Building a Business

Step one: Pick the right market space [know thyself]

The criteria for picking the right market space is based on our ability to be competitive in, to be profitable in, and, ultimately, to be dominant in the chosen space.

  1. Is this the space we are best equipped to compete in?  Do we have the leadership, expertise, and resources to deliver?  Can we navigate effectively?
  2. Can we be the most profitable in this particular market space [as opposed to another space]?  Is this where we will get the greatest return on our investment for all the resources we must commit to compete, profit, and dominate?  Is this the most fertile ground for the seeds we are going to plant for our merchant harvest?
  3. Can we eventually be dominant in this market space?  If we can’t, we will eventually be overwhelmed by the dominant player.  In order to build a sustainable core business it is not enough to be competitive and profitable – we must be dominant.  It’s not survival of the fit, it’s survival of the fittest.

Step two: Brand equity [the Advantage ‘Magic’]

In order to build a sustainable business it is essential that our operations become the brand.  This creates our brand equity.

We don’t have a service department, we have Lifetime Service.  We don’t have a wholesale division, we have iFul.  We even have Audio Al.  It’s not just a pair of Seven jeans, it’s a pair of Seven jeans from Tony Walker & Co.  It’s not just an A/V system, it’s a Stereo Advantage system installed by the Smart Squad.

In our chosen market space we need to not only attract the customers who will naturally shop in that space, but, more importantly, we must also attract those who are likely to make an aspirational purchase in that space.  We help accomplish this by branding everything we do, and we brand everything we do by adding the special sauce.

It’s just like the Ragusa Figs my great-great-grandfather use to bring to market back in Sicily.  He would dip his figs into his special sauce and get double the price for his figs.  They weren’t just any figs, they were Ragusa Figs.  We need to dip everything into our own special sauce – that’s the diferentiator – that’s the Advantage ‘Magic.’  And, remember, you’re the special sauce.

Our brand, however, is of little value unless it delivers performance,value, and cache.  We build our brand equity by exceeding the customer’s expectations in all three deliverables.

Step three: Get more bites out of the apple

In order to build a sustainable business it is also important to get the maximum performance out of our resources, especially our inventory.  We must get as many bites out of the inventory as possible.

We need to keep our inventory freshproductive, and turning.  Therefore, we not only sell our inventory through our retail stores, we also wholesale and distribute it.  Today, the internet offers even more opportunity to get additional bites out of our inventory.  Our Jumpsite strategy is the foundation of our online experience, but there are so many available venues it’s almost limitless.

So, since we already stock our core inventory, why not sell it as many ways as possible?  One of the noteworthy aspects of this strategy is that we don’t have to use the same criteria for choosing our market space.  As long as we are not putting our core operations, our suppliers, or our customers at risk, we can sell it anywhere.  We don’t necessarily have to be competitive, dominant, or, at times, even profitable.  It’s a great way to start a new root and create opportunity for everyone with limited risk.

Step four: Turn our support functions into profit centers

The same perspective goes for our other resources, especially our support functions.  If we have to do it anyway, why not turn it into a profitable business?  Whatever we do, we want to be world-class, and that’s a great start for any business.  Once again, our criteria for turning our support functions into profit centers is not as demanding as picking a market space for our core operations.  We have to manage our properties, so why not develop profitable income producing property?  We have to have a design team, so why not start a profitable Smart Squad design agency?  We have to have a service department, so why not provide profitable service for other companies?  Look what we did with our personnel department [the AP division has become our fastest growing and most profitable business].  This is the Root Philosophy in action.

When the inevitable storm comes, it’s taking on our redwood root structure.  Failure to prepare is preparing to fail.  We are uniquely prepared: We have branded ourselves; and, unlike our competition, we are getting more bites out of our inventory.  But, equally as decisive, we have dramatically reduced our overhead by turning many of our support functions into profit centers.  This all adds up to a remarkable competitive advantage, not to mention a growing root structure.

There are many businesses that are successful but not sustainable.  Most stop short of steps two, three, and four in building a sustainable core business.  Once they handle step one, they think they have succeeded.  It is a combination of hubris [the tragic flaw] and ignorance that eventually proves their undoing.  We, however, are in it for the long run.  We are here to build sustainable core businesses.

We are the root.  This is how we roll.  Be big, be a builder.

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