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Knowledgeable growth Featured

8:00pm EDT September 25, 2009

Tom Petrillo has a simple philosophy when it comes to growing his business: If he doesn’t know it, he doesn’t do it.

“I tend to not get into businesses that I’ve never been in before or ones where I don’t understand the business model,” says Petrillo, founder, president and CEO of The Salon People Inc. “Then I’ve got to rely on other people to coach it and feed me information and I don’t know if they are right or wrong.”

It’s not that Petrillo is unwilling to try new things. He just never wants to go into a new opportunity without a full understanding of what he’s getting into.

“My experience has told me that when I didn’t pass and I acted too quickly on a great opportunity, it never turned out to be a great opportunity,” Petrillo says.

By making smart decisions, Petrillo has grown from 12 employees six years ago to 140 employees in 2009.

Smart Business spoke with Petrillo about how to put yourself in the best position to experience healthy growth.

Follow a plan. You start by understanding the business model that you are in and comparing your business model against an industry standard. If you can get your hands on an industry standard business model, then you can understand what your gross margin should be, what your expense structure should be and what the capital infusion that you need should be.

When you understand that and you test sales projections, you literally live to that. If you end up with a good sales plan followed by a strong expense plan, meaning that you’ve thought out all of your expenses that drove you to profitability, you forward project what your business is going to do and what capital it’s going to require to do that.

It’s like looking through a rearview mirror in a forward way. We constantly look at trends and then adapt ourselves to that trend so we don’t get bit by hoping that trend is going to change. We monitor our trends and then look at our forward projections against those trends.

Understand the business sector you are in and what business models your competitors have in place. The more you understand about how they have built their business models and made good estimates about what it costs to put that business model together, the better you understand how you can compete in that sector.

Be selective. There are so many different opportunities that are sitting out there. I understand retail extremely well, and I understand product marketing extremely well. I’ve got to make sure whatever businesses I engage in that I could actually lead that company if I need to.

If you’re going to be a good coach at something, you have to understand the game you are coaching. For myself, I’m extremely disciplined in that I will only get into businesses that I understand fully.

For example, I would never get into the medical supply business because, at this juncture, I don’t know anything. I understand sales techniques and how to put marketing together, but I don’t understand that world. I don’t understand how the relationships are built in that world or what makes it move.

Put in the research. We have an HR services arm, which also includes insurance. We could have started on the insurance piece four years ago. We spent two years researching what aspects of the insurance would be appropriate for the business. We went all the way to state legislators and insurance commissioners and to a legal team to educate us before we embarked on it.

I don’t run the company, but the person who comes to it has 25 years of experience. I know the business extremely well now, but I would not have embarked on it until I became a student of the business. ... I’m not talking about reading a book; I spent a good year learning that business.

If you’re selling something and you don’t figure out who your target audience is and you don’t test the salability of that product with that target audience and you don’t do your focus groups, if you don’t put that level of time and energy into it, it’s a crapshoot. And personally, I don’t believe in crapshoots.

Measure behaviors. I don’t lay out a strategy; I lay out a desired outcome. From that desired outcome, we’ll challenge whether that outcome is possible and, if it is, how we’ll get there.

We constantly, on a quarterly, weekly and monthly basis, measure our results. We measure the results on all levels and that just makes ourselves and our team completely transparent. In doing so, we can make adjustments to the strategy. Things that are doing well, we accelerate. Things that aren’t doing well, we either redesign or we discontinue.

I actually take a backward approach to measurement. I believe in measuring behaviors first, and if the behaviors are in line with what you know to be the desired outcomes that that behavior can obtain, then the final result will be there.

We’re in the high-end salon business. So we know that a good consultation with a guest is of the utmost importance to deliver a retained guest. What do I mean by that? If somebody on the team who is doing the hair is asking the right questions or is asking a series of questions that’s leading them in the direction of giving them a good outcome, then I know the haircut becomes the least important.

The perfect haircut is not what’s important. It’s delivering to the guest what they really wanted. They may have come in and really wanted to know how to style their hair and were less concerned about the actual cut.

We have a process in place that goes through what a good consultation is. When I walk the floor, what I’m listening for is, ‘Are those questions being asked in the consultation?’ When they are, I know I’m going to get the outcome, which is a retained guest. When they aren’t, they break down. I could retain the client or I might not.

How to reach: The Salon People Inc., (727) 820-3170 or http://thesalonpeople.avedaflorida.com