Stan golomb

Every business needs customers. In order to get customers, a business needs a product or service that people want or need.

There is a big difference between want and need. People need to buy gas to keep their cars running. But people have a choice as to where they will buy their gas.

Lets say there are four gas stations on an intersection and they are all doing about the same volume. A new owner takes over one of the stations and within a year is doing more business than the other three combined.

This happened in Boston back in the 30s. The first thing the new owner, Johnny, did was dress his attendants in white shirts with leather bow ties. Then he had the islands the pumps stood on painted white every week so they glistened in the sun. He also saw to it that the washrooms were immaculately clean at all times.

He went still further and insisted that his attendants check the oil and clean the windshields and rear view mirrors and also offer to check the tires.

You’d think this would have been enough but he went still further. He got the name of the driver of every car and set up a card file in the office listing the last three numbers of the license plate. The next time that driver showed up, the attendant checked the plates and greeted the customer by name.

Did he do anything exceptional? No… he just used good common sense and put himself in the customer’s place and asked himself what kind of service he would like.

You might think this was the end of the story but it was only the beginning.

Johnny sold his station for top dollar and bought the Old Colony Gas Company, a firm that supplied stations with gas. He knew he could use the same methods to build this business up beyond its present level.

Johnny knew that a business has to reach the break-even point if there are to be profits, and profits are the driving force of any business.

Without profits, a business will sputter to the point where all the owner has done is buy himself a low paying job and this can quickly erode into total failure.

The following statement is hard to take, but true.

The vast majority of new businesses fail.

About 3 percent will be huge successes. Another 7 percent will be moderately successful, but 90 percent will fail to make the grade over a 10-year period and will have to either sell, close the business or go bankrupt.

Just look around your neighborhood and see the “For Rent” signs that keep popping up in storefront operations. These businesses come and go and with them go the dreams of those who put their money, hard work and sleepless nights into trying to make their business a success.

What went wrong with the nine out of ten small businesses that failed to make it beyond ten years?

It all goes back to one or several of the following:

1. Not enough customers.

2. Offering a product or service that not enough people want.

3. Poor management.

Those who succeed are doing things right. They have managed to reach the critical point of break even of sales to overhead. Once past this point, they keep going as all sales beyond break even are highly profitable.

Once they start making money, the well-managed businesses begin to improve their product and service so their sales expand and become even more profitable.

With this comes confidence and the opportunity to become even more successful.

Now comes the dangerous part: the business is making good money, the confident owner may become overly confident and start to relax and enjoy his success.

Every phase is important — you obviously can’t run a business without customers.

And without a product or service to sell, you simply have an empty store.

But most important are good business practices.

Another word for this is management. Someone has to be in charge, the driving force that makes the business work.

Businesses just don’t run themselves because if it is left to chance, they will run themselves into the ground.

The driving force, the manager, has to have direction. He is the one steering this business ship and if he falls asleep at the helm, his ship will drift and wind up shipwrecked on some deserted shore.

Unfortunately, too many business ships wind up shipwrecked.

They muddle along for years and at times seem to be on course, but then something will happen and the owner will be distracted and the next thing you know, he can’t pay his bills.

In my years of dealing with businesses, I have seen great businesses fail for one reason or another.

One thriving chain store had two brothers running the business. One was an excellent golfer who joined a country club and spent too much time on the wrong course.

The other brother was a nice guy but he was just that, a nice guy who really didn’t know how to run a business.

Then there was a restaurant. It was doing great and people had to wait for hours to get seated.

The key words are customers, good food and good management.

Every business has a break even in sales. Sales come from customers and making a profit comes from good management.

Once a business passes its break-even number, the profits soar. The reason for this is that all

businesses operate on fixed and variable expenses.

The businesses that you see advertising locally are usually those who understand this principle. They know they need more customers to bring in more sales which will get them past break-even to make more profit.

It sounds simple, but far too many small business managers don’t fully understand these principles.

For example: Restaurants have a fixed cost in rent, utilities, and basic help to service their clientele. They have slow periods and busy periods but if they can seat extra people during the slow periods, or get more early diners, they will see their profits soar.

The smart operators know this and run specials, such as a local bar and restaurant that offers oysters for 25 cents each on Mondays, from 4 to 7 p.m.

Some people will consume as many as three dozen and also have a few drinks to go along with them. Maybe the restaurant breaks even on the oysters, but they sure have their bar going full blast.

Others run Early Bird Specials, which are very popular in senior citizen areas. These folks want to save money and plan to eat out early, while the younger set comes in later. This extra business obviously has costs against it. There is the cost of food and extra labor, but the rest of their operating expenses are fixed and the profits climb.

Drycleaners and pizza restaurants are prime advertisers in marriage mail as it’s relatively inexpensive advertising. Both industries instinctively know that increased sales after break-even are highly profitable.

However, they don’t all know the best way to advertise their services and this can be costly or would be much more cost effective if done differently.

The reason I’m writing about this subject is to point out that profits come from customers and good management.