Cover Story
Ready to lose
How Steve Wolever knew a year without profits at Signature Inc. would be a winning proposition
By Joan Wall
Smart Business Columbus | December 2001
"If it wasn't hard, everyone would do it."
Steve Wolever considers Tom Hanks' quote from "A League of Their Own" his favorite line from a movie.
The chairman of Signature Inc. puts it to use when describing a 1999 turning point in his $10 million Dublin company.
At that time, Wolever's decisions were, indeed, anything but easy. He and his management team deliberately planned to go a year without a profit -- in fact, they expected losses. They were right.
They invested 10 percent of the sales and service training company's $6 million revenue to refocus it in a conscious effort to grow it rather than remain stagnate.
"We took a salary, but there were no dividends --zero," says Wolever. "You probably had half the money you did the year before."
The investment went into three new divisions and an office in Germany.
The payoff: In the two years that followed, a 66 percent growth in revenue.
"You have to have faith that what you're doing is the right thing and it will work out," Wolever says, "and it did."
A winning proposition
Wolever and his management team spent five months coming up with the four-pronged plan to invest in the company.
At the time, they had just two divisions: Transient Edge, which trains hotel staff to turn inquiries into reservations, and Global, which uses the same concept in other industries such as heavy equipment dealers and rental properties.
Wolever considered throwing all of the investment to the Global division, but he saw opportunities in the hotel and call center industries. He also knew the magic in his revenue came not from simply the initial training but from the ongoing reinforcement programs, continuing evaluation and education of his clients' employees, so he needed to broaden his client base.
"In 1999, we were fairly narrow in our focus," he says. "We thought, 'We have to broaden our offerings.'
"Prior to 1999 we made the decision that we wanted to be a growth company. At the 1998 revenue level, we could've said, 'Let's just see how much money we can make operating at this level.'"
Instead, he and his team wanted 30 percent growth per year to get the company to a goal of $20 million in revenue within five years.
The plan:
* Start a division that operates call centers, primarily in casinos.
* Add a division called Service Edge, which provides service training for hotel housekeeping and maintenance staff.
* Develop Catering Edge, a sales program for staff at hotels who sell space and services for conventions and meetings.
* Open an office in Germany.
"We knew if we did all four of those in a year, we probably would not make any money that year. We thought it was a wise investment for us to do that," Wolever says, noting that each of the four divisions has brought in about $1 million in revenue.
The four also have good prospects.
He expects the underlying premise of the company, training employees to create value with people making inquiries about a business, to continue.
"We believe there are service levels in the country -- and we're not saying anything anybody else doesn't say -- that are pretty bad," he says.
Signature does not sign exclusive contracts with its clients, enabling it to continue prospecting. In the heavy equipment industry, for example, Signature is doing business with seven of the top 10 companies in the United States, Wolever says.
"Last year we had 58 percent growth. We think this year we'll probably hit the 30 percent again," he says.
Signature this year added yet another division, Service Edge for Education, to help colleges and universities.
Looking back
Now, Wolever can see his risks have paid off, but at the time, his emotions ranged widely.
"I was excited," he says of the overall scheme. "If you consider yourself an entrepreneur, it's -- certainly it's about making money -- but it's also about making something grow.
"At several points in the company's history, and even today, we really could shave an awful lot of overhead we have and make two to three times what we're making today into our own pockets," he points out. "But what this is about is making the business grow."
Still, there were times when he questioned himself.
"All of a sudden there's a real sense of responsibility for 200-and-some employees," he says. "That's the scariest part."
There were a couple of times, Wolever says, when he had to get his personal checkbook out and, for example, cover payroll for three to five days. At any one time, he might have had as much as $100,000 of his own money into the company.
"We don't buy a lot of product, so we can't go to the vendor and say, 'Can we have another 15 days?' We're highly payroll driven," he says.
"At times there's a few sleepless nights there when you think, 'Am I doing the right thing?' It's the employees that you worry about," Wolever says. "You think if anything would happen to you, you'd go out and do it again, but you don't want anything to happen to the people that work for you."
Wolever expected that fear to permeate through to his employees. In response, he shared the plan with them.
"We were right upfront with them that we were losing money," Wolever says. "We thought, we owe it to them because they need to know, but we also owe it to them because we thought everybody thought we made tons and tons of money."
"As human nature is," he says, "everybody pulled together."
Not one employee left after the announcement of the plan and of the fact that the company would lose money.
"By doing that proactively, that's how you start out: 'We're telling you this because we don't want you to be concerned. We have a plan and this is how you fit into that,'" Wolever says.
When the $400,000 losses came in, they were twice as much as the executive team had anticipated before it initiated the plan. However, the loss was made up in less than one year thanks to one big sale.
Fitting employees into the plan meant setting goals for them and having them monitor their progress. Signature keeps monthly status checks through a system it calls "scoreboarding."
Each department has bulletin boards or whiteboards listing goals and status reports. For example, human resources tries to keep turnover below 10 percent; Service Edge keeps track of its minutes per call and calls per hour; payroll records its number of errors; and accounts payable lists the number of vendor invoices processed daily.
Every month, the scoreboards are posted on Signature's intranet, along with their relation to profits for that point in the year and the company's revenue.
Continued risk
As his business grows, Wolever knows he'll repeatedly face similar situations.
For example, this year was the first that his company invested in any marketing efforts. He's biting the bullet, knowing he may have to wait two years to see a return.
"You're constantly making that decision," Wolever says. "If I spend this knowing I'm not going to get anything this year, two to three years down the road, I'll get five times that."
Such risks, he points out, require constant monitoring of opportunities that come the company's way.
"That's pretty much my full-time job," he says, "to take a look at what's on the horizon."
