chances somewhere else where they can make more money. Oops. You just lost a valuable partner, future investor or a bunch of referrals.

Second – when they hear you pick “good” as a second, they immediately project this on your product or service. If “good” comes second for you when you are getting something for your business, it means you are not making goods or services good in the first place, you are making them cheap. And if they turn out to be good – it’s an added benefit. Oops again – you just did more damage to your image or brand than all your competition together.

Third – when they hear your projected time line is “sometime before next year” – they get a really good understanding of your take on schedules and deadlines. That is – if they are still listening at this point.

You can see that a natural response from most small business owners is damaging their reputation – in both short and long term. Even though there is no right answer to this question (strictly speaking), any business owner who want their business to grow should know how to answer that. How? Next post would elaborate on that.