BlogSmall business, Marketing, Promotion and Web Design

This is a second part in series. First part can be found here: Small Business Problems – Part I

Issue 2: Sales and Marketing
The partner who runs the business believes he knows the market. Not only he is further from the truth as he is from making his first million off this business, he also misses any feedback his own employees providing from their workings with clients. Which, to recall his trust issues, isn’t really surprising. Business’s web site is a single image with outdated address (he moved two times already after that), obsolete prices and graphics circa year 1999. However, this doesn’t prevent him from spending some significant amount on pay-per-click advertising to lead prospective customers to that awful site. Additionally he runs some commercials on TV and Citysearch. Obviously, he has no idea which channel brings him people who call company’s number, so he’s throwing all he can to everything he can cover.

Once the call is through to the cell phone and given it won’t drop, the employee who handles the phone this week is scheduling a free consultation. This is essentially is a sales session, but since the procedure concerns various places of (mostly) women body it has to be done in private. However, the managing owner had entered the room on numerous occasions when consultation was in progress under various false pretenses. One of the examples – he wanted to post his employees’ certificates on the wall, so he came in with hammer and nails and started hammering away while sale was in progress.

Seeing low prices as his only competitive advantage, he sets them extremely low. The way the commissions are distributed leaves his employees with pay rate per hour only slightly better than minimum wage. Given that average hourly rate for these procedures is somewhere in the vicinity of $25/hour or more, it’s not hard to imagine how happy his employees are to sell their services at those prices. It’s not uncommon that they just cancel people’s appointments because it’s not worth for them to travel to place of work and waste a few hours of their time to earn $20 for the whole day.

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)

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.