Marketing Plan for Small Business Expansion: B&B Custom Woodworks

Introduction and Problem Statement

B&B Custom Woodworks, Inc. has been in operation since March 2007 in the Chesapeake, Virginia area. It began as a sole proprietorship specializing in custom woodwork and personalized service. In 2009 the business incorporated and now operates as an S Corporation in the State of Virginia. The focus of the business is to produce heirloom-quality custom or personalized gifts for family, friends, and coworkers that will be cherished for a lifetime. The business is divided into several primary areas: custom woodwork, personalized gifts, engraving services, and sublimation items.

This is the only business in the local area that offers one-stop shopping for customers who want personalized gifts or awards for special occasions. The purpose of this study is to determine how B&B Custom Woodworks, Inc. can continue to grow in the Chesapeake, Virginia area, expand to a national market, and maintain the same quality products it currently offers to local clients. The mission of the business is to offer impeccable laser engraving and custom-built products with fast turnaround, high quality, and on-time delivery. Its items include awards, picture framing, shadow display boxes, personalized gifts, custom company logos, promotional products, and numerous additional laser applications. The company is categorized as an Internet web retailer for zoning purposes and has the flexibility to adapt its management style to meet customer needs.

In order to continue expansion, the company seeks a business loan of $100,000. The funds will be used for three purposes: development of a facility to house the business, capital for expansion to a national clientele, and financing for the acquisition of additional equipment to meet increasing customer demand. It is expected that these funds will allow the business to grow continuously over the next five years — from $229,272 in the first year to $367,061 by the end of year five. This expansion will be accomplished through continual reinvestment and by partnering with businesses that specialize in the distribution of personalized corporate gifts. The company plans to transition from dependence on the local economy to a market encompassing the entire United States.

B&B Custom Woodworks, Inc. began in March 2007. Since that time the business has thrived, increased its order volume, and experienced growing yearly profits. The business added an expansive online website that allows customers to order custom woodwork projects. This study explores the problem of how the business can continue to expand and sustain the success it has experienced since opening.

The business faces several challenges in its desire to grow. The company wishes to expand its product lines, facilities, and operations. However, it faces obstacles in doing so. Chief among these is the effect of a poor economy on all market sectors. This study addresses the question of how the business can continue to expand and reach its financial goals despite these challenges.

The study addresses solutions by examining the business's market, competition, and SWOT analysis so that it can develop a marketing plan that capitalizes on its strengths and minimizes its weaknesses. It is essential that the marketing plan be directly related to these factors in order to be successful and help the company achieve its goals.

B&B Custom Woodworks, Inc. has been a small, local company up to this point. Its expansion plans include marketing to the rest of the United States. In order to accomplish this, the company must develop a solid marketing plan that aligns with its goals, its market, its competition, and other factors that will influence the business. When the company expands, its competitive profile will also expand to include other companies across the country that offer similar product lines. The company will have to differentiate itself and its marketing in order to continue increasing sales and meeting its goals.

Literature Review: Small Business in America

The study relies on external market analysis to ensure the company continues to grow while maintaining a sense of innovation in the products and services it can provide to clients. The company will seek to maintain growth despite economic pressures in the open market. It is expected that woodworking products and services will remain relatively price inelastic as the economy fluctuates. Another challenge the company faces is keeping its prices affordable during times of economic recession and rising overhead costs, without changing its target market or focus.

The marketing strategy is one of the most important elements of a successful expansion project. The marketing plan must account for risks that must be overcome, as well as opportunities that may arise. A generic marketing plan is not sufficient, particularly in a niche market such as the custom woodworking industry. The marketing plan must align with all of the goals and elements of the expansion plan — this is the key rationale for studying the problem that is the focus of this research. This project focuses on developing a marketing plan suited to all of the company's needs and its future expansion.

According to the U.S. Census, custom woodworking is differentiated from carpentry work and the industry reports gross revenues of approximately $1 billion per year. However, the industry employs only approximately 10,000 people, which translates into high incomes for those in the business. Growth and demand for custom woodworking services closely follow trends in the general economy.

The outlook for the industry is favorable in the long term. Operational costs associated with the products and services offered allow the industry and its individual participants to maintain reasonable profit and positive cash flow despite economic shifts that reduce revenues. Currently, more than 10,000 businesses offer similar custom woodworking products and services. B&B Custom Woodworks, Inc. offers its products at a significantly lower cost than many of these competitors.

The customer profile for custom woodworking and personalized gifts is a mixed group. The business serves two distinct market sectors: individuals and businesses. The average individual customer purchases one or two pieces of custom woodwork or engraved products. Businesses often purchase customized plaques and memorabilia as gifts to recognize employee achievements. Business clients represent the greatest potential for repeat business and expansion of product sales. They are also more likely to be less price-sensitive than individual customers. The expansion project will focus on aggressively growing the business customer segment through the development of an online ordering portal and targeted marketing efforts.

Finding a clear definition of "small business" can be difficult. Even the Small Business Administration (SBA) has historically struggled to agree on a single definition. The SBA has considered a small business to be one with fewer than 250 employees, or a wholesaler with annual sales of less than $5 million. For retail establishments, annual revenues must be less than $1 million (Blackford, 2003). This definition was used since 1953. Thirty years later, as businesses grew, the SBA adjusted its definition to any firm with 500 or fewer employees, while noting that an acceptable number of employees differs by industry group. Retail-only firms must have 100 or fewer employees to qualify as a small business (Blackford, 2003).

Prior to 1880, small businesses were the norm in America. By the mid-nineteenth century, big businesses began to emerge in fields where technology allowed them to achieve economies of scale in production or distribution (Blackford, 2003). The first railroads were built, and big businesses quickly became a key part of the economy in many sectors. Blackford notes that the rise of big business did not necessarily mean the decline of small businesses. Throughout this period, the number of small businesses continued to grow in absolute terms, even in the manufacturing sector. Small businesses carved out niches in markets ignored by larger industrial firms. Only in agriculture did the small business decline in importance (Blackford, 2003).

In the 1950s, small businesses declined both in number and total revenues, as World War II had favored big business and mass production. In the 1970s and 1980s, small businesses experienced a resurgence, particularly in manufacturing. Since that time, small businesses have been recognized as more efficient and successful than many of their larger counterparts, becoming symbols of self-reliance and independence — a reversal of the 1950s attitude that viewed small businesses as inefficient and backward (Blackford, 2003).

Today, small businesses are an important part of the economy. More than 80% of all businesses employ fewer than twenty employees (Martin, 1988). With modern communications technologies, small businesses now have access to the same global market that was once available only to larger firms. The number of small businesses launched each year is growing faster than the Gross National Product (Martin, 1988).

Carland & Carland (1992) found that certain cognitive and visionary styles were predictive of whether an entrepreneurial endeavor would succeed or fail. They found that the method through which a business was obtained also affected management style. Differences were observed between those who started a business themselves and those who inherited or took over an existing business. Small business managers exhibited less risk-taking behavior than entrepreneurs. Small business owners tended to be more logical and deliberate in their decision-making, while entrepreneurs were more innovative and creative in seeking ways to expand. Each type of business owner has unique personality traits that influence their approach to problem solving.

The small business owner must navigate many competing demands. For instance, decisions about tax preparation, the use of professional accountants, and financial planning are all critical considerations. According to Flauaus (2008), having a trusted accountant is a key factor in ensuring small business success. This is one of many considerations that the small business owner must balance.

Small Business Marketing, Pricing, and eCommerce

Another challenge that plagues small businesses is the economy. In a survey of small business owners, respondents indicated that they did not expect any major improvement in the near term (Wade, 2010). Small business owners are particularly susceptible to economic fluctuations in either direction, as their smaller revenues and profit margins create instability during periods of economic turmoil.

Small businesses also face challenges that would not affect larger businesses to the same degree. For instance, many small businesses have difficulty establishing retirement plans for employees. In order to retain valuable employees, companies often find it necessary to offer retirement benefits so that workers are not attracted away by larger employers (Kalb, 2002). Avoiding high turnover is a key to success, and a retirement plan will more than pay for itself in the long run (Kalb, 2002). This is a key consideration as B&B Custom Woodworks, Inc. embarks on its expansion project, since experienced employees are the backbone of what the business has become.

In many ways, the problems of small business are not unlike those of larger corporations. Small businesses face the same challenges as larger organizations in terms of workforce diversity and corporate creativity (Govendo, 2005). Often, the small business concept is developed by a single individual or a close-knit group of family members or friends. When the company begins hiring additional employees, divergent thinking begins to emerge. This can create conflict, as the original founders tend to hold tightly to their vision regardless of the new ideas that enter the mix.

As Govendo (2005) notes, divergent thinking can be both an advantage and a disadvantage. It is the spark that ignites innovation — generating creative marketing strategies, new product lines, and growth ideas. However, diverse thinking can also throw the business off course in terms of its vision and strategy. Diversity in thinking improves problem-solving ability, but must be managed so that it does not interfere with the company's core mission and goals.

People are the most important asset of any organization, and small businesses must take measures to retain the best possible workforce. Current accounting systems are unable to capture the full value of human capital, which has led to the adoption of techniques such as the Human Capital Capability Scorecard (HCCS) (Bassi & McMurrer, 2005). This scorecard allows for better valuation of human capital across diverse organizations by examining the relationship between organizational outcomes and human capital value. Small businesses often lack the funds to invest heavily in human capital, placing them at a disadvantage in attracting and retaining a high-quality workforce. Tools such as the HCCS help small businesses make the most efficient use of the human capital they do have.

The federal health legislation signed in March 2010 has had a significant impact on small businesses. Those with over 50 employees are required to offer insurance to their workers beginning in 2014. Those with fewer than 50 employees are not required to provide coverage, but are charged an annual fee of up to $2,000 per full-time worker if any of their employees choose to take advantage of government-subsidized plans (Haskell, 2010). For small companies, this creates a financial strain that can significantly affect their chances for survival.

Moutray (2008) summarizes the future challenges facing small businesses. The cost and availability of health insurance will be one of the most pressing. Attracting and retaining quality workers will be another, as small businesses often cannot offer benefit packages competitive with larger employers. Globalization also poses challenges: the lowering of trade barriers makes it easier for foreign competitors to enter the U.S. market, making domestically produced goods seem less competitive. The need for investment in technology and innovation is similarly difficult to meet on a small business budget. These are all obstacles for which B&B Custom Woodworks, Inc. must plan in order to make its expansion sustainable.

Despite these challenges, many new businesses are finding ways to survive and thrive. A concept known as "economic gardening" is emerging — the idea of convincing communities to redirect funds previously used to attract big business toward supporting local small businesses instead. A network of small local businesses can collectively pump just as much money into the local economy as a single large corporation, and they are often easier to nurture because they do not require large-scale infrastructure investment (Moutray, 2008).

Advances in communication and transportation have also made international trade a realistic opportunity for small businesses. However, many small businesses have historically not been proactive in seeking foreign customers, thereby missing opportunities and over-relying on a domestic economy that has been shrinking (Moutray, 2008). The demographics of small business ownership have also shifted, with more women and minorities — including immigrants involved in high-technology entrepreneurship — now starting businesses than ever before (Moutray, 2008).

Education and training are among the most important links between the entrepreneur and their human capital. Small business owners tend to devote significant resources to workforce training to increase productivity and reduce labor turnover. Moutray (2008) sees education not only as a means of improving employee retention, but also as a way to develop new talent and preserve employee morale.

No business survives without marketing, and small businesses are no exception. At a recent summit targeting rural small businesses, it was found that social media presents a unique set of challenges and opportunities for the small business owner (Ross, 2010). One key insight from the summit was that small businesses in small communities already know how to advertise by word of mouth — and social media is simply the digital extension of that practice.

Ross (2010) explored the topic of marketing on a small budget, noting that what works for large companies often will not work for smaller businesses. The primary challenge is often finding the funds to support marketing efforts at all. Ross emphasizes using the local market and its unique characteristics, and identifies what to say, how to say it, and where to say it as the most basic elements of a local marketing plan. B&B Custom Woodworks, Inc. plans to use primarily a local marketing strategy as the foundation of its promotional efforts.

Web advertising goes beyond search engines and banner ads. Social media has proven to be a powerful tool for both large and small businesses. This method of advertising is particularly suited to the small business because it is low-cost and allows for promotion in a way that builds personal relationships with customers (Janoschka, 2004). Web and social media marketing will be explored further in subsequent sections of this study.

When examining the challenges of small businesses and how to achieve success, one encounters a wealth of articles on rules for success, common mistakes, and how to avoid common pitfalls. While these sources do not always qualify as academic studies, many of them contain actionable insights that can help a small business succeed. The following summarizes some of the more relevant findings and relates them to the challenges faced by B&B Custom Woodworks, Inc.

Isidro (2009) found that one of the most important strategies for small business is to identify a market niche. Small businesses with limited resources can efficiently serve niche markets, often more effectively than larger corporations. In order to fulfill a niche efficiently, the business owner must become an expert in their chosen field. B&B Custom Woodworks, Inc. has chosen a niche in high-end woodworking that is distinct from the mass market, including construction and consumer furniture. Its business is grounded in knowledge of the current market and years of experience meeting customer needs.

Isidro (2009) also found that small companies have several advantages over larger corporations, including the ability to respond quickly to customer needs, considerably more flexibility, and the capacity to offer personalized service. Another key to success is the ability to differentiate product lines. B&B Custom Woodworks, Inc. differentiates its products through quality and by offering items developed specifically to meet individual customer needs. Isidro (2009) further suggests that making a strong first impression is important, and that the small business must listen to its customers, be innovative, and work smart.

Several pitfalls can undermine even the best business plan. One of the most common is failing to meet sales goals — if this happens, the small business cannot meet its obligations and overhead. Many small business owners are so focused on their product or service that they neglect the role of selling. Any small business owner must be a salesperson, and those unfamiliar with sales techniques should invest in improving them (Pleshette, 2010).

Cutting prices is a strategy many companies use when not meeting sales goals. While it can attract customers and cover costs in the short term, Pleshette notes that it comes with significant downsides. Low pricing may cause customers to categorize the company in the "cheap" bracket, which can undermine the ability to retain a high-end market. For a business that has built its strategy around high-end sales, low prices can detract from brand image and attract a customer base unwilling to purchase premium items.

Gilkey (2011) describes buyers as "predictably irrational" and cautions that the instinct to offer lower prices than competitors is often the worst decision a company can make. He identifies three key pricing concepts — anchors, bumps, and charms — that explain how customers evaluate price relative to value.

Anchor prices are the baseline prices that customers have in mind for a particular product, typically set by the largest or first company to introduce that product to the market. Any business that deviates significantly from this anchor price — even by going lower — risks losing sales. The business must compare its products honestly to those of the anchor competitors, putting aside its own ego to assess how the product appears from the customer's perspective.

Bumps refer to clear distinctions between entry-level, mid-grade, and high-end products. Customers do not look at price alone — they look at quality. A lower price automatically signals to the customer that quality expectations should also be lower. For a company wishing to position its products in the high-end gift market, setting prices below the competition sends the unintended message that the product is of lesser quality. As Gilkey emphasizes, this is one of the most common mistakes made by businesses trying to expand their market.

Charms refer to prices set just below a round number — for example, $19.99 instead of $20.00. While this technique can make a product feel like a better value, it can also diminish credibility if customers perceive it as a trick. Gilkey's overarching point is that price is not separate from marketing — it is a central element of it, conveying a message about the type and quality of product the customer can expect. For high-end woodworking gift items, a lower price could suggest to the recipient that the giver did not consider the gift worth the expense. The business must price its products to reflect the quality and prestige it wishes to convey.

These considerations are especially important for companies that specialize in high-end gift items. If pricing is too low, it risks sending a negative message to both the giver and the recipient. To price items too low may have the same effect as charm pricing — the recipient may be fully aware of the product's perceived market value, especially when pricing information is readily available online. The worst assumption a business can make is that the recipient of a gift will be unaware of its value. The company must price items in a way that communicates that the recipient has received something genuinely special.

Small business marketing plans often fail because of the owner's inability to market the business in the right way. Many business owners develop their own marketing campaigns in an attempt to control costs. These campaigns can fail because they do not deliver the right message, achieve proper market saturation, or employ effective niche marketing techniques (Pleshette, 2010). In order to succeed, business owners must deliver a believable and relevant message and offer products at prices appropriate to their quality and desired market positioning.

Marketing in a recession can be particularly challenging for luxury items. High-end products are not typically as deeply affected by a recession as lower-end products. Consumers who are more price-conscious and have little disposable income are affected more severely by economic downturns. Those who typically shop in the high-end category often have more disposable income and are less affected by recession-related shocks. Therefore, a key strategy for recession-proofing a business is to establish itself firmly in the higher-end customer range from the outset. It is difficult to enter the market as a discount-priced item and later move into the high-end category, as initial pricing shapes customer perception indefinitely.

According to Morebusiness (2008), small businesses are particularly vulnerable during a recession, facing dwindling sales, increasing expenses, and challenges with customer and employee retention. Suggested strategies for recession-proofing include making a practical plan that identifies what can be downsized or eliminated if needed, retaining the best employees, launching an aggressive marketing campaign, and leveraging technology to improve efficiency. These are practical measures that arguably represent good business practice at any time, not only during a recession.

Morebusiness (2009) identified five strategies to win sales during a recession: following up with old leads, taking care of existing clients, being innovative in finding new prospects, being flexible in how to market to them, and increasing service levels beyond those offered by competitors. As with the recession-proofing advice, these strategies represent sound business practice under any economic conditions. For a small business, becoming more efficient during a recession can mean the difference between survival and closure.

Findings: Competitive Landscape and SWOT Analysis

Among the top concerns of small businesses are economic uncertainty, keeping up with technology, and access to adequate capital (Isidro, 2011). Nearly 50% of businesses surveyed planned to use the Internet as a key growth strategy in the next twelve months, though only 3% considered eCommerce an integral part of their business strategy. Isidro notes that many small businesses rely too heavily on credit card financing and do not pay off balances monthly — a costly mistake given that credit card interest rates are among the highest of any financing option available.

B&B Custom Woodworks, Inc. plans to use web marketing to increase its customer base to a national following. Understanding the basics of web promotion is therefore essential. Several key facets must be considered: the website itself, email marketing, social networking, and search engine optimization. For business owners not familiar with these areas, it may be worth hiring a specialist.

The first and most basic requirement is a functional website. Few businesses can survive today without one. The website has become the modern equivalent of a business card — without it, reaching a larger market is nearly impossible. One of the most important factors in driving traffic to a website is content. People must have ways to access content beyond the website itself, such as affiliate programs, embedded video, or live product streaming (Bullas, 2010). Live streaming has been shown to be more effective than pre-recorded promotional videos. Other traffic-driving strategies include Twitter and Facebook.

Customers are bombarded by email campaigns every day. Getting past this noise requires that the message be concise and relevant, appear valuable within one or two seconds of viewing, and be targeted to a specific audience rather than sent as broad spam (Black, 2010). Customers must see value in newsletters even when they are not ready to make a purchase. The goal is to attract them and keep them engaged with content.

Social media such as Twitter and Facebook, as well as blogs, are among the most important marketing tools available to businesses today. However, they are only effective with the correct strategy. Brigida (2008) stresses that goals must be concrete — for example, increasing links to the site by 200%. New platforms such as StumbleUpon, Digg, Reddit, and Digg Mixx are also emerging as useful tools. Social networks can allow small businesses to form mutual relationships by attracting like-minded people who are interested in the content offered. As with any marketing effort, it is important to test these channels and ensure that content is accessible and ranks well in search results (Brigida, 2008).

Search Engine Optimization (SEO) is the process of ensuring that a website appears at the top of search engine rankings. Traffic from search engines is considered one of the cheapest and most effective ways to attract customers (Patterson, n.d.). Key techniques include targeting one keyword per page, placing keyword-rich content in the first 100 words, and including keywords in description tags. Left-side menus waste valuable keyword real estate because search engines prioritize the first 100 words of a page, including navigation elements. Given the complexity of SEO, it is advisable for small businesses to consult an expert in this field.

Ecommerce website design is another specialized area that is often contracted to a third party. Best practices include displaying prices clearly, allowing shoppers to specify preferences, creating a user-friendly buying process, and avoiding lengthy checkout forms. If the eCommerce site does not function smoothly or is difficult to navigate, it will not result in increased business.

Businesses marketing online must also comply with applicable regulations. General offers and claims must be accurate and free of false or misleading statements, disclaimers must be clear, and privacy issues must be addressed (Bureau of Consumer Protection, 2000). These rules are enforced by the Federal Trade Commission (FTC), and failure to comply can result in fines or sanctions. Websites must also comply with the CAN-SPAM Act, which prohibits deceptive header information, misleading subject lines, and failure to identify content as advertising (Bureau of Consumer Protection, 2009). An Internet specialist is the most reliable way to ensure compliance and protect a small business from potentially devastating sanctions.

A competitive analysis begins with an Internet search for custom woodworking businesses in the local Chesapeake, Virginia area. This search returns five results, several of which specialize in carpentry, custom cabinetry, or lumber and wood products — not the same market as B&B Custom Woodworks, Inc. One company, Diablo Woodworks, specializes in arts and crafts but has no website. A search for "awards plaques" in the Chesapeake area reveals trophy and award graphics companies, most of which specialize in engraved metal plaques rather than custom woodwork gifts. These companies do not occupy the same target market as B&B Custom Woodworks, Inc. and are not a significant concern for this study.

The local competitive analysis concludes that B&B Custom Woodworks, Inc. is essentially unique in its market segment and has no identifiable competitors in the Chesapeake or surrounding areas. The products and services it offers should allow the company to capture a significant share of local and regional demand.

On a national level, significant competition exists among Internet-based businesses that can reach customers across the country. A search for "custom plaques gifts wooden" on Yahoo reveals over ten pages of companies specializing in similar products. This indicates that market differentiation may be challenging in a national marketing campaign. Additionally, a search for "B&B Custom Woodworks" surfaces several other companies with the same name in different parts of the country. While these competitors offer different products and are located in different areas, they could cause brand identity confusion in an Internet marketing campaign.