By Greg Reyneke, CWS-VI
Many dealers look back and fondly remember their younger more innocent days when life appeared to be easy. They’ve been running their businesses for many years now and have finally realized that things aren’t working the way they thought they would. They started the business and worked hard. Money was made, and money was spent—things seemed to be so good. The economy took an unexpected downward turn and suddenly things weren’t going so well. Customers began defecting to cheaper competitors; the time it takes to make a sale increased and suddenly they found themselves working for the business instead of the business working for them. The recent economic decline has served to magnify the weaknesses in all business, and especially small businesses.
It’s often hard to admit that you need help, but when you reflect on the past and truly understand that your future depends on ‘getting help,’ then only a special kind of stupid will cause one to doggedly ignore the obvious: something has to change! One of the easiest ways to revive a stale business is to work with an industry consultant who can review the operations of a business and provide the necessary advice to begin the recovery process. In the water quality improvement industry, many franchises and dealer networks exist that can help one accomplish this. In a small business, true success means effectively balancing six factors:
- Customer acquisition. Regardless of how many customers you have now, you need to always be acquiring new ones.
- Credibility. You live and die by your reputation, especially in today’s Internet-driven society. You need to cultivate and maintain an image of integrity, consistency and dependability.
- Cash flow. Your business needs to be self-sustaining for cash flow and shouldn’t require you to be constantly writing checks to the company or relying continually on a bridging a loan to stay afloat.
- Credit. You should have access to enough business credit to finance unexpected expenses and you should also have access to credit for your customers. In addition, your credit-worthiness often affects pricing from vendors.
- Capital. Excellent credit and track record of good business practice grants you access to capital for large investments like heavy equipment, buildings and other critical business infrastructure.
- Customer retention. If your customers aren’t ‘coming back for more’ every single year, you’re doing something wrong. Don’t be so arrogant as to assume that you ever ‘own’ a customer. You need to keep an eye on the value proposition that you’re offering and ensure that clients understand that you truly value their business.
Choosing the right options
Franchises and independent dealer networks are designed to help new and existing dealers with these critical components for success and longevity. The potential power of these organizations lies in the collaborative nature of a truly effective group. Component manufacturers, engineers, assemblers, marketers and dealers work together for mutual success; each understands that their business works better when assisting others in the chain. Choosing to ally with a dealer network or franchise organization can be a daunting prospect, since there are many groups on each side of the fence and some deliver the benefits of both types of operation. Deciding which one is right for you requires a thorough understanding of how each model operates and, of course, careful introspection into what you and your business need to be successful (again). Many people don’t fully understand the differences between franchises and independent dealer networks and it can often be quite confusing. Table 1 illustrates the commonly found characteristics of the groups—these are broad observations, not rules.
The most obvious benefits of franchises and independent, branded dealer networks are:
- Branding. Franchisors and network brand managers spend millions of dollars in developing, promoting and preserving their respective brands. You can leverage the power and presence of their brand(s) to promote your business and make it easier for your customers to trust you.
- Business assistance. The largest benefit of buying into a franchise is the turnkey business assistance available. Most franchises, and some dealer networks, provide invaluable tools like operations manuals, motivational seminars, mentoring and coaching, business consulting and even industry-specific legal guidance.
- Advertising assistance. Corporate marketing experts will usually be available to help you create successful marketing plans and even provide creative support for your local efforts. Broadcast-ready TV and radio spots, direct-mail pieces and sales support material, as well as Yellow Pages ads and retail newspaper ad slicks are often available for your use. Innovative groups offer ready-made websites and sponsor water-advice websites to help you reach new customers and keep your existing ones. Some groups will provide matching funds or in-kind compensation to help you with advertising and promotion efforts.
- Financing. Today’s consumers expect affordable financing to be available for large-ticket purchases and many businesses prefer to lease their processing equipment instead of purchasing outright. Profitable sales can be lost if you don’t have financing available to help your customers afford the outstanding products that you offer. Some groups help finance the inventory you need to streamline your operation.
- Proprietary products and services. Good franchise and dealer groups invest significant amounts of money and time into research, engineering, procurement and refinement of technologies that make it easier for you to solve water quality problems, maintain existing equipment and retain your customers. In addition to innovative water products, they should provide you with methods and procedures to perform preventive maintenance, disinfect systems, replace filters, augment media and even update operating software on compatible systems.
- Technical support. How your vendors support you will dramatically affect your ability to help your customers. Good franchise and independent dealer groups will not only provide good literature and manuals, but also facilitate ways to educate you on how to resolve equipment, chemistry, environmental and political issues that you will encounter as you rebuild your business.
- Reputation. Joining a trade group or purchasing a franchise will allow you to share reputation and credibility with the other members and the governing group/franchisor. Carefully research what reputation the franchise or dealer network opportunity currently has and whether you’d actually want your name associated with it. The actions of a bad dealer in an organization can easily cause collective damage to reputations; it is crucial to know how quickly the franchise or dealer network will act to mitigate these problems.
Take your time, put your pride in your pocket and research what style of operation will help you the most. Don’t be shy to discuss your concerns with other dealers that you trust. Sometimes, spending the money to hire an independent business consultant will be well worth it to help you understand why your business isn’t as successful as you’d like it to be. Neither option is inherently better than the other; they merely suit different personalities and business styles. You’ve worked hard, you’ve had your fun. It’s time to get serious and make your business successful!
Helpful Internet resources
- American Association of Franchisees and Dealers, www.aafd.org
- Federal Trade Commission Disclosure Rules, www.ftc.gov/os/fedreg/2007/ march/070330franchiserulefrnotice.pdf#page=102
About the author
Greg Reyneke is Managing Partner at Red Fox Advisors, a multidisciplinary research, development and consulting company with a strong emphasis on water, air, microbiology and energy projects. He also serves as an advisor to the ProFlow Dealer Network, a Pentair Platinum Partner and is a member of the WC&P Technical Review Committee.