Secrets of Operating a Successful Retail Business
Retail entrepreneurs need to keep an eye on more than the store
We like a good haircut. Not just because we feel cooler in this ridiculously hot New York summer, but because we talk to our barber, Nick, about small business.
Nick's about 35, lives in the same town as us, has a wife and two young children. In addition to cutting hair, he owns an Italian ice place in town that has been an institution for as long as anyone can remember. It's a great business. The gross margin on ices is about 90 percent and he owns the roadside, freestanding building that's open from May through September.
We learned a few things from Nick:
- A simple business is not the same an easy business. Last week, Nick and his wife (who's a schoolteacher the rest of the year but works in the ices store during the summer) had to drive 60 miles to Manhattan in the broiling heat to pick up a tub of vanilla chocolate chip. Why make the trip for one tub? "If I don't have the flavor someone wants, they might not come back." (Reminded us of Andy Grove's book, Only the Paranoid Survive.) Even though virtually everyone would come back, that's the kind of thinking that keeps Nick in business.
- Always look for something new and profitable. Nick spends his first one or two tips every morning at Starbuck's next door. "I'm an addict," he admits. So he's been thinking lately that the ices store should sell coffee. We asked him why he'd do that, since coffee is such a commodity, with Starbuck's, 7-Eleven and Dunkin' Donuts all within a two-minute drive. "Coffee costs almost nothing to make and it gives people another reason to drive up on a regular basis." If nothing else, it's a way to get people thinking about having ices that night.
- Ownership thinking is important. Nick asked us if we'd been to the new deli in town, which specializes in panini sandwiches. We hadn't, even though it's been open for more than a year. Nick goes there for breakfast. When he first started going he ordered an egg and cheese on a roll. Once the owner saw him a few times, though, he'd say, "You had that yesterday," and would make recommendations to spice up (and increase the price) of his order. Nick loved being sold, and soon was ordering more adventurously from the extensive menu of specials. And he's talking to us about it, so we will be going in there before long. The guy who owns the deli owns four other delis within a five-mile radius. Nick slowed down his haircutting to make some calculations about the net income of the deli owner.
- If your business is retail, keep an eye on youthful employees. While we were talking food, Nick pointed out that the best pizza in town was right next door to the panini place. "Everything's fresh, clean, professional." And unlike some of the other pizzerias in town that are a little casual in their service, cleanliness and adult supervision, this place is "run by older guys who are pros." Nick told me he has to keep a vigil over teenage employees. They're good workers, but sometimes forget to turn the freezer back on after cleaning it, things like that. Which reminded me of a Baskin-Robbins store our brother worked in when he was a teenager. We don't remember anyone ever paying for ice cream. The teens gave it away free to all their friends, and the owner was usually MIA.
- Don't gossip. Good businesspeople are very careful about what they say, and to whom. The barbershop Nick works in was sold a few years ago by owners who'd been there for 40 years. They had one barber who loved to "stir it up" -- gossiping about everyone and anyone, to customers and other employees. The owners couldn't stand him, but they kept him, for 15 years, because he was a great barber. When they were ready to sell, the chatty barber was cut out and the shop was sold to another operator. Ouch.