LESSONS FROM THE BEST SMALL BUSINESSES IN AMERICA

For the first time Forbes profiled the best small businesses in the U.S. The list which cut across industries ranging from business services to manufacturing has 25 businesses which have surmounted all the challenges of infancy.

These companies have had the opportunity to grow much faster, but the leaders focus on being great than just big. Little wonder they are called “Small Giants”. They have maintained strong and stable balance sheets for at least 10years running with steady profit margins, demonstrating that every small business has in it the seed of greatness if well harnessed. A critical analysis of these “Small Giants” revealed some valuable lessons for start-ups anywhere and everywhere.

LESSON #1: GREAT CUSTOMER SERVICE. Trading with the secret that customer is “the boss and he determines who should be paid or fired” has distinguished these businesses. They are all out providing outstanding customer experience and making the customers feel they are only there because they are around. They enjoy the power of repeat business as they have higher rate of customer retention and satisfaction.

LESSON #2: INVEST IN YOUR EMPLOYEES HAPPINESS. The stories behind the making of these small giants can best be illustrated by this quote by one of the CEOs “Take good care of your people and they will take good care of your clients”. The happiness of your people is the happiness of your clients/customers and the happiness of your customers greatly impact on your bottom line. Small business operators must understand that a commitment to the happiness of their employees is what engenders business growth. Ron Alvesteffer, CEO of service express Inc with 290 employees affirmed that the focus on employees has resulted in a yearly turnover rate of less than 10% and a customer retention rate of 98%.

Profit-sharing and employee-ownership plan have also been deployed as a strategy to keep employees happy and deadly committed to the success of their business. 

LESSON #3: FINANCIAL TRANSPARENCY. Laying out your financials before your employees will give them a sense of ownership. One of the companies according to the CEO operates “Open Book Management”- a practice that make available the company’s financials to the employees and also teach them how to read it. Opening their books and informing employees about sales profits has placed these companies above their peers.

LESSON #4: COMMITMENT TO SOCIAL AND ENVIRONMENTAL EFFORTS. The outstanding performance of these companies has been traced to a general belief they held about giving back to their communities despite their size. Commitment to social and environmental efforts has proven a pathway to growth for small businesses. One company that has held to this belief from its very beginning is New Belgium Brewery. It strong believes that a business can be a force for good in the world. New Belgium Brewery has not only reaped the benefits of its commitment to social responsibility but has also been in the forefront of a campaign for it. By sheer commitment to social efforts, New Belgium Brewery has grown from a basement company to a $225M with 685 employees.

LESSON #5: PLAN WITH YOUR EMPLOYEES. Sharing and strategizing the future of your start-up with employees is a notable practice to emulate in the emergence of “Small Giants”. Make your start-up small enough to actively involve all your employees in the corporate planning and you will be securing the future of business.

HOW TO BEAT A LOWER-PRICED COMPETITOR

It’s every entrepreneur’s nightmare: a competitor enters your market with a similar product priced at a fraction of what you currently charge. You need a strategy for beating the low-ballers. So what’s the best way to proceed?

On the one hand, all you need to do is drop your prices below the competition, and buyers will beat a path to your door. On the other hand, this approach will land you in a price war, and there are no winners in a price war-only survivors.

Even if you manage to run your competitor out of business, chances are you may not have much of a business left when the battle is over. Here are some steps that can be taken without necessarily engaged in a price war:

REPOSITION, READJUST AND REALLOCATE

1.Lowering your prices = Changing manufacturing and distribution. To beat low-price competitors at their own game while also remaining profitable, you need to squeeze every last drop of inefficiency and cost from your manufacturing and distribution system.

2.Building a Uniquely better product = Changing design and engineering. Determine through market research what features or design will prompt customers to see your product as being unequivocally superior to the competition. Then build it.

3.Creating a hassle-free experience = Changing sales and marketing. Figure out why it’s difficult to buy and use your competitor’s product, and then make it easy to buy and use yours.

4. Taking ownership of the customer’s results = Changing customer support. Build a deep bench of experts who really understand your customer’s businesses. Example: Under Lou Gerstner, IBM hired and retained thousands of consultants, transforming the company from a mainframe computer vendor into a computing services provider.

PROMOTE THE NEW YOU

Once you’ve implemented all the operational changes required to reposition your product in the marketplace, it’s time to tell the world why your firm offers superior value. That means adopting a communication strategy that matches your market strategy, as follows:

1. If you offer low prices, mimic the competitor’s go-to-market strategy. Ensure that whenever a customer sees a competitor’s product, your product is right next to it- at a lower price.

2.If you build a uniquely better product, target your advertising. Reach customer groups that are most likely to believe your product is superior by selecting venues that the competition neglects. Example: Sony’s VAIO PC business advertises in lifestyle magazines to reach female buyers, who are more likely to appreciate the VAIO’s sleek design.

3. If you create a hassle-free experience, generate positive word of mouth. Make it easy for your customers to sell for you. Consider “Tell a friend” coupon or offer referral fees. Example: “Network Marketing” products are typically priced higher than store-bought items, but they are sold by neighbours (that’s the word of mouth).

4. If you take ownership of the customer’s results, create a presence as an industry insider. Get your sales consultants out to conferences, working groups, and industry-association meetings where they can work closely with decision makers and develop consulting opportunities. Support your consultants with a wealth of case studies and reference materials.