Ralph Sanese Jr. was pondering what to do with a substantial drop in revenue for his food service, vending machine and in-house cafeteria business that was started in 1946 by his father, Ralph Sanese Sr., and his uncle, Al Sanese. The drop had been a one-two punch: after Sept. 11, revenue was slipping, and then when the 2008-09 recession hit, the national vending industry dropped almost 30 percent in revenue.
The founders had accomplished a rags-to-riches dream, starting from scratch and taking the company above the $50 million mark in 50 years and — Sanese wasn’t about to give up.
“We were fortunate, our revenue only dropped about 20 percent, but still you have to manage a declining number, and it’s very difficult when you are a paternalistic organization — you’re trying to take care of people, and you have less revenue coming,” says Sanese, president of the 750-employee Sanese Services Inc.
“It was one of the toughest times, the declining revenue and all your people looking at you saying, ‘Ralph, what are you going to do about it? What do we do? What do we do?’”
Over the years, Sanese had sought help from several consultants. The results were mixed, and in one case, detrimental.
“I’ve been that route with the wrong consultants and sometimes we went the wrong way, and it cost us the worst financials that we ever had,” Sanese says. “They didn’t understand the business and what it took to really make it work, and even though we weren’t doing everything right, we were doing some things right.”
But as time went on, he was as determined as ever to get his company on the right track. He would try another set of consultants, but this time, the experience was unlike any Sanese Services had ever been through.
Here’s how Sanese vetted his next set of consultants, took the suggestions they made and parlayed the proposals into profitable results each month.
Lay the groundwork first
If a company that is several decades old doesn’t adapt to meet changes in customer tastes and preferences, it could very well suffer a decline in business or eventually go out of business, regardless of the economic climate. This time around, Sanese knew that he had to bring in an outside company to help him reconstruct and find a way to run a business model that definitely needed to be updated since its 1946 inception.
“That was difficult because we felt we knew everything about this industry,” Sanese says.
“If you need some outside help, that’s the first thing. Do you need outside help or can you internally make some changes work? A lot of times, the old rule of thumb is consultants are people that you bring in to say something to your folks, something you know you should do but what you can’t say. It has to be done. It’s the truth. Get somebody else to say It. For us that’s how that worked for some matters.
“The one thing that I did learn is that before, in my younger years, I would have said, ‘This is what we’re doing, guys, and that’s it.’ What I did this time, I brought this company in, I interviewed them and I felt good about them.”
Sanese attended a presentation a firm gave at the Conway Center for Family Business in Columbus.
“I liked what they had to say, and I got references from customers” he says.
But once bitten and twice shy, Sanese decided he would visit companies where the consultants were on the job. That way, he figured, he could see them in action and decide if the firm was a good fit and could deliver for Sanese Services.
“We actually went to this facility, and we went right into the shop floor where they were helping this company with its manufacturing processes — and I walked the floor with the owner of the company,” Sanese says. “He told me quite frankly at first he didn’t believe the consultants. But he said, ‘I am going to tell you, here’s what they did,’ and I walked the plant without the consultants, with the owner and he showed me how it was working.”
Sanese also visited a couple of other companies to make sure that the consultants had a vested interest in what that company needed — and not what they wanted to bring to it.
“I would definitely check their references, that helped us, and I would check those references to the nth degree,” he says. “That’s what we did.”
Decide on the core issues
When considering a company makeover, turnaround or whatever you want to call it, it’s best to focus on a minimum of key issues. Trying to solve too many problems the wrong way could lead to a letdown.
One of the approaches was to appoint a team of trusted employees to work with the consultants. The team members will be the go-betweens and should be able to vigorously defend their positions if they feel strongly about a particular matter.
“I brought in a team that was going to help me make it happen, and I let them go through their motions with the consultants,” Sanese says. “I brought in our people because we had been through consultants before, trying to find that silver bullet. I brought in the right people to help me execute a well laid-out plan to improve our core business.
“And once you decide that this is the right thing to do, make sure that the team embraces it and that they are going to be a part of this process and not buck the movement.”
The two teams hammered out a two-pronged approach: reducing product costs and getting delivery routes and labor costs more in line.
“Those were the key things, so you start out with a couple of key fundamentals that you want to get a handle on,” Sanese says. “We showed them what we had and they wanted to expand upon those tools with an improvement in software and managing.”
The company put together a dashboard website that provided current financial information on the company’s revenue and expenses. It was a way for employees
to get right into their own financials and understand their business division.
“They would be able to understand the key components and the key indicators of what each business division works off and how they could help to manage and navigate their own business division to make better and quicker decisions,” Sanese says.
The introduction of new technology to manage financials may come with some bumps along the road, however. There may be issues with employees not wanting to accept change and with others nervous about the openness of financial information.
“We’ve gotten better using some of the technology,” Sanese says. “Some folks had to change — they didn’t want to use technology. Some of these guys have been around for a lot of years and they didn’t want change. So you have got to go through some of those things with them. We have had to make several changes with people that had been with us for a while.
“Then you have to share the financials with every employee. We share everything so that they know how we are doing. We’re very transparent. I don’t hide anything. I just think it pays you dividends in the long run. I don’t think showing too much is a big mistake.”
Sanese found that sometimes, financial officers were not always comfortable about sharing information.
“You never want to be vulnerable to one person anymore,” he says. “What I wanted to do was to have our folks, including me, be stronger at our home company financials to understand where they can make responsibilities and make changes and make them quickly.
“Transparency is what employees want nowadays,” Sanese says. “They want to be a part of something. They want to see if they can make improvements to the organization. They want to be measured on that.”
This contrasts with some older or more conservative attitudes that in previous times, you didn’t want to share too much. You were afraid the wrong eyes would see the data.
“That’s what they did back in those days,” Sanese says. “Close to the vest. Don’t tell them everything. Don’t ask how we are doing. Your business heads had to wait for your financial people to tell them how they did.”
Build enthusiasm with successes
Many business experience seasonal problems with cash flow problems, Sanese Services included. But the company put itself on the road to a better performance by using its new dashboard reports — and other plans to increase business.
“We’ve done an analysis on each business division every week for the last 2.5 years and before, we would always lose money in January, June, July and August,” Sanese says. “Always. Not anymore. Now we consistently earn a profit, not a lot during those months, but turning a profit versus a loss is a great swing.
“So that’s what you need to do when it comes to improve each of the businesses and then your business heads don’t wait for your financial people to tell them how they did − they already know it. They are measuring it with metrics.
“You know the old saying, ‘Measure twice, cut once’?” Sanese asks. “Well, now we are measuring a whole lot more than just twice, I can tell you that. And it’s working.”
It helped the company with everything from keeping track of product transfers from a tractor-trailer, to products being processed, ordered and shipped to the actual location and how it’s tracked.
“Our own folks got enthusiastic because they could see the differences that they were making, and they could see if their costs were shrinking, let’s pick an average of 52 percent product cost, and our goal was set at 42.5 percent — they wanted to see how they were doing toward that goal,” he says. “Then we rewarded them, and did other things for them. To this day, we have a managed cost per route and that’s how we operate this business today.”
To help keep costs down, the up-to-date financials gave a picture of what was given away or wasted.
“We have to give away a lot of product in the food service industry,” Sanese says. “But we never did know how many cases of napkins or forks, knives and spoons went out; or a gallon of gas or diesel fuel that went in the truck; or waste of product, if you are loading too much on a truck.
“So we employed the consultants’ recommendations to help us control our waste on these routes, and that was a big and important part.”
While looking at the concepts a modern business model needs to employ as compared to the traditional one if you want to increase revenue, it is valuable to stick to your core business but yet find ways to diversify.
“We knew that we needed to diversify the organization because our business was changing,” Sanese says. “Manufacturing was being hurt in Ohio. I couldn’t keep feeding the manufacturing folks; their numbers were down. I knew I had these kitchens, so I had to find a way to keep our associates working and find other places where we could distribute fresh product.”
To expand your market, finding prospects that are extensions of what you already do can be the answer.
“We got into the school business, and then we got into the senior meal-feeding business,” Sanese says. “We know that’s a growing market because there are a lot of seniors. So that’s how we diversified the business because we had a fleet of refrigerated trucks, we had certified food safety people, and we know food. If we could stick to the core business of what our company is really known for, making fresh food on somebody’s site like a big in-house café operations, then we would be OK.
“It’s a new way to do business and you don’t lose the values of what your company was founded on; it’s just the improvements matching what the industry is being called to do now.”
How to reach: Sanese Services Inc., (614) 436-1234 or www.sanese.com
The Sanese file
Born: Columbus, Ohio
Education: Franklin University. I earned a degree in business. I put myself through school. It was one of the things my father made me do: ‘If you ever want to be an officer in this corporation, you are going to have to go to college, and by the way, I am not paying for it.’
What was your first job?
I had a lawn cutting business and I had all the neighborhood yards, and I did mulching and all that. By the time I was 16, I probably had $5,000 in the bank. That was back in the early ’70s. I bought a Pontiac Firebird with that money, and I drove myself to school.
What is the best business advice you ever received?
I was always taught to hire people that were smarter than you were and that could help you to complement the skills that you did not have. I probably haven’t done a good enough job of that, but I’m still trying. I’m still trying to do that. And ask for advice. Ask for help.
Beyond that, my dad and uncle would tell me some of the greatest things in the world These are some of the principles and fundamentals with which I was raised:
Look a man in the eye and tell him exactly what you’re going to do and live by your word no matter what. You don’t need a piece of paper to tie into it. Shake a man’s hand, that’s what you mean, period. You never you give up on being an ethical, principle-driven person. No matter what, you have to always do the right thing. No matter how tough it is, you have to always do the right thing. You have to work harder than everybody else does. Lead by example — you have to do it. And always protect the entity, because it will protect you. Protect it first. Take care of it first.
Whom do you admire in business?
I loved John McConnell of Worthington Industries. Of course, he’s passed but he would be my all-time choice. Doing the right thing was at the center of everything in his life. I just think the absolute world of the man.
What’s your definition of business success?
The people in your own organization reaching heights they never thought they could obtain. And then having a company resistant to losing business and gaining new business, modest growth every year. I always wanted to be the biggest — but I don’t care about that anymore. I just want to be the very best at what we do and protect that reputation.