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There is a new report on MSNBC today Main Street’s Sour Loans Sour courtesy of the Associated Press that says, “the government last year was left holding a record $2.1 billion in write offs for small-business loans they had guaranteed. There were over 2500 restaurant charge-offs making it the largest number of defaulted loans. More than 150 of those loans were made by Quizno’s franchisees worth nearly $15.5 million.” It also highlights the difference between the banks that were “too big to fail” to the mom and pops not making it now. Maybe what worked before doesn’t work anymore.
Instead of saying, “Where’s our handout,” where are the stories of people who realized they have to change or die?
I get there’s a lot of pain out there. I understand business for many is down. But when are you going to do something about it?
You have to radically change your business if you are not making it and want to survive.
I had lunch last week with Roger Leithead, the former CEO of Arrow shirts who told me a story about how Arrow survived the Great Depression. A bit of back-story.
The Arrow shirt concept came about in the 1800’s because men only wore white dress shirts and they all went to work in a suit. Even the blacksmith would work in that white shirt. Well this one guy was a singer and his wife didn’t like him coming home and changing into a clean shirt just to go out – especially since they only bathed on Saturday nights. The idea of a detachable collar and cuffs made it easy to look presentable without all that washing.
This is the way Arrow built an empire of over 450 warehouses across the US filled with detachable collars and cuffs. It was a recipe for success: find out what the customer wanted and then give it to them.
A competitor, the Manhattan shirt company, had a shirt you could buy with an attached collar and cuffs but it was built like a tent with yards of fabric to tuck in. Also, the sleeve length was a 37. That’s why guys wore armbands, so their sleeves wouldn’t reach over their fingers – like you see in barbershop quartets. At the time that was based on need, not looks.
Sales were dropping off and the Arrow CEO saw the trend was changing to a complete shirt. He announced to his board of directors in 1930, “We will never get there doing what we’re doing now.” That’s when something truly remarkable happened.
He went downstairs and gave instructions to open the doors of their main warehouse on River Street in Troy, New York, which bordered on the Hudson River. “Clear out the warehouse.” Using pitchforks, the warehouse men threw all of the existing collars and cuffs into the river.
Forget the environmental consequences of such an act of over 1 million dozen collars and cuffs floating down the Hudson. He threw out their entire inventory in order to make the changes needed.
They came up with 64 combinations of neck and sleeve lengths so that Arrow shirt fit you properly, not like a sack. They changed from natural ocean pearl buttons that broke easily, to plastic and invented Sanfordizing, which meant a shirt wouldn’t shrink. They again became the leader in men’s shirts because of the CEO realizing they had to change or die.
You think it’s tough to compete now? Imagine going into a retailer in the Depression telling them they needed all this inventory to serve their customers; where three models could capture the market, now they needed 64.
The CEO then had marketing come up with the “Arrow Shirt Man.” Splashy ads in the best magazines touted how well an Arrow shirt fit. It created a need for the women who purchased their husbands’ shirts to go into retailers and ask for that “Arrow Shirt.” Retailers had no choice but to carry them and the rest is history.
When I speak across the country I hear many people quick to tell the story of how business is off, but they themselves are reluctant to change. It might be like going to the emphysema ward of a hospital seeing people smoking while they’re under their oxygen tents. The will to change can seem too much even when what you’re doing is killing you.
If things aren’t going your way, what radical change do you need to do to ensure your success? Are things bad enough to change? Do you have the guts to throw out what you’ve been doing and start over?
Many businesses didn’t make a profit in the past when the money was easy – don’t blame the banks, Obama or someone else. It is your responsibility to make a profit. If you can’t, that’s capitalism.
And no, there is no level playing field – Wal-Mart will always be able to undercut your price, Starbucks will always be able to get a better location, etc.
My message to small businesses today? It’s not whine and cry but change or die. The choice is yours, but the time to act is now!
Learn the essentials of getting a retail business back in shape here
that is a fantastic and true article. Change or Die is the business motto.