The Eye of the Beholder

Promotional materials (brochures, fliers, business cards and catalogs) can also plant an image in customers' minds that your homebased company is actually bigger than it is. One homebased firm in Chicago has an eight-page, full-color brochure, with graphs, charts, smiling faces of customer referrals, and photos of forklifts in a warehouse and a three-story glass office building on the cover-even though the business is operated from a home with no warehouse. The owner sends out hundreds of these mailers with money-saving coupons and refers to his "…staff processing your orders for immediate delivery."

Of course you want to create a professional look for your company using marketing materials, but when your presentation is intentionally designed to connote a larger business with employees and a nonhomebased headquarters, you're deceiving your customers. "What customers look for in a homebased business is substance," explains Laura Douglas, founder of marketing consulting firm Small Business Marketing Analysis and co-author of Getting Business To Come To You. "When there's an apparent lack of substance, size often becomes the only criterion left. When a homebased business fakes size to appear substantial, it ends up losing credibility; so not only are such tactics not harmless, they ultimately help destroy credibility for all homebased businesses."

Contractual Scale
Client contracts can also be worded and structured to generate an impression of legal efficiency and high-level business activity. For example, one contracting firm I know of is really just an entrepreneur operating from his home. However, he bids job contracts as though a network of carpenters, electricians, plumbers and masonry professionals from his firm will be finishing the job. The line-item costs analysis of the contract acutally means the owner will be subbing out 75 percent of the tasks and materials requirements to other independent suppliers and passing the cost of these services along to the consumer at the job-site with a mark-up. But the lengthy appearance of the contract virtually ensures the customer won't note the discrepancy in his representation.

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David Brown, a landscaper in Santa Barbara, California, knows that many landscapers work hard to create a large-scale image in order to bid on the really big jobs for city- and county-managed construction sites. But he's seen firsthand that ultra-low bids submitted by smaller companies often force the owner to do all the work himself because there are contractual minimum requirements in labor rates for hired workers that a one-person outfit can't accommodate. "I'm happy to represent myself as the owner who actually does the work that's bid," says Brown. "The clients know I'm the one who bids the job, completes the work, and stands behind the finished product." As such, Brown made the decision not to pursue "big business" strategies that could compromise his image as a seasoned craftsman and responsible business owner.

David Newton is professor of entrepreneurial finance at Westmont College in Santa Barbara, California, and the author of Entrepreneurial Ethics: Values and Decision-Making in Successful New Ventures. He is also Entrepreneur.com's Financing Expert. His other books include How To Be A Small-Cap Investorand How To Be An Internet-Stock Investor.

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