Working with Small Businesses
-- The Caveat Venditor Offer
Over in the Ryze Business Network Small Business Owner's forum, one Daniel Bennett wrote:
"I am curious to know if any of you small business owners would actually use an advisor to help raise growth or acquisition financing?"
I realize that Daniel's question was about advice on financing, however, in my recent experience, I've discovered that small ($2-10 million) businesses can be surprisingly willing to pay for advice/consulting in the realm of operational improvement and strategic planning that goes beyond the current "executive coaching" paradigm.
I'd like to say it's simply a matter of presenting them with a dose of common sense in the early contact, but they tend to still have non-trivial obstacles to taking on significant improvement efforts with what they would normally perceive as a "high priced consultant." On the other hand, the small business owner might also fear a "you get what you pay for" situation if the consultant is too willing to come in on the cheap. These, plus the stage set and supported by common and traditional "caveat emptor" (Let the buyer beware) relationships in this realm don't really help in cracking the small biz market.
Recognizing these obstacles (the lack of cash flow and time available to devote to improvement over day-to-day stuff, exacerbated by the perceptions of consulting services as being for the big boys), I've been successful getting the attention of such small businesses with what I call a "caveat venditor" approach. This is a "partnership" of sorts, based on what some might consider "gain-sharing."
(Actually, the "caveat venditor" concept jelled for me after absorbing the writings of Mitch Ratcliffe, Britt Blaser, and Flemming Funch and exposure to the development of Xpertweb as well as a growing appreciation for The Cluetrain Manifesto -- by Doc Searls', David Weinberger, and Chris Locke -- and its unique approach to markets.)
It involves a surprisingly small (but non-trivial -- so the client has some "skin in the game") up-front investment, and ongoing small quarterly payments that "coaches" should be familiar with -- but quarterly payments based on a small percentage of the business' revenue.
(The focus of my work is not on cost cutting, but rather, on addressing constraints that unnecessarily limit business growth at the top line. If you can grow the top line while growing expenses slower, the bottom line will take care of itself. Hence, my compensation is tied to a now mutual goal of growth.)
My side of the win-win is that while the bulk of the "extra hands, fresh eyes, and open mind" work that I do with them is in the first few months (work that I believe differentiates me from the typical pure "coaching" arrangement), the bulk of their payments to me are based on improved business results over the next two years (unless they want me to hang around longer), and add up to appropriate value for my services and a nice flow of revenue for me from several sources. The client's side of the win-win is that they are able (even happy, later on) to pay those small percentages of significantly higher -- and growing -- revenues. Essentially, I get paid out of the improvements that I help put into place in the early part of the engagement. It's your basic "reap what you sow" approach.
But the clincher for hard-headed, feet-on-the-ground small business owners who are dealing with their own money -- not merely managing the money of a big corporation -- is the "caveat venditor" (seller beware) aspect of the relationship that allows the client to pull out at any point that they lose faith in the direction of the solutions or in their implementations. This usually boggles their mind when first presented, as they suspect there must be some catch. The only catch is that I have enough faith in the performance of the TOC-based solutions and tools that I bring to the table, and in my willingness to do whatever is necessary to help the client. As a result, I'm willing to put my potential money where my mouth is. I'm not fooling myself -- I suspect I'll run into the occasional situation in which I'll be taken advantage of, but I prefer to have faith in the integrity of my fellow man or woman.
I've only recently developed this offer, as I've been shifting my practice from serving partial components of larger firms to smaller firms that want to be bigger, but the experience and interest so far has been heartening, and looks like it's going to be profitable for both myself and my clients. It's all a matter of understanding the real issues and concerns of the small business person -- issues and concerns that usually revolve around three things...
1. cash flow,
2. cash flow, and
3. cash flow.
Admittedly this approach might take some rethinking and restructuring for one-time services such as financial match-making that Daniel might be talking about, but it's offered as food for thought. Perhaps a little help in developing a market offer would be called for -- offered, of course, in a "caveat venditor" manner...