Nine ways to make sure your small business is better off four years from now (no matter who wins the election)
By Michael Houlihan and Bonnie Harvey
“Obama’s tax policies will cripple small businesses!” “Romney cares only about bankers, huge multinational corporations, and the super wealthy!”With election coverage ramped up to a fevered pitch and blasting the airwaves 24/7, many small business owners are rightfully feeling confused and anxious over which candidate will save the day and which will rain death and destruction on our free enterprise system.
Michael Houlihan and Bonnie Harvey have a word of advice: Tune out the rhetoric and get back to work. No matter who occupies the White House, entrepreneurial small business owners will have to rely on who we’ve always relied on to be successful: ourselves, our employees, and our customers.
“Whoever heads up our government will have only a minimal impact on the small businesses that form the backbone of our nation,” observes Houlihan, co-author, along with Harvey, of The Barefoot Spirit: How Hardship, Hustle, and Heart Built a Bestselling Wine (coming in January 2013 from Evolve Publishing, www.thebarefootspirit.com). “We, ourselves, are the best determinant of how successful our businesses will be.”
“Examine the issues and vote your conscience, yes, but don’t take your eyes off the creativity, hard work, and proven business practices that keep the entrepreneurial engine humming along,” adds Harvey.
Houlihan and Harvey speak from experience. They are the founders of Barefoot Cellars, the company that transformed the image of American wine from staid and unimaginative to fun, lighthearted, and hip. They started the Barefoot Wine brand in their laundry room in 1986, made it a nationwide bestseller, and successfully sold the brand to E&J Gallo in 2005. Starting with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles and create new markets.
What’s more, they did it all while four presidents, each with very different governing styles, held the highest office in the land.
“From Reagan through Clinton, and through both Bushes, we learned a lot about what makes a small business successful,” Houlihan reflects. “We learned the hard way and the best way: by experience. I am convinced that any company that has a good product or service and gets the basics right will thrive – regardless of the outcome of the election.”
What exactly are the basics? Houlihan and Harvey share nine of them:
- Embrace the advantages of being small.
While small companies, especially start-ups, tend to be undercapitalized and (relatively) unknown, they also have some big advantages over larger competitors. They tend to be more nimble and flexible, instead of being mired in bureaucracy. Since they don’t have big, “siloed” departments, they can communicate faster. They’re less risk-averse. All of this allows them to turn on a dime in response to market changes and customer demands.
Even a shortage of cold hard cash can be an advantage, says Harvey. Why? Because it makes you more innovative.
“Because small companies are usually underfinanced, they are always scrambling for inexpensive and effective ideas to stay in business,” she notes. “This apparent hardship forces you to discover and employ unorthodox ideas, strategies, and tactics that the big guys wouldn’t dream of. They don’t have to. In a small company, cost-saving ideas, customer retention, and marketing concepts can come from anywhere. The big guys tend to want ideas to originate from their proper divisions, which can miss or kill some gems in an effort to defend precious turf.” - Think creatively about marketing. You don’t have to spend a lot of money.
Back in 1986, when Barefoot was founded, Houlihan and Harvey pioneered what they call “worthy cause marketing” (WCM). They partnered with nonprofit organizations (NPOs) that believed in the same causes they believed in – specifically, environmentalism and civil rights. They donated product at fundraising events, they worked festivals, and they got out into the community to talk about causes they were passionate about, Barefoot wine, and their NPO partners – all in the same breath.
In this way, they gained access to lots of potential customers and gave them a “social reason” to buy Barefoot wine. And in return, the NPOs received donated product and manpower at events, as well as publicity via Barefoot’s distribution channels.
“One of the reasons we wrote our book is to show American businesses that worthy cause marketing really works and can actually be more effective than advertising,” says Houlihan. “As the company’s brand grows, so does the nonprofit’s brand. If Barefoot can be a case study of WCM success, perhaps we can get some of the $100 billion-plus spent on conventional advertising in this country redirected to the NPOs like ours.” - Find good people. Make great people.
Of course you need to hire well. That means finding people who are not only qualified, but who have foundational qualities you can build upon. Harvey says Barefoot looked for enthusiasm, confidence, honesty and integrity, a willingness to learn, and a sense of humor. But they didn’t stop there—they made sure to provide the environment, encouragement, resources, and flexibility for them to become their best.
“We made sure to create a positive culture,” Harvey explains. “We caught people doing things right and told our entire staff about it. We allowed them to make mistakes so as not to squelch their creativity. We put a lot of energy into mentoring and training. We gave them plenty of vacation time to rest and recharge. We did everything possible to help them live up to their full potential.
“To get the best out of your people, find out what they excel at,” she advises. “Then, redesign their jobs to fit those skills. Ask others to pick up the aspects of the former job that still need to be done. You might be surprised at the positive response. Don’t put the square peg in the round hole. Build a square hole.” - Use performance-based compensation.
Most compensation plans are based on an hourly rate, which is paying for attendance, not necessarily production, points out Houlihan. Consider offering bonuses based on sales, cost reductions, and customer retention. In other words, give them a financial reason to help the team perform.
“With the ideal compensation system, non-producers can’t afford to work for you, and producers can’t afford to leave,” he says. - Grow your business by sharing the wealth.
Henry Ford used to say he’d rather have one percent of what a hundred others made working for him than 100 percent of what he made by himself. Some business owners want to have it all, but in the process, cut off the very folks they need to get what they want. Harvey says she and Houlihan were chastised for “overpaying” salespeople. True, they had several salespeople who made more than they, the owners, did – yet when they looked at the efficiencies of scale, the value of stability, and the increase in sales, they knew they were doing the right thing.
“Sharing the wealth allows you to reduce turnover, attract go-getters, and motivate people to produce even more,” says Harvey. “Best of all, increased profit is ‘found money’ – it really costs you nothing. Just make sure the payment is tied into profitability, and not based solely on ‘growth.’ You are paying too much for labor when you pay for ‘attendance’ alone. It’s their production you really want, because that is where your profits come from.” - Don’t treat information as currency. Let it flow freely.
Some companies, especially big corporations, treat information like a coveted commodity. In fact, it’s often used as a type of currency to buy a lunch, get a promotion, receive kudos, or trade for other information. Some information is down right suppressed because it may threaten some supervisor’s concept of job security. Do not let this happen, urges Houlihan.
“Do whatever you can to engage everyone and keep the information free-flowing,” he advises. “Be transparent about challenges and ask the entire staff for solutions. It can also help to link compensation to overall performance. At Barefoot, we made sure all people were getting bonuses on sales, which meant that sharing information and ideas was good for everybody’s paycheck.
“Respecting the intellect of your human resources, giving them a financial reason to work as a team, and sharing your challenges can avoid hardening of the information arteries,” adds Houlihan. - Listen to your salespeople. Without them, there is no company.
Run everything that affects your product and its image by your salespeople. Before you allow a change or “improvement” to the product or the package, check with the folks who have to actually make the sale, overcome the objections, and talk directly to the decision makers and the end users. Top-down thinking, when it comes to product, package design, and even promotion, can undermine what has taken years to establish.
“It’s critical that your non-salespeople appreciate where the money comes from that pays their salaries, bonuses, and benefits,” suggests Harvey. “When folks are hired, present them with an infographic that follows the money trail backwards from the customer through the distribution system, through the marketing and sales system, through the supply and production system, and winds up in their pockets. It may seem obvious, but it can be forgotten as your company gets larger.” - Establish a positive culture.
Company culture has a direct bearing on the survival and growth of a company. This starts from the top and permeates throughout an organization. Barefoot’s culture was based on two overarching principles: generosity and permission. Its use of worthy cause marketing gave employees a level of satisfaction that went far beyond making a sale – they got to make a difference. And by allowing – no, insisting – that people use their imagination to experiment, be creative, and even make mistakes, Barefoot gave them permission to be all they could be.
Plus, says Houlihan, Barefoot was fun. “The whole approach was fun, from the image of the bare foot to the colorful labels and cartons to the slogans, puns, and parodies,” he says. “Barefooters were encouraged to be playful. Having fun with the ‘foot’ was always a hallmark of Barefoot culture.
“All of this gave Barefooters a unique level of ownership seldom seen in most companies,” he adds. “It kept Barefoot fresh and its people involved. They looked forward to coming to work because it was so exciting. Again, it was fun and they knew they were making a difference.” - Make sure customer service is an integral part of that culture.
At the time Barefoot Wine was founded, the business model was considered radical. The founders viewed it as more of a “service” rather than merely a product. At its “velocity price point,” Barefoot could not survive without becoming “America’s Personal House Wine” – meaning Tuesday night wine, picnic wine, beach wine, the wine you kept on hand because it always delivered quality and value. They would have to sell massive quantities to stay in business – and that meant pulling out all the stops to create a great customer experience.
“The original Barefoot culture was based on the most comprehensive definition of customer service,” says Harvey. “Imagine a company that, through worthy cause promotions, encouraged customers to go into specific retail establishments to buy their brand. Imagine a company that viewed its displays as retail entertainment, adding color, fun, and theme sets for the enjoyment of its customers! This is the ultimate in customer service to your retailer, your end user, and to your community.”
Business owners need to remember something crucial, say the Barefoot founders: Governments cannot create. It’s just not their job. They can make things easier or more difficult (and often, the policies they put in place could be argued to work either way), but they cannotbuild something new and exciting and inspiring. That’s our job – and we should focus on it instead of worrying about things we can’t control.
“No matter who becomes president, we need to be grateful for the opportunity to have our dreams, bring them to life, provide a good living for our employees, and make life better for our customers,” says Houlihan. “It’s a privilege, and if we can stay focused on that, we’ll be the winners in every election!”
About the Authors: Michael Houlihan and Bonnie Harvey now share their experience and innovative approach to business as consultants, authors, speakers, mentors, and workshop leaders. Their book, The Barefoot Spirit, chronicles the history and lessons learned building the popular Barefoot Wine brand.
To learn more, visit www.thebarefootspirit.com
