bill corbin - entrepreneurial leadership - fundamentals

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Entrepreneurial Leadership: Fundamentals

by Bill Corbin


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2000 by Bill Corbin

All rights reserved. Except for brief review excerpts or quotations, nopart of this book may be reproduced in any form without written

consent from the author or an authorized representative of CorbinGroup.com

Printed and bound in USAby UN Printing, Division of UN Communications, Inc.

Cover Design: Tim Tobias

ISBN #: 189345604-8

First Printing: March 2000

For Information:

Bill Corbin CorbinGroup.com.1429 Chase Court Carmel, IN 46032 317 800 222 0590 x330

http://www.CorbinGroup.comemail: [email protected]

LEGAL DISCLAIMER

An entrepreneur is a risk taker. The purpose of this book is to help the readertoward a positive outcome. However, there are no words or ideas in this book

powerful enough to guarantee success. Therefore, Bill Corbin accepts nopersonal liability should your business results be unsatisfactory (nor will he

claim any credit for your success).


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Table of Contents

Entrepreneurial Leadership: Fundamentals

Introduction...................................................................................1A book based on in-the-trenches entrepreneurial experience.

1. Time, Your Most Precious Resource ............................7Excellent use of time is crucial in reaching critical mass and managingthe business afterward. It is important to prioritize well, including timespent outside the comfort zone. It is important to learn to invest timerather than simply spend it.

2. Marketing! The Key Is Marketing! ...................................17Marketing is crucial in reaching critical mass and growing beyond. Itinvolves identifying prospects, measuring market potential,communicating your concept, and making final sales. It involvesdistribution channel decisions and media/message decisions, thenrelentless execution within a sound long-range plan.

3. Customer Philosophy / Customer Values...................50The customer is always right is sometimes not true. How do you dealwith wrong customers without harming relationships with goodclients? Your policies must be clear so that employees fully understandand effectively execute your philosophy. Your service philosophy mustbe affordable while providing the carefully defined values that create acompetitive edgea tough balancing act.

4. Employee Philosophy and Team Building .................61Employee additions should fit with your personal style and businessstrategy. There must be clear communication of expectation, and theremust be training, ongoing performance assessment and rewards forgood performance. There must also be strong action, including firing asnecessary, to deal with unacceptable performance.

5. Order-Writing As a Crucial Discipline.......................72Many businesses involve high risk of misunderstood orders. A soundorder entry system, often including a confirmation step, can avoidcostly errors, improve customer satisfaction, and support more efficient

production.


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12. Your Management Information System................ 126An effective MIS measures progress against pre-set standards. It tiesclosely to strategy and objectives and will provide information thatsuggests action. It will measure key trends and should be carefullyscrutinized to assure that important truth cant hide in the numbers.

13. A Vendor Philosophy..................................................... 131Most entrepreneurs select between price-oriented or service-orientedvendor relationships. Carefully analyze the role of vendors in yourbusiness mix to assure your philosophy fits your needs. Include sourcesof financing in your thinking about vendor relationships. Determinewhether your companys philosophy will be based on partnership oradversarial relationships.

14. Fear Not .............................................................................. 136Concern about the potential loss of key clients or key employees cancause the entrepreneur to live in fear and to lose the feeling of independence. Dealing with the fear is important. Developingcontingency plans is equally important.

15. Handling Employee Conflict ...................................... 140Some conflict is healthy and shows that strong employees are doingtheir jobs. But a culture of whining and griping can become poisonous.The entrepreneur must make clear that this behavior will not betolerated and must actively shape a positive no-whine culture. Moresevere problems must be addressed even more firmly.

16. Profit & Loss Plus Cash Flow....................................145Ideally, a smoothly running business will generate strong profit andcash, but it is important to understand the keys to managing the P&L.Positive cash flow is difficult to achieve in a growing business.Managing cash flow is crucial when times are tough.

17. Use of Financial Resources ......................................... 157There is an ongoing need for resources and an ongoing conflict amongpotential uses: short-term needs, longer-term investment, andentrepreneurial compensation. Among the entrepreneurs highestcallings is intelligent allocation of financial resources.


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18. Effective Negotiation ..................................................... 160Effective negotiation involves a combination of skill and savvy. Itinvolves understanding and, to the extent possible, controlling theprocess. It should involve clear objectives and limits and as muchknowledge as possible of the other sides objectives and limits.

19. Keep Your Strategic Eyes Wide Open ................... 169Every business faces change. Some is driven by the economy, some bychanges in tastes and demographics, some by technology, and some bylocal market conditions. The entrepreneur must be keenly aware of keytrends, making contingency plans to address negatives and aggressiveplans to capitalize on positives.

20. The Lure of Diversification......................................... 172Diversification involves a shift in focus from the core business. Therewill be an inevitable dilution of resources, including time and funding.Diversification can be very good or extremely bad. Key questions arethe entrepreneurs personal motivation and the strategic situation thecompany faces. Corporate R&D helps prepare for sounddiversification.

21. Become a Good Leader................................................. 179Effective leadership involves being yourselfmodified by reality,being consistent and trustworthy, and defining then demanding crucialperformance requirements. Styles can vary widely, but thesecomponents seem crucial to success.


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INTRODUCTION

This book is intended for early-phase entrepreneursor those studying intently to prepare for entrepreneuriallife. This is book 3 of The Entrepreneurial Five Set . Book 1deals with the question Are You Cut Out to Be an

Entrepreneur? If you have not successfully grappled withthat issue, book 1 may be the place to start.

Book 2 is titled How I Started My Own Businessand Lost My Shirt. It deals extensively with how to (andobviously how not to ) get your business off to a soundstart. If you are in the pre-start-up phases of developingyour idea, business plan, and financial resources , Lost MyShirt will be helpful. (Its goal is to help you keep your shirtby avoiding the pitfalls that took mine in my first seriousentrepreneurial effort.)

This book is intended to cover fundamentals of sound operation. The phrase entrepreneurial leadership

covers the entire process of establishing your idea in themarketplace and building it toward real success.Occasionally, leadership may be something like the visualof Teddy Roosevelt boldly leading his army up San JuanHill. More often, leadership involves analyzing what yourbusiness needs, making solid action decisions, gatheringnecessary resources, and effectively focusing thoseresources on the challenges at hand.

Several topics make the assumption that yourbusiness will involve hiring, training and motivatingemployees. If your concept does not involve employees, Ill


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work hard to make the rest of the book worth the price of admission.

As with all Corbin entrepreneurial books, there iscandor throughout. Some of the topics we discuss havebeen learned well by your author and are guiding principlesof my business operations. Some still elude me but areworthy objectives. Some of the lessons were learned hard.So well present some informative war stories.

The book is based partly on personal experience butalso on a lifetime of observing the entrepreneurial process.Therefore, it is not industry specific. It aims at a set of sound thought processes and leadership fundamentals, andmust necessarily leave it to you to add the fine pointsrelated to your industry. Many of our topics should inspireyou to dig deeper. For example, the subjects of marketingand negotiating provide rich opportunity for further studyand growth.

Credentials:

This quick resume is not intended to puff accomplishment. Many entrepreneurs have accomplishedfar more. But youll be hard-pressed to disagree that BillCorbin and family have paid their entrepreneurial dues andcan speak from experience.

1968: Graduated with MBA, Harvard BusinessSchool (which, interestingly, didnt teach me a largepercentage of the key material in this book).

19681971: Big company guyGM and RCA.

19721973: Founder of Concepts 4, Inc., a grandidea that failed grandly, wiped out the family savings,


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moved the Corbin family to an apartment, and inspiredcreative negotiating one memorable afternoon when thebank called to repo both our cars.

1974: Founded Trailblazer Service Company on$100 of invested capital. Began selling and installing homedoor appliances (most notably deadbolt locks andpeepholes). Dreamed up the concept of Unified Neighbors.

1975: Founded Unified Neighbors, Inc., a consumerinformation service aimed at informing clients aboutreliable home service providers (including TrailblazerService Company, of course!).

1977: Purchased printing equipment to self-producethe mini-magazine being mailed to Unified Neighborssubscribers.

1977: Launched At-Your-Home Auto Service,changing oil and doing minor repairs in peoplesgarageslasted about two months.

1978: Launched The Family Photographer, a studiowithin our officeslasted about six months.

1978: Launched a firewood chopping, selling anddelivery service. Lasted one season.

1979: Launched Carmel Happenings, a localizedPeople Magazine concept for our local community.Folded the tent after three issues.

1979: Launched Unified Neighbors of America tofranchise consumer information concept. Closed after acouple grueling years.


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1980: Launched UN Printing Company as a free-standing business. (Finally a winner!)

1981: Acquired a small printing company onIndianapolis eastside. Changed its name to The PrintingPlace, dreaming of national franchise again. Closed in early1983.

1984: Launched Carmel Publishing and its mainproduct The Highflyer a monthly, direct-mailedcommunity magazine. This business was operated by mywife Janet until sold in 1996 to Thomson Newspapers of Toronto, Canada. Thomson paid us extremely well for The

Highflyer.

1984: Experienced the need to be a turnaround artistwhen problems in the UN Printing operation nearly sank the ship (book 4 of the Five Set).

1986: Launched UN Mailing as a free-standingbusiness.

1988: Purchased Townsends Printing, a failed$500,000 operation, using a creative financing packagethrough the bank that had repod Townsends.

1988: Spun the original Unified Neighborsmagazine into a separate operation that was sold favorably.Recast the printing and mailing operations into UNCommunications, Inc.

1988: Co-Founded Bereavement Publishing, soldinterest in 1992 and still operating successfully with HQ in

Colorado.


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1993: Launched Beckett-Highland Publishing, ledby daughter Kimberly. Attained national marketing forthree Bill Corbin books and aided successful self-publishing for several other authors.

1994: Formally added Fulfillment as a divisionwithin UN. Fulfillment is the process of storing finishedgoods for clients and shipping those goods on demand. Ourlargest client was Macmillan Publishing for whom weboxed and shipped promotional materials.

1995: Daughter Lisa and her husband Jasonlaunched ProSound Entertainment, a successful evententertainment business.

1996: Closed Beckett-Highland, consolidatedTownsends Printing into our main printing plant (now30,000 sq. ft.), closed the fulfillment operation, andgenerally scrambled to turnaround the business for a secondtime. This experience is also detailed in book 4.

1996: Sold, very favorably, The Highflyer magazinebusiness to Thomson Newspapers of Montreal.

1997: Launched UN WebDesign, led by sonBrandon, and become active users of the Internet. Brandongoes on to launch several dot com enterprises.

1999: Launched CorbinGroup.com. to concentrateon entrepreneurial assistance.

The whole adventure has yielded a pretty decentlifestyle, a solidly successful core business now doingabout $3.5 million annually, and a heckuva lot of


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entrepreneurial experience. The Highflyer operation wasrun by my wife Janet as a classic female-operated business.The ProSound enterprise is far-removed from the corecommunication businesses, as were the attempts at autoservice, firewood sales and studio photography. Hopefullyyoull agree that Corbin experience, coupled with closeobservation of hundreds of other entrepreneurial efforts,provides a great deal of diversity and depth for this book.

The entrepreneurial life has been quite a trip. May

yours be as good or better!


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Chapter 1

Use of Your Time

What is your most precious resource? A room fullof entrepreneurs would debate this question fiercely. Somewould say, Money, of course. Sure, theyre right in thesame way that air to breathe is the most important attributeof a great family vacation. If we dont have enough moneyand dont use it wisely, were kaput. Some would argueyour employees, some would say your customers. Allthese positions are defensible. But as a 100% practicalmatter, the most precious resource of early-stageentrepreneurs is time.

Heres a simple way of looking at a complex issue.The E (which is what Im going to call us entrepreneursfrom now onin the interest of saving ink, trees andpotential carpal tunnel treatments) must balance time

among these demands:

Planning the business and where its headed,sometimes involving relationship selling tobankers, investors, vendors and other interestedparties;

Being sure the sales/marketing effort is happening Running the day-to-day operation; Trouble-shooting and problem solving; Being sure to have some kind of life outside the

business.


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There is a lot to do, and heres an unsettlingrevelation to those who were perfectionists before theybecame Es. There just plain isnt enough time to doeverything youd like to do (unless your rich uncle or deep-pocketed venture capitalist is willing to fund a sizablestaff). Therefore, it is absolutely crucial to invest timebased on carefully set priorities.

Weve Gotta Get Organized!More on priorities in a minute, but first a challenge:

You can skip to the next paragraph if you are a highlyorganized person who maintains a highly organizedcalendar, constantly updates a comprehensive to do list,and utilizes highly organized files that make it easy to findall important information. But stay with me here if yourdesk frequently looks like Hurricane Nellie blew throughand you occasionally find yourself rummaging againthrough multiple stacks to find that envelope you wrote animportant note on.

The very first time-management goal should beimproved personal efficiency and time management. Whentime is precious, it is a tragedy to waste several minutesdaily, that become several hours monthly, because of disorganization. As your business grows, the downsidebecomes bigger: potential missed appointments ordeadlines, missing data necessary to do importantproposals, etc. Take the time to secure and learn to use apowerful organization and time-management tool. Optionsinclude hard copy systems such as the Franklin Planner orelectronic systems such as Microsoft Outlook and Palmproducts. Similarly, develop a system of organizing and


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storing key notes and papers. Make it a singular goal toknow where key information is.

Prioritize Even If PainfulOK, now that were committed to time-efficiency,

lets look again at priorities. If your business is still in start-up phase, youre in a classic race against time. Youroverriding strategic goal is to reach critical mass. Criticalmass is a somewhat mysterious concept that you dontquite understand until you reach it. It is the point in abusinesss growth when it has enough market presence andbusiness momentum that it seems to gain a life of its own.In the early days, you might wonder where the nextcustomer will come from. After you reach critical mass,they just come. You must continue marketing, servingcustomers well and executing the fundamentals, but themomentum of critical mass, once achieved, can normallybe maintained by careful business execution.

Getting to critical mass is something else again. It

can feel like carving granite. The marketplace hasntaccepted you. The competitors are tougher than youexpected. The ad campaign you were sure would work isfalling flat. So youre in a literal race against time as youstrive to get the business to critical mass before you run outof money (or your spouse runs out of patience).

In most cases, the most important priority is sales ormarketing, primarily because critical mass is achievedbased on market-acceptance. Correct prioritizing is acompany-specific issue, but there are some general errorsto avoid:


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Former big company people tend to over-concentrate on infrastructure in the early going. Iveseen start-ups that had zero sales volume but highlydeveloped procedure manuals and cost control systems.Infrastructure is important. But the issue in this chapter ispriority. Especially if the E used personal time to developthe structure, the time could likely have been better spent inbusiness building. A related error is the expenditure of many hours and dollars in the perfect logo or animpressive cover for the impressive procedure manual. Wemust avoid majoring in minor things especially duringstart-up.

Another big company tendency is heavy use of high-priced professionals in start-up. This may includelawyers, accountants, computer gurus, communicationsconsultants, or other consultants. Good professional help iscrucial, and the right help can help you attain critical mass.But in looking at priorities, consider the tragedy of a start-up that has invested so heavily in infrastructure consultants

that it cant afford to test (and perhaps retest a few times),then launch its marketing programs. Early-stage consultantsalso tend to absorb a great deal of E time.

A related error is visualizing a three or four tiergrowth process but pre-investing to support all fourtiers. As a simple example, lets say our restaurant conceptwill be introduced in small towns, then medium towns, thenmajor cities. Once weve realized full rollout, our computersystem will be a masterpiece of data collection andmanagement feedback. One choice is development of theentire software package. But an E carefully using resourcesmight be wiser to use a much smaller platform for start-up.


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Time and resources can then be devoted to the marketplace.When we get to phases 2, 3 and 4, well have relevantexperience and can better afford the full-blown package.

There is a tendency to over-refine the product.There is virtually no product concept that cant stand someimprovement. Often the E says, Ill keep tweaking thisthing until I get it just right. The clock ticks. Revenuesdont come in. Competitors may be moving forward.Finding the right point to go to market is crucial, whichleads us to an extremely useful concept, admittedly not anoriginal Bill Corbin idea.

Ready, FIRE, AimTom Peters in his must-read Excellence series

introduced Ready, FIRE, Aim. Simply stated, this ideasays, get ready enough to get in the game. Start playing,learning and fine-tuning. The advantages are two. First, youare in the game. The sales and marketing wheels can beginturning. Revenue can start. The first step toward critical

mass is begun. Second, there is often no better way tofinalize product development than by direct feedback fromthe marketplace. Some of the things you thought wereimportant wont be. Some things you never thought of maybe suggested by customers you won or prospects you didntwin. A great many E-projects never happen because of thehuman nature to be sure weve got it right before movingforward.

Time and Your Comfort ZoneWe Es are human, meaning we like to do what we

like to do, and tend to avoid doing those things we dont


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like to do. If your background is product development,thats likely a favorite area. If youre a number cruncher,youll like that part of the entrepreneurial life. Marketerslike to market, etc.

Heres another annoying truth. The highest priorityof your entrepreneurial endeavor is often outside yourpersonal comfort zone. A common example is sales andmarketing. There are Es who break into a cold sweat at thethought of selling. But sales and marketing may becrucial. On the other hand, if youre a fabulous peddler buthave never balanced your personal checkbook, youregoing to need to spend some time outside your comfortzone while you plan the administrative side of the business.Moving outside the comfort zone requires both goodpriority setting and firm personal discipline. The disciplineis often the tougher issue. We know in our hearts what weneed to do, but tend to resist the uncomfortable.

Even reaching critical mass does not eliminate theneed to operate effectively outside your comfort zone. We

could cite 100 E-examples. Here are just a couple:

You are a bit of a non-confrontational, gentle-at-heartperson. Your business now has multiple employees.Unfortunately it isnt big enough yet for a full-timegroup of hard-nosed supervisors or for an HR manager.One of the employees is behaving very badly and mustbe severely reprimanded if not fired. Even if reluctantly, the E must step up and firmly address thesituation.

Out of the blue a huge potential client calls to learnabout your business. She wants a personal visit,


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including detailed background on your company and aproposal of what you can do for her. Your sales teamat that point is your great uncle who is a heckuva guywho used to sell auto parts until he retired. Guess whosteps up?

As you grow, you will add employeeshence timeand talentto help handle the issues that fall outside yourpersonal comfort zone. Until then you must stretch thezone.

After You Reach Critical Mass, INVEST TimeCongratulations if youve reached that magical

point. The business is actually working. There is a steadyrevenue stream. Hopefully the revenue stream is higherthan the ongoing payment stream. Time managementremains crucial, but the issues change. An importantconcept is whether you are spending time or investingtime. Es tend to be busy people, and much of the busy isdriven by the tyranny of the urgent: talking to the next

customer, getting out the next order, invoicing, handlingcash receipts, etc. Time must be spent doing business, butfor the most part that time is spent vs. invested. Investedtime yields future benefits. When you develop a new,effective marketing plan, you are investing time. When youhire and train a new, effective employee, you are investingtime. When you develop an effective internal procedurethat overcomes a recurring problem, you are investing time.

Notice the recurring use of the word effective whendescribing your investment of time. Es can think time isbeing invested, but generate the equivalent of an equitystake in the Brooklyn Bridge. Some examples are obvious.


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If we take a chance on a marginal job applicant, spendconsiderable time training, and wind up with a pooremployee, we have obviously not invested well. If our newquality control procedure is poorly conceived or executed,weve wasted time. If by chance our new idea is so weak that additional problems result, we may have disinvested.

For some Es (Bill Corbin included) there is atendency to be a brainstorm machine. My spot is themorning shower where, almost daily, great new ideas popinto my head. Some of them are good. Some are so-so.Some are out-and-out bad. In my early entrepreneurialcareerwhen life had not yet taught me that I have thecapacity to be an idiotI tended to execute brainstorms ata furious clip. Careful reading of my resume shows a 3-issue foray into a new magazine during the very earlystages of my core businesss growth. That was, being blunt,idiotic. We diverted precious resources (time and money)from the core business. We risked the core while failing toreach critical mass with the new venture. It was a stupid

thing to do, but very entrepreneurial. Today, I utilize aseveral deep breaths rule regarding new ideas. In part thatmeans intense personal scrutiny and staff scrutiny overseveral days or weeks. My staff is empowered to say, Uh,Bill, how bout putting that one on ice for awhile?

It is vital to understand that diversion of resourcesfrom the core business is a very serious strategic issue andshould be done only with great care. The strategyimplications are discussed in a later chapter. For now,remember that your time is one of the precious resourcesthat should be diverted only with great deliberation. Someearly-stage entrepreneurs, flush with a bit of success, enter


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new co-ventures, join boards of directors, teach classes, etc.Be careful of diversion.

Invest Every DayIt is doableand a good thingto have at least one

item on every days to-do list that relates to investment inthe future. It is also doable to vow that no week shall passwithout some identifiable long-term improvement beingmade in the business. Here are examples: Generate aquality control procedure that helps eliminate a recurringerror. Generate a lead follow-up system that gets a brochureto new prospects by tomorrow morning. Establish or makea specific improvement in your website. (Chapters 8 and9Building Infrastructure and The Power of Policy andProcedureprovide multiple improvements that involvetime investment.) As you add and empower employees, youcan develop the same concept. By yourself, a weekly long-term improvement results in 50 investments. If you have anempowered staff of six, the total becomes 350. If they have

empowered employees, the numbers skyrocket.

One Final Thought: Be Sure to Have a Life!A combination of motivation, fear and latent

workaholism can cause an E to prioritize the venture aboveoutside interests and relationships. It is definitely anoccupational hazard and should be carefully monitored. Formost Es, success isnt sweet enough to justify sacrifice of relationships and quality of life.


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Chapter 2

Marketing! The Key Is Marketing!

OK, lets boldly tackle a pretty tough subject.Marketing allows us to find, reach and sell customers.Marketing is the lifeblood of most businesses, yet itsimportance is often badly underestimated, especially by

early-stage entrepreneurs. We Es, until experience hastaught us better, tend to get excited about the idea,believing that a good idea is the primary key to businesssuccess. We cling to the hope that two well-worn sayingswill apply to our business concept:

Build it and they will come. Build a better mousetrap, and the world will beat a

path to your door.

Ahif only it were true. Now and then, theres aconcept that attracts a crowd merely by being built. Severalyears ago, a restaurant chain called Victoria Station showedup on high-traffic streets in major cities with a couple of boxcars and a caboose. Their concept was both intriguingand visible; and, sure enough, big crowds showed up onopening day. (Unfortunately they apparently didnt stay, asVictoria Station is no longer with us, but thats anotherchapter.) So, if you have high intrigue and high visibility,you might build a client base by folks just showing up.

Most early entrepreneurial efforts dont enjoy that luxury.The garages and workshops of America are littered

with better mousetraps. Only rarely can you spot a path


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beaten to the door. Some of the mousetraps are brandnew inventions; others are creative wrinkles on existingproducts. There are innovative services, new softwarepackages, new Internet concepts, and a host of other better mousetraps that never achieve market acceptance despiteoffering substantial benefits. Conversely there are arguablyabsurd ideas (no offense meant, but pet rocks come tomind) that generate fortunes. When the winners and losersare counted, it is far more likely that marketing vs. idea

explains the difference.In this chapter, well cover some of the key issues

related to effective marketing, but you are sincerelyencouraged to study more and dig deeper. Es who becomereal students of marketing enjoy a greatly increased chancefor serious success. (Side note: the concepts in this chapterare also helpful as you build a business plan, whether forinternal use or to present to potential investors.)

To simplify things a bit, well include severaldisciplines within our definition of Marketing: MarketResearch; Advertising; Distribution and Selling . We willdivide the process into four elements:

1. Testing and measuring the strength of our idea Docustomers find it appealing? Will they buy it? Will theypay enough to cover our costs and a fair profit?

2. Measuring the potential size of the market Howmany buyers? How much revenue per buyer includingpotential repeat business?

3. Finding a way to communicate our idea to potentialbuyers The advertising media and the message thattell our story.


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4. Developing a selling system that inspires a favorablebuy decision and delivers product to customers.

Steps 1 and 2 fall under market research, so astart-up entrepreneur must work through all four steps. Theestablished E will spend more time at steps 3 and 4 but willreturn to steps 1 and 2 when considering new products orwhole new business concepts.

1. Basic Product AppealOne of businesss old sayings runs, Nothing works

if the dogs dont like the dog food. A business idea mustbe appealing to consumers at the most basic level. It looksgood, feels good, tastes good, adds joy, improvesefficiency, adds convenience, solves problems, etc. If thedogs sniff and walk away, forget it. But even at this verybasic level, we must dig a bit deeper. We must ask prospective buyers two questions:

Do you find this idea/concept appealing? Would you be interested in actually buying it?

For reasons often overlooked, these are definitelytwo distinct questions. Granted, there are some ideas thatare just plain bad, for example a clothing line that ispitifully ugly, or a software package that is totally user-unfriendly. But for most entrepreneurial concepts that failthe appeal test, its more likely that the basic idea is fine,

but not fine enough to inspire customers to buy it. Here aresome specific pitfalls:


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Inventors and highly creative entrepreneurs areparticularly prone to develop clever but likely neverbought concepts. The reason is focus. Aninventor/creator typically starts with a perceived need,envisions a solution, and happily goes to work, focusingprimarily on finding technical answers that overcomeobstacles. When the creative type emerges triumphant fromthe laboratory, the emotion is, IVE DONE IT! I haveworked 20 hours a day to bring this idea to life, and it

works! Surely the marketplace will reward my brilliance.But our creative genius has devoted 95% of his effort to theidea and 5% to the question of whether the marketplacereally caresand often, unfortunately, it doesnt.

Entrenched competition represents another trap. Abusiness that squares off against seriously entrenchedcompetition probably has an OK idea (otherwise therewouldnt be so much entrenched competition). But anentirely different question is, Do I offer something thatwill inspire customers to leave a competitor and come tome? Just showing up to play definitely does not assure awin in the E-game.

Some businesses stumble at a common senselevel. Lets envision a beautiful, upscale restaurant orcountry club located 55 miles from the nearestconcentration of potential clients. The concept may befabulous, but success requires a positive answer to thisquestion: Do we offer enough value, consideringcompetitive alternatives, to allow us to build a loyal

clientele that will travel 110 miles for each visit? Theanswer may be yes, but its a question that must becarefully asked and answered.


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Lack of resources and/or lack of realistic accessto the market can be a strategic stumbling block. Wechuckle at the garage inventor who develops a lunarlanding device; but many Es make a related mistake:envisioning a concept that cannot be realistically brought tomarket without mega -resources where mega is defined asfar more money, personnel and expertise than the E canrealistically put together. The movie Tucker told a classicstory of an entrepreneur who dared challenge the might of

Detroits automakers. His battle was inspiring, but losing.A similar access to the market dilemma concerns

distribution. Some good ideas have no realistic chance tosecure physical distribution, shelf space, and marketingattention. This possibility (discussed in more detail later inthe chapter) causes some Es to consider strategicalternatives such as licensing or outright sale of ideas. Thegoal is 5% (or whatever) of a serious assault on themarketplace rather than 100% of a puny attack.

Lets shift to case study thinking by looking at areal, although unusual, E effort. A company called JohnGalt Enterprises has developed an automatic toilet seatdevice (trade name The Gentleman) that politely lowersthe seat after a pre-determined time interval. I assume thatMr. Galt is the inventor and that his motivation was youleft the seat up again! complaints from female householdmembers. The product has an Internet presence, hasachieved some market momentum, and has received

considerable publicity, no doubt including the stand-upcomedy routines you might expect. In a market researchsense, it beautifully illustrates our two appeal questions:


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Is the idea basically sound? Here the answer is almostcertainly a strong YES. Men and women have battledover raised toilet seats since someone thought to addhinges. Our inventor has found a way to replace angstwith tranquility in homes worldwide.

Will enough customers buy the idea to make itcommercially successful? Here the answer is lessclear. Each unit costs $39.95. Will a 3-john home invest$120 plus S&H for toilet-seat tranquility? Further, there

is definitely some assembly required . An arm somehowlinked to the floating ball in the toilet tank launches theseats downward journey. Do customers care enough todeal with the challenge of installation? As an admittednon-user, I cant assess the field maintenance problemsinvolved in keeping The Gentlemen workingsmoothly, but I would guess that it can becomemisaligned. If so, the customer dissatisfaction causedby toilet seats stuck at 45 degrees could devastate word-of-mouth advertising.

Although John Galt Enterprises marketingchallenges may provide more humor material than yours ormine, many of the fundamental issues are likely similar.

How Do We Ask the Appeal Questions? Largecompanies devote whole departments with major budgetsto market research. We Es tend to market-test by acombination of personal gut feel and conversation withacquaintances and associates. Often, these resources fail

miserably to provide a valid measure of the market value of our concept. To be valid, information sources should be:


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Outside our sphere of acquaintances to eliminaterelationship bias. (It just has to be a good idea if Johnny Smith had it. Or, more hurtfully, It justcant be a good idea if Johnny Smith had it.)

Representative members of the hoped-for customerset, or

Bona fide experts

The notion of seeking direct (probably face-to-face)

contact with potential customers may involve another tripoutside the comfort zone, but it can provide crucial input.While this book cant construct market surveys for everybusiness idea, the basic question set will likely include:

What do you think of my basic business idea? How are you presently securing the value and

benefit Im offering (if applicable)? (If there is an existing resource) Would you

consider yourself a happy customer? Why or whynot? What would improve your satisfaction?

How did you first learn about _____(your presentprovider)?

How much do you typically pay per transaction? How often do you purchase? Do you feel you would give my business a try if we

offer benefits a, b and c (located at_____ if applicable)?

While in the discussion, you should learn as much

as possible about the mind of the consumer: motivations,turn-offs, the role of emotional issues vs. practical issues in


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making decisions, the factors that help secure establishedloyal clientele, etc.

To the extent possible, prospective customerdiscussions should include actual demonstration of theproduct or service. This is particularly true of a new orhighly creative concept. Pictures, charts or other visuals arenext best. Purely verbal interaction is better than nothing,but obviously not as good as hands-on.

Veteran entrepreneurs can provide valuable

insight as you test the market-worth of your concept.Although your ego may take several shots, seek out agrizzled veteran who will absolutely shoot straight. Youwill be asked hard questions. You may be told that severalparts of your plan need major work. But it is far better toreceive negative shots from a tough but fair consultant thanfrom the cold and callous marketplace.

It is likely easier than youd think to find grizzledE-vets willing to counsel. A retired E may be available. If not, many active entrepreneurs are willing to share theirknowledge, war stories, advice and warnings. And relevanthelp does not need to come from a person in precisely thesame field. Many of the fundamentals of businessoperationparticularly sound marketingapply to a broadrange of businesses.

An indirect information source is available bystudying businesses similar to yours. Find success stories.Find those who are struggling. What factors create successin the marketplace? What factors are missing when

companies struggle? How does your product concept andservice set compare to the winners and the strugglers?


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As a practical matter, the very best source of market research for most Es is the early customer set.Many Es (perhaps using the philosophy of Ready-Fire-Aim ) enter the battle before having all the market-testanswers they should have. But rather than smile and say,Hey, Ive got some customers, Im on my way! it isbetter to say, These early customers can providewonderful information. I must try in every possible way tolearn from them. To the extent possible, speak with them

directly. Include comment opportunities via cards orInternet feedback forms. Call them. Their information iscrucial. Among the questions:

How did you hear about us? Why did you decide to visit the first time? What was your initial reaction to our operation? Do you feel generally satisfied or dissatisfied with

our company? Specifically, has anything disappointed you with

our products, service, selection, administration,etc.?

What suggestions do you have for improvement of our product set or service set?

Do you think youll continue buying from us? If not, why not?

2. Prospective Customers & Revenue OpportunityThe first phase of our market research hopefully

says, Yes, our concept is appealing; and yes, it is

appealing enough that customers will actually buy. Thesecond phase asks an equally important question:


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Are there enough potential customers within ourservice radius to support our business concept? (Byservice radius, we simply mean the geography we caneffectively cover. Radius can range from worldwide downto five miles from the shop.)

To answer the revenue opportunity question, welladvance to Marketing 201 class. (Actually these high-sounding concepts mostly involve common sense):

Market segmentation

Market share Revenue opportunity per customer

Market Segmentation. Lets say we operate in acity of 100,000 population. With zero awareness of marketsegmentation, we might say that our potential customerbase is 100,000. But we dont need a marketing degree toknow that our actual prospect count is far less than100,000. A sizable percentage of the citys population isless than five years old. Another percentage is well up inyears. If, for example, were selling sporting equipment, theissue of age will assuredly limit our market size. Here aresome of the more common ways to segment the market:

Age Male/ female Profession of household head(s) Income Homeowner? Age of home

Value of home Location of home (city, suburb, town, rural)


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Proximity of home to a specific location (e.g.,shopping mall)

Educational level of household head(s) Children in the home

Number of childrenAges of children

Interests and hobbies. Position on the technology food chain

Hardware

SoftwareInternetHousehold gadgetry

If your concept sells into the commercial market,these would be typical market segments:

Category of business (SIC code or otherdesignation)

Size in terms of revenue Size in terms of employees Located in city, suburb, small town or rural area Type of location: free-standing, office complex,

shared industrial space Known purchaser of another product or service Advertising media / marketing methods utilized Trade show attendee Uses travel and/or outside meeting facilities Position on the technology food chain

Computers

Network Internet accessHigh-speed Internet access


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Every time we define a market segment, ouravailable target market gets smaller. Lets put ourselvesin the luxury boat business in our town of 100,000. Weobviously cant sell to all 100,000. Our tip-top potentialis probably limited to one per household, so the first cutreduces potential to something like this: 100,000/3.7people per household=27,027.

If our boats sell to people earning $50,000 or more,potential drops substantially. If, during the last three years,

we have sold to 20% of likely buyers (a measure of marketsaturation ), potential drops again.

If we market mens hairpieces, market segmentationlikely includes males / bald / annoyed about being bald / able to afford our hairpiece / willing to deal with variousinconveniences.

When were done with realistic marketsegmentation analysis, we have an idea of the likelymaximum number of customers within our service radius.

Market Share. Market share introduces theunfortunate reality that you arent the only E who may beseeking a piece of the market-potential pie. Largecompanies tend to have high awareness of the issue of market share and invest heavily in securing good marketshare numbers. Some smaller companies ignore the wholeconcept. If your business concept is highly creative, youmay not have a clearly identifiable set of competitors.Some Es are fortunate enough to operate in a market large

enough that there just seems to be enough business foreveryone. But many Es need to be keenly aware of the


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use formulas or we can use common sense. Basically wereasking, is my overall market large enough to be potentiallyworthwhile? Can I grab a large enough piece of the marketto give my business a meaningful number of customers?Will those customers spend enough to support me in themanner to which I need to become accustomed, consideringboth their initial purchase and their possible ongoingpurchases?

Can radius be expanded? What if your market

potential analysis says, Sorry, not enough potential?Before folding the tent, you should explore whether theservice radius can be expanded. Are there waysforexample, by advertising in a nearby city or by adding out-of-town shipping capability or by developing an Internetpresenceto increase the size of your potential market?This analysis must be handled with great objectivitybecause you clearly want a favorable answer, and enoughwant to can lead directly to over-optimism.

Might we be production constrained? There is animportant caution related to market potential. Ourdiscussion thus far assumes we can physically produceand/or distribute the goods or services our customers arewilling to buy. This assumption is critical and must becarefully examined. Do we have the resourceswhetherfunds, equipment, personnel or distribution capabilitiestomeet potential demand. If not, our practical marketpotential is production constrained, meaning limited byour resources.


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3. Reaching the Potential Market: A Combination of Medium and Message

We next ask, How do I deliver my message toprospective customers? Should I use mass media likenewspapers, radio and television? Should I use moretargeted media such as direct mail or highly specializedpublications? What about the Yellow Pages? Should I usean outside sales force? Can I reach prospects via theInternet? Are there creative ways to reach my target

audience that may not use traditional media at all, forexample fund-raisers or sponsorship of local events?

The absolute key for new Es is finding an efficientmethod of prospect communication, and finding it quickly.As we said in Chapter 1, the ticking clock is a majorconcern. We must not waste time floundering for the rightmedia. Obviously funds are precious and must not besquandered.

Judging whether a communication medium isefficient requires three separate considerations:

Reach: the number of potential customers actuallytouched by the medium

Impact: the degree to which we gained theattention of and communicated with potentialcustomers

Cost: the dollars necessary to achieve reach andimpact.

It is possible to make extremely poor judgments

regarding the interaction of reach, impact and cost. Acommon example is the suburban retailer who selects ametro-wide media. Reach is probably excellent. Impact


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may be excellent. But cost is likely exorbitant because wepaid to carry our message north, south, east, west andcentral rather than targeting our specific area. A betteranswer may have been zoned editions of the newspaperor products such as suburban weeklies.

The advertising woods are full of extremely low-cost media that claim substantial reach. You can hit everyhousehold in the county for only a half a penny each! Buta tremendous number of these advertising vehicles are

unseen, unheard or used primarily for kitty litter. Low costis not a bargain without impact.

Many small businesses are best served by findingspecialized communication avenues aimed directly atprospective customers. An E-friend built a decent part-time business from a fish-cleaning table he invented. Hismedium of choice, as you would expect, was fishingmagazines. If we compare media by ad cost per thousandcirculation, the cost of a specialty vehicle will almostalways be higher than that of a broad-based vehicle. But theefficiency can be far higher because we are aiming directlyat our target audience. For this reason, direct mail can be avery efficient medium even though the cost per thousandmay be 20 times (or more) than the cost of mass media.

Note the role of market segmentation in planninghow to reach prospects. If we can determine that our idealprospect is a male / father / homeowner / earning over$50,000, we can seek advertising vehicles that target thismarket segment. Certain publications may be appropriate.

Purchasing a direct-mail list based on demographics isanother possibility.


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Advanced marketing thinking often strives forcreative market segmentation; for example: Ill bet parentsof four or more children, all of whom are less than tenyears old, are ideal candidates for a getaway cruise.

A direct sales force is the most dramatic example of achieving high marketing impact despite very high cost percontact. The cost will be high vs. almost any traditionaladvertising medium. Will that cost be justified? It dependson our industry, our product, the receptivity of prospects

and the effectiveness of our sales people.Avoid marketing/media planning by default.

Since many early-stage Es dont have every media-selection answer, there is a danger that I will illustrate by aslightly embarrassing personal story. I had decided tolaunch an advertising campaign for the fledgling UnifiedNeighbors concept and had blocked out a day to hear foursales presentations from advertising companies. Two of myemployees later confessed to this hurtful exchange:

Employee A: Bill has four appointments today tohear advertising ideas.

Employee B: Any idea which one hell choose?Employee A: Probably depends on who wears the

shortest skirt.Of course, I deny totally that skirt length could have

possibly swayed my judgment, but it illustrates an early Edilemma. You likely have no professional consultant to callon; and the woods are absolutely full of media sales peopleeager to help you. It is easy to fall into the sway of the most

effective media sales person or to lurch from sales pitch tosales pitch, trying various media.


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A key objective is development of a formal, writtenmarketing plan covering the next several months at aminimum. It is also very helpful to become a student of marketing within your industry and in businesses similar toyours. Whether you use books, chatrooms, classes,seminars, networking opportunities or organized study of the actual marketplace, gain the knowledge to put togetheryour own marketing plan. Then become the hunter ratherthan the hunted in terms of media vendor relationships.

Avoid stop-go marketing/media planning. Overthe years, Ive spoken with at least 25 Es on some variationof this theme: We got so busy, I put marketing on the back burner. All of a sudden the pipeline emptied and we startedmarketing furiouslygot busy again, quit marketing andthe cycle started all over.

Another key reason for your written marketing planis improved likelihood of a consistent marketing effort. Thebasic elements should just happen . The plan can besomewhat activity sensitive, with provision to increase ordecrease intensity as revenue levels fluctuate, but the key ispreplanned activity that rolls out through time.

Avoid the Greatest Error of All. Book 4 of TheEntrepreneurial Five Set talks about turning around yourown business when the going gets tough. Lets touchbriefly on a related, remarkably common business error.Budgets are tight. Dollars are being carefully allocated. Sowe decide to eliminate major portions of the marketingbudget(!) . Granted there may be turnaround situations in

which this step is correct because of bloated or ineffectivemarketing. There may be other cases in which it issurvivable for a short period while other problems are


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being addressed. But in general, it is akin to saving waterduring the dry spell by not watering your garden.Turnarounds are tough because problems beget problemsand things can spiral downward at an accelerating rate.Failing to market when embattled can lead to a revenuedrop that leads to more cost cutting, etc.

A principal of turnaround thinking can be borrowedfrom the old naval warfare concept If were going down,well go down with all guns blazing. With that attitude,

theres a chance of turning the tide and winning. If themarketing guns stop blazing, the only question is when wego down, not whether .

How much do you spend on marketing? There isno right answer, but an answer from the previous sectionwould be enough. Most business categories haveresearchable financial data such as average gross marginand average percent of sales spent on advertising,promotion and selling. Your early business plan thinkinghopefully included a dollar assumption. The only uniformadvice is this: Develop a budget that is affordable while

providing necessary impact, and then invest that moneywisely and consistently.

Study cable/direct television. If someone had toldme in 1955 that I would have 60 channels on my televisionand was only a small dish away from hundreds more, Iwould have scoffed. (We had three channels, and one of them didnt work very well.) These mediaas they splinterinto improbable subsets like The Quilting

Channelprovide a potentially affordable avenue to yourmarket segment.


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Study the Internet. The Internet brings a new toolto the E toolbox. Some have made it their avenue to theballgame as attested by a host of companies with nameslike Eggplant.com. Some are riding the power of established Internet forces such as Amazon.com or eToys.Some are integrating web technology into production andadministrative functions. Some are making their website anintegral part of marketing and customer interaction. Somehave dabbled only as far as a non-integrated brochure site

developed by their nephew who took an HTML class incollege. Somewhat surprising, a large group of businessesare ignoring the Internet completely.

In this Es humble opinion, this one should not beignored. I watched the printing industry revolutionized overa period of about eight years by desktop publishing and thedigital applications that flowed from its momentum. TheInternet as both trend and tool is much more powerful thandesktop publishing. I truly believe that ignoring it risksdestruction at the hands of competitors who are there tocapitalize on the momentum.

On the other hand, it is not a miracle worker. Astruggling restaurant doesnt develop a website, receive40,000 hits and become an overnight success. There is ahuge amount of noise on Internet search engines (asyoull quickly discover if your business name has even oneword remotely akin to the world of fetish). So the Internetmust be understood realistically in terms of use andpotential.

Nonetheless, it can be immensely helpful to smallbusiness. As one simple example, a growing number of consumers research their purchases on the Internet. They


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are there for facts, comparisons and ideas. If selling yourconcept has a high fact-communication requirement(especially if telling your story is aided by color pictures),the Internet can be a powerful addition to your presentmarketing programs. It may not replace other advertising;but at every opportunity, you deliver the message, Formore information, visit us at http://www.mysite.com.Suddenly you have a low-cost salesperson who can talk tomultiple people at the same time and is willing to work 24

hours per day at no additional wage. Its hard to pass thatone up.

As Internet technology matures, audio, video andvarious interactive possibilities will further expand the usesof this medium. Again, those who delay risk aninsurmountable competitive disadvantage, particularly asthe applications become more sophisticated.

Consider publicity. If your business concept oryour entrepreneurial story can be made newsworthy,consider press releases. Professional help is available in thephone book and may be as near as the journalism graduatewho lives in your neighborhood. Some ideas makeinteresting topics for radio (or TV) talk. Some are uniqueenough to earn a mention on late-night TV or in humorcolumns of the type written by Dave Barry.

A powerful argument for seeking publicity isleverage. The attempt at publicity is usually low cost. Oddsof success may be low, but the potential return is very highif you manage to ring the bell.


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Developing your marketing message .Excellent selection of communication vehicles is

worthless unless your communicated message is effective.Here are some considerations:

Strong, Distinctive, Confident, Bold Many of uswere taught that humility is good and bragging is bad. Butin a marketing sense, its usually necessary to present youridea just short of that line where confidence becomesobnoxious. Much of the reason is competitive. The jackleg

down the street will sure say hes the best, so youd betternot sit by too quietly.

Benefit Oriented Every time I go by an undernew management sign, I worry about the marketing savvyof the new E inside. What does that mean to me as aconsumer? If I knew the place was an absolute mess before,I most likely wonder what kind of fool would have boughtit. If it was a pretty good place before, I wish it had beenleft alone. Its pretty hard for the consumer to find muchbenefit in the marketing message under newmanagement.

Look at any large daily newspaper and youll findan amazing number of ads that bury benefit under self-serving headline copy. Consumers tend not to care thatwere celebrating Our 10 th Anniversary; theyd ratherknow whats in it for them.

Watch the Ego In most cities there are Esstarring in their own TV ads, and, being charitable, arandomly selected member of the broadcast journalism

sophomore class would surely have done better. Often theproblem is a triumph of ego over good marketing judgment.


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This one is complex though. When Iaccoco forChrysler and Kiam for Remington took to the airwaves,they werent professional faces or voices, but theysuccessfully delivered marketing messages important totheir company. So it can work. If your field is full of hucksters and con men, if your marketing message is trustand integrity, and if you successfully convey trust andintegrity in a personal advertising message, plow on. But if your heart of hearts motivation is a desire to see yourself in

lights, be careful.As in many E issues, the real key is objectivity. Get

opinions about your personal campaign idea. Then getobjective appraisal of its effectiveness. Your advertisingsales representative wont give it to you. Your spouse ormother probably wont give it to you. So find peoplewilling to tell the emperor whether or not he has clothes.

Action Oriented Be sure that your messageclearly suggests the prospects next step. Large companiescan apparently afford the luxury of purely imageadvertising. Some well-known athletic gear companiesdont even bother to mention their name, letting a swooshdo the talking. Most of us Es dont have that luxury, so itsimportant that our message clearly communicate whathappens next: call, visit the website, send the reply device,whatever represents the next step in the process.

A related action issue is urgency, a reason to do itnow. As the noise level of American marketing increases,urgency is becoming increasingly important. If you dont

secure action in the brief time you have attention, yourelikely shuffled to the bottom of a very tall stack.


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True Companies large and small have troublewith truth in advertising. Were not talking here about out-and-out deception (hopefully clearly a bad idea withoutcommentary from Bill Corbin), but rather consistencybetween message and consumer experience. A good friendworked for a well-known national brokerage when the TVcampaign broke talking about a whole new approach tocustomer service. More help. More knowledge. Great stuff.Problem was that no one in New York communicated to the

field offices that anything had changed. There was no morehelp out there. No more benefits. Same old stuff. Worse, noone even told the field that the campaign was breaking. Sowhen people called about the new derivatives package (orwhatever), they got nothing new except more busy signalsand longer service waits.

If weve opened an upscale business of almost anykind, our message must convey upscale, and the experiencehad better be upscale, especially if our prices are upscale. If we say great fun for kids, then we had better deliver greatfun for kids as analyzed by the only relevant yardstick:what the kids really think. If theyre driving home beratingtheir parents for another yukky idea, we need to reviseour message or our reality.

Understand the role of distribution channel. Anearly strategic decision relates closely to many of ourmarketing decisions. At the broadest level, you decidewhether to sell direct or sell through other businessentities. Direct usually means that your employees handle

every aspect of the marketing/sales process. They place theads, field the calls, close the deal and hand over (or ship)the goods to customers. Selling through others usually


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involves distributors or dealers who assume many of themarketing/sales functions. Dell Computer chose to selldirect, making powerful use of the Internet. Compaq wasclosely tied to a retailer-based distribution channel. Itappears that Dells choice was better. Here are some of theissues for small business:

Selling direct provides more flexibility and control. Selling through others often provides more market

presence than the E can afford going solo.

Selling through others has a cost usually reflected asa percentage of final retail price. In many businessmodels, distributors operate on a 15% markup;retailers operate on a 40 to 60% markup. If the Ecan efficiently reach the end user, much of thatmarkup can be retained.

Selling through others may provide functional skillthe E does not possess. An obvious example wouldbe overseas marketing where familiarity with, say,the Russian language is important.

A good distribution channel decision is extremelyimportant as it tends to establish the direction of all otherparts of the marketing mix. If we sell direct, we must learnto interact effectively with end users. If we sell throughothers, marketing emphasis shifts:

We must learn to sell to distributor/dealers. We must learn to sell through distributor/dealers,

meaning we find ways to assist our distribution

partners in successfully selling our products.


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A serious small business dilemma is earning theattention of a distribution channel. If we are a one-productcompany working with a distribution channel geared togiants, we will struggle for attention. A common analytictradeoff runs, Am I better off working with smallcompanies with limited power who find my idea interestingor giant companies with immense power who view me assmall potatoes?

4. The Final Step: Making the Cash Register RingFor some businesses, effective advertising leads

directly to the cash register. The prospect sees our ad, pullsour coupon and brings it to the store. For others, there is apotentially complex final step: closing the sale. This finalstep may occur on phone, Internet or selling floor. Veryoften it involves face-to-face selling where everyonesclassic example is the trip to the car dealership (still thestuff of great stand-up comedy routines). But in businessesfrom real estate to insurance to computer software sales, thefinal sales process is likely direct and personal.

Since there are a hundred final phases for athousand-or-so industries, we will generalize:

Study your process diligently. Obviously, theprocess of finalizing sales is the key to success. Brilliantconsumer analysis and advertising go for naught if we failto make the sale. Know the customer. Know thecompetition. Know your people and their skill set. Analyzewins and analyze losses. Call some of the people you lost

and ask for a candid assessment of their decision process.Why did you select a competitor? Know your statistics, andstrive constantly to improve them.


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This may be a very complex analytic process. Youmay be losing final sales because your sales people are tooaggressive, but it may be because they arent asking aclosing question well enough. You can analyze the salesprocess intensely and perhaps make a decision to becomemore aggressive when the real problem is price or productselection. Whatever the issues, you must study diligentlyand understand well the final selling process.

Be as aggressive as makes sense. This is a truly

tough issue. During a vacation to Cancun, my wife and Ifoolishly accepted our hotels free gift and breakfast if wewere willing to tour the hotel and learn how to save moneyon future visits. Breakfast was fine, the tour was OK, butsoon we were in a sales room where we would learn how tosave money. Long story short, it was a timeshare concept,investment was in the range of $10,000, and the heat wason. We resisted one sales pitch. A heavy hitter hit us again.We resisted. Our breakfast partner returned to lightenthings up. A bigger hitter hit us again. We tried to declinegracefully and exit but ran into a thousand or so reasons weshould stay and buy. The price of the deal started comingdown ($6,500 by the time we departed) and the heat keptturning up. I finally said something like, Look, friend, Inot only wont buy but I truly resent a resort screwing uppart of my vacation by high-pressure crap like this (orwords to that effect) and we literally pushed our way out.

In a personal sense, I hated the experience. As amarketer, I understand it (except for the fact that I wouldnt

go back to that resort if it was the only oasis on the hotplains of hell). The marketers knew they had one shot. If


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we got out of that room, we were lost as prospects, so theywent for it.

Every business has some combination of window of opportunity and time frame of potential interest. You needto understand your windows and develop your salesfinalization process accordingly.

Is your personal style compatible? It is vital thatthe E selects a business that is within the personal comfortzone in regard to treatment of prospects. I could not

personally run a business that involves intensebombardment of prospects until they either buy or punchme in the nose. Therefore, I must select a business conceptthat does not require aggressive direct selling of this type.But there are more subtle possibilities. Intangible productsfrom insurance to investment vehicles likely require areasonably aggressive closing process. Be sure tounderstand the likely process before you enter the fray.There is nothing sillier sounding than a failed E exclaiming(usually after a couple stiff ones at the pub), Well, once Irealized that making a sale required me to take a guy tolunch twice and visit his office at least three times, I saidno way Im gonna do that.

Does your concept require a sales force? Theprocess of hiring, training, motivating and controlling asales force is (understatement coming) a difficult challenge.The E must make sure all aspects of the process areconsistent with the business strategy. For example, if yourstrategy calls for intense customer service to develop and

maintain loyalty, your sales force is different from the teamthat will go to war daily to deliver a new wave of aluminumsiding clients. They are different in talent, temperament and


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percent salary vs. commission. The two ends of thespectrum are:

Aggressive 100% commission types who willbadger their own mothers until mom buys or throwsthem off the porch,

Kind and gentle 100% salary types who loveexisting customers to death but, during gradeschool, were uncomfortable selling fund-raisingcandy-bars to their own mothers.

The marketing challenge is finding the right pointon the spectrum (20% commission, 80% salary? 10%-90%?50-50?) and finding sales people with the right talent-temperament qualities to fit your business strategy.

Unless you are comfortable with this whole process,it is mightily tempting (and quite possibly wise) to hire asales manager to handle it. But it is crucial that you have aclearly defined strategy that your sales manager clearlyunderstands and is comfortable with. It is a surprisinglycommon error to hire the equivalent of an aluminum sidingsales manager to build a sales team that will call on gift andantique shops. Get out there and bang on em til they buy,boys!

Perhaps best for the early-stage E is intense study of successful companies in the same or similar businesses.Their model for sales force deployment is likely a goodbenchmark.

Word-of-mouth is amazingly powerful. The

previous discussion covers more or less textbookmarketing ideas. Heres a concept that cannot be ignored,but is much harder to explain. It is possible to make word-


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of-mouth a very important element in your marketing mix.UN Printing & Mailing was built to a $3 million volumelevel primarily by word-of-mouth advertising. We do notuse a traditional field sales force. Instead, we give nearfanatic attention to issues of customer service. Yourbusiness may be more or less oriented to word-of-mouththan mine, but dont ignore the potential role of WOM.Here are some issues:

Word of mouth advertising is not free. To earn

WOM requires an investment in customer service that isgreater than that of your competitors. If you are in disputewith a customer, you may bend over a little furtherbackward than you would need toor than your competitorwould. You must also surprise on the high side in variousways, and there may be costs.

Word of mouth can be encouraged. You canactually ask your customers to tell others about you.Methods can be subtle or can involve some variation of afinders fee, but nothing will work if you arent providingunusually good service.

Word of mouth is a two-edged sword. Just ascustomers can recommend you, they can also say, Dontgo within ten miles of that place. Heres why. Soawareness of the potential role of WOM includesawareness of opportunity and risk.

DONT LET MARKETING SLIP !The real key to long-term entrepreneurial success is

marketing. Yet it is often treated as a back-burneractivitysometimes ignored altogether. Be sure to developand execute excellent marketing programs.


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To Ponder and Discuss

1. Why can marketing slip easily to the back burner? As a time

priority? As a money priority?

2. List examples of very ineffective marketing campaigns. Why

were they ineffective?

3. List examples of marketing campaigns that correctly defined

market segments and efficiently/effectively reached thosesegments.

4. Which is more important: media, message, or sales closing

technique? If you can only improve one at a time, which would

you start with?

5. Do you believe that effective marketing can overcome a bad

ideameaning an idea that does not seem to fill real need?

6. Why is a 100% commissioned sales force wrong for a businessthat builds and nurtures long-term relationships?

7. Why is a 100% salaried sales force probably wrong for a

business that sells advertising or life insurance?

8. What do we mean by fit between your business strategy and

your selling strategy?

9. Take a specific business idea and list the pros and cons of selling direct vs. selling through others.


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Chapter 3

Customer Philosophy /Customer Values

I was well into my E career before I understood thekey role of a philosophy of customer service. Thestumbling evolution of my philosophy is probably

instructive if not inspiring, so here it is.I was sitting on a barstool at Muldoons about 5:30

one very grim afternoon in the printing business. There hadbeen an ugly debate with a customer who had behaved, atleast from my end of the telescope, like the south end of anorthbound horse. On the other side of the bar was mygood friend Fred Cameron. Fred had done duty in theFederated department store system, then launched asuccessful discount ladies wear shop. His latest venturewas Muldoons, a place that understood the Cheersconcept before anyone had heard of Cheers.

Man, it was bad, said Corbin. This customerripped us to shreds publicly and demanded a full refundeven though he had signed a proof OKing his artwork asis. He kept saying, Youre supposed to be theprofessionals. The words were right on the copy I gave you,and I counted on your typesetters to give it to me right. Hedidnt give a hoot that our proofing form makes it 100%clear that we dont provide proofreading and the customer

is responsible for pointing out typos. Whatd you do?asked Fred. Well, said Bill, after a nasty exchange, I


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remembered the old adage the customer is always right,and decided to let him have his way.

Fred asked, Do you know where the idea thecustomer is always right came from? I didnt, so he gaveme the history. Early in his career as a retail empire builder,J.C. Penney developed the always right concept as aphilosophy. His concept was revolutionary, but hisreasoning was simple. If there was a customer dispute inone of his far-flung stores, and if the local clerk or managerwas empowered to act as judge and jury, Penneyscustomer service philosophy would be an absolute hodge-podge based on the mood and temperament of individualclerks or managers. By instructing the entire system toyield gracefully in all disputes, Penney assured uniformtreatment of customers throughout the retail system.

Note this important distinction: Penney did not saythe customer is always right because he believed it was100% true. In fact, he well knew that some unscrupulouscustomers would take gross advantage of his philosophy.

But the philosophy was consistent with his expansive, andhugely successful, business strategy and has been widelyutilized ever since. Nordstroms, as one well-knownexample, has taken the philosophy to legendary heights.

Thirty or so years ago, a related concept floatedwidely: You cant afford an unhappy customer. Thepremise was that the cost in terms of negative word of mouth is higher than any possible cost to gracefully rectifya dispute.

So, early Corbin philosophy, if there was one, wasan unenthusiastic always right posture. In a period of about three months, three events changed my mind:


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A lady dropped in to order business cards. Sheasked for help designing a logo for her beauty salon (calledShear Something-or-other). I said we dont do logo design.She said, Oh, cmon, all I want is a flowing S to go withthe Shear. That cant be any big deal. I said we dont dologo design work because our art team was busy onnewsletter-type printing projects and wed found that goodlogo design takes too long because it is too subjective. Sheabsolutely insisted, promising not to be fussy about thedesign we gave her. Several art hours and seven Ss later, I(reasonably politely) told the lady to take her S and goaway forever. I received no money, but learned a valuablelesson. I imagine, had I stuck with an always right,philosophy, my children and my grandchildren after themwould still be reshaping the ladys S.

Another lady(?) became a reasonably large clientbut was so amazingly arrogant and rude that she invariablytrashed the day of any employees she encountered. Afterdetermining (by listening from an adjoining room) that my

people were accurately describing the verbal and emotionalabuse, I decided to fire the client on behalf of myemployees.

Shortly after that, the female manager of my ill-fated The Printing Place venture called to report spendingseveral uncomfortable minutes trying to keep a Saxoncopier between herself and the groping hands of our bestclient (in terms of dollar volume anyway). So I fired himtoo and decided that customers arent always right.

Once we left the relatively clarity of an alwaysright philosophy, we had to develop a corporate attitudetoward customers that (1) made good business sense; (2)


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had room to say enough to unreasonable clients; while(3) assuring that good judgment was used in any suchconfrontation. A competitors stupidity helped me developpart of the answer.

I was working our front counter in something like1984. The owner of a growing home inspection businesswalked in, threw a form down on the counter and said,Does this form look crooked to you? I agreed that itlooked a little crooked. If you were my regular printer,would you reprint it for me if I told you it was crooked?he demanded. Well, uh, sure, I said. Well, [acompetitor], the blankety-blank, blankety-blank down thestreet told me Im being unreasonable; that the form isusable; and that theres no way he would reprint it withoutcharging me. I do $10,000 per year with him. I cantbelieve it. Neither could I, so we printed the crooked form($48 worth at retail value) and became printer for the tenyears until the company merged with another firm. Our ten-year revenue was over $150,000 taken from a competitor

who battled his own customer fiercely for $48retailprobably $20 at actual cost.

From that encounter, we articulated the notion of avalued customer where valued is a combination of reasonably high ongoing business activity and reasonablyreasonable business dealings.

As we better understood our industry, we realizedthat success required adding value beyond paper and ink.We realized that many clients are seeking counsel in howbest to plan and execute complex projects, so we decided tobecome genuine printing/mailing consultants even if theshort-term result was reducing the price we might have


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been able to charge for specific projects. From this concept,we evolved the notion of seeking genuine partnershiprelationships with our valued customers. We wouldprovide help, fair prices, and intense attention to productand delivery issues. We would expect fair dealing andparticipation in the process such as timely return of proofsas required to help us stay on schedule. After climbing thismountain (It was a pretty long way from groveling forclients in our early days to declaring ourselves equalpartners in the business relationship.), the issue of handlingdisputes also clarified.

We maintain one aspect of always right thinking:asking ourselves, Is there any way this dispute canreasonably be declared our fault? And we set the mark high. For example, if our quote letter was confusing in anyway or if the customer might have reasonably assumed wewould notice an obvious error, we declare ourselves guiltyand resolve the issue without fuss. Our criteria is notlegal, but rather what should a client reasonably expect

from a company they are relying on as highly professional,meaning, in part, better than competitors?

If, after harsh introspection, it is clear that we havebeen fully professionalhence that the customers positionis unreasonablewe next ask, Is this a valued client-partner having a bad day or a bad partner having a typicalday? If the answer is valued client, we find a way toresolve the matter as smoothly as possible, even if therescost to us that no jury would reasonably require us to pay.The overriding goal is living to fight another day and wouldbe the basis on which UN would not have lost the home-inspection companys $150,000 worth of business. If the


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client is not in our valued partner category, we will not bowto unreasonable positions or demands.

On perhaps ten occasions, we have fired clients;usually because of abuse of our employees, blatantdishonesty or totally unreasonable business dealings. Wereserve the right to fire for the president of the company,but all employees know they will not be asked to absorbunreasonable treatment and are empowered to notify ourmanagement team of any concerns.

Avoiding Letting Jerks Dictate CompanyPolicy The most subtle message in J.C. Penneyscustomer is always right strategy is keen awareness of hiskey to success. Penney was appealing to middle-America.He had great faith that the vast majority of his customerbase were fair and reasonable people. He was willing toabsorb the cost inflicted by the few jerks so he could servethe vast majority extremely well.

Too often, fledgling Es are burned by a few jerks

and begin making increasingly harsh customer policies toavoid further abuse. The problem, of course, is that the corecustomer basethe good folkscan be alienated by harshpolicy. Ironically, a dedicated jerk usually finds a way tocircumvent the policies anyway.

The Employee-Customer Interaction TheCorbin story shows a clear orientation toward valuingemployees above customers in matters of dispute. I wouldargue, in principle, that this is correct priority setting, butthere is a tremendous burden on the E to be sure the rightperson is being backed. Employees can be tired, moody,


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unreasonable, surly and worse. The mere fact that anemployee feels abused does not declare the customerguilty. It is important to hear, blow by blow, whathappened. If it is possible to hear from both employee andcustomer, the ability to make judgment is much improved.The previous section warned of creating overly harshpolicy toward customers. Be well aware that someemployees, at least on some days, can take a p

bill corbin - entrepreneurial leadership - fundamentals

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