Leverage Relationships to Achieve Your Business Goals – Sage International

Whether your business address is on Wall Street or Main Street, you will increasingly be held to a national, or even global, standard of execution. Smart entrepreneurs look to relationship value to achieve their goals in this demanding environment.

By W. David Bayless, president, Small World Networks, Inc. http://www.pioneerentrepreneurs.com

(Many thanks to Julie Foster for passing this along. Russ)

The Importance of Execution

George Gendron was the editor-in-chief of Inc. magazine for 20 years. During his tenure, the magazine systematically interviewed thousands of successful entrepreneurs regarding their assumed sources of comparative advantage. As George tells the story, until six or seven years ago, entrepreneurs regularly attributed their success to having a better product or service idea. But, in an increasingly networked world, good ideas spread rapidly. So, it should not surprise us to learn that entrepreneurs began to change their tune a few years ago. These days, entrepreneurs almost invariably attribute their business success to superior execution.

So what does superior execution mean? I believe that it means learning about, and adapting to, customers’ evolving needs and wants faster and less expensively than anyone else. Jeff Shuman and Jan Twombly at The Rhythm of Business http://www.score.org/cgi/third_party.cgi?url=http%3A//www.rhythmofbusiness.com/ , a Boston-based consultancy, refer to the process as “getting smart fast for short dollars.” Easier said than done. Nevertheless, it’s a fair statement of the challenge that all businesses face. Customers’ expectations are shaped by their improved access to information and alternatives. If you can’t deliver the goods, customers will find someone who can. Customers truly are in the driver’s seat.

Resources and Value

So, what does this mean for small businesses? How can they hope to compete against large companies that have superior resources? Part of the answer lies in understanding the difference between owning a resource and using a resource. Other insights come from differentiating between money and value.

If you want to get to Los Angeles from New York, you don’t need to own the highway. Indeed, you don’t need to own the car you ride in. Nor do you even need to rent the car. If you could find someone who needed his or her car transported to the West Coast, you could provide that person a service and accomplish your own goal in the process.

Shuman and Twombly assert, “Value is whatever is useful for achieving desired outcomes.” Small businesses can increase the scope and depth of their capabilities by shifting their mindset away from buying or renting resources in financial transactions and toward the purposeful cultivation of relationships and the exchange of value.

What set of needs do you want to satisfy for your customers? What is hindering your ability to serve those needs? What goals do you want to achieve to overcome those hurdles? Who has what you need to meet your goals? What value can you offer in exchange?

Vacuous networking isn’t the solution. However, the purposeful cultivation of relationships can give you access to value that, in many cases, can’t be purchased for cash.

A Case in Point

An example is worth a thousand theories; so let me give you one.

Justin Bigart and Stephanie Orler are the 20-something owners of Sage International http://www.score.org/cgi/third_party.cgi?url=http%3A//www.sagespasalon.com/ . Less than 90 days ago, they opened their first day spa and salon on Main Street in Bozeman, Montana. Hardly a unique idea—even in a town of just 28,000 people located 500 miles from the nearest metropolitan area. Nevertheless, Bigart and Orler perceived customer needs that weren’t being met by local providers.

For starters, Bigart and Orler recognized that local customers’ expectations regarding a day spa were increasingly shaped by their experiences in places such as San Francisco and Seattle. In Bigart and Orler’s view, these national standards weren’t being met by area spa owners. More specifically, Bigart and Orler thought that the physical environment of local spas, the breadth of product offerings, and customer service levels were not up to par.

It’s possible that incumbent spa owners in Bozeman may have assumed that they didn’t have to make a greater investment in facilities, inventory, and employee training. After all, it’s a long, expensive flight to San Francisco, and local clients may be willing to forego a little service and selection in favor of convenience. I suspect, too, that at least some spa owners may have been victim of their own linear thinking regarding the resources available to them.

Like nearly half of the 2003 Inc. 500, Bigart and Orler launched their business with less than $20,000 of startup capital. That’s not much equity to leverage in order to design, furnish, stock, and staff the kind of spa Bigart and Orler thought was required. In fact, it’s not nearly enough. Even if they could have financed 95 percent or more of their launch expenditures with debt, the spa wouldn’t have been able to generate enough cash flow to meet its interest and principal payments.

Was the Sage concept DOA? No, not as it turned out.

The conventional approach would be to settle for less—and forego the opportunity to compete on the basis of a superior customer experience. Bigart and Orler took a different approach, which allowed them to meet their startup objectives by leveraging four sets of overlapping relationships.

First of all, Bigart learned of a developer who was building new, high-end retail space in a historically under-developed block of Main Street. The developer was looking for tenants with some cachet, which is what Sage offered. In exchange, the developer gave Bigart and Orler an unusually generous build-out allowance and a back-ended lease schedule.

Second, Bigart and Orler learned that its chosen product vendor was looking to upgrade and consolidate its retail relationships. With its relatively large, high profile retail presence, Sage fit the bill. In exchange, the vendor offered an attractive employee training allowance and special inventory financing that allowed Sage to carry a complete product line, which Sage supports with dedicated staff, unlike its local competitors.

Third, Sage engaged the services of a retail space designer in the area who wanted to enter the spa business. Sage got good design for not much money, and the designer walked away with a design statement for his portfolio.

Bigart and Orler then turned to a fourth set of relationships: prospective employees. A cool space and a commitment to training have enabled Sage to attract solid employees in a market that has experienced unemployment rates of around 2 percent.

Shuman and Twombly encourage their clients to view everyone as a customer—that is, people having needs that can be met in a mutually beneficial exchange. Bigart and Orler took that approach with their landlord, primary vendor, designer, and employees. As a consequence, they launched a differentiated business without spending any more than a conventional spa startup would have cost.

But is Sage really different—or is it the misguided reflection of Bigart and Orler’s obstinacy? Well, Bigart reports that Sage achieved breakeven revenue in its first week of operation. Month-to-month revenue growth is in the double digits. Apparently, the soft skills of relationship business really can translate into hard results.

Cultivating Serendipity

Sure, Bigart and Orler have had their share of good luck. They have benefited from some great timing. Even so, their luck hasn’t been blind. Bigart and Orler had a strong sense of the market opportunity and evidently made some shrewd guesses about what kind of business model was required to exploit the opportunity. Importantly, they didn’t let their lack of money distract them from the task at hand. Their weakness didn’t dictate their strategy. Instead, Sage grew out of an iterative, messy process that drew strength from meeting the needs of multiple constituencies. Hard work? Undoubtedly. But it seems to have provided Sage with a real advantage.

Now, if they can only continue to execute. Bigart tells me that two more competing spas are scheduled to open in January.

2003 © Small World Networks, Inc. All rights reserved.

Small World Networks, Inc. facilitates the Pioneer Entrepreneurs community, which aims to help communities be more successful by helping entrepreneurs be more successful. David Bayless can be reached at [email protected].

http://www.score.org/leverage_relationships.html