Building an Enduring Business

We asked business owners in various industries about what gives them an edge — and how they keep it sharp.

"To me, creating a sustainable advantage is very different than the business-school doctrine of building barriers to entry," says Mike Faith, founder of Headsets.com, a San Francisco-based marketer of telephone headsets and accessories. "Sure, defensible barriers to entry by competitors are great. But nothing beats great customer service."

Everyone claims to deliver great customer service, but few companies go beyond lip service, Faith points out: "Just anyone can’t do great customer service, so I consider it a barrier to entry."

Last year Headsets.com generated $4 million in revenues with $5 million expected for 2002. "With this company, I’m forced through need to think about how to keep customers," Faith explains.

To that end, Faith preaches a doctrine of customer love: "It’s about letting the customer know how much we care. We use the phrase ‘customer love’ internally, and anyone who’s not comfortable with it isn’t right for our company."

A couple of ways Faith demonstrates customer love include:

• No voice-mail merry-go-round. 98% of calls are answered in person and within four rings (compared to an industry norm of about 75%).
• Acting on feedback. Every new customer is surveyed, and responses are tracked by service reps. "This helps us learn which reps are doing it right, and which ones need some help," explains Faith.

Incremental improvements

"Getting a sustainable market advantage is more about incremental change than a big hairy idea all at once," says Ron Huston, founder of Advanced Circuits, a manufacturer of printed circuit boards in Aurora, Colo., with 190 employees and $23 million in revenues last year.

After determining what your company can do best, find out how to do it better, says Huston: "Each year we’ve made strides — either in lower cost or faster delivery. And every time we make an incremental improvement, I make a big deal about it in the market. I send out e-mails, postcards and make sure that customers know."

Tip: Business owners need someone on staff who gets bored with the status quo. "You need to find a ‘pot-stirrer,’ someone who keeps asking, ‘How can we change what we’re doing to improve things?’ That’s the secret to making incremental changes that give you a sustainable competitive advantage," says Huston.

A core ideology

Brent Bingham, founder of Eclipse Marketing, chalks up his success to a crystal-clear mission and values. "You have to define who you are and what you stand for because that influences the kind of employees you’ll attract," says Bingham.

Eclipse Marketing, which has $10 million in revenues, sells service contracts for Orkin pest control, and the backbone of its work force is college students who want summer jobs. When Bingham launched Eclipse, he took an opposite stand from his main competitor. "Their image was the ‘fun company’ — that if you worked for them, you would have a good time," explains Bingham. "Our mission was to work hard, and we hammered away at that in our recruiting. We told people, ‘If you don’t want to work hard, then don’t come work for us because you’ll hate it.’ "

The emphasis on "working hard" paid off: Bingham recruited 120 employees that year, and after a couple years, his company did, indeed, outsell the competitor. Today Eclipse hires 200.

Another of Eclipse’s core values is to continually strive for improvement. "Top people want to associate with the best," says Bingham. "If you are perceived as the best, you will get the best people, who will help you perpetuate your top position."

Create your economy

Diversification has given Aurelio Valeriano an upper hand.

Founder of Southeast Construction LLC, a $3 million general-contracting business in Knoxville, Tenn., Valeriano opened a separate company last year: A development entity that generates business for Southeast.

"I was on a treadmill," explains Valeriano. "Southeast was working primarily for retail developers and as a general contractor; we didn’t have any equity in projects, so we were always chasing the next deal."

By leveraging his experience to win the confidence of commercial lenders, Valeriano secured financing for Miramar Properties and began to purchase properties that not only generated jobs for Southeast — but also produced an income stream of rents.

"Those rents help me create a war chest to do other deals," says Valeriano. "And we have a captured audience that’s feeding Southeast Construction. In a sense, we’re creating our own economy."

The payoff: In one year, Southeast’s net worth has increased 500% by creating a separate revenue stream with a net operating income in the low six figures. Valeriano expects this number to double every year for the next three years as he acquires new commercial properties.

Up-to-date advantage

When Luegemus Bratton founded Star Detective and Security Agency Inc. in 1923, he built the company on relationships. Yet trust is hard to come by in the 21st century, says great-granddaughter Volora Watson, director of sales and marketing at the Chicago-based, family-owned company that generated more than $6 million last year. "So we’re restructuring our competitive advantage," Watson explains.

Employee training is an important component of Star’s strategic planning. "We benchmark what competitors are doing — and then go above and beyond that," says Watson.

Beefing up training means that Watson can market Star’s security officers as possessing additional skills, such as customer service. "If a client needs both a security officer and a receptionist, instead of hiring two people, they can hire one of our employees," explains Watson.

Some final words

Stay balanced. A long-term advantage should link back to three areas, says Mike Meek, founder of IntelliTec, a $1.5 million management and operational consultancy in Stilwell, Kan.

1. Shareholder value (making money).
2. Customer satisfaction.
3. Employees.

A common mistake is to focus on one area at the expense of the other two, says Meek. To be truly sustainable, your competitive advantage needs to be a plus on all sides — profits, customers and employees.

Real-world strategic planning. A sustainable advantage means always looking ahead. "If you can’t think beyond six months, you’re probably not going to be in business," observes Jacques Habra, founder of Web Elite, a $4 million company in Ann Arbor, Mich., which develops Web software and applications to help clients cut costs.

Yet strategic planning must be tempered with reality, Habra stresses: "Essentially, what drives success is having people who not only commit to tasks, but who have a strong capacity to assess the time necessary to complete those tasks."

Writer: TJ Becker.