Below is a transcript of an interview I conducted with Marc Kaplan.
Tell me a little bit about how you started ERRIKAP Inc.
I started ERRIKAP LLC with the express purpose of acquiring a retail business in Sunset Beach, NC with a new business partner.
Could you give me some examples to illustrate the challenge you faced in starting
ERRIKAP Inc.?
The first challenge I encountered was learning how to work with a business partner. The second challenge was the actual purchase of the retail business. The previous owner valued the business too high and it took quite a bit of negotiating to get the price negotiated and deal structured to a point that was favorable for me and my partner to feel that it was worth the risk of acquiring this new business.
When problems arise, how do you resolve them?
My partner and I decided from the beginning that we will not make any unilateral decisions when it comes to this business. So when a problem arises we immediately contact each other and have an open discussion voicing our opinions, putting egos aside as best we can, to come to a conclusion that is best for the business.
How have the experiences that you have had during your entire career influenced the way
you now run your own company?
I was a former corporate executive in the late 80’s and early 90’s for a furniture retail company based out of Atlanta, GA. While being a corporate executive I ended up working in an environment where people were not viewed as important to the company and not only did this create a hostile work environment but because of my accounting background, I believed that the bottom-line was also hurt because of this. So when I started my first business I created an environment where the people are the most important and I put their needs over even my own. I go out of my way to do what I can to help them in and out of work.
How do you select people to join your company?
I have a typical interview process where I assess how professional they come across and how trustworthy they are. Also, because our business is in retail sales, I assess how well they can interact with the public. If they cannot interact with the public, it becomes possible for them to do some harm to the company image and I am hesitant to hire them.
When someone joins your company, how do you orient them as a member of your team?
Either me or my partner will shadow them for the first week (or so) to show them how to interact with customers and how the systems work. Then after we feel like they got the hang of things we give them a nickname to fully integrate them into the team.
How do you motivate and reward people?
The employees receive monetary bonuses based on work performance at the end of the season; they receive free meals while they are working and discounts on their own purchases. I mostly work at night with one of the employees and it is not uncommon for me to buy dinner for both the employee and myself. We take turns eating so that they receive an equal break and uninterrupted meal. I also do something which I feel is lost and that is saying thank you to them on a daily basis for the work they do.
How do you market your business?
I network with other businesses in Sunset Beach, NC such as the house and condo rental agencies where they give our advertisement to new renters in their welcome packet. The rental agencies will place our deli menus in the houses prior to the arrival of the weekly rentals. We also have a video rental program with the rental companies that allow the weekly tenants to rent movies for free. That produces an automatic customer base that brings people into the store. We also have deals with local clubs and restaurants where customers get discounts if they bring their receipts into the our business.
How do you determine what new products to introduce in your stores?
We attend three buying shows per year, in Myrtle Beach, Gatlinburg, and Orlando and try to determine the currently popular trends that will best fit in our store. And to be honest, we have a few vendors that whose opinions we strongly rely on that will sometimes tell us when an item is really popular and that we need to sell it. There have been times that we weren’t completely convinced, but one of our vendors has suggested a couple of clothing items that have been our strongest sellers to date.
How do you decide on what products you need to let go of?
We have a computerized inventory tracking system. At the end of the year [season] we look at the items individually and decide based on overall sales, what has done well and what has not. Our criteria for dropping an item largely depends on the type of item. For example, we really want to sell five to six dozen of a particular clothing item to show success in that item. Again, we are reliant on our trustworthy vendors to assist us with decisions regarding certain items, particularly, alcohol sales as our vendors are acutely aware of positively trending items in their market.
What is the largest expense in your company?
Payroll is the largest expense and is followed by rent on the building and utilities.
How do you determine mark-up for the products you sell?
This is somewhat of an intuitive task. It is based on experience mostly, competition in the market, and the perceived value of the item to the customer. Even if I paid X and the traditional profit margin equals Y, the margin can always be adjusted to be more in line with the perceived value to the customer. I am not out to price-gouge, but I do want to make money. My partner and I call these “football items” because they are bought for convenience and desire, not because our customers are competitive-shopping. For example, we buy an item from one of our distributors from what they call their “dollar menu”- a grill lighter that has a cost of $0.74 with a recommended retail of $0.94. Well, we sell ours at $2.99 as a convenience item and we can’t seem to keep enough of them in stock.
We do have some items- groceries and beauty aids- that have set margins and that our distributors print price tags for. We cannot be as competitive with some of the larger chain grocery stores, because our bulk purchase is lower and our cost is higher, but we remain as competitive as we can in those areas for a beach-front grocery.
Are there any new markets you are looking to get in to?
NO.
How are things going in your company in general, right now: are you hiring,
downsizing, or “staying as you are” in terms of your company’s workforce; are sales up,
down, or flat?
We have a tourist-oriented business in the same type of community and our business is largely contingent upon the state of the economy and especially the weather. I live by the rule that: over a ten year span in your business, you will have one great year, one terrible year, and eight normal years and that’s how it’s been. Since 2008 we’ve seen some decline in overall sales based on economic factors, which then went up, and most recently, back down again.
Probably one of the biggest things that impacted us was the construction of a new high-rise bridge a few years ago. Sunset Beach had one of the last one-lane, swinging, draw-bridges on the East Coast and due to safety concerns, it was removed in favor of a high –rise bridge. While this addressed issues of access and safety, it also greatly impacted our business. Some of those customers that didn’t want to leave the island because it was so inconvenient, will now travel across the bridge to the local Food Lion. The customers can afford to competitively shop now if they choose to, and that has effected grocery sales.
How do you keep up with best practices in your industry?
Again, we attend multiple trade shows to try and stay abreast of current trends in the market and we do have trusted vendors (not all of them, but there are a trusted few) that we rely on to help us make product decisions.
Could you describe a typical day?
The work is more physical and I spend a lot of time stocking, restocking, merchandising, and cleaning. I also fold an inordinate amount of t-shirts. This business is a lot more hand on than my former career. What I really enjoy the most though, is working the register and interacting with, and taking care of, my customers.
How did you first enter your line of work?
I had a very high-pressure corporate job in Atlanta as the Controller of a national furniture company. There were some personal things that greatly affected me during that time- namely, the death of my father, and I just couldn’t manage the pressure any longer. We [my family and I] had been vacationing at Sunset Beach for years and our friend was dating the current manager of the pier. He told us that he wanted to sell the business and retire. We met with the owner of the property and in five minutes, we bought the business. We both [my wife and I] quit our jobs, sold our home, and moved to North Carolina. And it was a huge risk for us, giving up everything to step into a business that we knew nothing about. But we knew that we had to make a change and 19 years later, we’re still going strong, having kept that business and acquired another.
What advice would you give to someone who was considering a career in small business ownership and management?
I personally find that owning a business is way more rewarding than working for someone else; you are responsible for your own decisions, good or bad, and that becomes much more of an enjoyable life.
What kind of formal education and additional specialized training would you recommend
that a person should acquire to enter into a profession like yours?
I find that most new business owners are sorely lacking in accounting skills. They may have the business acumen regarding what to sell and at what price, but these people never know if they are successful because they have no accounting skills. Even something as simple as filing corporate taxes can become something of a nightmare because new business owners have no idea what the accountant needs to file their taxes. At the minimum, I would suggest courses in double-entry book-keeping; the rest could be learned in the business with a good teacher.
About Marc Kaplan
Marc Kaplan is a formally trained accountant who decided to abandon his position as an executive in the corporate world in favor of a happier life. He has owned one small, oceanfront business for 19 years; a true testament to his determination, for this was a business that he knew nothing about upon its acquisition. He developed his second business (a retail store and grocery) in 2008 with business partner, Cliff Errickson and manages and invests in other properties on the island of Sunset Beach. He will tell anyone he meets that he goes to “fun” and never to work and he can usually be found schmoozing with any random person that he meets.
