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."