I attended a networking lunch today sponsored by the Mid Atlantic Venture Association.

The key note speaker was Fred Schaufeld, founder and Chairman of NEW.  If you’re not familiar with NEW – they are a $2BN company (founded in 1983 with $79.00).  Today they are the industry leader in service contractor administration.  If you don’t know what service contract administration is – don’t feel bad.  You’re not alone.  In summary, NEW is probably one of the biggest little companies that you’ve probably never heard of.  They work behind the scenes and partner with large retailers like WAL-MART, Best Buy, and Circuit City to provide extended service contracts and replacement plans designed to give consumers enhanced product coverage.  In other words, they sell “just in time” insurance policies to consumers to cover things like Plasma TVs and refrigerators.

Without a doubt  Mr. Schaufeld was one of the most interesting, entertaining, and authentic personalities I’ve seen in a long time.  On one hand, he came across as incredibly smart and shrewd.  On the other hand, he came across as a blue-collar kind of guy who deeply understands how normal every-day people sell and buy things.

One thing Mr. Schaufeld said really stuck with me and made feel more confident than ever before about the business my partners and i are building at SMBLive.  It was a comment about the tremendous power of distribution and existing customer relationships.  Specifically, he was reminiscing about a company called Crazy Eddies -- a dominant retailer in the 70s and 80s in the New York Tri-State area with a distinct reputation for aggressive sales tactics and poor customer service.

So what's the lesson of Crazy Eddie?  According to Mr. Schaufeld there are actually two lessons:

Lesson #1:  people buy from people they know and trust.

Lesson #2:  even if they don't entirely trust them -- people still buy from people they know

Incumbent broadband service providers such as BT, Telmex, Telus, and AT&T have millions of existing billing relationships.  And although they have their share of challenges when it comes to customer service -- the fact is that customers will still buy from them -- which is good news for SMBLive (and reassuring to yours truly).