Image by Gerd Altmann from Pixabay
Part one of a three-part series: How to grow your small business
Small business owners face more predators than ever, which makes decision-making about growth seem very challenging.
In order to minimize the likelihood of entrepreneurial migraine headaches during bad-hair days, a business owner needs to perform like a masterful clairvoyant when decision-making about growth.
Each financial decision seems like a life or death matter.
If you’re trying to grow a small business, you’re very familiar with these challenges:
– Product returns
– Weak cash flow
– Ineffective or disloyal employees
– Rapidly changing consumer tastes
– Customers with insatiable appetites for instant products at deflated prices
– Increasingly astringent laws and regulations
– Local, state and federal tax burdens
– Marketplace competition
– Poor-performing vendors
So, to help you match your assets and strengths with the right strategies, it seems fitting to turn to the timeless strategies of the late Neil Delisanti.
He retired as a professor of business at two colleges in Washington: University of Puget Sound and The Evergreen State College.
He also counseled more than 2,000 small businesses while running Tacoma’s Small Business Development Center (SBDC). That’s the complimentary counseling service underwritten by the Small Business Administration and Washington State University.
He was hired to help small Northwest businesses, but financial institutions and economic development officials also respected his forecasting acumen. He could be direct in his constructive criticism; the self-effacing analyst proved to be knowledgeable about countless issues.
In focusing with him on small business products, there was some overlap with marketplace and management issues, which we’ll primarily discuss in two other columns. To keep things simple, we’ll use the term product in referring to both product and service.
In order to minimize the likelihood of entrepreneurial migraine headaches during bad-hair days, a business owner needs to perform like a masterful clairvoyant when decision-making about growth.
Two key questions
Mr. Delisanti said there are two salient questions a new business should be able to answer about its products: “Is the business making money off them? Where on the product life cycle is the product – the stages a product goes through from introduction until off the market?”
In other words, remember the plight of Pontiac’s Bonneville. It first hit the market in 1958. It was great car, but it has ended production because of declining sales for many years.
So, the question is: Did Pontiac wait too long before introducing its exciting new models – the G6, GTO, and Montana SV6?
Buy a franchise?
Even though franchising is popular, Mr. Delisanti often recommended against buying a franchise. “Unless they are well established, the risk may be greater than starting your own business,” he said. They also go bust and often you really aren’t your own boss due to the restrictions by the franchisor.”
Creativity
What did he feel are the key elements in the creativity of product?
“One has to think of the utility of the product and how some attributes enhance the product in the marketplace. Be cautious on getting too far out of the box. It may take customers awhile to get used to the product. Creativity is looking at how your product can better serve its purpose,” he believed.
He said every small business needs to focus on specific facets to develop a commercially viable product: “It needs to have a market – customers, clients, patients, etc., of sufficient numbers – to provide sufficient sales to cover costs and expenses and to produce a profit.”
Target emotions
Small businesses should analyze their product differentiation. His recommendation: “Find out why customers buy the product, what they use it for and what they are looking for. Then provide it better than the competition. Remember people don’t buy flowers at a florist shop, they buy warm fuzzies.”
He, of course, was referring to every consumer purchase being based on emotion. As for determining the price of products, his principles are simple: “Anywhere between the market price, which is what the product is usually selling for, and the price that will cover costs, expenses including taxes and profit.”
Alliances
In picking suppliers and vendors, when making a product-supplier assessment and evaluation, Mr. Delisanti advised caution: “Make sure that your alliances are based on good business practices. Make certain they can provide the increased products, in a timely manner and at an acceptable cost. Often, your old vendor, one that may have been based on a personal relationship, may have to be replaced by one that is better qualified for your new operation.”
Key for expansion
He agreed diversity plays a role: “This is a key in expansion. There are two generic factors in increasing sales: sell what you have to new customers or sell something new to current customers. And selling complementary products helps, such as coffee with munchies.”
Product mix
Mr. Delisanti said this also means product mix is important, too: “A product line is also important – having deluxe, very good and good – keeps a larger market served. That’s a safe way to expand.”
On aquiring other companies
Often, the fastest way to grow is to acquire other companies. When did he suggest small business owners consider buying other companies to maintain product dominance? “They must look very carefully, using due diligence, at the company. If the pricing and terms are right, it can be a quick way to expand.
His warning
A caution: the owner must be capable of running that size of business. One key is to be sure your current company is running well.”
Financing
His reminder about knowing when to apply for financing: “As soon as you’ve done your business plan see if you are financeable.”
There are two other columns in this series, how to grow your small business:
From the Coach’s Corner, if you need free counseling for your entrepreneurial idea or small business, contact your nearest SBDC. You won’t find Neil Delisanti, but you’ll get some great help and the price is right.
P.S. Mr. Delisanti provided an analysis why women receive less angel funding than men.
“The greatest good you can do for another is not just to share your riches but to reveal to him his own.”
-Benjamin Disraeli
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