Our guest speaker in Midwest Entrepreneurs class yesterday was Mr. Joe Thompson of Thompson Brothers Painting, Inc., a Roseville, IL-based commercial painting firm specializing in the painting of grain bins and storage buildings. .
Early on in the entrepreneurial tale shared with the class, I was reminded of something I have written previously in this class blog: Business as it can and should be; facilitated, in large part, by a keen focus on providing superior value to the customer. However, Joe Thompson’s success story provided me with further clarity on the issue.
While there are no doubt numerous reasons why we keep hearing about entrepreneurial success attained by focusing on the customer and otherwise conducting business the way it can and should be conducted, one clear answer as to why this theme is so common snapped sharply into focus while Thompson was speaking. This “reason why” is, in short, community interconnectedness. Here in the Monmouth area, everyone essentially knows everyone else; at least indirectly through someone else they are related to or know very well. In Joe Thompson’s case, he is (1) one of nine siblings, most of whom either run their own local businesses or work for one another, (2) the brother of Bill Thompson, the mentor of last week’s class speaker Will Zimmerman, (3) a neighbor and good friend of John “Beefy” Huston (who spoke to the class early in February), and (4) heavily involved with a wide variety of local charities and other community-based organizations (in fact, he had to end the class a bit early to be on time to volunteer-coach a basketball game at a Monmouth school).
Another way of understanding what I am getting here is to realize that in a tightly interconnected community such as this one, a business owner cannot get away with treating customers poorly. This is not to say that they would like to “get away with it” even if they could; they simply both know better and know no other way.
We, as business students and faculty members, frequently hear the refrain “focus on the customer” in a general sense; as something that all businesses must do to be successful. However, we just as nearly often hear about—or personally experience—what can probably best be characterized as “horrible customer service.” You must ask yourself who or what does this horrible service typically come from? Does it come from local entrepreneurs and local family businesses? No…
And the reason why, again, is that entrepreneurs doing business on a local or regional scale know that the negative word-of-mouth communication that would emanate from treating customers poorly—and spread like wildfire amongst the local social network of closely connected persons—would do significant harm to their businesses and themselves personally. So, what local entrepreneurs like Joe Thompson focus on doing is treating customers right; so as to engender the spread of positive word-of-mouth communication (leading to new customer referrals and, more generally, a stellar reputation for the business and entrepreneur in the community).
Hopefully, Facebook or some other means of—probably as-of-yet-to-be-created entrepreneur-initiated—social networking will one day soon render the too-often not very true “business truth” of “treat the customer right” as applicable on a national or global scale as it is today in “small-town Midwestern USA” (as exemplified here in the Monmouth area).
However, treating customers right was far from the only necessary component of the portrait of entrepreneurial success painted in class yesterday by Joe Thompson. Chief among these “other” needed keys to success was having clear expectations of the total cost of running a business.
While we have heard about having a realistic feel for the cost of running a business from others this semester, Thompson was adamant about the issue. Looking at his business from a long-term perspective gives one a good idea of the overall cost of growing a business. Back when he bought the business from his brother Frank 38 years ago at the tender age of 18, the company owned one car, one paint sprayer, and one truck. Today, the company owns 12 sprayers, 10 trucks, and three bucket sprayers. From a more short-term view, the entrepreneur must accurately anticipate the cost of running this fleet of vehicles. Further, Thompson explained that his company annually purchases 3,000-4,000 gallons of paint at an average cost of about $25 per gallon (i.e., $75,000 to $100,000). He also must pay wages to the eight or nine persons that he typically employs in the busy summer months. And while gas for business vehicles, the cost of paint, and wages paid to workers might seem to be obvious—and easily anticipatable—costs for a painting business, other just-as-significant costs are often not so clear. Thompson ran through a long list of “other costs” including workers compensation insurance, health insurance for himself and his family, vehicle insurance, material price increases, and the cost of meeting at times dynamic OSHA, EPA, and other governmental regulations.
On top of all of these costs, Thompson warned that taxes can be a particularly significant burden on the entrepreneur. He stated, in this regard, that about 50 percent of his potential profits are instead paid in taxes of various form.
The bottom-line message to the aspiring entrepreneur should be clear: Before you start getting excited about how much money you can possibly make with a particular business idea, you must do all you can to calculate the totality of the costs that will be incurred—in the short and long run—in running the business. If the reality of cost is not adequately considered early on, your dreams of sales and profits are likely to be little more than fantasy (and the business may well join the legions of other entrepreneurial ventures that quickly fail).
Finally, Joe Thompson explicitly shared two pieces of valuable advice with the Midwest Entrepreneurs class. The first was “build as you have money.” Here, Thompson urged the students to be very careful not to take on more debt that can be handled to grow the business. He stated that he had taken out but one loan for his business; a $2,200 loan to buy the business 38 years ago. The rest of the cost of running and building the business—including the vehicles—was paid for in cash. Perhaps another way to state “build as you have money” is to say “avoid spending money you do not have.” Good advice for us all; entrepreneurs or not…
The second piece of advice offered by Thompson was to “use quality products.” In the case of Thompson Brothers Painting, Inc., this means using top-quality brands of paint that are, as Thompson stressed, viewed as being of high quality by customers. Adhering to high quality standards in this dual manner ensures not only that jobs will be done right (and last longer/not have to be redone sooner), but that customers will have confidence that the job will be done right in advance of it being done.
The portrait of entrepreneurial success for Joe Thompson is now clear and complete. Focus on and provide superior value to the customer. Do all you can to initiate the spread of positive word-of-mouth communication. Have and maintain intimate knowledge of the total costs of running your business. Build the business with money that you have (i.e., avoid debt). Use quality products that are “high quality” in terms both of actual performance and customer perception.
Business as it can and should be in a tightly interconnected community.
Sounds easy, right? We know better. Our speakers often make it look easy but it is not.
Thanks to Joe Thompson for sharing with the class his personal story of ongoing entrepreneurial success!
Two more next week…
See you then.