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How to Keep Tabs on the Competition

admin — Thu, 29 Apr 2010 12:55:53 +0000

I was contacted last month by a staff writer for Inc. magazine who was writing a story on competitive intelligence, also known as CI. It may sound like something only big companies can afford to do, but even small businesses will find it doesn’t take a lot of time or money to keep track of their competitors. An article this month in Inc., How to Keep Tabs on the Competition, provides useful tips and resources from business, marketing and CI consultants.

Buy Local

admin — Sun, 14 Feb 2010 15:06:42 +0000

by Robin Lasher

Do “Buy Local” initiatives really make a difference? You bet they do! Dollars spent locally with small businesses circulate in the local community as they then spend locally, making both business and personal purchases from other local businesses. Agurban’s January newsletter, states that “for every $100 spent at a locally owned business, $68 comes back to the community. Only $43 recirculates from national chain stores.” While Main Street is often the focus of these Buy Local programs, it is just as important that a community’s larger institutions buy from local suppliers. According to John Tozzi in Buying Local on a Large Scale, “Getting big institutions to switch to local suppliers has rarely been part of the equation.” For those that purchase outside of their community, at least some of those dollars could probably be redirected to local small businesses. But Buy Local programs need more than just occasional and sporadic support to be effective. In a February 2009 BusinessWeek article, Jeff Milchen claims they share three common elements that include educating consumers about the value of independent businesses in the community, jointly promoting shopping at those businesses, and giving independent owners a unified voice in government and media. Main Street program directors have long recognized the value of Buy Local. Now add in a community’s Economic Development, Chamber of Commerce, local government, educational institutions, financial institutions, organizations, churches, media, and Buy Local gets greater visibility and real traction.

For Many Entrepreneurs, Running the Show is Stressful

admin — Mon, 11 Jan 2010 07:00:07 +0000

By Colleen DeBaise
Adapted from THE WALL STREET JOURNAL COMPLETE SMALL BUSINESS GUIDEBOOK (Three Rivers Press).
Running a business isn’t easy. Work-related pressure can lead to a host of stress-induced problems: headaches, sleepless nights, irritability, weight gain and lost productivity, among others. Business owners often cite the following as their most common sources of stress:• Excessive workloads • Concerns about making enough money • Fears (when employees are involved) about making payroll • Underperforming when it comes to meeting customers’ expectations • Feeling increased pressure to succeed when many things (such as personal savings, a corporate career and time away from family) have been sacrificed The statistics on survival only underscore the stress placed on small business owners. About one-third of new businesses don’t make it past two years, and almost 60 percent fold within four years, according to the Small Business Administration’s Office of Advocacy. Causes of failure range from lack of capital to inexperience. It’s clear from numerous interviews of entrepreneurs that the best method of combating business-related stress is to plan. Entrepreneurs who haven’t updated or assembled their business plan (for more on business plans, click here) can feel directionless, inefficient and overwhelmed— all of which contribute to stress. Writing out even a simple plan can prevent overload while also providing a viable road map to success. Too many business owners make the mistake of working in the business and not on it. While it’s easy to get caught up in the daily grind, you’ll ultimately reduce your stress by taking a step back to focus on your business in the long-term scheme of things. Essentially, you want to anticipate everything that might happen, and everything that’s in your control to make happen. The best time to do that is often during quiet periods, or, as some business owners prefer, on a mini-retreat away from the office. During this time, your goal is to take a look at how the business has been performing— what’s worked, what hasn’t— and to come up with a plan for the year ahead. If you need more clients, target specific areas where you think you can drum up business. Come up with a marketing plan. Develop a budget by figuring out how much you need to set aside for quarterly tax payments, capital expenditures, your retirement plan, employee salaries and other areas. All of this advance planning will allow you to spend less time putting out fires and more time meeting the business goals you’ve outlined. As a result, you will feel more in control and less vulnerable to stress. Write to Colleen DeBaise at colleen.debaise@wsj.com

Small Business Economic Indicators

admin — Sat, 09 Jan 2010 07:00:09 +0000

By Diana Ransom When you’re a small-business owner, issues like whether you can afford to give your assistant manager a raise or whether your dinner bread will be delivered on time loom larger than the trade deficit and crop results. Yet, the nation’s employment outlook factors into your hiring decisions and the truck that delivers your bread runs on gas — so keeping an eye on the bigger picture can help you avoid cost surprises. “If [you know] consumers are spending more in October, that might give you a bit more confidence if you’re a retailer going into the Christmas season,” says Chad Moutray, the Small Business Administration’s chief economist.While the economic recovery is still tentative — and credit remains tight — small-business owners could help themselves in 2010 by monitoring the macroeconomic picture. Already, members of the Board of Governors and the presidents of the Federal Reserve Banks, have projected that the U.S. economy will expand between 2.5% and 3.5% this year. Meanwhile, the unemployment rate is expected to fall to between 9.3% and 9.7% from November’s rate of 10%, and economists from Morgan Stanley expect that a more sustainable recovery will sink in, as the financial markets improve, risky assets continue to fetch higher prices, and bank lending improves.In the absence of your own economist or strategic planning office, what indicators should you keep an eye on? Here are five that often matter most to small firms.
Real Personal Consumption Expenditures

Also known as consumption, this indicator, which tracks the inflation-adjusted price changes in consumer goods and services, accounts for 70% of the country’s gross domestic product — that is, the basic measure of a country’s overall output. Basically, this indicator will shed light on whether consumers are spending and how much. “When the public is hording money, small businesses are going to feel that more than anyone,” says Moutray.Big companies can often lean on hefty credit lines to get them through rough patches, while many smaller firms don’t have the same luxury. (For the most recent consumption release, click here.)
Consumer Confidence

Similar to consumption, consumer confidence and consumer sentiment figures attempt to gauge consumer attitudes toward the economy. The more confident consumers are about the economy and their own financial pictures, the more likely they are to spend. “What we’re telling our clients is, closely follow the economic indicators, which can point to a recovery in demand trends,” says Bonnie Riggs, an analyst for the market research firm NPD Group. “When consumer confidence moves in a positive direction, they’ll see [business] traffic pick up.”Check the Index of Consumer Sentiment, which is tabulated by the University of Michigan’s Institute for Social Research. Also, look to the Consumer Confidence Index, which is released by the Conference Board, a research firm in New York.
Producer Price Index

Businesses that make products will want to pay close attention to the Producer Price Index, which measures prices at the producer level, before they get passed on to consumers. This indicator speaks directly to how much businesses pay for their materials. When this indicator rises, most businesses will want to raise prices to keep up with higher costs. However, boosting one’s prices during a downturn may be counterproductive, as consumers are looking for savings. In this scenario, a business’s profit margins tend to get squeezed, says Moutray. By tracking the price changes within the production pipeline, however, businesses can anticipate possible inflationary pressures and make changes accordingly, he says.
U.S. Dollar

Another inflation gauge is the value of the U.S. dollar. When the greenback falls against other currencies, U.S. exports look more attractive to some foreign buyers. However, within the U.S. it may take more dollars to purchase the same materials — effectively, causing producer prices to rise.To track whether or not this is happening, look to commodities prices. The price of gold, for example, often increases when the value of the dollar slides, says Moutray. A good resource for checking the price of gold futures is the Comex division of the New York Mercantile Exchange. Also, check how the dollar performs against a basket of trade-weighted major currencies, the U.S. Dollar Index Futures.
Unemployment Rate

Though it’s a lagging indicator, the unemployment rate, currently at 10%, can be useful for business-planning purposes, says Riggs. For example, because unemployed workers tend to skip eating breakfast out, morning sales have dampened at many restaurants. However, if the jobs picture suddenly improves, that could lead to an uptick in demand for breakfast and cause business owners to ramp up production and potentially hire more staff.To get an even clearer sense of the labor market, however, Josh Lerner, an investment banking professor at Harvard Business School’s Arthur Rock Center for Entrepreneurship, suggests looking at the local unemployment rate. “We’re in a period where there is tremendous heterogeneity across regions of the country, and, as such, using a one-size-fits-all measure isn’t as helpful as local figures.” (For states’ rates, click here.) Write to Diana Ransom at dransom@smartmoney.com

Do Top-Ranked Cities Really Measure Up?

admin — Thu, 07 Jan 2010 07:00:09 +0000

By Dyan Machan I’ve always assumed that new companies put their headquarters in the towns where their founders sleep and eat. But a recent poll by Zogby International found that 45 percent of small-business owners might be willing to relocate. This may explain the weed-like growth of one of the strangest niches in business journalism: the “best places to do business” survey.Greenville, S.C., is the town that got me wondering about the best-place phenomenon. I was recently bombarded by glowing results and testimonials from the Downtown Greenville Development Initiative, a local booster group. I’m sure Greenville is terrific, but can we take at face value the myriad beauty contests it has won? For instance, Greenville is ranked the Top Micro North American City of the Future by fDi Magazine. But fDi, which serves global megafirms, doesn’t exactly put convenience first; it recently also designated Iraq’s Anbar province as a great place to put down corporate roots.The booster group trumpets Greenville’s designation as the least expensive midsize location for business, in a survey by accounting giant KPMG. But they don’t tell you this first-place finish came in 2006; by 2008, Greenville had lost its crown. In another 2008 survey, by Relocate-America.com, it ranked as the nation’s fourth best place to live. How is that survey’s top 10 decided? By write-in vote—which can give well-organized boosters a leg up. (A spokesperson for the Greenville group says they were unaware of this.) “Community enthusiasm is more common in the South,” says survey editor Steve Nickerson. “You don’t find it in Maine.” I’m dubious about the value of this methodology, in part for personal reasons: In Relocate-America’s 2009 poll, Greenville is on par with Cuyahoga Falls, Ohio. I have tracked this suburb of Akron for many years—it’s my hometown—and can attest to it being suffocatingly average.Most of these survey results are based on data like tax rates, the number of college-educated workers and average rents (all measures by which Greenville does well). But many also hire academics or other experts to create secret-recipe methodologies and make judgment calls about who’s better than who-creating discrepancies that can leave readers confounded. The subjectivity of the process also leaves room for cities to lobby the scorekeepers. Asked why Greenville had been left off one survey’s Top 20, the Greenville development group’s Kym Petrie told us, with some consternation, “We need to get our message out better.”Whatever the polls say, entrepreneurs who move are usually looking for an appealing workforce, lower costs and, harder to measure, happiness. Steve Wagner, 36, moved from Seattle to Greenville in 2006 to start an online business service called Dealer Ignition. Why Greenville? It helps that it’s small. “You can plan events based on what you want to do rather than on traffic reports,” says Wagner. He loves the climate, and thanks in part to the 250 international companies with outposts there, his family lives in a cosmopolitan environment. These were all things he considered while scouting for a location-but he doesn’t recall relying on any “best places” survey.Ultimately, when you see some metropolis popping up on a list of “hottest American cities,” it’s hard to know whether it owes its selection to immutable facts or a well-funded chamber of commerce. In the end, of course, you might win either way. If a city has a civic organization that cares enough to splurge on a publicist, it’s likely to welcome start-ups with open arms. Write to Dyan Machan at dmachan@hearst.com

Boring Meetings? Get Out the Water Guns

admin — Thu, 07 Jan 2010 04:55:11 +0000

By Emily Maltby
Heather Logrippo says her employees didn’t seem too enthusiastic at first when she handed out construction paper and crayons and told them to find a quiet place for 30 minutes.The unconventional assignment—in which workers were asked to use the crayons and paper to brainstorm a customer-incentive program—was part of an effort to make staff meetings more efficient, says Ms. Logrippo, owner and publisher of “Distinctive Homes,” a monthly magazine based in Boston. Ms. Logrippo believed the tools would help employees come back with colorful suggestions to present around the conference table.”This was a situation where you couldn’t just Google the answer,” she says. “They came out with great ideas.”In the downturn, some small- business owners are looking for more creative ways to make conference-room time as efficient as possible, an effort they hope will ultimately trickle down to the company’s bottom line.Many managers say fostering participation is a major challenge, particularly when the attendees with valuable ideas are too reserved or timid to speak up. Without their contributions, the meetings are less productive.Dixon Schwabl Advertising Inc., in Rochester, N.Y., tries to lower the inhibitions of its 82 employees by arming them with water guns, which workers are instructed to bring to all meetings. Anyone who passes a negative comment at the meeting is bound to get wet.”It helps them be more comfortable because no one will be criticized or scrutinized,” says Lauren Dixon, the marketing and advertising firm’s chief executive.Anonymity can also help lower inhibitions. During meetings at cloud-computing firm Box.net Inc. in Palo Alto, Calif., Jen Grant gives workers seven minutes to jot down as many thoughts as possible on Post-It notes, without having to write their names. When time is up, the suggestions are put on a wall for the employees to read and rearrange.”I tell them to not think about whether the idea is dumb or too costly, which allows them to think as big as they can,” she says.Other entrepreneurs are relying on technology to propel the meetings and keep the employees engaged.Managers at Russell Construction Co. introduced a new device at a recent quarterly meeting that calculates the average salary of those in attendance and determines exactly how much the meeting is costing the company based on those figures.”I don’t think people thought of time as an expense before,” says Angela Bagby, director of marketing and client relations for the 70-employee firm, which is based in Davenport, Iowa.That initial 90-minute meeting cost the firm roughly $5,000, according to the $25 cost-management gadget, which is made by Bring TIM LLC. Since then, employees have used the device at smaller group meetings, helping to shave off as much as $100 per meeting, Ms. Bagby estimates.Other small businesses are using special software to hold interactive meetings that end with tangible outlines and focus points.AscendWorks LLC, a consulting firm in Austin, Texas, is using a program called Mindjet Catalyst that allows employees to write out the talking points of the meeting as they are being discussed. They can then easily manipulate the text, organizing it by category and subcategory.”It’s like thinking out loud, except it’s on a screen,” says AscendWorks President Don Dalrymple.
Finis Price, a lawyer in Louisville, Ky., uses a visualization technology called Papershow to similarly engage his two paralegals, who work remotely.”If I couldn’t verbally describe something, I’d just have to say, ‘You’ll see what I mean after I send it,’” says Mr. Price of his meetings prior to purchasing the technology last year. “Then, they’d call and inevitably have questions about it.”Papershow, which is made by Canson Inc. and retails for about $200, works like a digital whiteboard with a special interactive pen. By using Web conferencing sites that recognize the Papershow technology, employees on their home computers can follow everything that Mr. Price draws and erases.Mr. Price says he primarily uses the tool to create flow charts. “It really eliminates confusion,” he says. Write to Emily Maltby at emily.maltby@wsj.com

Start-Ups Will Keep Struggling

admin — Tue, 05 Jan 2010 03:55:04 +0000

By Colleen DeBaise The economic downturn has dimmed many entrepreneurs’ hopes of opening a small business, as sources of funding have dwindled or dried up completely. And while many hope 2010 will be better, the outlook continues to be bleak.The majority of entrepreneurs use personal savings or contributions from family or friends to fund their ventures, but personal wealth, often connected to the value of stock portfolios or homes, hasn’t bounced back. Meanwhile, banks—under scrutiny by regulators—are continuing to strengthen capital reserves, making it difficult even for entrepreneurs with track records and years of experience to qualify for loans. And professional investors, stung by the financial meltdown, are meting out fewer capital infusions.
Kenneth MacKinnon moved to Los Angeles over two years ago with plans to start a tapas wine bar, but despite a high credit rating and collateral, including a home, the Scotland native says he has been unable to secure the $300,000 he needs from banks or private investors.”The money supply has been shut off,” says Mr. MacKinnon, who had run a successful seafood eatery for 15 years in the U.K. that he sold in 2007 before moving to the U.S.Funding from angel investors, or high-net-worth individuals who provide capital to young companies, fell 30% to $9.1 billion in the first half of 2009 compared with the same period a year earlier. That figure is expected to remain flat for 2010, according to Jeffrey Sohl, director of University of New Hampshire’s Center for Venture Research, which tracks the data.What is encouraging, Mr. Sohl says, is the number of deals has ticked up slightly. While angels are investing less—$370,000 per deal in 2009, versus $530,000 in 2008—about 24,500 ventures received funding during the first half of 2009, compared with 23,100 the year earlier.”They are still doing the deals, but the deals are much cheaper now,” he says.Venture capitalists, too, are continuing to invest, but typically in later-stage companies already in their portfolios rather than new prospects, says Mr. Sohl. The average deal size declined to $5.7 million in the first half of 2009, compared with $7.4 million to $7.8 million between 2005 and 2008.As for Small Business Administration-guaranteed loans or conventional bank loans, the best thing about 2010 is that it won’t be 2009, says Bob Coleman, publisher of “The Coleman Report,” a La Canada, Calif., trade publication for SBA lenders. “We’re better off than where we were 12 months ago, but we are nowhere near where we were two years ago,” he says.The SBA approved less than 45,000 loans for the 12 months ended Sept. 30, down 36% from a year earlier. Total volume for its flagship 7(a) loan was $9.3 billion, off year-ago levels by $3.4 billion.Stimulus-related measures, however, contributed to an uptick in SBA lending in recent months. Mr. Coleman expects that trend to continue for 2010.But SBA loans make up only about 1% of overall small-business lending, Mr. Coleman estimates. That figure may grow to 5% to 10% in 2010 as the government provides more incentives for financial institutions, especially community banks, to provide financing to small businesses, he says.Still, getting the money may be a challenge. “Whether it’s an SBA loan or a conventional loan, you really have to be perceived as the ‘cream,’” Mr. Coleman says. Start-up entrepreneurs in particular will have to show they have a significant amount of their own savings in the venture, plus solid cash-flow projections, he says.
Maria Coyne, executive vice president and head of SBA lending at KeyBank in Clevand, agrees that start-up entrepreneurs will have to have a solid plan and assets. “They’ve got to get a good hunk of skin in the game, too,” she says. Babson College in Wellesley, Mass., estimates that entrepreneurs need on average $65,000 to start a business, two-thirds of which comes from personal savings and the rest from “informal” investors such as relatives and friends.Although the stock market is starting to recover, housing values remain weak. Two years ago, relatives were more willing to invest because “they might have seen they had a couple hundred thousand dollars in equity in their house,” says Babson entrepreneurship professor Andrew Zacharakis. “Today, that’s a scarier proposition.”Lack of access to capital will also likely hamper entrepreneurs interested in buying a franchise, says Matt Shay, president of the International Franchise Association in Washington. The group estimates 2% growth in franchises for 2010 to over 901,000 establishments. That’s better than zero growth in 2009, but off the average 5.6% growth per year from 2001 to 2005.In the past, potential franchisees could finance a purchase if they could put 15% to 20% down. Now, banks require large down payments of between 40% and 50%, Mr. Shay says.Babson’s Prof. Zacharakis says he’s seeing companies doing more with less, including asking friends and family to work for free. “Instead of capital infusions, there might be a lot more exchanges of services or trading favors,” he says.In Los Angeles, Mr. MacKinnon says he’s considering taking on partners so he can open his long-planned bar. Instead of starting from scratch, he might invest in a failed restaurant.University of New Hampshire’s Mr. Sohl says he believes “we’re done with the downdraft,” though he remains cautious for 2010. “People aren’t ready to bet the farm,” he says. Write to Colleen DeBaise at colleen.debaise@wsj.com

More Workers Set Up Shop at Home

admin — Mon, 04 Jan 2010 07:00:08 +0000

By Colleen DeBaise So maybe 2010 will be the year that you finally break out on your own. Voluntarily or not.As we continue to dig ourselves out of the deepest recession since the Great Depression, many of us have lost corporate jobs. Others worry that layoffs are lurking. We’re taking on free-lance assignments, contract work and short-term projects — and getting them done in the extra bedroom, eat-in kitchen or spare corner in the utility room.The home is the new hotbed of entrepreneurial activity.For those who have temporarily joined the ranks of the self-employed, a home office is the natural (and cheapest) place to get work done. For others who are using severance packages to take a shot at entrepreneurship, the home can be an ideal incubator to test out ideas. Many a successful venture began life in a garage (Hewlett-Packard, in 1938) or launched from a living room (LinkedIn, in 2003).In many cases, it makes sense to grow the business at home before moving into a separate physical location. Other times, your new venture, career or sideline is simply well-suited to be run out of your home. And in a tough economy, a business owner who has rented office space might return to a home office to trim costs.About 52% of all small businesses are home-based — representing a broad swath of industries, from software development and mail-order sales to plumbing and general contracting — according to statistics from the Small Business Administration’s Office of Advocacy.What are the advantages of working from home? The easy commute, for starters, followed by the flexibility and the informal dress code. There also are tax write-offs: As long as you use a portion of your home exclusively and regularly for business, you can deduct a percentage of your rent or mortgage interest, utility bills, repairs and other costs.Yet there are some distinct disadvantages, too. Most frequently cited is the lack of social interaction. For others, the home is one giant distraction. A pile of dirty dishes, a screaming child or even a sunny patio might compete for attention. Often, friends and family who don’t understand you are truly working might call or stop by.The home can be a difficult place to meet customers or clients, especially if you don’t have an extra room or an appropriate place for a business discussion. When it comes to hiring employees, some home-based entrepreneurs say there isn’t enough space or that it feels too invasive to have staff in the house. Most home-based businesses (about 93%) don’t have employees, according to SBA statistics. Often, it’s the need to hire employees that forces home-based entrepreneurs to rent space elsewhere. Lastly, the line between work and personal life can easily blur when working from home.As such, it’s important to come up with a set of practices to maintain some degree of separation between your work and personal life. Here are some ways to do so:Have a separate office space. Ideally, your work space is in a separate room, with a door that closes, good ventilation and lighting. The bedroom is the worst place for a home office, as work becomes the first and last thing you see each day. If you don’t have a spare room, screens or cabinets can help divide your work and living spaces.
Install office equipment. Make sure you have a phone line and a computer (with high-speed Internet access) dedicated to your business. Install any necessary business software on the PC, and consider other office-grade equipment as needed: copiers, scanners, work desks, filing cabinets and the like.
Set a timetable. Keeping regular business hours (such as 8 a.m. to 5 p.m., Monday through Friday, with weekends off) will assist you in dealing with clients, customers, suppliers and vendors — and make it easier for you to have a social life.Fashion work hours around logical periods of productivity, such as when a spouse leaves for work or kids go off to school. If you live by yourself, set a finite end of the day.
Take breaks. A big challenge for home-based business owners is setting aside time for small breathers or lunch. Short breaks can reduce stress, improve productivity and prevent burnout.
Limit household tasks. Be disciplined about not letting household errands and chores interfere with your work day. Consider getting housekeeping help to free up more time and energy for work.
Get child care. While many parents choose to be home-based to be closer to their kids, young ones can easily distract you from work. Consider getting full- or part-time child-care help, or sharing responsibilities with a spouse or family members.
Communicate to others that you are really working. Make sure those close to you respect your decision to work at home. Ask friends and family not to call or stop by during the day, or if they do, to keep it brief.Chris Russell, founder of the job-posting site AllCountyJobs.com in Trumbull, Conn., says even his wife, who works outside the home, sometimes forgets that he’s trying to work. “My wife will say to me, ‘Can you go to the dry cleaners for me? Can you start dinner early?’ ” he says. “I give her a little friendly reminder: ‘I’m working, dear.’ ”
Write to Colleen DeBaise at cdebaise@smartmoney.com

Business Plan Template from FastTrac

admin — Sun, 03 Jan 2010 22:05:18 +0000

By Robin Lasher

If you’ve decided to start writing a business plan, it really helps to have a template to step you through the process. While the Texas Roadmap provides an outline of a business plan and helps you understand the different components, a good template lets you organize, modify and format this document to meet your specific needs. The business plan template and financial projection template from FastTrac, provider of award-winning entrepreneur learning programs, is available in the BizToolkit. A step-by-step tutorial on how to download these templates is available in the Tutorials section of the Business Plan Guide.

Chrysler Dealers Fight Closings

admin — Thu, 31 Dec 2009 07:00:08 +0000

By Emily Maltby In May, Randy Painter and his nine siblings were taken aback to learn their 65-year-old family business—two Chrysler Group LLC dealerships in Nephi and St. George, Utah—would be terminated as part of the auto maker’s restructuring. The dealerships, opened by their grandfather and father, respectively, were historically profitable and had long been an integral part of their small communities.Since June, they have struggled to convert their stores into used-car dealerships—and, like many rejected dealers, they still question the logic behind Chrysler’s decision. “This doesn’t happen in the U.S.,” said Mr. Painter. “It has been a devastating, horrible mistake.”For months, many of the 789 dealers terminated during Chrysler’s bankruptcy restructuring have cried foul, saying they were entitled to stay in business despite the auto maker’s problems. As Chrysler continues to report dismal sales, industry experts and even a former executive question whether the company blundered by dropping so many dealers and giving them just over three weeks to wind down operations.Jim Press, who served as Chrysler’s president and vice chairman until last month, said in an interview that he personally fought the dealership closings. “I saw it fraught with terrible issues and short-term sales cost as well as dislocation of customers,” Mr. Press said. “Dealers are [Chrysler's] only customers, the reason we are in business. How do you eliminate your customer?”Chrysler had been trying to consolidate its dealerships for years by encouraging mergers and acquisitions of neighboring franchises. But “instead of letting natural order take its course, they tried to get it through in 30 days,” Mr. Press said. By terminating dealerships, Chrysler could expedite the consolidation all three of its brands at the remaining stores. Chrysler then could phase out similar vehicles such as the Chrysler Town and Country and Dodge Grand Caravan, which the company said could save it $1.4 billion over four years. Some of those who follow the industry say the wind-down process wasn’t fair to dealers and hasn’t served Chrysler well. “The rationale wasn’t the issue—it just was not the best judgment in how to do it,” said David Cole, chairman of the nonprofit Center for Automotive Research in Ann Arbor, Mich. “The terminations were done so hastily. If it had continued on a systematic basis, it would have been better.”Chrysler has stood by its reduction plan even in light of recent federal legislation that allows rejected dealers to pursue third-party arbitration, with the possibility of being reinstated. Days before Christmas, Chrysler Chief Executive Sergio Marchionne said that reinstating dealerships could “cause havoc within Chrysler,” adding that the company may challenge Congress’s decision in court.Former Chrysler dealers view the legislation as a milestone in their struggle to get back what they say is rightfully theirs. Until now, the dealers have had scant opportunity for recourse. Because Chrysler had federal bankruptcy protection, they were unable to exercise their state franchise rights, which would have allowed them to contest Chrysler’s decision. Many have already closed, unlike counterparts at General Motors Co., which were given longer wind-down periods during that auto maker’s restructuring and in many cases have continued to sell new cars.After 43 years in business, Richard Mealey said he wasn’t going to take the Chrysler terminations lying down. The owner of Birmingham Chrysler Jeep near Detroit plans to use the arbitration process even though his dealership’s financials are weak from selling only used cars most of the year.Meanwhile, Annette DiLorenzo Thayer, owner of Quality Jeep Chrysler of Albuquerque, N.M., faces another problem. Although she has remained well-capitalized selling used cars and owns the dealership’s property, Chrysler already awarded her Chrysler and Jeep brands to a new dealership across the street that now carries all three nameplates.Though that dealership has been open only a few months, reversing the transfer may not be permitted under state franchise laws, which once again are applicable since Chrysler exited bankruptcy.Still, she said, “We are ecstatic to move forward with the arbitration. After months of betrayal, we finally can find out why they did this to us—why they took our store and gave it to someone else for free.” Write to Emily Maltby at emily.maltby@wsj.com