How to Beat Your BIG Competitors at the Game of Business

Hey, everyone, it's Mike Andes and you're listening to the Business Boot Camp podcast. Today we're going to be taking questions from a painter and a pharmacist about how they can improve their business. Before we get into today's questions and the answers, a big thank you to today's sponsor, which is Gusto. If you haven't already, go to gusto.combootcamp try out their software completely free for nine days. It's an entire quarter where you can test out all of their payroll features, all of the direct deposit, all the benefit features, and the beautiful software they have for iOS, Android and desktop versions, all online, access it anywhere, all for the low price of just starting at 6 bucks per month. Try out for completely free for 90 days by going to gusto.combootcamp so today I'm taking questions that I haven't done one of these episodes for a long time. Kind of a Q and A of people have asked questions from Business Boot Camp podcast. So if you go to businessbootcamppodcast.com, you can go to the contact page and leave a form. We're gonna take two questions that have come in recently in the past 24 hours or so that I thought would be just good for everyone to hear. The first question comes from Will. And Will is a painter and their business has about $85,000 in annual revenue. And so I'm gonna go ahead and read his question. He says, I'm really struggling with closing the sale after bidding on painting jobs. I wanted your input on the following idea. I'm thinking of hiring an outside salesperson, treating as a 1099 subcontractor and paying strictly commission. So a couple thoughts I have about this. Number one, it takes a lot of self awareness to realize you might not be good at something in your business and realizing that you need to to hire out. You need to go find an employee to cover the weak spots that you have in your repertoire of skills. So if Will realizes that, hey, I'm not good at sales, that might be a really good opportunity to hire someone that has good sales ability, is able to speak good with a customer, build rapport, and also probably needs to know a little bit about painting in order to become that salesperson. But I would have a couple cautions and that's what I want to talk about on this question. This is why I wanted to bring it up. And forgive my voice. I probably have what most would call a cold. I don't talk about it a lot, but I'm all Congested. But anyways, my caution to this would be delegating the Lifestream of your business so early in the business's life. Like so early. The business is not big, it's only 85,000 in annual revenue. And so you're not gonna be able to afford a massive payroll. Or even if someone is a great salesperson, let's say you gotta pay them 40, 50,000 dol, for example, that's a huge chunk of your money. You need to triple or quadruple the size of your business just to make a decent salary for a good sales rep. And if they're really good salespeople, they can make a lot of money. So it's tough sometimes to find really good ones for a decent price. Sometimes. However, my caution is not so much about that, it's about delegating what I feel. For example, painting.

So young in the business's life, you know, still a small business, to hire out the Lifestream, the thing that makes the business or breaks the business is going to be the sales. At this stage of the company. To delegate out something that is the fundamental absolute groundwork and foundation of the business is a little bit scary to me. You as the owner, usually the last thing you delegate is those items that are driving bottom line revenue are looking, you know, really changing the trajectory of the business. To put that all on an outside sales rep that's just getting commission. If you get a bad sales rep, like you literally could make no money, you could have no sales. And so I would be careful about delegating out the part of your business that is the fundamental, most important thing you should be doing right now. When your business is doing 85,000 in annual revenue, is going out and getting more sales. I would focus on number one too. And that is number one, I would try to sub out the work itself that is doing the painting. It's gonna be easier to find people, it's going to be cheaper to hire people that are good at painting versus really good at sales. And then secondary part is find someone to delegate the things that are less foundational to the business, such as doing the performing the work. And then go spend money that you would otherwise be spending on training a salesperson, getting them started. Spend that money on making your systems better and making your sales abilities better. That might be attending a conference, reading a bunch of books like Digging the grant Cardone stuff or there's tons of sales gurus out there. But just get the ability and get the knowledge that you might need.

To break through some of those barriers so that you can focus on the sales aspect of your business and continue to stay in the driver's seat of your business. As soon as you put a 1099 in the role of a salesperson, that is going to be the most important position in your business, in my opinion. You are basically putting somebody else that has no ownership in the business, that isn't even an employee, is not even a W2. You're putting them in the driver's seat of your business. And I feel like that is a caution that I would definitely put on someone that has such a young business and is going to be delegating the most important part their business. The third thing is you talked about commissions. Again, just a warning. I'm not saying I don't have a lot of context here, but the third thing I would say is whenever you're doing commissions or any type of bonus plan or pay for performance or whatever, there's going to be perverse incentives. So how you structure that commission plan is very, very important. You want to make sure that their payment that they're being incentivize to go after the things that you as a business owner want. So for example, if you're going to incentivize them based upon gross sales, that's fantastic. You want to make sure though, that those sales are profitable, that they didn't just discount a bunch and all of a sudden they reduced it by 25%, which just happens to be your profit margin. And all of a sudden you are basically doing work and your business is growing and you're making more revenue, but you're essentially not making any profit because they are caught up in one thing and that is gross revenue. So you incentivize, expect that thing to be the driving force of that employee, of that subcontractor. However you do it, regardless if it's an employee or subcontractor. If you have a bonus structure, whatever you incentivize, expect that behavior. If you incentivize really great quality and customer service and reviews from your customers, and that is the way that you incentivize your people, you can promise, you can rest assured that customer is going to be treated better on average when that kind of a bonus structure is in place. If you're focusing on upfront sales, you can rest assured they're going to be more incentivized, they're going to be more energy is going to be spent on the upfront upsell selling of that client and less on the customer service or on the quality or on the relationship going forward and retention. So these are all things you want to think about without making a complex commission structure or a complex bonus structure that's so convoluted and confusing that people just throw up their hands and don't even worry about it. They're just like, I'm just going to do my thing, hopefully I get some money. Like literally that's what happens in some bonus structures that are so complex that have like, okay, well, 30% is weighted based upon gross sales. You know, then 10% is based upon profitability of the job, 24% is based upon the retention of the and the lifetime value of the customer over the course of 5 years and 4% is based upon whatever and you know what I'm saying? And so that sort of bonus structure is not useful. However, just basing your commissions or your bonus upon something that could have perverse incentive. What that means is if someone is incentivized to do something, they will do something that's actually negative for the business in order to reach numbers or hit a certain quota or boost that number that is going to give them the highest bonus or the highest incentive. Alright, so if you're gonna go after gross sales, you can balance that out. So how I look at it is like you can have a bonus structure for one thing, and then you have a counterbalance. So for example, at our gusta, Lawn care and the franchisees we train pay for performance. How we do that is we pay based upon speed, that is production, we pay based upon that. But we balance it out with a component of quality that basically corrects them if they are going too fast and are making mistakes. Same thing here. I would have a counterbalance. So for example, if you're going to have them have gross sales as the driving force in terms of their commissions, you should also have a counterbalance of either profitability or you should have a system in place that is the counterbalance that is going to dictate what their pricing structure is so they can't discount. So for example, if you had a pricing grid that was based upon the square footage of the house and that was what dictated the price for the painting, or the height of the ceilings, or the square footage or the surface area of the walls, whatever it is. If you have a price matrix that is set in stone that they cannot change, then that can be the counterbalance to them going out and selling as much as possible and going gross revenue. So either have the counterbalance of some sort of quality assurance or.

Not a system either have a. So on this side, you're driving for revenue. You're going to pay them based upon revenue, but have a counterbalance of either a great system that's a pricing grid essentially that they cannot change or have some sort of incentive around the quality or the end result, the profitability, that job. Last thing I would say I'd kind of just be wary of, kind of the fine print is some contractors and 1099s can get a little bit hairy. I've seen that relationship be a bit murky sometimes in terms of telling them what to do, in terms of them wearing certain uniforms, showing up certain times being having certain professional standards that you want them to have as a 1099, sometimes it's tough to dictate them to do those things, whether it be how they present themselves or how they, you know, show the information or, you know, if you start really trying to fine tune their presentation to the customer, it can get a little bit hairy in terms of should they be an employee versus a subcontractor? So the second question today comes from a pharmacist named Ash. And so I'll read his question here and jump into the answer. So Ash says firstly, congrats and great work out there helping with your ideas and advice on boosting the business. I am an avid follower of your podcast. I am struggling to boost the revenue and client growth. As you know, my industry is full of big corporate chains and making a mark as a small independent pharmacy is a very difficult task. I would like to get your advice on how to reach out to the potential customers so I can survive in this cutthroat pharmacy market. One other question, I have always wanted to use your welcome letter to new residents in the area advice. Can you help me with sample? Alright, so two questions here. First one is about how do you differentiate yourself from the big guys? So as most of us know, the pharmacy market is very cutthroat. Lots of margins involved, big conglomerates, you got Walgreens, you got cvs, you got Rite Aid. These big brand pharmacies that are moving into the market and taking out a lot of these small independent pharmacies. So what do you do? You do what the big guys can't. So what the big guys can't do is scale the unscalable. What they can't do is they cannot know the name of every single one of their customers. Right? They cannot individualize their service. They cannot to some extent do what you can do in terms of making an experience out of coming to the pharmacy. So instead of it just being a very sterile experience of going up saying, I want this, the amia, a number, them giving you a piece of paper, getting the, filling up the prescription and done. Like, how can you make that a memorable experience? How can you make that where people are willing to drive an extra few miles across town to pick it up from you versus some other pharmacist that they have? They have no idea who they are, they don't know anything about them, they don't know anything about their family. They have no context whatsoever. But they'll come to you because they literally just want to see you. What that means is you want to create content around you. You want to create content around what makes you different and what you are emphasizing within the experience that you provide to customers. So scaling the unscalable, making things are remarkable. And I mean weird perhaps. So for example, instead of having a waiting room where they just sit in chairs, maybe they sit on some weird, I don't know, bean bags or like you have some sort of a thing for the kids that makes, you know, the parents want to come or, you know, maybe you really start to really think about, okay, what's our, who is our real customer here? Maybe you live in an area where there's gonna be an older demographic. How can we provide an experience then an elderly individual, a baby boomer, we can market to them in just the way that we handle their account, the way that we introduce ourselves, the way that we have them fill out information on a clipboard. How can we create this experience that's really memorable? And literally to do that, you might have to do some things that are a little bit weird, right? Weird is remarkable, weird is worthy of comment. And so this is something we're playing with right now. We're building out this ketosis cups they're called, which is basically a keto based chocolate kind of fat bomb. And one of the things we're working on is the packaging is like, how do we do something so different that's Instagramable, Instagram worthy hashtag that people will take pictures with. We want people to take pictures with our product, with the packaging of our product. How do we do that? We gotta do something a little weird, a little bit different thing that's gonna stand out. The packaging's gotta be different. Like we aren't gonna get away with just doing film seal like every other bar on the aisle, right? So what do we do differently? How do we package? What kind of materials are we gonna use, what sort of sheens, what sort of colors what kind of fonts are we going to use to stand out from clutter? And so as a pharmacy, whether it be a pharmacy or whatever industry you're in, if you're up against really big competition with national presence, with thousands of locations, the advantage you have against them is that you're small, you're nimble, and you can react. So local news, if something happens in your local area, you can talk about it, you can be a presence, you can be the one that informs all of your customers, gives them a weekly synopsis of the local news via a newsletter, their email with a video of you explaining the top highlights of the week in your local area, in the news around health, perhaps throwing some of those things in there. But you can become that person that they begin to know like and trust, because they're not going to know like and trust Walgreens. They're not going to be able to create that individualized one on one connection. They're going to have five different pharmacists there. They meet a different one every time. There's a big turnover that you Walgreens can't compete with you on the level of personality and individualization and customizability. That's not even a word. They cannot compete with you on that. They can compete with you on price, they can compete with you on location, they can compete with you on ease of access and speed of delivery, but they will not be able to.

Replicate you standing behind a camera, giving the synopsis of the local news to your local audience, sending that out on a weekly or monthly basis, giving a newsletter, doing local presentations to local fitness facilities or senior citizen homes, and doing things like that in the community. They cannot scale that. So you've got to get focused on scaling the unscalable. Now, Ash, you mentioned about a welcome letter that I've mentioned a couple years ago, and what that basically is, if you're new to the podcast, is trying to get all the new homeowners that people have just recently bought homes, moved in the area and giving them a welcome letter. Basically, one side of it, the 8.5 x 11, is introducing yourself, saying hello. The other side is really just giving them some things that are actually valuable to them in terms of a couple contacts for local handyman, a couple contacts for local plumbers, couple contacts for local gyms, and maybe some free seven day passes or whatever it is, giving some recommendations for the best places to eat and things like that in your area. So you become the expert, the resource for them, and it puts you present you a Very personable individual. Now, how can you take that one step further in your case, Ash? How can you scale the unscalable instead of just sending them all letter in the mail? If you live in a small enough area, I don't know what your neighborhood is, I don't know what your local city or township is, but if you're getting a list of sold properties from a real estate agent from the MLS off of Zillow, whatever, and you, instead of just sending them a letter, why not go to their house, knock on the door and introduce yourself, right? I promise you, if they just moved in the area and they are needing a pharmacist.

The pharmacist who comes to their door, knocks on the door and says hello, introduces themselves and says, welcome to the area, I promise you, they're gonna make a little more effort to get to that pharmacist when they need their drugs prescribed or fulfilled. I just. I just. They want to have that connection, especially the older market, the baby boomers who are moving into your target demographic as a pharmacist, they want that personal connection. They don't want to just be a number in a spreadsheet on a computer behind a glass door that they never transact beyond. Here's my prosecutor. They want that personal connection. They don't want to just be a number in a spreadsheet on a computer behind a glass door that they never transact beyond. Here's my prescription. Here's your drugs. Like, they want a connection. And if you live in a small enough area, if you have a township of 5,000 population and five or six houses sell every week, I would make it a habit of every Saturday morning going and spending an hour or two hours knocking those people's doors. And I promise you there'd be big returns on that. The last thing I would say to you, Ash, is thinking about the gatekeepers. So it really depends on your market, again, what the local clinics and hospital might look like around you. However, if you live in a small area and you have clinics, local clinics with physicians, family doctors, a lot of times when they ask the patient about, they literally ask the patient, where do you want to pick up your prescription? And at that moment, if the customer, if the patient doesn't know where to get their prescription, they're just going to take whatever the doctor says the doctor will be okay. What about Rite Aid? Like, are you close to Rite Aid? Are you close to Walgreens? Well, if you can become that one.

That pharmacy that says, you know, do you want to Pick it up at Rite Aid or do you want to pick it up at Ash's pharmacy? Whatever the name of your pharmacy is. Like do you want, you want to be top of mind for the gatekeeper? And that might be the family doctor or the clinic or the physician's assistant that has a local clinic around you that is asking every single day clients every single day asking their patients, who do you want to pick up your prescription from? Because that's who the doctor then sends that to electronically and then they go pick it up. If you can become friends with the doctor, and I don't mean just friends like we play golf with each other, but how do you provide them value? How do you make it easier for them? How do you make an experience? How do you throw a party for all of their staff and bring them all lunch once a month? Like, how do you get creative with the gatekeepers of your industry? I don't care if you're in pharmacy or painting or whatever it is, there's certain gatekeepers, whether it be vendors, whether it be key suppliers that you need to make relationships with that will open up the doors to a bunch of customers. If they hold the key to the customer, that means they're a gatekeeper. You gotta make friends with them, alliances with them, JV with them, joint venture, whatever you gotta do, you know, exchange contact information of clients, do parties together. Maybe it is you get a coalition or like a group of those clinics together with you and you put on a local event, like you brand co branding with them, you co signing on some sort of local event that you can all participate in. Those are some ideas. I hope some of those helped. If you have a question on how to start, grow or save your business, you could go on a businessbootcamppodcast.com but the faster way now is to go on to Facebook, join the group. It's Small Business Owners of America and in brackets you'll see Business Bootcamp. Look at the logo, you'll see my face. Just so you can recognize it. There's about 40 or 50 of us in there. Ask a question on there, I'll try to answer within 24 hours and I look forward to seeing you there again. I'm Mike Andes and you've been listening to Business Boot Camp podcast. Until next time, Be great because nothing else pays.