Friday, October 25, 2019

Why do small businesses go out of business?

The short answer is this: we don't really know. The long answer: a combination of factors, most of which are out of the control of small business operators.

Tectonic change in technology would perfectly explain why mechanical typewriter or video recorder repair shops no longer exist. Lack of operating capital is another major reason for going under, as well as the burden of debt which can choke even a once thriving operation. Recession or a war are more drastic factors. But all these reasons are as obvious to the business owner as they are to the outsider.

However, as a third generation small business owner myself, my main interest is in those less obvious factors which make a small business go out of business. And just because those factors lie beneath the surface, appear infrequently, or perhaps don't really affect daily operations, they are commonly overlooked until it's too late.

The more we study Australian pocket watches and the porcelain dials that proudly bear the names of once thriving businesses, it's harder to ignore the rather sombre fact: most of those businesses are gone, forever.
Yet somehow, a few of them are still around. Those watchmakers and jewellers have not only survived but prospered, remaining both reputable and profitable.

Is there anything to learn from watchmaking history? What is the secret of success and longevity?

Or perhaps, should we rephrase our question: How can (small) business stay in business?

Here are just a couple of my thoughts, refined over the years, but still a work in progress:


No matter what we call ourselves, what we specialise in or what kind of service we provide - we are all in the retail business. Our core business should be selling ourselves and our business philosophy. Only then, our products and services. Retail is tough, competitive, cut throat business.

I have seen too many shy professionals, reputable experts in their field, who are overly introverted. Watchmakers are the perfect example of such retail-averse operators. They love to be 'discovered' while tucked away from passing traffic. Yet watchmakers and jewellers who have 'made it' are those who are always striving for the best exposure they can get; a shop at the most prominent location. For them, selling is not a dirty word but an art form which they have mastered to perfection.

2. Direct engagement with customers is the only way to engage

This means two things: first, no subcontracting. If I am to repair a watch (or make a ring or build a house) I'll make it for YOU, the paying customer, not for the middleman. Not just because I'll make more profit (cutting out the unnecessary middle man) but because I want to be YOUR builder and build my reputation with YOU as a result. Such a relationship is long lasting, profitable and will bear fruit in many decades to come.

The second rule of engagement: TALK to your customers. Whether it is in the form of advertising, engaging in a meaningful conversation over the counter or writing a daily newsletter - disengaged businesses that are out of sight have no future.

I cannot tell you how frustrating it is to deal with some of our suppliers. While we have no choice but to place our orders with them on regular basis, they are so disengaged that it is just a matter of time before they'll be completely wiped out. One particular spare parts supplier has changed hands 3 times in the past 25 years. The only reason they are still in business is for the monopoly on the supply of certain parts. In 25 years I have not received a single 'we appreciate your business' via email or phone. Not once. We spend thousands of dollars with them every month, but we could easily spend twice more if they just said 'thank you' and delivered parts promptly.

3. In order to stay in business, small businesses must grow

For the good part of 30 years, my grandfather and my father - both watchmakers - operated two watchmaking businesses. They ran two separate shops, trained apprentices and employed staff, all while competing with each other! That's right: instead of working together, they worked against each other. This is probably the most disheartening reality of my youth and the reason why I hated watchmaking for so many years. One can only imagine what the two of them could have achieved if they had worked together, complementing each other.

My grandpa was an excellent salesman and a very competent watchmaker. However, he couldn't save money if his life depended on it. My dad was always keen to talk, debate, express his own opinion and was very much liked by customers for being a 'down to earth man'. At the peak of his career, mechanical watches were replaced with cheap battery operated ones and he completely missed the trend. He is still a good watchmaker, but an awful salesman, and totally incapable of hiring and retaining employees. So to this day, at the age of 79, he still runs a one man show. He is in love with his business style, and so is his competition.

I am trying to learn from their mistakes. For us, slow but steady ORGANIC growth is the only way forward. Dealing with apprentices and assistants is not easy, but the objective is to create an environment where young people with different sets of skills will work together, in harmony, for YOUR benefit.

Josh can machine anything, he is technically much smarter than me and a better chess player. His mind is a mind of a practical engineer, a mind which works fast. Andrew is a wonderful, respectful, appreciative, reliable and incredibly honest young man. He is a fast learner, firmly on his track to becoming one of the best watchmakers AND machinists in Sydney. Gemma is tower of strength with fantastic attention to detail, impeccable customer service and amazing management skills. She makes my life easy and she is simply irreplaceable. Young Michael, who has only been with us for one year, has a true and very rare gift of knowing the value of everything. If I drop dead tomorrow, he should be in charge of buying and selling. And Emily from Liverpool - who recently joined us and will only stay in Australia for a few more months - is contributing like there is no tomorrow. I can only imagine what the future will bring for a small team dedicated to a common goal: to serve you.

(To be continued...)

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