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BUSINESS PLANS

Big Firms Can Share Some Helpful Wisdom

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If you're like most entrepreneurs, at your company you're the chief executive officer, top salesman, finance boss, personnel director -- and you make the coffee. And increasingly, you find yourself competing against larger companies that have well-trained specialists in all of those roles.

It hardly seems fair that the competition has all that expertise, and there you are winging it. But very likely, large companies with such expertise play another role in your business: they're either suppliers who rely on you to sell their product or service; or they're your customer, buying from you.

Here's an idea: Ask them for help. They need you to stay in business, as their customer or supplier, so perhaps they'd be happy to share a little big-company know-how with you.

Measure Performance

Inventory management, cash-flow analysis, work-force training. These things aren't rocket science, but they're not easy, either. And if you're not sure how you're doing in these areas, chances are you're not doing well enough; measuring performance, regardless of the business you're in, is the first step toward improving it.

In retailing, the advantage enjoyed by big players grows each year, as Wal-Mart, Target, Home Depot and the like continue to chew up market share formerly held by small players.

Hallmark Cards Inc., Kansas City, Mo., with annual sales of about $4 billion, sells to many big chains. But it also sells to about 4,000 independently owned little shops known as Hallmark Gold Crown stores. And the big greeting-card maker is trying to do more to help those small players survive and thrive.

Next year, says Carol Hallquist, Hallmark's vice president of specialty retailing, Hallmark expects the number of Gold Crown stores to shrink by about 100. The Gold Crown group has already shrunk by about 500 stores in the past five to six years, Ms. Hallquist says.

Market-Data Help

So, her group, about 160 people, is devoted to helping the entrepreneurs who own and run those stores be more competitive. Hallmark helped hundreds of the independents renegotiate leases last year, providing local real-estate market data and other help to keep rents lower.

Hallmark also provides employee hiring and training programs, customer-satisfaction surveys, theft-prevention plans and a newsletter that spotlights best selling products and slow sellers, helping the retailers better plan their buying.

An inventory management system installed in about 1,000 of the Gold Crown stores -- mostly in ones whose owners operate multiple stores -- has helped increase inventory turns, which lifts cash flow.

And it helps merchants, with precise numbers, to make difficult decisions to get rid of product lines that move slowly, including collectibles, which were so hot in the 1990s but now have cooled off.

"The inventory turn is bad on that product," Ms. Hallquist says.

Hallmark is now mulling whether it should develop a simpler inventory management system for the single-store owner.

Big-Time Tinkering

The company owns about 340 Gold Crown stores itself. And in those, Hallmark tinkers and experiments, trying to find ways to lift sales and profits. Serve coffee? Sell flowers? "We try a lot of things that don't work," Ms. Hallquist says of those two efforts.

But changes in layout and lighting made at corporate-owned stores do seem to be lifting sales, she adds, and that will be shared with independent operators.

More broadly, retailers can often look to industry associations for market data and training programs. And other efforts are afoot to help the small player.

"We'd like to eradicate retail bankruptcies," says Dick Outcalt, a partner at Outcalt & Johnson Retail Strategists LLC, Seattle. Mr. Outcalt's firm recently formed, with backing from Hallmark and some other big suppliers to independent retailers, the Retail Owners Institute, a for-profit seller of financial training and planning software that also offers lots of management tips free on its Internet site, www.retailowner.com.

Financial Tools

Merchants "didn't go into business because they love finance," Mr. Outcalt says. But without some financial tools, retailers are increasingly vulnerable to competition.

For small merchants, increasing annual inventory turns by one-half a turn often produces enough additional cash flow to eliminate debt, Mr. Outcalt says. That can either lower the risk profile of the business or allow it to finance some growth.

An independent merchant is usually his or her own head buyer, too. As such, "they fall in love with the merchandise," Mr. Outcalt says.

"They remember when they bought it." That makes them reluctant to slash prices soon enough to clear out inventory, leaving more cash tied up and blocking the way for fresh merchandise to hit the sales floor.

Quicker Cuts

"Take it earlier," Mr. Outcalt advises on discounts. "The first discount is the best one."

And most simple inventory management programs provide compelling information to small merchants that will encourage them to do so.

It's not just in retailing, of course. Smaller companies in virtually every industry are being beaten now by better-informed, better-financed and better-managed competitors, who also happen to be bigger.

So, find a friendly big company and see what you can learn.

Copyright © 2003 Dow Jones & Company, Inc. All Rights Reserved

Last updated: Nov 1, 2003




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