Building a square hole

Every election brings uncertainty to the business community. The latest US Presidential election is no exception. But here’s a word of advice: regardless of who occupies the White House, Downing Street or whatever the government buildings are called in your country, entrepreneurial small business owners will have to rely on who we’ve always relied on to be successful—ourselves, our employees, and our customers.

We’re speaking from experience. We are the founders of Barefoot Cellars, the company that transformed the image of American wine from staid and unimaginative to fun, lighthearted, and hip. We started the Barefoot Wine brand in our laundry room in 1986, made it a nationwide bestseller, and successfully sold the brand to E&J Gallo in 2005. Starting with virtually no money and no wine industry experience, we employed innovative ideas to overcome obstacles and create new markets.

We learned the hard way and the best way—by experience. I am convinced that any company that has a good product or service and gets the basics right will thrive—regardless of the outcome of an election. So what exactlyare the basics?

Embrace the advantages of being small
While small companies, especially start-ups, tend to be undercapitalized, they also have some big advantages over larger competitors. They tend to be more nimble and flexible instead of being mired in bureaucracy. Since they don’t have big siloed departments, they can communicate faster. They’re less risk-averse. All of this allows them to turn on a dime in response to market changes and customer demands.

Even a shortage of hard cash can be an advantage. Why? Because it makes you more innovative. This apparent hardship forces you to discover and employ unorthodox ideas, strategies and tactics that the big guys wouldn’t dream of. They don’t have to. In a small company, cost-saving ideas, customer retention and marketing concepts can come from anywhere. The big guys tend to want ideas to originate from their proper divisions, which can miss or kill some gems in an effort to defend precious turf.

Think creatively about marketing
You don’t have to spend a lot of money. Back in 1986 when Barefoot was founded, we pioneered what they call “worthy cause marketing” (WCM). We partnered with nonprofit organizations (NPOs) that believed in the same causes we believed in—specifically, environmentalism and civil rights. We donated product at fundraising events, we worked festivals, and we got out into the community to talk about causes we were passionate about, as well as Barefoot wine and our NPO partners—all in the same breath.

In this way, we gained access to lots of potential customers and gave them a “social reason” to buy Barefoot wine. And in return, the NPOs received donated product and manpower at events, as well as publicity via Barefoot’s distribution channels.

One of the reasons we wrote our book is to show American businesses that worthy cause marketing really works and can actually be more effective than advertising. As the company’s brand grows, so does the nonprofit’s brand. If Barefoot can be a case study of WCM success, perhaps we can get some of the $100 billion-plus spent on conventional advertising in this country redirected to the NPOs like ours.

Find good people. Make great people
Of course you need to hire well. That means finding people who are not only qualified, but who have foundational qualities you can build upon. Barefoot looked for enthusiasm, confidence, honesty and integrity, a willingness to learn, and a sense of humor. But we didn’t stop there—we made sure to provide the environment, encouragement, resources, and flexibility for them to become their best.

We made sure to create a positive culture. We caught people doing things right and told our entire staff about it. We allowed them to make mistakes so as not to squelch their creativity. We put a lot of energy into mentoring and training. We gave them plenty of vacation time to rest and recharge. We did everything possible to help them live up to their full potential.

To get the best out of your people, find out what they excel at. Then, redesign their jobs to fit those skills. Ask others to pick up the aspects of the former job that still need to be done. You might be surprised at the positive response. Don’t put the square peg in the round hole. Build a square hole.

Use performance-based compensation
Most compensation plans are based on an hourly rate, which is paying for attendance, not production. Consider offering bonuses based on sales, cost reductions, and customer retention. In other words, give them a financial reason to help the team perform. With the ideal compensation system, non-producers can’t afford to work for you, and producers can’t afford to leave.

We were chastised for “overpaying” salespeople. True, we had several salespeople who made more than we, the owners, did—yet when we looked at the efficiencies of scale, the value of stability, and the increase in sales, we knew we were doing the right thing.

Sharing the wealth allows you to reduce employee turnover, attract go-getters, and motivate people to produce even more. Best of all, increased profit is “found money”—it really costs you nothing. Just make sure the payment is tied into profitability, and not based solely on “growth.” You are paying too much for labor when you pay for attendance alone. It’s their production you want, because that is where your profits come from.

Don’t treat information as currency
Some companies, especially big corporations, treat information like a coveted commodity. In fact, it’s often used as a type of currency to buy a lunch, get a promotion, receive kudos, or trade for other information. Some information is downright suppressed because it may threaten some supervisor’s concept of job security. Do not let this happen.

Do whatever you can to engage everyone and keep the information free-flowing. Be transparent about challenges and ask the entire staff for solutions. At Barefoot, we made sure all people were getting bonuses on sales, which meant that sharing information and ideas was good for everybody’s paycheck. Respecting the intellect of your human resources, giving them a financial reason to work as a team, and sharing your challenges can avoid hardening of the information arteries.

Listen to your salespeople
Without them, there is no company. Run everything by your salespeople that affects your product and its image. Before you allow a change or “improvement” to the product or the package, check with the folks who have to make the sale, overcome the objections, and talk directly to the decision makers and the end users. Top-down thinking, when it comes to product, package design, and even promotion, can undermine what has taken years to establish.

It’s critical thatyour non-salespeople appreciate where the money comes from that pays their salaries, bonuses, and benefits. When folks are hired, present them with an info-graphic that follows the money trail backwards from the customer through the distribution system, through the marketing and sales system, through the supply and production system, and winds up in their pockets. It may seem obvious, but it can be forgotten as your company gets larger.

Establish a positive culture
Company culture has a direct bearing on the survival and growth of a company. This starts from the top and permeates throughout an organization. Barefoot’s culture was based on two overarching principles: generosity and permission. Our use of worthy cause marketing gave employees a level of satisfaction that went far beyond making a sale—they got to make a difference. And by allowing, no, insisting that people use their imagination to experiment, be creative, and even make mistakes, Barefoot gave them permission to be all they could be.

Plus, Barefoot was fun. The whole approach was fun, from the image of the bare foot to the colorful labels and cartons, to the slogans, puns, and parodies. Barefooters were encouraged to be playful. Having fun with the “foot” was always a hallmark of Barefoot culture. All of this gave Barefooters a unique level of ownership seldom seen in most companies. It kept Barefoot fresh and its people involved. They looked forward to coming to work because it was exciting.

At the time Barefoot Wine was founded, our business model was considered radical. We viewed it as more of a “service” than a product. At its “velocity price point,” Barefoot could not survive without becoming “America’s Personal House Wine”—meaning Tuesday night wine, picnic wine, beach wine, the wine you kept on hand because it always delivered quality and value. We would have to sell massive quantities to stay in business—and that meant pulling out all the stops to create a great customer experience.

Business owners need to remember something crucial. Governments cannot create. They can make things easier or more difficult, but they cannotbuild something new and exciting and inspiring. That’s our job—and we should focus on it instead of worrying about things we can’t control.


Michael Houlihan and Bonnie Harvey

<!--paging_filter--><p>Michael Houlihan and Bonnie Harvey, authors of&nbsp;<em>The Barefoot Spirit: How Hardship, Hustle, and Heart Built a Bestselling Wine</em>, started the Barefoot Wine brand in their laundry room in 1986, made it a nationwide bestseller, and successfully sold the brand to E&J Gallo in 2005. Starting with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles and create new markets.<br /> They were pioneers in what they termed &ldquo;worthy cause marketing&rdquo; and performance-based compensation. They held a comprehensive view of customer service, resulting in the National Hot Brand Award for outstanding sales growth in 2003 and 2004.<br /> They now share their experience and innovative approach to business as consultants, authors, speakers, mentors, and workshop leaders. Their book, <em>The Barefoot Spirit</em>, chronicles the history and lessons learned building the popular Barefoot Wine brand.</p> <p> To learn more, visit <a href=""></a>.</p>