Features - August/September 2003

Reach Out

These seven small business owners snagged new markets and discovered hidden profits.

by Karen M. Kroll

If you feel like you've exhausted the customer base in your original market, then it's time to branch out. New opportunities abound in places you might not have thought about.

"Developing different groups of customers looks so easy," says Wally Bock, a small business consultant in Wilmington, N.C. "However, you've got to figure out how to advertise, market and distribute to the new market."

What's more, different customer groups pose different challenges. Here's how several business owners are cracking a variety of markets.

Add Wholesale Clients

Bill Broadbent, president of T-ShirtKing, is adding wholesale customers to his retail clientele. "Many retail clients are requesting wholesale quantities of T-shirts for family reunions and company picnics," says Broadbent, who runs the 18-employee Web site in Mountainair, N.M.

By offering bulk shipment, T-ShirtKing can better serve their retail customers. But Broadbent took a measured approach as he entered the market. Rather than print the shirts in-house, T-ShirtKing used an online reverse auction to solicit bids for the work from printers around the country. This meant purchasing some software, but no staff additions. "If you have to change your whole infrastructure, you're taking a big risk," says Broadbent.

Franchise Your Business

Bob Kodner wanted to reach markets outside of his homebase of St. Louis. So to expand geographically, the head of The Crack Team, a concrete-foundation repair firm, decided to franchise.

Several years ago, Kodner began receiving calls from previous customers who had moved from St. Louis and couldn't find qualified companies in their areas to work on projects. They wondered if he could send a member of his 30-person staff to do the work.

When Kodner realized a niche existed, he decided franchising would be the most effective way to fill it. With seven franchise units in the greater St. Louis area, The Crack Team will add several dozen more over the next year or so.

The key to success, says Kodner, is making a commitment to franchising without taking your eye off your core business. "It's the equivalent of a part-time job for a few months," he says.

The reward? "You can help other people fulfill their goals and earn a livelihood through something you've developed," says Kodner.

Expand From B2B to B2C

Two years ago, Topbulb , a multi-channel merchant of light bulbs, decided to add consumers to its traditional business clientele. To reach this market without breaking the bank, the East Chicago, Ind.-based company turned to the Internet. "On the Web, the cost to acquire new customers is so low, you can go after the consumer market," says Philip Bonello, president of Topbulb.

To boost its online sales to consumers, the company made its Web site more user-friendly. Because few consumers know the product number of the light bulb they need, the Topbulb site allows searches by the lighting application. If customers run into questions, they can call Topbulb's toll-free number.

Were the changes worth it? Consumers now account for 40 percent of Topbulb's sales -- up from zero just two years ago.

Work With Nonprofits

Similar to Uncle Sam, the nonprofit field is sometimes subject to stereotypes. Some business owners assume the margins inevitably are lower than in the corporate sector. True, most nonprofit organizations watch their pennies. But they can be good customers.

"In today's market, everyone is fishing to trim costs," says Greg Littlefield, president and chief executive officer of Professional Facilities Management Inc. (PFMI), which provides janitorial, landscaping and maintenance services.

But margins in the nonprofit sector may be similar to those earned on larger corporate accounts. Public and private schools make up about 15 percent of the Montgomery, Ala.-based PFMI's customers.

To crack this market, says Littlefield, recognize that decisions are slow in coming. "You can work with a school for several years without any results," he says. But when decisionmakers are ready to make a change, they'll typically consider only firms they know.

Crack the Government Market

What small business owner hasn't eyed a potential customer in Uncle Sam, who purchases some $230 billion of goods and services annually? Though the public sector can be a viable market, developing it often requires mastering a competitive bidding process and completing a lot of paperwork. Vendors also may need security clearances. But minor hassles may be worth it.

Clara Conti, CEO of ObjectVideo, disagrees with the stereotype that doing business with the government is cumbersome. "I think that's a myth," says Clara Conti, who runs the 40-person company in Reston, Va., that's developing video surveillance technology. The federal government accounts for about three-fourths of ObjectVideo's sales.

You don't need deep pockets or friends in high places to do business with the government. Federal law requires that 23 percent of all government contracts be awarded to small businesses. Conti utilizes the expertise of individuals working in a federal program that helps small businesses in her industry secure government contracts. "They are enormously helpful," says Conti. Such programs can tell prospective vendors when contracts are about to be issued, and whether a portion is earmarked for small businesses. Visit the Small Business Administration's Web site to see how you can work with the Feds, http://www.SBA.gov.

Find a Partner

Partnership might appeal to you, but you don't have to split your business with someone to enjoy the benefits of new customers. A perfect partner might be miles away. Lonnie Lehrer, owner of Leros Point to Point in Thornwood, N.Y., is a good example.

Since its founding in the 1970s, the limousine and taxi service has taken tens of thousands of people to the airport. "But it dawned on us a couple of years ago that we were missing revenue on the other side," says Lehrer, who has 125 employees.

Lehrer started striking agreements with taxi and limousine companies in the cities his clients were heading to. For instance, Leros might feed business to a taxi company in Orlando, Fla. He handles the paperwork and coordinates the manpower on the other end for a percentage of the fee. This kind of expansion allows Lehrer to utilize the infrastructure his affiliates already have in place.

Sell Yourself

You're an expert in your field, so why not sell your knowledge? That's the approach that Jon Fox, president of Xworld , a New York-based web design firm, is taking. As fees for Web design services started to decline, Fox needed to reach new markets.

Earlier this year, he began offering IT consulting services to small companies, rather than Xworld's typical corporate client. The move prompted several changes. Rather than rely on word of mouth, Xworld is marketing its services via direct mail. And, as consultants working on an hourly basis, Xworld employees needed a system for tracking time and travel. In contrast, the firm's Web design assignments typically are done on a per-project basis."The results look promising," says Fox.

Another positive affect: Employees are excited. "People want to see the company succeed," he says. "At a simple level, they want it to stay afloat. At a higher level, they themselves want to succeed and grow."