Sunday, February 10, 2008

A Personal Touch

I'm a big proponent of using Return on Invested Capital (ROIC) as a primary benchmark for business success. And not just at the end of the year when sizing up our P&L statements. ROIC has to be used for every business function in order to know if it was "worth" it or not...period.

That's why we use tools like email newsletters and blogs to communicate with our members at TickerHound. It's a "one to many" device - meaning, we write a message once and it reaches many people (at the same cost). It's what makes software and the web such a highly profitable medium.

But I think that in the search for increasing ROIC, we might lose that personal touch that helps build businesses. There's something to be said for appearing to be a "big company" - customers want to feel like they're part of something bigger than they are, they want a feeling of security, credibility and reliability that comes with being aligned with a large company.

But I can't help but feel like "being big" might not be an advantage sometimes - especially on the web. Striving for increasing ROIC in the short term might hurt a business over the long term. So I've been thinking a lot about the web and how it was supposed to "level the playing field" and put small companies on the same level as big companies...and it's certainly done that.

The other thing it's done is it has made this world a much smaller place to live in. I can chat with my friends in China, California and New York just as easily as the person next to me. I know what they're doing via their "Status" on Facebook. I know if and who they're dating, what bar they went to this weekend and I even get to see the tan they got on their latest vacation.

So with that being said, should web start-ups continue to adopt "big business" images or should we start to look at what makes "small businesses" work?

And I don't just mean "small" in terms of revenue or number of employees...I mean "small" in terms of the community the business serves. So the small businesses I'm thinking of are those that serve local communities - the pizzeria down the block from my house, or the dry cleaner at the corner - those small businesses.

Now, the most successful small business I know of was Tony's Deli - an Italian Deli owned by my friend's parents in my old neighborhood of Whitestone, Queens. Tony's was a typical Italian deli - fresh cold cuts, great hot food prepared by my friend's mother and every single time you'd walk in they'd shout your name from across the counter and ask how you were.

It didn't feel like you were walking into a store - you didn't feel like you were walking into a place of business. It felt like you were walking into a friend's place, grabbing some food and by coincidence leaving a little money on the counter. They knew your name, your family's names, the names of your pets. It was great.

But then one day this MONSTEROUS Italian Deli opened up just 3 doors down! They had more food, more selection, fresher produce, etc....AND, they were charging 50% less than Tony's.

So here you have a situation where a competitor enters the marketplace with a better product at a cheaper price - most "business strategists" would say that Tony's would be done for.

But that's not what happened - no sir.

Without Tony's asking for help or even bad mouthing the competition, the community rallied around the local deli. The lines got longer, people bought more things more often and whenever you would walk in you'd be able to hear at least one customer mention that they'd "never shop at the place down the block, hope they go outta business!". It was amazing - Tony's actually did better when the new competitor hit the markerplace because they had captured the loyalty of the community they served.

The "Tony's Community" became champions of Tony's success - the "bigger" company was considered a common enemy that the community could rally against. And boy oh boy did it work out well for Tony's...within 6 months the competing Deli was out of business and in the last 15 years not a single new Deli has tried to open in that community.

Tony's became the king because the community decided it should be so.

And that's what prompted me to do the first truly "small" business tactic that I've done since we decided to launch TickerHound last year.

I began to personally e-mail "thank you" letters to every TickerHound member...and not the standard, "Welcome to TickerHound" e-mails everybody gets. I e-mailed them thanking them for joining and for their contributions to the site. These aren't copy & paste, mass production e-mails either. These are letters I personally typed and sent, from my personal e-mail address, to our members.

This is obviously going to lower our ROIC in the short term, but over the long haul I have this belief that it'll help TickerHound become the "Tony's Deli" of the financial education market. And even if it doesn't, I know that at the very least I'll have made some friends, built some loyalty and have gotten some invaluable feedback on our product - so no matter what, it's a win-win for me, for TickerHound and for the community.

So here's my message to other entrepreneurs out there - "think small".

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