10/ 17/ 2003
Take on the Big Guys by Thinking Small
Even in today's tremendously competitive business environment, many small businesses aren't just coexisting with the big guys - they're thriving. They've tapped into the competitive edge that comes from being small.
The threats are obvious: Every metro area is overstored. The amount of retail space per person in the U.S. has ballooned 450 percent since 1970. Add to that the growth of e-commerce, bringing items and services from around the world to every desktop.
Businesses succeeding in this environment have found the secret lies in flaunting - not hiding - their smallness. Corporate giants can't achieve the personal relationship small business owners have with clients. They aren't as close to their customers, and can't respond as quickly to changing demands. It's easier for small business owners to gain community trust, because they're not viewed as outsiders.
"Small businesses can certainly survive and prosper when faced with a tough competitor," says Don Taylor, a small business owner himself and author of Up Against the Wal-Marts. Taylor and co-author Jeanne Smalling Archer researched the survival strategies of small businesses nationwide that were taking on larger competitors and winning.
"The No. 1 thing successful small business owners said was they adjusted their business to what the customer wanted," Taylor says. "I can't overestimate the value of keeping a positive attitude toward making changes in your business."
That means not looking at the situation as David vs. Goliath, or throwing up your hands in defeat. Instead, do what Ben Malcom did when Home Depot moved in 100 yards away from his Future Wood lumberyard four years ago. Malcom started stocking unusual lengths of pretreated lumber, as well as cedar wood and railroad ties at his Fayeteville, Ga., store. Now Home Depot refers buyers to Future Wood for the wood they don't stock.
"Certain small businesses want to be as close as they can to the Home Depot or Wal-Mart," says Kenneth Stone, an economics professor at Iowa State University who has studied retail competition since 1988. "They can benefit from the additional traffic a superstore brings."
Some small businesses have been squeezed by the omnipresence of superstores. But any future closing of doors is expected to come from the big guys, consolidating in overstored markets, Stone says. "There may be a shakeout coming, but it will affect the larger companies. The smaller ones have already adapted to the environment."
They've done so by exploiting a niche, adding value to sales and partnering with others. On the following pages, we offer strategies that small business owners have embraced to compete, proof that it doesn't take a huge investment to take on a corporate giant and come out ahead.
Trade ya!
Small businesses have discovered that barter is an excellent way to conserve cash, expand market reach, and grow a business when needed, rather than when capital is available.
Catherine Fischer, co-owner of the Parkway Speakeasy Theater in Oakland, Calif., bartered to get her second-run movie theater and restaurant off the ground three years ago. She and her business partner used Web sites like BarterTrust.com to get their monthly movie schedule printed and distributed before the theater opened-advertising their business before it had earned a dime.
They aren't alone: bartering is becoming one of the fastest-growing segments of the world's economy, according to the Trade Exchange of America. The TEA estimates that more than $16 billion was bartered last year in the U.S.
"For a small business, cash flow is everything," Fischer says. "Your margins are so tight, any easing of that is welcome."
Unlike the ancient method of trading goods face to face, modern bartering can be done electronically via the Internet. Web barters are made by placing a "barter dollar" value on goods or services (equal to one U.S. dollar). Small businesses list their available goods and services on a barter Web site, and then trade with other business owners across the country-or right in their community. Since surplus goods or down time can be bartered in exchange for more immediate needs, the real value of bartered goods is usually greater than its cash equivalent.
"Trade dollars . . . are cheaper," says Fischer, who still barters Parkway meals and movies for vacations, employee bonuses and Christmas presents, luxuries the business couldn't afford if it had to come up with cash.
"Not only was [BarterTrust] able to bring customers into our business, they were marketing for us in the same way as if we had bought advertising," Fischer says. "It's like extra money . . . money you find in your purse or coat pocket."
Beyond bartering, Fischer also competes by flaunting her two-screen size. Parkway features snuggly couches, "real" meals of salads, pasta and pizza, and special themed nights. New parents are welcome to bring their infants for the "Baby Brigade"; cult film fans line up on Friday nights, and there's even a Harley Davidson motorcycle night. The theater also has a cheeky Web site, www.PicturePubPizza.com.
- by Deanna Larson
Virtual Reality
We've all heard how technology is helping small businesses compete against the big guys. But it's not just high-tech firms going virtual.
Take Bill Fletcher. He revamped his Raleigh, N.C., advertising and marketing firm eight years ago, offering his clients expertise from around the world without the expense of a full-time staff. He now has three employees, supplemented by a stable of freelancers from London to Atlanta doing the work of 10 full-time workers on a project basis.
"We are the client interface, but we recognize that all knowledge doesn't rest here," Fletcher says. And with technology, it doesn't have to. Through email, telephone and videoconferencing, Fletcher brings together teams of freelance experts to fulfill a client's needs.
"We have client teams who never see each other or the client," Fletcher says. "Our objective is customer satisfaction. We've never tried to be the lowest cost provider. Our strategy is to bring the right people to the table."
On a smaller scale, but in the same vein as outsourcing, more small businesses are turning to virtual assistants to take care of their scheduling and correspondence from a remote location.
For 21 years, Suzanne Skelly has sold real estate in St. Louis. Last year she hired virtual assistant Jeannine Clontz, based 40 miles away in Arnold, Mo. The two have never met face-to-face.
"There are certain tasks that are not the best use of my time," Skelly says, citing bulk mailings, client newsletters and other correspondence. She hires Clontz, among hundreds listed at www.ivaa.org, for 10-15 hours a week.
Virtual assistants aren't temps but small business owners themselves, hired as independent contractors on an as-needed basis. Fees range from $20-$50 an hour.
Clonts works out of her home and has clients as far away as Colorado. She can do everything from mailings, database projects and research to legal transcription.
"It's hard to find someone with the skill level you need for what you can afford to pay for just part-time," Skelly says. "I have her do lots of little projects for me. It's a great arrangement."
- by Lisa Waddle
The Littlest Niche
When it comes to children's clothes, Charlie Lowe has done her homework.
The owner of Pookie's Place in downtown Troy, N.Y., can't compete with the Wal-Mart down the street, so she doesn't try. In fact, she does just the opposite.
"You look around and see what they're doing, and you do what they can't do," Lowe says of large retail chains. Rather than focus on the masses, Lowe has honed in on a niche market - premature babies' and boys' clothing.
"Preemies are a bigger market than they used to be, because now, preemies are surviving," she says. But most retail giants have a limited selection of preemie-wear. "You'll find pale colors, like pink, blue and yellow, as if preemies are colorless," Lowe says. "I sell the reds, the greens, the blues - their clothes should be fun too. They're just like everyone else, only smaller."
From books and trade magazines, Lowe found that 80 percent of the children's clothes made are for girls. So she chose to carry what the chains didn't - unique, upscale boys' clothes, brother-sister outfits and custom-made girls' clothes.
Lowe recently moved the five year-old Pookie's Place into a larger location, and her sewing machine hasn't slowed down. She runs the entire store and the sewing machine herself. "I'm chief cook and bottle washer," she says.
Special occasions such as Easter, first Communions and Christmas are her busiest times. Last year, she made over $50,000 in revenue, and is currently developing a Web page to sell her clothing.
As for new retail chains - she's not concerned. "You've got to beat them at their own game," she says. "It's no magic formula. It's called reality."
- by Jackie Ross
Community Commitment
 |
| "From the beginning I've tried to take the customer's point of view," says Nick Pappas, owner of Lizzy's Homemade Ice Cream. Photo courtesy of Bill Melton. |
Nick Pappas left the high tech world after 25 years to enter one of the most competitive retail fields around: selling ice cream in New England.
"In this area, ice cream is a real institution," Pappas says. "Besides all the chains, there's lots of independent ice cream makers who have been here for years."
Entering such a glutted field would spell doom to many small businesses. Yet sales at Lizzy's Homemade Ice Cream have grown over 30 percent each year, climbing to $500,000 last year.
Pappas' secret? Start with a high quality product, then gain area residents' support and trust through community service. He mixes his 38 flavors in the basement of his 1,100-square-foot store in downtown Waltham, Mass., about 10 miles east of his hometown of Boston.
"We have a very high quality product and attract people from wealthier communities who come here to eat at our great restaurants," Pappas says. "But we hadn't done a good job of connecting with our local community."
So in his second year of business, Pappas started donating ice cream to area schools for fundraising sundae parties. In exchange, Lizzy's (named for his daughter) was publicized at the fundraisers, and Pappas often got a picture in the local newspaper. That free publicity propelled his sales to double in 1997. "That really got the community wanting to support us and make us successful," he says.
From the beginning, Pappas mailed out coupons for free cones to local residents. He actually makes money on the giveaway, because coupon-holders often bring friends who pay full price. "It more than paid for itself," Pappas says. "Lots of people in food service think too much about costs, to the point of being counterproductive. You can't save your way to prosperity - you have to invest."
To help cash flow, Pappas diversified into catering sundae parties three years ago, mostly at area companies. That corporate business now makes up 10 percent of his business.
At it's heart, Lizzy's is about beating outsiders by winning community member's loyalty. One scoop at a time.
- by L.W.
7 Service strategies that can give you the edge:
1. Emphasize your expert technical advice.
2. Offer delivery.
3. Offer on-site installation.
4. Be able to special order items.
5. Offer "how to" classes or rentals.
6. Adopt a "no hassle" returns policy.
7. Sell the benefits , not the features, of your
product or service.
Team up to grow
Instead of competition, think cooperation.
 |
| "Partnerships are a way for Cathy Anderson-Meyers, owner of snowshoe company CathyWorks, to use her expertise, instead of an advertising budget, to bring in customers. Photo courtesy of Ron Schwager |
That's what Cathy Anderson-Meyers has done to expand her six-year-old snowshoe tour company, CathyWorks. She initially partnered with YubaShoes, a small business that made snowshoes. When YubaShoes sold shoes, they would hand out a flyer for Anderson-Meyers' tours. And Anderson-Meyers only wore YubaShoes and recommended them to her customers. A win-win situation that helped CathyWorks and YubaShoes expand.
From there, Anderson-Meyers formed a partnership with Eagle Mountain Cross-Country Ski Area, an hour outside Sacramento. "I needed a place to start my tours," says Anderson-Meyers, who charges $50 for a five-hour tour (www.earthshine.net/body_snowshoe_tours). "Eagle Mountain rents snowshoes and has a restaurant, so I'm bringing them customers."
The one-woman CathyWorks also partners with outdoor gear store giant Recreational Equipment Inc., or REI. Four years ago, Anderson-Meyers started giving free talks on snowshoeing at one of the Seattle-based company's California stores. This year, she'll speak at six stores, which also stock her brochures. With 54 stores, REI has the potential to get Anderson-Meyers's name out to snowshoe enthusiasts she couldn't reach.
"Every bit of exposure is helpful," says Anderson-Meyers, who used to be a banker. "Because of these partnerships my business has grown. It's a way to use my expertise, rather than paying for advertising, to bring in business."
- by L.W.
Prepared to partner? Teaming up with other small business owners can range from an informal referral network to satellite subcontracting or a legal partnership. Where you fall on the partnership spectrum depends on how much effort and commitment you want to devote and how much autonomy you're willing to surrender.
You should consider partnering with someone to grow your business if you:
- need to fill downtime between jobs;
- want to go after larger projects;
- want to share the risk of testing the viability of new ideas;
- need access to resources such as a database or area of expertise;
- want to reach clients in other geographic areas;
- want to share expenses.
At your service
It seems so simple - call customers and ask them what they expect and appreciate in a business. But you won't hear the local retail giant on the other end of the line any time soon.
That's what separates Handyman Express from the national repair chain down the block. Owner Andy Bell picked up the Denver, Colo., phone book and called over 300 people, asking about their experiences with repair services.
"It just made sense to me to chat with people and find out what they liked and what they didn't like," Bell says.
People complained that contractors are often late, unreliable, that their work lacks the quality they expect. After dozens of conversations, Bell learned what to avoid and what to provide. "They just told me how to run my business," he says.
Rather than the estimates most home repair services give, Bell realized it was more efficient and affordable to charge for time plus materials. Eliminating the unnecessary step of scheduling an estimate allows Handyman to offer high quality work affordably.
Two years into his business, Bell continues to stress customer relations. A live receptionist answers phone calls and questions about repair work, and schedules appointments on the spot. Chain repair companies often have answering machines fielding calls. The night before the project, a Handyman Express repairman calls the client to confirm his arrival and discuss any last minute questions.
"When he arrives, he is clean-shaven, polite, and dressed in a Handyman Express shirt to put the customer at ease," Bell says. "It takes the nervousness out of that first visit. We show up with a bucket of tools, ready to work."
This customer service-oriented approach earned Handyman Express over $385,000 in revenue its first year, $1 million the second and Bell's on track to earn $2 million in revenue this year. His two year-old company does double the sales of the retail giant down the street. He even opened a second location in Boulder, Colo., With about 40 employees in Denver and 10 in Boulder, Bell isn't slowing down.
"The little guys are still out there swinging," he laughs.
Not bad for a guy who had no formal business training when he started Handyman Express. Bell simply combined principles he previously learned in the food industry with customers' expectations - a perfect recipe for a success.
- by J.R.
Getting The Edge
Up Against the Wal-Marts: How Your Business Can Prosper in the Shadow of the Retail Giants, by Don Taylor and Jeanne Smalling Archer (AMACOM, $22).
Outsmarting Goliath: How To Achieve Equal Footing with Companies That Are Bigger, Richer, Older, and Better Known, by Debra Traverso (Bloomberg Press, $19.95).
Teaming Up: The Small Business Guide to Collaborating with Others to Boost Your Earnings and Expand Your Horizons, by Paul and Sarah Edwards and Rick Benzel (Tarcher Putnam, $13.95).
How to Drive Your Competition Crazy, by Guy Kawasaki (Hyperion, $12).
The Main Street National Trust Historic Preservation is a group dedicated to restoring downtown areas with economic development. Their Web site, www.mainst.org, has a directory of main street programs nationwide as well as resources for small business growth. Or call (202) 588-6219.
Some Barter Web sites:
www.BarterTrust.com
www.BigVine.com
www.TradeFirst.com
