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The Inc. Network

Reader-to-reader advice.

Maritime Marketing
Our eight-year-old company custom-fits marine canvases, and our customers are boaters within a 40-mile radius. We'd like to grow the company by marketing our services beyond that radius. What's the next step?

Sandy Price

Owner

Price's Yacht Canvas

St. Michael's, Md.

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Marketing beyond that 40-mile radius will likely increase your market presence , but it's hard to say if it's the most profitable growth strategy. After all, adding clients doesn't automatically fatten profits, says Jim Miller, founder of the Rigging Co., a company in Portsmouth, R.I., that rigs yachts. "We had two consecutive years of doubling sales, but the sales growth had no impact on the bottom line. Plus, as we grew, our quality and commitment to existing accounts decreased, and that created a greater urgency to attract new customers," says Miller.

Miller points to a marketing fundamental you mustn't ignore. "In hindsight, it would have been much less expensive to sell more to existing customers than it was to acquire new ones," he says. He suggests you calculate the cost of acquiring one new customer for each marketing strategy you try. If, say, you spend $1,200 for booth space at a boat show, and you get 40 new customers, your cost per new customer is $30.

Remember, too, that if your company isn't profitable now, any growth could accelerate a depletion of resources. Take an inventory of your internal resources to determine whether you have what you need to support the amount of growth you seek. What's your capital base? How many bodies will you have to hire? How thinly will your resources be spread in your ideal growth scenario?

Once you've taken the caveats into consideration, study the growth curves and marketing strategies of companies in your industry. Did they introduce products or add services that clients needed? Did they explore tactics such as supplying canvas products to original-equipment manufacturers?

Insiders agree that boat shows, expositions, and regattas are rich sources of new customers. At the next such event, hand out self-addressed, stamped postcards to collect basic information from attendees: name, address, phone number, and reason for interest in your services. "It's a great way to build a database of qualified buyers," says Dianna Boyer, chief financial officer of Maritime Services, in Hood River, Oreg., which customizes interiors for commercial vessels. Boyer says that Maritime's managers can't afford not to go to about a dozen such shows a year.

Meanwhile, work at boosting your business's name recognition. Back in 1989 the Rigging Co.'s Miller invested about $8,000 in a black-and-white catalog that doubled as a company brochure, which he distributed at boat shows, yacht clubs, and marinas. He even poly-bagged some to drop on every boat he could reach. All that running around paid off: by 1990 sales had doubled, and a year later the Rigging Co. made it onto the Inc. 500, our list of the fastest-growing private companies.

You can also buoy market visibility with an assortment of direct-mail pieces. Maritime Services includes a company fact sheet with all responses to product or service inquiries so new customers can learn about the company's range of offerings. Boyer also recommends short, focused customer-satisfaction surveys to reveal your strengths and weaknesses. Also, you might hold promotional events, such as an open house to display works in progress. To alert likely attendees, distribute a flyer that quotes your customer-satisfaction creed and includes a list of the services you provide, projects you've recently completed, and types of boats you've serviced.

* * *

Executive Pay 101

I'm opening my own business, and I'd like to know the basic issues other small-company owners consider when they're setting their own compensation levels.

Matt Groescher

Lodi, Wis.

* * *

Here's a great rule of thumb from Randy Kirk, president of AC International, a company in Santa Fe Springs, Calif., that makes bicycle accessories: "I've always tried to pay myself the same amount I'd have to pay someone else to come in and do what I do," he says. "That way I can't go wrong."

Kirk adds that your compensation should be featured in the realistic budgets you set for the start-up years and well into your company's initial growth spurt. You'll have to decide on the rewards you feel you deserve for the risks you're taking. But your budgeted salary levels shouldn't raise investors' eyebrows; if need be, hire an accountant whose independent, professional assessment can help you calibrate those levels.

A few additional angles to think about before you cut your first check:

· The nature of your industry or business. "Executive pay in a service or research-and-development situation is different from that in product manufacturing. For example, if you're in the R&D phase, where you're borrowing heavily, pay would be more conservative. But once you're generating revenues, you can set a salary level based on projected revenues two years out," explains executive-compensation specialist Peter Chingos, a partner with KPMG Peat Marwick in New York City.

· The importance of benefits. "Many owners overlook the immediate need for benefits. Protect yourself and your family with medical, life, and disability insurance. Your first dollar should go toward that," advises compensation expert Frederic W. Cook of New York City.

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