Key Idea #1: Identify A Gap.
The reason you start a business (or in this case, buy a business) may be the key to sustained success. Growing is not always good; and you don't have to grow your business if it means you have to give up what it is you personally love about the business.

Dr. Smith loves fresh, homemade-tasting candy, candy made from the highest quality ingredients with no preservatives added. He grew up on this candy and doesn't want to change recipes that are now over 80 years old. To grow substantially, the Smiths would have to increase the shelf life of the product. To compete on price, they would have to cut back on raw costs. With this retail store plus three others and the mail-order business, Angell & Phelps has found its place in the hearts of plenty of customers. Tours have increased sales and the custom mold making is an entirely new revenue stream. This family owned and operated business is not growing rapidly, but growing is not the goal. The goal is to make the freshest, most delectable candy any customer could find anywhere - and that they do.

You think back... Why would it be difficult for Al to convince his dad that they should use preservatives so they could increase shelf life, thereby growing the business?

Answer: The entire reason Dr. Smith bought the business was to preserve the old recipes so his customers can experience what he had as a child. But it's more than that. Dr. Smith is so emotionally attached to the old recipes that he would sell the shop before he would change. <

What do you think? Is Dr. Smith making a bad business decision?

Possible answer: Probably, but it doesn't matter. He owns the business. If this were a publicly held company, his stockholders would push him to change. Dr. Smith is making a personal decision with this thought in mind: I like this candy the way it is and there are plenty of people like me who want to buy it.

What do you think? Is Dr. Smith a typical small business owner?

Possible answer: Yes. This is the big difference between publicly traded companies and closely held ones. In fact, there is much discussion about the enormous impact of small business on this economy and also the quirkiness of small business owners. The CPAs and bookkeepers of the world see this quirky side often. When you look closely at the numbers of a small business, you will see many emotional decisions are being made. For example: family members who work in the business being paid double what you would have to pay another person to do the same work.

Note: Small business owners generate 52% of all the sales in the U.S., employ nearly 60% of the workforce and lease about 40% of the commercial real estate.

What do you think? Is Dr. Smith a bad businessman?

Possible answer: Yes and no. Yes because, if he allowed the recipes to be modified, he could increase sales; and, no because he has thousands of happy customers and he is making the money he wants to make in the business.

The one drawback is that he could create more good jobs if sales increased, but this is not one of his goals. He could perhaps develop a recipe that would be a category killer in the candy business, but he isn't trying to do that.

What do you think? Why would anyone not want to make more money?

Possible answer: Most small business owners don't start a business for the money. They start a business to have control over their destiny and just to see if they can do it. Money is the byproduct of having happy customers. Money is what allows the owner to keep doing what he's doing. There are millions of "lifestyle" businesses in world. Angell & Phelps is a lifestyle business for the Smith family. They love chocolate, they love their town and their place on one of its main streets, and they love seeing people enjoy their products.

You think back... What two things did Al do to increase sales to tourists?

Answer: He created a tour of the little factory so people could learn how the chocolates are made and he printed a rack card offering the free tour and free samples. The racks containing information about what to do in Daytona Beach are found in hotels, restaurants and other public areas.

What do you think? How does Al know that the rack card is working?

Possible answer: The rack card says, "Bring this card to Angell & Phelps for a free tour and free samples." It is very important to track the results of your marketing efforts. Al spends good money to print the four-color card and he needs to know for sure that he is getting a return on his investment.

You think back... Why does Al say he does not make candy?

Answer: Because he doesn't. The people who work for him make candy. This is very important when it comes to running a business. Al understands how candy is made and perhaps can do all of the steps himself. However, on a day-to-day basis, he does not make candy. Ron has been making candy for 40 years. He is a valued employee who has great skill and who takes pride in the quality of his work. The hand dipping of chocolates requires skill. Like all leaders, Al's job is to provide the environment for the employees to succeed. This means he needs to insure the best ingredients, best equipment and good working conditions are in place.

What do you think? Does Al's degree in social work help him to be a good leader?

Possible answer: Yes. His courses included psychology and sociology. This gives him a foundation of understanding the nature of human beings and how we act in groups.

What do you think? Why would a small business owner spend his or her time working in the community?

Answer: Because as the community improves, each business has a greater chance to improve. In programs 401, 403 and 409 we saw other business owners doing what we find Al doing.

You think back... Why is there great potential in customized molded chocolate products?

Answer: Made-to-order products that can be duplicated easily have high profit margin. For example, once the swan mold is made, the chocolate makers can use the same mold over and - but only make it when ordered. There is no inventory sitting on a shelf waiting to sell.

Also, the molded chocolates are less labor intensive than the hand-dipped products although they are unique which keeps the price up. Since the equipment is in place, the only thing that holds back this division is imagination. Molds can be made to replicate anything!

Many companies who make products to order require at least ½ payment in advance, which is great for cash flow. In the retail environment, Al has to make the chocolates and hope they sell.