It’s a good bet that if you own a small business you probably learn something new every day. In today’s volatile marketplace, knowledge is still power. Granted, there’s no substitute for on-the-job experience but you must be prepared to keep up with the rapid pace of commerce in order to stay competitive.
Entrepreneurs who believe they can stay on top by merely having a good product and loyal customers soon discover that isn’t enough anymore. Experts maintain that those owners who stop learning are basically writing their own epitaphs.
Nancy Fabricius, a Fiducial franchisee in Marlton, NJ, is constantly counseling her small business clients on the importance of keeping up with the changes in their specific industries.
“They should be reading industry magazines articles and should be members of their industry association, ” said Fabricius. “That’s how you stay on top of changes. They should also go to conventions. ”
Keeping up with the changes
That’s one of the ways Fabricius keeps up with the changes that are occurring in the accounting industry. She was among the attendees last week at Fiducial’s Fifth Annual Convention in San Francisco where she learned about utilizing Information Technology systems to better serve clients.
“You should make sure that the IT systems are interfacing smoothly because clients don’t want to pay to process work—they pay for consulting, ” she said.
Fabricius keeps up with the latest trends in the accounting industry and in particular how to target small businesses that have been dropped by larger CPA firms who don’t necessarily want their accounts anymore because of compliance issues with the Sarbanes-Oxley Act of 2002.
One of her clients owns a gym that she purchased two years ago but fitness centers have changed a great deal since then. The client, who was always an aerobics instructor, has found out that aerobics aren’t in much demand anymore since gym club members want to lift weights, use cardio equipment, get a massage and sit in the sauna as opposed to turning themselves into bodybuilders.
Fabricius recommended that her client attend a fitness industry conference in Atlanta, which she did, and the owner came back much more open to making necessary changes in her operation. She will even be charging more for annual membership fees with aerobics and massages offered as extras.
A key reason why small businesses fail, Fabricius says, is they do not stay on top of what’s happening in their industry.
“Business has a life cycle, ” she said. “It’s all about dealing with consumers who are trendy people. The smartest entrepreneur will definitely spend more time keeping up on their industry and less time running the company. ”
Being open to new ideas
Larry Recor, who was named Fiducial’s 2005 Franchisee of the Year at the recent company convention, increased his knowledge by sitting in on several IRS seminars and networking with his colleagues. He learned what’s going on in technology where “new advances are being made to help us run our businesses. ” The IRS seminars also paid dividends.
“It was an update basically to let us know what they IRS is doing as far as audits and areas of concern that they have, ” said Recor. “It’s important that we have this information so that small business owners can be vigilant in their record keeping and they aren’t surprised with audits. ”
There are time-tested formulas in any industry and it’s sometimes a hard sell convincing a veteran entrepreneur to alter their routine.
Terry Smith, a business development specialist with Fiducial in Maryland, has 30 years experience in the sales field. He says there’s definitely a formula that he follows but he still keeps an open mind when it comes to other ways of doing things.
“As new ideas come along I’ll certainly make changes but the original premise of going out and acquiring small businesses for clients for accounting firms still rings true, ” said Smith who has observed over the years that the most successful franchise owners “were the ones that followed the marketing system that they paid for” in buying the business.
“It would not be a good idea for franchisees to reinvent the wheel, ” he said. “The system works and if you follow it, you’ll have the tools and the formula to make the presentation and close the sale. ”
Working on the business
Gene Polley, a senior small business advisor in Fiducial’s San Diego office, took a good look around at the company’s convention and saw it was mainly comprised of veteran franchisees in attendance.
“These are the successful ones who are willing to pay the money to show up, ” he said. “They go to classes, go to seminars, read books, get periodicals and have mentors, advisory boards or some way of getting input on their business. It’s the ones who are insular in their approach that are not successful. You need to listen to someone at your level. ”
While it all depends on the business, Polley underscored the need for owners to get feedback about their operation whether it’s meeting informally with fellow business owners or having something more formalized such as an advisory board that meets and advises them on their business. In any case, he says it’s the smart owners who are “always learning and bouncing their business issues off other business owners so they’re getting varying perspectives. ”
A catering client of his remains ahead of the pack in that industry because he bought his own building and was into pricing so that he knew what the profit margin was for every item listed on the menu.
“He could tell you how profitable lunch was, ” Polley said. “Even though he didn’t know how to go about measuring these things he knew he had to get a grip on this stuff. ”
But Polley noted that many owners have tunnel vision when it comes to doing things a certain way year after year.
“Most don’t go to seminars—it’s the minority you see there but those are the best ones, ” he said. “They are active in the chambers of commerce and they’re working on their business rather than being buried in it. ”
Be aware of your environment
Successful entrepreneurs are those that are always learning, according to David Prather, Fiducial’s accounting and financial reporting product manager.
“Typically you know your peers, ” said Prather. “If you have a flower shop you go to the same distributors and attend the same trade shows where vendors want to get your attention. ”
Prather says owners should become aware of their environment to keep abreast of the latest trends.
“As far as expanding your business you’ve got to look at the ice cream store, ” he said. “What do they do in the winter—become a coffee shop? You have to look at different ways to extend your business. ”
Randy Penn, branch manager of Fiducial’s Arvada, CO, office believes there are more successful business owners who listen, change and learn from the market then those that are high-bound, set-in-their-ways and rely on a rigid formula to be successful. Some business models are flexible enough that the entrepreneur may never see it run into difficulty in their lifetime. Yet trouble comes to any business if certain issues are not addressed. Penn pointed to the recent announcement by General Motors spin-off Delphi Corp. , the world's largest automotive parts supplier, which filed for Chapter 11 bankruptcy protection.
“That business is changing and the successful entrepreneur that built and grew GM in the early part of the last century had no idea that spinning off the parts organization might be a good deal and now it’s filed for bankruptcy, ” said Penn. “Sometimes the model works long enough or there are enough small corrections that the entrepreneur still sees success even though they’re not innovating. Failure to innovate at some point will doom the business. ”
Be willing to listen
Occasionally an industry can undergo so many changes that it’s difficult for owners to avoid being swept under. Jay Heaton, a senior business advisor for Fiducial in Elkridge, MD, has a number of clients that operate service stations and convenience stores who are reeling from the intense competition in that industry.
“The problem you’ve got is the industry is changing so much that people are willing to sell fuel for nothing to get people in the stores and they don’t make a profit, ” said Heaton who has pushed his clients to add automated teller machines (ATMs) in their stores as a counter measure.
“ATM machines don’t take up a lot of space but it generates a tremendous amount of profit, ” he said. “They get [on average] $1.75 per transaction—that’s a good profit center. ”
Heaton has been advising operators in the service station industry since 1969 and knows those dealers that are successful are the ones that have been able to adapt.
“I think if they aren’t willing to listen they are just going to dry up, ” he said. “Competition is just too tough. ”
Stephen Parezo is the Media Manager for Fiducial.