From the January 1996 issue of Startups

WARREN CASSELL IS a small-business owner; you'd be hard-pressed to find one smaller. His Just Books bookstore in Greenwich, Connecticut occupies only 650 square feet, and he has "one and a half" employees.

So how does Cassell compete with the big guys, who probably have 650 square feet of restrooms in their megastores? "Very effectively," he says. To be more specific: "I live and die by service."

Before, above, beyond and over all other messages is that one. Of the seven cardinal virtues of running with the big boys, six are "service." The seventh is "more service."

"The entrepreneur has to differentiate," says William H. Crookston, professor of entrepreneurship at the University of Southern California. "If Wal-Mart moved into town, I would still find successful ways to keep people coming into my store."

Service Specifics

Service is an immutable law of business. If you haven't learned that lesson, you aren't ready to start a business. And you'll learn the truth of it every day--unless you have a burning desire to be bankrupt. But what does "service" really mean?

For Cassell, it's calling people when Just Books gets a title he knows they'd want (and knowing his customers well enough to do so). It's also free gift wrapping, not charging for special orders, an 800 number and "five or six telephone lines," a newsletter, out-of-print book searches and worldwide shipping, among other amenities.

Adapt his practices to your particular business. Deliver (or assemble, hang, move, adjust, explain, etc.) your product. Get a pager and offer 24-hour access to clients. Establish yourself as an expert in the field so customers want to see you rather than the teenager behind the counter at your larger competitor's store. Get involved in the community so customers see how you enhance the quality of life in their town.

The result? Well, Cassell's toil has netted him, among other things, a 6,000-name mailing list; hefty corporate accounts and relationships with publishers, who now send authors with names like Kissinger and Thatcher to his store for "Meet the Author" breakfasts. (More service: Cassell guarantees autographed books to customers who want them, whether or not they attend the breakfasts). He even distributes pre-publication proof pages to customers who might like to order a book in advance.

One other thing: You charge full-price because, as Crookston notes, "You create and add value to a transaction--to a relationship--that a big company can't match." Last year, each of Warren Cassell's 650 square feet produced $1,500 in sales, $900,000 total.

Smaller Is Better

The next lesson involves a hefty dose of reality. You must come to terms with your size. You are small. But remember, that's a good thing.

Barbara J. Swist has no illusions about whether her business will make her a millionaire. Her self-named company, located in donated office space in Costa Mesa, California, gives people an alternative to hiring an attorney. She started it out of her home for $4,500, using money she won in a self-represented legal malpractice suit.

Calling herself a "legal alternative advocate," Swist uses her size to her advantage, providing in-depth consultation, one-on-one, to her clients. She does not give legal advice, but with her personal involvement she does "direct them in how to help themselves. Teachers don't make a lot of money, but what I do empowers people." Swist estimates her 1995 sales at $5,000 in videotapes and $20,000 in consulting.

Even Cassell, who jumped into an industry where the superior purchasing power of billion-dollar chains has sent plenty of small operators packing, has already considered--and rejected--expansion plans. "We haven't expanded," he explains, "because it would cost more in inventory and fixtures than it would produce in sales."

Find A Niche

Another way to compete effectively with larger rivals is not to compete with them at all. That's what Stephanie Graziano and Karen Adler did.

"I don't consider myself in competition with Disney and Warner Bros.," Graziano says. Most start-ups don't, since those two companies are megabillion-dollar entities. But, as president of Graz Entertainment in Glendale, California, she's smack in the middle of an industry those companies dominate: animation.

In the four years since she started the business with her husband, Jim, Graziano has produced cel animation--a traditional technique of hand-drawn and hand-colored animation--for television, multimedia, commercials and other projects. Two of the top-10 animated children's shows on network television, "The Tick" and "X-Men," are produced in her studios.

The niche Graziano found was in the work-for-hire market. Big players in children's animation don't produce a show unless they own the idea. Graziano saw she could offer services to creative people interested in retaining full ownership of their product.

"The larger companies want to retain the rights to their productions and build their libraries," she says. "That leaves fewer options for creators who want to produce shows without giving up ownership."

Now they have the option of going to Granziano or other work-for-hire companies. The niche is real, and so are the profits. With Graziano's 20 years of industry experience guiding its course, Graz Entertainment--started for less than $50,000--grossed between $8 and $9 million in 1995.

Finding such unserved niches is an excellent way to begin whupping the big guys, if not in their own backyard, at least on the same street.

Karen Adler's industry is similar to animation in that it would give even the hardiest entrepreneur pause: book publishing. In a world of Simon & Schusters and Random Houses, Adler is the owner of Pig Out Publications, which produces barbecue-related cookbooks, guidebooks and other titles; and Two Lane Press, which publishes regional and local travel guides and cookbooks. She does this all from Kansas City, Missouri--not exactly John Grisham territory.

Then again, these aren't John Grisham books. And that's the point. Adler started Pig Out in 1988 and added Two Lane Press two years later. Current production is about seven books a year, a total that is minuscule when compared to the New York City powerhouses. But, frankly, nobody cares.

"I don't compete with the large publishers," says Adler. Pig Out titles are sold in the so-called "barbecue belt," of the South and Midwest, including places like Kansas City, Memphis and Texas. Two Lane Press is also a regional publisher.

"My books are for a certain geographic area," she notes, "and we always find a local author to write them."

Distribution is just as unique: Adler ignores B. Dalton ("My books would be lost in those stores") and targets gourmet shops, some mail order, wholesalers and specialty shops related to each book. "They're sold in places where they'll stand out to the customer," she explains.

A final difference between Adler's enterprise and a massive publisher is that of the 30 titles she's published since 1988, only six are out of print. If a title isn't producing for the Random Houses of the world, they cut it loose. Adler's books did quite well in 1995; Pig Out grossed $125,000, while Two Lane Press boasted nearly $300,000 in gross profit.

Not only is it impossible for the big guys to compete at Graziano and Adler's level, they don't even want to. By the same token, you'll probably be so busy not competing with them, that you won't consider them.

"I'm so busy running the company," says Graziano, "that I don't have time to think about them. I just do the best job I can and don't worry about the big guys."

Seek Professional Help

A final piece of advice: Seek professional counsel. Don't be a lone ranger. Contact the organizations that are out there and want to help small-business owners.

A bookstore owner like Cassell, for example, can turn to the American Booksellers Association in Tarrytown, New York, as more than 8,200 members have done. Dues are paid based on members' sales, so even the small-business owner can join. The ABA offers things like marketing information, a credit card processing program, weekly newsletters, a monthly magazine, a listing on their World Wide Web site, and "booksellers' schools," four-day programs covering the basics of running a store.

Publishers can also seek advice from the National Association of Independent Publishers in Highland City, Florida, and the Publishers' Marketing Association in Hermosa Beach, California. Both offer information and assistance through newsletters, co-op cost programs, trade show exhibiting, direct mail, publicity, information on legal issues and so on.

"The trade associations are eager to help you," says Crookston, who is also a believer in chambers of commerce, community colleges, networking and trade publications ("especially their big, annual issues").

Talk also to other business owners who have 'been there and done that.' "Other people won't be afraid of giving away a little of what they know," says Crookston.

If you're skeptical, call an entrepreneur from another state. He or she probably won't care if you're starting a similar business 200 miles away. And call your local Small Business Administration (SBA) office for information about the Service Corps of Retired Executives (SCORE), a volunteer group comprised of retired business owners that offer business advice and assistance.

As you listen to their stories, you'll undoubtedly hear tales like that of Cassell. He bought Just Books in 1979, spending $50,000 and selling his house to do it. His first-year sales were $110,000.

He kept plugging away, as he does to this day, and his persistence is working like a dream. He's seen other bookstores in town, large and small, close their doors. Nonetheless, Warren Cassell is as sure today as he was that first year. "There wasn't much on the balance sheet then," he says, "but I knew I wanted to do it."

Five Easy Pieces

USC Professor William H. Crookston, also a consultant and a former business owner, offers five cardinal rules for holding your own against the competition:

1. Cash is king. "No amount of cash will support a bad idea," he says, "but in all cases, you must be an awfully good manager of your resources." Be frugal, collect on your accounts, work within a budget, don't stray from your territory and control inventory. "The biggest problem I have seen in small start-up businesses is that people lost control of their cash."

2. Provide services bigger companies don't--or can't. Crookston tells the story of a company promising overnight delivery. The firm concentrates on a small, local market and--here's the kicker--it'll pick up as late as 9:30 p.m. "Nobody's wrong to use FedEx," he says. "But this guy isn't trying to be FedEx."

3. Flexible is as flexible does. Each semester, Crookston shows his students slides of elephants representing the changing corporate structures of the last three decades, from the Bull Elephant of the 60s and 70s (huge companies of old) to an elephant with huge ears wearing a tutu (today's firms, which must listen to the customer's demands and dance to their tune).

In practice, he says, this means, "Be sensitive. Hours are longer, service is customized, location is convenient, delivery and installation are a given. Your expertise is your edge."

4. Listen to your customers. Don't keep your ear to the ground listening for trends (you may get run over). Instead, lend your customers your ear.

When customers choose a small business they "trade savings and low prices for service, quality and expertise," says Crookston. Each customer needs to know you have all three in spades, but each will have a different idea of what that means. The only way you'll know what they think is to listen to what they say and watch what they do.

5. Empower the people. This primarily means employees. Teach yours the rules of running a good business. Then give them the latitude to break those rules when necessary.

In Crookston's view, a rigid system means one of two things: You are either a huge company or you are a small one that does not much care to stay in business. The typical teenage worker at a fast food joint has neither the authority nor the inclination to adapt to customer service situations. Your goal as a business owner, on the other hand, is to win and keep customers.

"Customers want a relationship," says Crookston. "They want to keep going back to a place of business. Rather than hustling to the next order, be adaptable in ways the big guys can't and hang onto the people you've dealt with. Embrace your customers. Make them clients."

Paul Hughes writes for the Orange County Business Journal in California.

For More Information...

American Booksellers Association, 828 S. Broadway, Tarrytown, NY 10591, (914) 591-2665.

Barbara J. Swist Enterprises, 2900 Bristol #A-108, Costa Mesa, CA 92626, (714) 854-0881.

Graz Entertainment Inc., 1745 Victory Blvd., Glendale, CA 91201, (818) 241-6718.

Just Books, 19 E. Putnam, Greenwich, CT 06830, (203) 869-5023.

National Assn. Of Independent Publishers, P.O. Box 430, Highland City, FL 33846,

(941) 648-4420.

Pig Out Publications/Two Lane Press, 4245 Walnut, Kansas City, MO 64111.

Publishers Marketing Association, 2401 PCH #102, Hermosa Beach, CA 90254,

(310) 372-2732.