As an evangelist for small business, I am the consumer equivalent of the locally-grown food movement. I spend as much of my discretionary income as possible with the owned-and-operated businesses in my area.
As a consultant and coach to owners, I also admittedly observe these businesses with a gimlet eye. I know how difficult it is to run a good business; but I also know how easy it is to miss the things that really make your company shine above its competitors.
The most impactful of these is usually service. When I ask owners what makes their company different, most of the time the answer is “Our service!”
“We really take care of our customers. They know that we are there for them. Every person is greeted personally. I walk around telling our customers how important they are to us. All complaints come directly to me.”
I’m sorry, but those things are really just the opening salvo in the service wars. I’m greeted at Walmart, but it never makes me think “Boy, what terrific service! I was wondering how I’d get that shopping cart!” Managers in restaurants come over to ask “So, was everything you had absolutely wonderful today?” Geez, I’m eating in a chain restaurant. Lunch was fast, reasonably priced and relatively tasty. Is that supposed to be my definition of “absolutely wonderful?”
I could say no, but why bother? All they can do is offer me a second lunch. Too late (I’ve already eaten) and it’s only going to be more of the same. It wasn’t bad, but it is what it is. Which is a long way from absolutely wonderful.
Notice, however, that the chain restaurant is training the manager to check with the customers. Walmart is greeting you at the door. If all your small business does is duplicate the standards of corporate giants, please don’t pretend that it is special.
We have a local residential service company whose owner buys substantial TV ad time. He promotes that his company is different because they will make an appointment for a service call, and phone ahead to tell you that they are keeping it. His ad is often followed during the same commercial break by Time Warner Cable’s, showing a giant phone bank with employees making appointments and phoning ahead to tell you that they are on time.
Just because a local owner says his service is different doesn’t make it so.
Last week we ate in a local restaurant that has recently remodeled. It was nice before (a white-tablecloth establishment) but they obviously spent a lot upgrading it. The waiter, all in black, was very polite. Too bad he had to be sent back to the bar three times to find a liquor shown on the menu, forgot part of the drink order, served the appetizers when only half our party had drinks, sent someone else’s entrees to our table, delivered our 4 entrees in 3 separate trips, and forgot to tell the kitchen about one of our party who was emphatic in explaining her food allergy, thus requiring a remake after everyone else had been served.
I hate to say it, but a chain restaurant’s training and systems would probably have eliminated two-thirds of those mistakes. The expensive décor upgrade was wasted. I wish they had spent a tenth of the amount on service training.
“Great service” is a fantasy for too many small business owners. To paraphrase Michael Porter, the Harvard Business School strategy guru; if you aren’t spending money on it, and working to improve it every day, it isn’t differentiation.
These 200 companies will not have time to grow. A couple will continue to attract enough new capital to keep up. If the pattern holds true, in two or three years a dominant online player will emerge, with a handful of others in the also-ran category. The rest will go away, either snapped up by the wealthier players, or by having their money lifelines cut.
Moi? We saw ourselves as the class of the industry. Our internal dialogue was always about how we were trying to do it right when everyone else was bottom feeding. I couldn’t get over a mental picture of a mechanic calling to another, “Hey, the whores are on the phone for you.”
Bob is calculating what the brokerage industry calls “Seller’s Discretionary Benefits” or SDE. While it is a legitimate way to look at the full value of business ownership, ball park valuations of 4-5 times pre-tax earnings don’t apply to that calculation. Cash flow expensed for benefits (rather than dropping to a taxable bottom line), isn’t included in those earnings multiples. The traditional multiple for a small business sale averages 2.5 time SDE, or half of what Bob is estimating. We are immediately reducing the likely price to something like $1,250,000.
Perhaps the most amusing application was in “Gilligan’s Island.” The seven castaways fill their assignments well. There’s Gilligan (Sloth), the Skipper too (Wrath). The millionaire (Thurston Howell — Greed) and his wife (Gluttony). The movie star (Ginger — Lust, of course); The professor (Pride) and Mary Ann (Envy), here on Gilligan’s Isle (Hell?)
Even if you work on it every day, if you do not do it well the effort is still wasted.
people have stopped investing in training and expect their employees to intuitively “know” these things. not possible. Really caring is just not that common.
Service is a nebulous term. It has a different definition whether it comes from the provider or the customer. What supersedes service is the experience from the customer’s standpoint. Today’s independent business owner has a great opportunity to differentiate itself from its competitors. Unfortunately, many do not know how to do this.