BY ROBERT P. MADER
OF CONTRACTOR'S STAFF
CHARLESTON, S.C. — Contractors want to grow but few have any idea how to do it right. Steven Little, senior consultant for INC. magazine and author of the book, "The Seven Irrefutable Rules of Small Business Growth," told them how in October at the 21st Annual Mechanical Service Contractors of America Educational Conference here.
Good business growth means 20% a year or more over a period of five years, Little said, adding that 20% is sustainable. It may be a bit tough from a management and cash perspective, but mechanical service contracting is a good market and most contractors should be able to grow 20% without outside cash or additional management.
Business owners of growing companies have a sense of purpose, Little said, the reason they get out of bed in the morning. It's not about money, although money is the way we keep score in business. Purpose manifests itself in a 1,000 ways, he said, that usually have something to do with serving others.
Growers have outstanding market intelligence, he said. They can recognize and adapt to change. Small businesses are good at internal management, such as how they manage labor or the accounting department, but they're myopic when it comes to external forces. Growing companies have to balance both.
Growing companies have effective growth planning, which may be the best predictor of whether they will have sustainable growth, Little said. According to INC. magazine, only 12% of small businesses do growth planning. On the other hand, 82% of companies listed in the INC. 500 perform growth planning.
The business owner doesn't have to do it all. In fact, Little said the employees should have a major role. He noted that Ted Turner launched CNN in the 1980s and had his employees do most of the planning for the fledgling network while he was out sailing in the America's Cup.
Next, growing companies have customer-driven processes. They put the needs of the customers before the needs of the organization. Most companies have, in many little ways, put the needs of the company first in processes such as how they invoice the customers or the terms they offer.
No. 5 in Little's book of small-business rules is the power of technology. How we use tools defines us, he said, and how we put the tools of our time to work matters even more in the service business. We live in an information age and a service economy, he said, and contractors have to be great at use of technology.
Little expanded on the use of technology when he explained his Milkshake Rule to the contractors.
He travels a lot, so a great many annoyances and inconveniences can occur in the process. To get himself through, he pictures a vanilla milkshake, his favorite treat. When he checks into a hotel, if a vanilla milkshake is not on the room-service menu, he orders one as a test. The test works with any food item not on the room-service menu, he noted, and 80% of the time the food-service staff gets it wrong. Why?
"Their systems makes them stupid," he said.
A vanilla milkshake is not in the computer, so therefore they don't know how to charge for one. The computer manages to prevent them from combining milk, vanilla ice cream and a blender, all of which they already have in the kitchen.
Little's next rule is to hire the best and the brightest, which he noted might be the most important of the seven rules. The main job of a business growth leader is to make himself an expert on employee retention. Employee retention equals customer retention and the two become a reinforcing loop that leads to growth, he said.
"This is your job," he said, adding that the biggest impediment to growth in the future will be finding more employees, not more customers.
The final rule for growth is seeing the future more clearly. While one can't expect the unexpected, he said, forces of change, such as high fuel costs, shouldn't come as much of a surprise.
Little presented a laundry list of significant trends. One is population shifts. In 1900, only 12% of the population lived in cities. By 2025, two-thirds will.
The population is graying. An average female can live to 100 today. While 55 used to be old, now it's a time of peak performance. He would hire 55-year-olds and let big corporations spend money training young people. He noted that 70% of discretionary spending is done by people in their 50s.
The U.S. population is decentralizing. People are moving out of California and New York to places such as Montana and North Carolina. Little said the small city to watch boom over the next 20 years is Rogers, Ark. Land is cheap and the weather is good, he said.
Green is gold, Little noted.
"Being environmentally conscious will make you money," he said. "Be greener than the next guy."
China is huge. It's experiencing the greatest wealth creation in history.
Biotech will affect everyone. For example, orb weaver spiders make the strongest silk on the planet, but they can't be farmed because they eat each other, he explained. So the spider DNA was put into Nigerian dwarf goats. The goats are milked, the protein for the silk is separated out and the thread is used to make products such as bulletproof vests. Contractors must pay attention to biotech.
The world is turning brown, he said. Learn Spanish, Little told the contractors, because Hispanics will soon be 25% of the U.S. population. North Carolina ranks No. 1 in the growth of the Hispanic population. The same demographic shift is happening in the world at large, he said. By 2050 only a tiny minority of the world's population will look like today's mechanical contractors, i.e., middle-aged white males.