Network: October 1989
Educating the Owner
Most of the Network responses we received this month concerned the query from Steve Tanner of Bolero Pizza, Subs & Salads (Educating the Public, August, [Article link]). He had expressed exasperation with the intelligence level of his blue-collar customers, who would ask, for example, "How large is a 12-inch pizza?" One reader called in to say he had the same problem. Others were less sympathetic:
It is a shame that Mr. Tanner requires a certain level of intelligence in his customers. I would have thought he needed only hungry people with money in their pockets. And maybe my intelligence is limited, too, but how large is a 12-inch pizza? Four slices? Six? Tanner says the old owner offered items he doesn't carry anymore. If I knew someone who would come in three times a week and pay $2 for a peanut-butter-and-banana sandwich, I'd figure out a way to honor his taste buds. Steve, are you running a quiche-and-club-soda-let's-do-lunch-dahling café, or are you trying to make money on your food kiosk in a blue-collar part of town?
Christi M. Lutz
Why not give customers a paper cutout of a 12-inch pizza, listing all the ingredients as well as the kiosk's address and telephone number? Or what about delivering free pizza samples at lunchtime to different areas of the city where people might appreciate his offerings more?
ATEC Associates Inc.
Bob Winter of Bob Winter Designs Inc. had inquired about the types of contract services available to inventors (Help for Inventors, August, [Article link]). In particular, he wondered whether outside contractors could be found to hand parts ordering, order taking, and the like.
Mr. Winter can easily find a contract manufacturer who will order material, fabricate product, and ship to customers. He should be prepared to pay a minimum of 10% markup on materials for these efforts. He would be unwise, however, to let "order taking" get out of his hands, at least in the early stages. How else can he get a feel for the market and a sense of the opportunities and options available? Later on, he can rent an 800 number with operators to take orders.
A. G. Alessi
J.T.L. Design Group
Ocean, New Jersey
Perhaps what Mr. Winter needs is a business like the one described on page 60 of the August issue (" Inc.'s Guide to 'Smart' Government Money," [Article link]).
John E. Cutting
J & N Enterprises
For more about business incubators, see "Mother of Invention," [Article link].
Readers also responded to Robert J. Connolly's request for help in structuring his new company (How to Organize a Business, August, [Article link]). Most advised him to get an accountant or to take an accounting course. A representative of the Small Business Administration wrote in offering assistance. Then there was this letter:
Sole proprietorships, partnerships, and corporations are primarily tax and legal liability structures. Any accounting firm would be happy to describe their differences for a fee. That's not how to determine a company's organizational structure, however.
I used to be a small-business consultant. When I founded my own business, I began by writing the world's most structured organization chart. I promptly hired too many chiefs, and their wages almost killed us. What did I learn? You should hire the foot soldiers first. Build from the bottom up, not the top down. What work needs to be done to help you? Write down the tasks; then sort them into well-thought-out job descriptions. You'll find it much easier to decide when and whom to hire. You'll need supervision only as your company grows. Let it grow and shape its structure as you go along.
Titles are important. I let my 50% partner be president -- he loves it. I originally called myself the chief financial officer -- I grew to hate it. People thought I worked for my partner. I discovered that customers enjoy talking directly to the boss. A proper title will help your sales and your psyche. Some entrepreneurs like the title owner. That certainly says it all.
Ask your team members about their titles, too. My productions director was glad when I suggested we replace the word manager in his previous title. And we don't have assistant lighting technicians. Oh, and one last thought. I have been reading about incentive plans in Inc. for years. I finally implemented one. It works!
Douglas W. Peterson, CPA
Chief Executive Officer
Elk Grove Village, Ill.
Karen Blue of Advanced Marketing Solutions had written for advice on "productizing" services -- that is, packaging them as products that could be marketed more easily to prospective clients ('Productizing' Services, August, [Article link]). Readers differed in their recommendations.
Like Ms. Blue, we thought that prepackaged services would be easier to sell, but clients didn't like that strategy at all. We now focus on the more difficult task of designing individual procedures to address clients' unique needs. Since shifting our focus in this way, we have had a tremendous increase in repeat business and learned an important lesson: clients with complex, specialized problems are not interested in canned solutions.
J. Gregory Bryan
Earthfield Technology Inc.
I've been working toward the same goal as Ms. Blue with the services my law office provides. Here are my suggestions:
1. Make sure that both you and the client know what's included in the service, and put the description in a brochure. Anticipate related services a client might desire, and describe those as optional. This prevents misunderstandings and helps to sell related services at an additional fee.
2. Describe the service from the client's perspective. Remember that the 'product' is what the client has at the conclusion of the service -- not the process you go through to reach that result. Avoid abstractions, too brief descriptions, or the jargon of your business.
3. Put a price tag on the service. I use flat fees whenever possible. Clients like a flat fee because they know how much they'll be paying. I like a flat fee because it lets me ask for payment up front. But protect yourself by putting a lid on the total number of hours included.
4. Hire a lawyer to draw up a simple but clear agreement regarding the service being rendered and the fee and payment arrangements.
Ann E. Kruse
Ann E. Kruse & Associates
A Company Apart
Finally, we heard from readers about the query from Steve Opperthauser of Corporate Interviewing Network, whose company is hired by corporate clients to videotape interviews with job applicants (Video Differentiation, August, [Article link]). Noting that he does not come up with the job candidates -- their names are supplied by the clients -- Mr. Opperthauser wanted to know how to differentiate his company from a search firm. A couple readers wondered, why bother?
Instead of trying to correct the image of his firm, Mr. Opperthauser could take advantage of it. A search firm does not necessarily have to search for individuals. By carefully categorizing candidates not hired by the client, he could create a database of candidate videotapes over time. He could then develop a computerized search system to locate the videotapes of individuals who fit a client's needs. This approach has two distinct advantages. First, you can provide clients with a second service if the first one fails. Second, the product needed for the second service is actually created by the discards of the first. How many businesses are that fortunate?
Gregg J. Haugland
Vice-President of Research and Development
Distributed Micro Systems Inc.