Defending themselves against large insentient forces like insurance companies and the workers' compensation system creates a siege mentality in many small businesses. Those companies are often run by families struggling to preserve a legacy, which frequently means relying on what is tried and true. Moreover, small family-run businesses often grow risk averse as the margin for failure narrows.
Tom Stafford is 33. He began working at Kiva Container at age 9, watching his father try to experiment with new ideas, while his father, Mel, opted for a more conservative course. Now he understands that tension. "It's hard working with family at times," says Stafford. "There's always a power struggle between father and son. My father pushed against his father to take us places we had not been before, and now I see it happening again. It took me three years to switch our salespeople from salary to commission. It took me three years to get a consultant to come in and analyze the company."
Tom Stafford's background is in marketing. That is what he has excelled at, having been national sales manager for a cosmetics company, expanding distribution from 3 to 42 states. But then the family business drew him in. He recalls looking at statistics for family-run businesses and realizing the long odds: the chances of a family-run company being passed intact from the first generation to the next are fewer than one in three.
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In a Just-in-Time World You Niche and Innovate
Technology has greatly accelerated the pace of change, which, in turn, requires a stepped-up rate of adaptation. Small businesses, by definition, are specialists and theoretically can adapt quickly. But just when small companies grow secure in a niche, they must respecialize. They must become perpetual learning organizations.
Five years ago Kiva Container made just four basic products and variations thereof. Since then, Kiva's product offerings, says Tom, "have grown by 1,000%." A few years ago some customers drifted away when they could not get everything they wanted from Kiva. "We have done a lot of things to get that business back," says Stafford.
Key to making this "horizontal" strategy work is the need to constantly innovate. Kiva has invested $50,000 in a CAD/CAM system to generate new designs quickly. Larger customers come looking for patentable designs and an exclusive license on those designs. The potential payoff for Kiva is larger, but so, too, is the up-front cost and attendant risk. Currently, Kiva is talking to half a dozen large customers, each of which could give it $1 million in business, based on a single proprietary design. But product innovation requires a lot of preliminary design and development work with no guarantee that it will yield a contract. Tom Stafford estimates that in the past year alone Kiva has spent $50,000 on product proposals that have resulted in zero sales. In fact, the Staffords assert that some customers come in, look at Kiva's ideas, and go elsewhere to have them executed. Kiva wants big customers because there is good operating leverage in the work -- if they can get it. If they can't, considerable time, effort, and money have been spent for zero return.
At the same time Kiva must keep pushing on related fronts. Attending trade shows has become more important than it used to be. But a large regional show can cost Kiva $25,000 to $30,000, and meanwhile, the number of shows has increased exponentially. Kiva has brought more consultants in and sent more employees to seminars -- all to meet the market's expectations. Larger customers now insist that Kiva manufacture according to ISO 9000 standards -- which for a box maker is overkill. Ruth Stafford says that ISO 9000 creates a huge paper trail. The manual for the purchasing agent alone is two inches thick.
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The Business Becomes Your Life
In talking to people who run their own small businesses one hears a common refrain: you may leave the business each night, but the business never leaves you. The business preys on people. It wakes them up at 3 a.m., and if it can't rouse them, it infiltrates their dreams.
At Kiva one readily sees the stresses and strains. Earlier this year Ron Stafford spent a full month away from home, helping to set up the new plant in South Carolina. His wife continues to work her 70-hour weeks -- and then some. In addition to her work with NAM, Ruth Stafford is the first female president of the Arizona Association of Industries. She has gone to Washington on her own time and dollar to talk to legislators about health care and other matters affecting small business.
Asked if she takes her work home, Ruth Stafford replies, "I'd better take it home." Does she work harder today than in years past? "Definitely," she answers without hesitation.
Does she worry about Kiva's future? "Definitely."
She also worries that given the way things are going she might not have much of a company to pass on.
