The call and the dilemma
It's 2:00 p.m. on a Thursday in June, just a few weeks before we'll celebrate Independence Day. A call comes in to my office from a trainer. She wants to speak with me about her independent dog training business and about becoming a Karen Pryor Academy Certified Training Partner.
My caller is a graduate of a fine specialty dog training program. As I listen to her, she sounds bright and experienced. She has an excellent, if not great, telephone voice. Soothing, but not boring, and confident. Clients would trust this person.
"So, what's the problem?" I ask her.
"I've got to turn things around or in 12 months I won't be in business," she explains.
Today, independent training businesses face significant obstacles if they want to remain independent entrepreneurs. Talented people are struggling to make a good living using the skills they have invested in learning. I have surveyed hundreds of trainers for my courses at ClickerExpo, and it's startling to see how many trainers in the comfort of survey anonymity tell you how tough it is to make it. Why?
Coming out of the Great Depression, my grandfather, Louis Blinder, a non-English speaking immigrant, opened a successful neighborhood hardware supply store and added two others before selling them and retiring at the age of 50. His story wasn't unique. In a golden age of independent entrepreneurialism that flourished after World War II, independent entrepreneurs opened and grew businesses in all kinds of industries that are today dominated by franchises and "category killers"—and marked by the absence of people like my grandfather. Guys like him may work at the store, but they no longer own it.
In hardware supply today, it's Lowe's, Home Depot, and the 5,800-store, retailer-owned, cooperative brand known as True Value. Independent hardware stores that thrive outside of these three names are exceptions.
You can pick any number of industries and see this same transformation, including those in our own field. Pet food manufacturing and pet retail are among the most dramatic examples in our industry, but independent veterinarians, boarding and kenneling operators, and dog trainers increasingly find themselves in competition with larger, multi-site versions of companies offering similar services. Again, why?
Industries transform in this way for two economic reasons. First, there are "economies of scale"—significantly greater volume over time can result in significantly lower average per-unit production costs. Second, there are "economies of scope"—one company can often produce and market two products in the same production system more effectively and at lower average cost than two companies acting independently.
It's not always easy for business people to realize the hoped-for advantages of scope or scale economies. Quality deteriorates, employees defect, customers leave, or a myriad of other problems derail an individual company's efforts to get scale or scope economies. Nevertheless, the overwhelming allure of the potential gains drives the trend toward consolidation that we see so often. Once set in motion within an industry, the transformation rarely stops, but adjusts to the difficulties. It may slow down if one prominent player stumbles or funding dries up. But soon another picks up the baton or funding flows anew. Once the transformation starts, most times it just accelerates.
Our call resumes
The independent trainer and I talk some more. "A friend graduated from the same dog training program I did," she said. "She has just closed her business. I don't want that to happen to me."
How to make sure that that doesn't happen? We start talking about her basic financial goals. To my delight, she has a gross revenue target in mind and knows what that amount would translate to in net income. We discuss approximately how many hours of billable service that would mean, and translate that into the number of new clients she needs each week based on the average length of her consultations today.
But that's where we have a problem. This trainer's new client goal is too high for now. She is not being realistic about the number of clients she can win each week. We decide to look at and adjust her business in two other ways, and come back later to the issue of how to win more new clients.
A business is like a funnel. Potential customers are at the wide, open top of the funnel. People who don't know you or haven't contacted you are circling above it. Those who've made contact with you are sitting around the rim, deciding whether to climb in. Known customers enter the thinner middle of the funnel, and lost customers exit the bottom.
Most trainers today face three problems. The first problem is what I call the "top of the funnel" problem—figuring out how to get more potential customers to be aware of and inquire about your services. The second problem is the "rim-to-in funnel" problem. Once they've contacted you, how do you convert potential customers to paying customers? The third problem is the "exit funnel" problem. Once they're in your funnel, how do you manage the exit so as to retain most of them as long-term customers?
I suggest to my caller that we start by looking at the "rim-to-in funnel" problem and the "exit funnel" problem. We dissect her pricing and product strategy and the scope of services she offers. Thirty minutes later, we have fashioned a new strategy that will encourage greater client trial of her services, increase the likelihood of a longer engagement, and give her continued access to the customer over the pet's lifetime.
How? We made three changes. The trainer had been offering a flat rate lesson price, the same rate whether you took one or five lessons. She had recognized the importance of multiple lessons, but few customers took more than one or two lessons. So, we packaged her home services into a five-lesson package. To reduce the potential sticker shock of a five-lesson package, we increased the cost of a single lesson taken alone, and reduced slightly the cost of the five-lesson package, thereby creating the perception of a substantial value for the average cost of the five lessons. Next, we decided to let customers choose at the end of the first lesson whether to purchase the multi-lesson plan or pay the single lesson rate. We discussed how to present to the customer the significant training and economic benefits of multiple visits.
The third change tackled the exit funnel problem. We discussed what she was doing to continue to service the customer. Other than e-mail, the answer was nothing. Why couldn't she service the next phase of the pet owner's needs by offering reliable pet-walking and pet-sitting services? The trainer felt she could strike an alliance with a dog-walking service she already trusted. In exchange for signing up clients and collecting payments, she would be paid a portion of the fee. She had already begun to think about home-boarding, too.
These three changes wouldn't completely solve her financial issues, but if they were at all effective, she'd see financial gain immediately and the collective impact would be enough to get her out of crisis mode. Just as importantly, these changes would decrease the number of new clients she would need to win every week to say in business.
We turn back to the "top of the funnel" problem.
"I didn't realize," she says, "how hard it would be to get customers to even know about me. It's so expensive to advertise; even little ads cost a fortune. It's time-consuming to make the ads, never mind figure out if they are working. I've got a decent website, but hardly anyone visits. I'm building relationships with local veterinarians and that is helping some. But, it won't be enough. And then there are those guys from Bark Busters outspending me!"
Right there she had outlined the "economies of scope" problem. I explain how companies with more than one location spread the cost of their advertising over a greater number of locations. Businesses that can spread the costs of reaching customers over a greater service base will have a comparative advantage, and those that can't are at a comparative disadvantage. Her $1,000 advertisement only helped her single location. Their $1,000 advertisement may help four locations. The greater the difference in scope of services, the greater the advantage.
So, what can be done to counter this disadvantage?
"Didn't you call to inquire about becoming a Karen Pryor Academy Certified Training Partner?" I ask my caller. "There's your answer."
Like the 5,800 independent hardware retailers united under the True Value brand, excellent trainers who are comparatively under-resourced—trainers like my caller and like you—can receive the economies of marketing scope. As Karen Pryor Academy Certified Training Partners, you get the comparative advantage—for the first time.
Graduates of Karen Pryor Academy learn from some of the most experienced teachers in the field, following a curriculum that weaves best business practices together with best training practices. Certified Training Partners are offered valuable levels of business assistance, too. Our innovative post-graduate programs give our alumni continuing support for financial success.
Maintain your independence, but within a larger circle of talented trainers and business people. Work toward excellence in training practices while adding the necessary skills to ensure financial success in your profession.
Karen Pryor Academy celebrates Independence Day by saluting the independents.