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FORTUNE Small Business:

How small shops can compete with big ones

Do what the big guys do, only better

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(FORTUNE Small Business) -- Dear FSB: My friends own an artisan gelato and coffee store whose products are excellent. They are even better than the big guys (who have a store right across from them). But they are a struggling family business. How can they generate adequate cash flow to start making some money?

- Joy Grier, San Jose

Dear Joy: You do have reason to be concerned. According to the Small Business Administration, most businesses fail because of poor management and/or inadequate cash flow.

Restaurant consultant William Bender has spent the last 20 years working with independent and chain restaurants. Bender says that small players can benefit from applying lessons that work for major restaurants.

"This segment of the restaurant industry is so competitive," Bender said. "The major names have an edge because they usually have the best location and follow the industry's best practices."

"Your friends need to make sure they build a sound infrastructure, establish a strong brand, create a great product and do a great job of delivering that product to the customer," he says.

Bender urges all restaurant owners to consider focus on catering to all needs for their guests. That's something the major chains do well.

"I go to Starbucks (SBUX, Fortune 500) anywhere from five to seven times a week and if I know I won't be able to leave at lunch time, I'll pick up water and a sandwich," he says. He suggests expanding the café's menu so it has something for everyone.

When to hire a pro

Strengthening a business owner's education in managing a restaurant can be a challenge when the focus is on running the business. However, a food consultant can help. Find one at the Foodservice Consultants Society International, which has 1,400 members in more than 43 countries worldwide.

"If you have new competition or if you aren't increasing sales or guest counts and aren't as profitable as you once were, it's a good time to call a consultant," says Bender, a member of FCSI and the California Restaurant Association

Good consulting help doesn't have to cost six figures: "A quick retainer can get you on the right track," he noted.

Where's the cash?

"In this current lending climate many banks have pulled back on startup lending," said Sue Malone, principal of Small Business Strategies, a leading-small business lender. "But many banks still make SBA-guaranteed loans."

For business owners who don't want to borrow money from a bank or other lending institution, Malone suggests seeking investments from family and friends.

"Make sure you have everything in writing and that each party understands what is expected of them, whether it's a loan or an equity injection," she advises. To top of page

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