The record speaks for itself. Having spent its first 19 years in the black, ProMusica Chamber Orchestra of Columbus may be one of the best examples in town of good money management.
Thats not to say ProMusica has always had smooth sailing. In the early 1990s, says Executive Director Jennifer Keefer, the organization had to cut concerts and rehearsals to meet financial goals. However, the fact that ProMusica identified the need to make adjustments before large losses were incurred and actually did so epitomizes the organizations dedication to watching the bottom line.
Smart money management, cautious risk taking and strong control over growth have contributed to the organizations sound financial history. So have product development, marketing, customer service and diversification.
Its not rocket science, Keefer says. Its business, and it all takes the same things. You need to raise the money, produce a product, search for excellence. All of these things its all universal.
ProMusica goes to great lengths to measure its success, keeping close track of every detail, from each source of income to the attendance and capacity of all performances. This gives it a way to see signs of trouble that need immediate attention.
In 1991 and 1992, for example, ProMusica noticed audiences were not filling seats at the twice-a-weekend concerts, so one performance each weekend was eliminated and rehearsals cut back.
Its all based on the financial situation, Keefer says. We were not bringing in enough revenue to manage the scale we were doing.
Now, however, ProMusica is seeing a period of growth in the past two years, revenue increased $150,000, pushing the annual budget to $530,000 and the board is considering a return to the double concert weekends.
To stay prepared for the hard times, the organization keeps a cash reserve equal to 10 percent of its budget. Established in 1995 through a matching grant from the Greater Columbus Arts Council, ProMusica now sustains the fund.
Although the money could be used to maintain cash flow throughout the year, ProMusica has never needed to access it. In fact, in her past three seasons as executive director, Keefer says, it also has not had to draw on a $35,000 line of credit set up through The Huntington National Bank for the same purpose.
In keeping with its forward-thinking nature, the organization has taken a look ahead at another potential income source: its endowment fund.
Established in 1992 for general support of the orchestra, the fund grew to $19,000 through contributions and reinvestment of its average annual 10 percent interest, but the fund was never tapped because it was so small. Rather than let the money sit idle, the board recently set out to increase it. In honor of ProMusicas 20th anniversary this year, members did a six-week blitz soliciting pledges that should add nearly $500,000 to the fund.
In addition, subscribers this season were asked to contribute $1 or more toward the endowment, a move made more to increase awareness of the endowment, and thus garner more contributions down the road, than to provide a significant or immediate increase.
That will be our nest egg, Keefer says, adding that an advisory committee will review the income and recommend ways to use it. We can build on it and help sustain our growth in the future.
Keefer says the ProMusica board knows that to keep the organization growing, it will have to take the occasional step out onto a limb.
A prime example: the move this season from Weigel Hall at The Ohio State University to the newly remodeled Southern Theatre. That costs the organization nearly $20,000 more per year in production costs, but is tempered by a $7,500 grant from the Ohio Arts Council and the prospect of increased ticket sales due to the mystique of the historic, newly restored theater.
It was a calculated risk that has paid off, Keefer says, because four of seven concerts so far this year have been sold out, and the others had at least 85 percent capacity. Because Weigel seated 700, compared to the Southerns 900, ProMusica still comes out ahead.
ProMusica will have to assess the risk again in the coming year, when the grant expires. Even though it has only signed a one-year contract to perform at the Southern, the organization is making plans to stay.
This year, we have identified a lot of new donors for our annual fund, Keefer says, noting that the move to the Southern, and its ensuing cost increase, was incorporated into solicitation materials for corporations and donors. In addition, ProMusica will continue to modify pricing in order to bring in the necessary income to remain at the downtown theater.
Patrons, she says, were willing to pay the increased ticket prices about 20 percent more during the 1997-1998 season. In fact, income from subscriptions grew 43 percent that season due to the price increase and a larger subscriber base. During the 1998-1999 season, patrons supported tiered pricing because of the Southerns varied seating options and were willing to pay more again.
Another risk ProMusica takes may not appear to deal directly with income, but can dramatically affect the groups finances all the same. That risk is balancing the need to provide a consistent product with the need to continually innovate. That means scheduling concerts that include traditional and new works.
Its an approach Keefer and her board are passionate about, but one that could turn off patrons if not handled correctly.
If we stop commissioning, premiering, promoting contemporary music, there wont be any new music, Keefer says. So we ask the audience to support that development.
Were committed to taking [musical] risks, but because weve done it so long, we know how to present it with something we know is going to be successful, she explains. For example, the May concert includes a piece written by Messiaen in the 1950s and a symphony Beethoven wrote in the 19th century.
Ray Hanley, president of the Greater Columbus Arts Council, says ProMusicas sound day-to-day business operations make it easier for it to take such risks.
They are very stable in their basic operations, and when they get an idea to take a risk, its for several years away, Hanley says. Because they plan well, because the board is very knowledgeable and involved in the organization, they are able to do projects very risky for an organization their size.
ProMusica recognizes that new customers those who have never before experienced its chamber music are taking risks, too. To continually attract new patrons and bring in more revenue, ProMusica must meet them half way.
To do that, the musicians perform in different venues, such as at corporate events or weddings, or hold concerts at the Pontifical College Josephinum.
This expands our reach into the community, Keefer says. Im going to take the mountain to Mahomet. Well be in your setting so you can experience ProMusica at your own comfort level.
The organization makes an effort to cater to various customers.
For example, it presents concerts, curriculum materials, recordings and special ticket offers for children. The orchestra reaches out to senior citizens with open rehearsals for an up-close-and-personal look at how it transforms from the rehearsal state to the performance state.
Aggressive recruitment of new donors and ticket holders comes from board members, who add a personal touch, and the Trustees Circle, a group of established Columbus leaders, including Bernie Yenkin of Yenkin-Majestic Paint Centers and Artie Isaac of Young Isaac Inc., who serve as a mbassadors, or social advocates, of the organization.
Like any business, once ProMusica gets its customers, it has to keep them.
Music Director Timothy Russell sends pre-concert letters to subscribers and offers a personal talk 30 minutes prior to each performance. He also speaks with the audience during concerts to introduce and explain various pieces of the program.
While forward thinking and big-picture management guide ProMusica, its board and staff have not forgotten primary business strategies, including diversification, to increase revenues.
Keefer acknowledges that ProMusicas income is limited to approximately $20,000 for each concert that fills a house. One way it has conquered that obstacle is to arrange small ensemble performances, such as a quartet at a corporate event, to draw additional income.
In the 1997-1998 season, ensembles brought in $8,630, a 40 percent increase from the previous year.
Looking ahead, ProMusica has invested in another potential revenue source: compact discs of contemporary, childrens and multicultural music performed by ProMusica. Although it will not gain royalties until sales top approximately 20,000 CDs, ProMusica has arranged with record companies to receive about 500 discs to sell at its concerts and events a move that has netted a couple thousand dollars each year. Other revenues are very far off; in the first five years, the CDs are nearing 5,000 sold.
The same premise ProMusica uses to find additional patrons holding more concerts in various locations results in increased revenues. Those smaller concerts cost less to produce at $5,000 for a three-concert series at the Ohio Historical Societys Ohio Village, for example, versus more than $35,000 for a full subscription concert. And they bring in about $3,500 after expenses, which are typically paid by a sponsor.
On a larger scale, ProMusica looks for a financial boost during the 1999-2000 season with its production of PASSION, a chamber musical by Stephen Sondheim. Although its another risk since it requires a $200,000 budget, the effort is already paying off with a Huntington Bancshares Inc. promise of $100,000 ProMusicas largest gift ever.
It is because they are conservative that they can take risks like PASSION, Hanley says of ProMusica, pointing out that PASSION will require more than one-third of the organizations normal operating budget. They had the money banked to do it before they announced it. Its not that they get an idea they want to do and then get the money for it.
The Huntington gift, plus a grant from the Greater Columbus Arts Council and an anonymous donation of $25,000, have covered 75 percent of the musicals costs, and ProMusica hopes to earn more than $20,000 for each of the two scheduled performances.
Moreover, PASSION is an investment in exposing more people to ProMusica in the hopes of attracting them as patrons later, Keefer says.
Staying in the black, she says, has been possible for ProMusica with such conservative and calculated business operations.
When we talk about growth, Keefer says, it isnt, How do we get to be an $8 million organization? Its, How do we become a stronger organization? Joan Slattery Wall (firstname.lastname@example.org) is a reporter for SBN.
Ronald Brown, CEO of Maximation LLC in Dublin, which is a prime competitor of Quick Solutions
Ive known Quick ever since hes been in business. Weve been in a lot of competitive situations. ... Our business is probably more competitive than the majority of businesses in the world ... so were constantly stealing people from each other. At one time, Gary and I came up with an agreement that Id leave his people alone and hed leave my people alone. We both lived up to that agreement, so I have to assume hes a man of his word. One way to evaluate a human being is if they say theyre going to do something and they stick to that. That tells me theyre an honorable person.
I cant say anything negative about Gary. I respect him as a human being.
Jack Butler, a partner with Swedlow, Butler, Levine, Lewis & Dye Co. LPA, who serves as Quicks attorney
One of the things thats quite apparent to me in working with Gary is he has a good intellect. Hes unassuming in his demeanor, hes very relaxed and nonthreatening [but] I think sometimes he has to mask the fact that he has a real strong intellect.
His style and personality also serve him well in the business hes in. ... I think hes quickly embraced by people he does business with. He has a lot of energy, but he can really stick to his knitting, so to speak. ... He has a vision. He wants to grow his business and add to its breadth and depth. And, like the typical entrepreneur, his attitude is, This is what we will do to accomplish it. The glass is half full, not half empty. Theres a positive, can-do attitude thats pervasive in his thinking. ... I think those are very important characteristics.
Another thing I can tell you about Gary is his employees like him. ... And they respect him. Ive always seen him treat his employees with considerateness and respect as well. He likes the people that work for him and that shows. That fosters the same kind of attitude back toward him.
Ed Ahearn, IS manager with Bank One Services Corp., a long-time client of Quick Solutions
[Hes] results oriented, a go-getter and he tries to understand the clients needs. ... He also has good people. I think he spends a lot of time developing his organization to support the clients.
Hes a straight-forward person. ... He must be regarded very highly because of all the awards hes gotten. Obviously hes very successful, so hes doing a lot of things right.
Kelly Borth, owner and president of Greencrest, and Quicks nominator for the SBA award
[Hes] energetic, bright, fun. Hes a very employee-focused individual and a very fair player. ... He has an innate ability to motivate people. ... Im in awe of his creativity when it comes to coming up with incentive programs or recognition programs. ... I learn a lot from him by watching and observing and being around him. Hes always free to give advice. He has genuine concern and care as much for his business as for mine. ... You dont run across that many people who are that down-to-earth and that successful and unpretentious.
In the March issue of SBN Columbus, you invited comments on the new format [Not broken? Fix it anyway]. I find it excellent and must compliment you on your publication. I feel that it has much more practical value than your competitors publications and thoroughly enjoy receiving and reading it.
Robert W. Clark, M.D., medical director
Regional Sleep Disorders Center
Columbus Community Hospital
I enjoyed your article on Gary James [Who to Know, SBN, April 1999]. It is wonderful to see successful businessmen give back. It is also refreshing to have one share his most candid thoughts.
My firm specializes in providing business advice and raising capital for small and medium-sized companies. If I had one wish, it would be that all the entrepreneurs we represent would take the time to read your article. They would clearly benefit from it.
Keep up the good work.
J. Michael Leonard, president
JRP Consulting Group
Right on! I find it incredible what the legal system allows regarding frivolous lawsuits such as hot coffee, smokers suing the manufacturers when it says right on the pack, May be hazardous to your health. Utterly ridiculous! Your lighter example you wrote about is equally astonishing [The cruel truth, SBN Columbus, April 1999]. Who can we write to, to communicate our outrage?
Duane Hickerson, partner
Marketing Services by Vectra Inc.
A strong small business community benefits Central Ohio in many ways, says Steven C. Hines, vice president of National City Bank and the 1999 SBA Financial Services Advocate of the Year.
We can start with growth, with employment opportunities and with maintaining a diverse community, he explains. Small business in many areas has been and will be the employer for the future. Every day of the week, more and more people are employed by small business than by large corporate employers.
Hines knows about small business. He joined National City Bank [then Ohio National Bank] in 1973 after graduating from Bowling Green State University. He has spent most of his professional career in the small business lending area, recently moving into a retail credit position. He got involved in the Columbus Countywide Development Corp. 16 years ago and has served on its Loan Review Committee and all-volunteer board for several years, the last two as president.
The initial thrust of Columbus Countywide was to support one of the lending programs of the Small Business Administration, the SBA 504, which provides excellent financing options for small businesses that are acquiring fixed assets, principally real estate, explains Hines.
He says the organization has grown substantially because of the people involved and the general business community in Central Ohio.
I have had the opportunity over the years to attend sessions throughout the country and talk to other bankers, and I think the business community in Central Ohio is much more attuned to small business than in many other areas of the country, he said. Locally, the SBA finds ways to put deals together and has an excellent working relationship with financial institutions. In many parts of the country, thats not the way it has been.
Hines was instrumental in raising the initial capital to start the Micro Loan Fund and the Columbus Growth Fund two Columbus Countywide projects in which the SBA requires a loan loss reserve fund in the event a business is unable to repay the loan.
We went to the financial institutions and asked for their participation and we were very fortunate, says Hines. The $150,000 in fund-raising from five area banks enabled Columbus Countywide to borrow $1 million from the SBA for the Micro Loan Fund. The other fund involved $3 million, with half of the $500,000 loan loss reserve provided by the City of Columbus and the rest contributed by the five banks.
They stepped up to the plate, and in both of those programs, they did fund those so that we had the loan loss reserve set up, Hines said. Now both of those programs are off the ground and moving.
The loan loss reserve funds enable Columbus Countywide to take greater risks than banks are able to in making loans to small businesses, says Mark Barbash, executive director of Columbus Countywide.
The purpose of these programs is to expand access to capital beyond that which a business can get from conventional lenders, he said. In order to do that, we have to create these financial tools that can be kind of unusual.
Columbus Countywide has worked with the state on financing programs, Hines says, and has put together programs to benefit women in business and entrepreneurs just starting out.
Will Bowdish, a vice president at National City Bank who nominated Hines for the SBA award, says Hines has dedicated many years to making things happen in the small business community.
Steve has gone out of his way, not just to be involved in CCDC, but to take a leadership position, he says. Through participation in new projects or programs that were available, Steve was instrumental in contributing to the growth at CCDC.
Hines says involvement in the community is a two-way street. You cant just take in the business and reap the benefits. Youve got to give back, and I have tried to do that through participation in Columbus Countywide and through participation in educational programs. And I have been very fortunate that National City Bank has given me the opportunity to do so many of these things.
Columbus is fortunate, he adds, to have broad-based support across all business sectors.
Locally, I find that most of the financial institutions and the people who deal with small business look for solutions instead of seeing obstacles. Thats what has made the overall growth in Central Ohio what it is today. Its the environment; its the people here who try to put things together.
The lights were dim, but the room was loud really, really loud. Plane engine loud. And not just because the music was blaring. There were people everywhere: standing, seated, clapping, dancing, talking, laughing, singing. There must have been close to 3,000 excessively exuberant, mostly middle-aged, revelers assembled and it was barely 8 a.m. It was the strangest sight Id ever witnessed as a member of the media.
This was the Longaberger Reunion Bee and I was in awe.
What kind of company evokes such unbridled, almost cult-like enthusiasm from its sales force? I mean, thousands upon thousands of independent sales associates, as The Longaberger Co. likes to call them, flew and drove to Columbus from all over the country for this annual powwow. What could possibly make these people so loyal and so very proud of what they do for a living? I soon found out.
When company founder Dave Longaberger took the stage, the fervent cheers hit a whole new level as the entire crowd sprang to its feet. When he spoke, the group hushed. Clad in hand-woven Longaberger sweaters and clutching basket-shaped purses, the masses leaned forward and hung on his every word. Then they cheered, and cheered, and cheered some more. Clearly this man was more than their leader; he was loved and admired by them. He was their hero. In many ways, they couldnt have picked a better role model.
Dave Longaberger was a picture of dignity and class. He was humble in his success and gracious when honored. He was intensely dedicated to his hometown of Dresden, a quiet community about 50 miles east of Columbus where he chose to start his basket weaving business 26 years ago. Longaberger was noble in his fight against cancer, too. He never hid his worsening condition or tried to evoke pity in the 22 months he fought this disease.
His genuine nature made him a father figure looked up to, trusted and revered, not just by his two grown daughters, but by his staff of more than 54,000 nationwide. Its said that Longaberger was the type of manager who often walked the manufacturing facilitys floor talking to employees, listening to their concerns and recruiting their ideas. Apparently he knew the importance of respect and he earned it honestly.
Longaberger was also a master planner. Years before his cancer diagnosis, he laid the groundwork to ensure his legacy would continue to flourish under the able leadership of his daughters, Tami and Rachel. Thats why, although Longabergers March 17 death seemed to come far too soon, his company wont miss a beat.
Tami, his eldest, has been serving as president of the now-$700 million Longaberger Co. for nearly five years, with the same modesty, energy and genuine class her father displayed. Rachel appears to share her dads passion for supporting the local community, too, through her work as president of The Longaberger Foundation.
Although Dave Longaberger won dozens of awards for his business and civic achievements during the 64 years he spent on this Earth, I have to think his most cherished reward is knowing his daughters have done, and will continue to do, him proud.
Rest easy, Dave, and thank you for showing us all how to succeed with grace. Nancy Byron (email@example.com) is the editor of SBN Columbus.
Most home-based workers dont fit the popular image of a woman who provides childcare or sells crafts out of her house, according to new research.
In fact, a study of 899 home-based workers in nine states found that nearly 59 percent were male. The average home-based worker was 44 years old, married, had some education beyond high school and had been involved in work at home for nearly a decade.
The traditional view is that home-based workers are dominated by home knitters and quilt makers who fit their work around childcare and household responsibilities, says Kathryn Stafford, associate professor of consumer sciences at The Ohio State Universitys College of Human Ecology. But we found that most home-based workers are men performing traditional work in fields like sales and construction.
The findings of Stafford and colleagues at Purdue and Montana State universities also suggest home-based work has a strong economic impact. Researchers estimate the total income generated by home-based businesses in the states studied is $19.7 billion annually about 3 percent of the total personal income generated.
We found in Ohio, for example, that home-based work contributed more to total income than did farming, says Stafford.
The sample included home-based business owners, often referred to as self-employed, as well as those who worked at home for outside employers. The most common occupation among those surveyed was marketing and sales.
States included in the study were Ohio, Michigan, Pennsylvania, New York, Vermont, Iowa, Missouri, Utah and Hawaii. Although these states were selected due to their interest in funding the study, Stafford says theyre fairly representative of the United States, with the exception of the Southeast. Stafford says she is also involved in new research extending the study to all 50 states.
How to reach: Kathryn Stafford, 292-4564, Stafford.firstname.lastname@example.org
When an employee at Columbus Capital Fire Protection Co. slipped on a job and twisted his ankle, he couldnt drive to the pharmacy to fill his prescription for pain medication.
He didnt have to find a relative or neighbor to do him the favor, however; Capital Fire Protection sent help. This act of generosity actually saves the company money in the long run.
To us, when it comes to safety and an injury, there is no limit were going to go all the way, says Troy D. Gattshall, the companys director of purchasing and safety.
In fact, since the company gave it renewed focus in 1995, Capital Fires safety plan has reduced injuries and time away from work for employees so much that it cut the companys workers compensation premiums by $10,000 in just two years. In 1997, Capital Fire received a Governors Excellence in Workers Compensation award for its efforts.
Capital Fires primary focus is protecting its 62 workers from being injured in the first place. To do that, employees at every level work together to identify safety hazards and take precautions while theyre installing sprinklers and fire alarm systems.
Before each job, the estimator, project designer and fitter, or system installer, meet to discuss possible job hazards. Dangers include falls from ladders, being struck by falling objects and working in confined spaces where employees could be trapped or injured.
This meeting, whether by phone or in person at the job site, gives estimators a better idea of what a fitter is getting into and helps designers know what they can do to make a job easier and safer for the fitter.
All three of them have to go through the job together from estimating the job to signing off on it, Gattshall says.
The site-specific safety focus teams, along with other safety programs at Capital Fire, have reduced the number and severity of injuries at the company, resulting in less time off work for employees.
Having a better safety record has improved Capital Fires rating with the Bureau of Workers Compensation by nearly 50 percent between 1995 and 1998. That means money savings: Capital Fire paid $78,000 in workers comp premiums in 1995 and reduced that to $68,000 by 1997.
Weve worked with them for about the last five years, says J.C. Benton, BWC spokesman. Theyve taken a real aggressive approach at training for their employees, including bringing all their field employees in for a 10-hour training class run on their company time. Weve worked with them to incorporate a written safety program and assist them in updating it on a regular basis.
Capital Fire also takes advantage of programs offered to businesses through the bureau, Gattshall says, such as on-site surveys, a group discount with Builders Exchange of Central Ohio, and counselors and a video library available through the bureaus Division of Safety & Hygiene.
If an employee is injured on the job, Capital Fire managers and employees are prepared.
The last thing we want our employees to do is worry about problems, says Gattshall, explaining the companys procedures for handling injuries:
- Any time employees are at a job site, they know the location of the closest medical facility.
- The company keeps track of employees medical preferences, including the name of their family doctor.
- If an employee suffers a severe injury that needs immediate attention, we drop what were doing, Gattshall says.
Fellow employees call the company to tell safety staff the medical facility where the employee will receive treatment. Employees at the companys headquarters access injury packets prepared ahead of time for just such emergencies with the appropriate paperwork to send, for example, to third party administrators or medical providers.
They fill out the paperwork and fax it to the medical facility.
The intention is before the employee walks into the medical facility, they have in their hands everything they need. Our guy, all that he has to worry about is getting medical treatment, Gattshall says.
Not only do these steps help ease the process, Gattshall says, they also are corporates way of showing concern for employees.
We want them to get back to work as soon as possible. It benefits us to get them back to work. Its a benefit to them to get back to work, he says. We dont want bad feelings about anything. We want them to know were looking out for them.
How to reach: Ohio Bureau of Workers Compensation, (800) 644-6292 or www.ohiobwc.com.
Where would you go for money and for marketing assistance?
TEAM America gets both from its bank.
In January 1998, TEAM America Corp. arranged a deal with National City Bank whereby some of the banks employees refer small business clients to TEAM America.
At National City, we look at ourselves as relationship managers for our clients. We try to match them with services that will assist them in growing their businesses, says Anne Jennings, vice president of the banks business services group.
For example, Jennings had two clients, a husband and wife running a local business, whose time spent on employment issues could have been used in sales and operations. Jennings recommended they use the professional employer organization services of TEAM America to handle personnel matters, and the two have repeatedly thanked her for the suggestion.
Theyve commented to me that through the benefits TEAM America offered, theyve been able to enhance benefits offered to their employees at a reduced price to what they were paying themselves, she says. They felt the money they were paying TEAM America to process payroll and other things was literally paying for itself.
While National City gets kudos from its clients, TEAM America gets an additional marketing outlet key at a time when the industry is just starting to make its mark, says Shankar Ramachandran, TEAM Americas assistant vice president of sales and marketing for the Midwest region.
What we find is the PEO industry, especially in the Ohio market, has fairly low penetration, Ramachandran says, adding that hes seen figures showing 3 percent or less of those businesses employing fewer than 75 use professional employer organizations. So theres a huge potential market out there. A lot of the reason the industry penetration is so small is there isnt that much awareness of these services as you would expect. People often dont understand what PEOs do and think of them as temporary agencies.
Through National City, however, TEAM America gets a referral from someone the potential client already trusts and a more promising prospect than a simple cold call can yield.
The thing that works best is if the relationship between the referring person and the client is a good relationship, Ramachandran says, so that when we call to set an appointment, the client is very interested in what we have to say.
Ramachandran and Jennings, citing competition and proprietary reasons, declined to say how many referrals have resulted from the partnership, which is still in a test phase. Ramachandran, however, points out that of those referrals that have become clients, all so far have stayed with TEAM America, and Jennings says National City has heard positive comments from its clients.
To make the partnership more successful, National City invited TEAM America to make a presentation at a breakfast of bank clients. In addition, National City employees have attended training sessions to better understand TEAM Americas services.
About 12 people are actively involved in the referral partnership; 10 others are learning about it.
The idea is not that theyre going to become experts on TEAM America services and go sell the product to their client, Ramachandran says. Its just so they can see how this might benefit their client and who would be a good candidate and who would not so they could effectively refer.
Profit margins are not guarded secrets at Excel Business Systems. In fact, President Mike Warren is so confident he runs a lean operation that he freely shows not just his companys gross profit, but its net profit after operating and occupancy costs, to prospective clients.
He says its simply a better, more honest way to do business.
Its such a shell game how we price in this industry, says Warren, whose Grandview Heights-based company has been selling office furniture for five years. I didnt like all the deceitfulness and all the hidden agendas. People are spending hundreds of thousands of dollars and they dont know why. Its intentional that they dont know why ... I think the customer has a right to know those things. We have nothing to hide.
Maybe so, but will customers embrace or even understand this tell-all pricing strategy?
It would not influence me, says Bob Valentine, president of Design Collective Inc. in Columbus, who negotiates furniture deals for heavy-hitting corporate clients including Sterling Commerce and Cameron Mitchell Restaurants. But it probably would appeal to a first-time buyer. They might get the impression that theyre being more open on the cost of furniture.
It could get sticky if [customers] want to question different markups, Valentine cautions. Any time youre exposing the cost, I think its an advantage to the end user. I think youre making yourself kind of vulnerable.
Bucking the system
A desire to sleep better at night and enjoy his work during the day led Warren to explore open-book pricing for his business.
Furniture sales is just so adversarial, he says. At some point in the day, youre going to be fighting and arguing with somebody.
By breaking down his companys costs and desired profit margin, Warren found the pricing game became much less abstract and less confrontational. He could plainly show clients how much of an orders price went toward reimbursing Excel for purchasing products from the manufacturer, how much went toward Excels office and administrative expenses, how much went toward rent, utilities and insurance, and exactly how much fell to the bottom line.
We can figure up our cost, not to the penny, but to the dollar, Warren says. Our customers know we need to make a profit and were not embarrassed to show it to [them].
Excels pricing even takes into account the cost of collecting on an account thats more than 30 days old and specifically outlines the customers timetable for delivery and installation. Penalties can also be built into Excels part of the contract in case the project doesnt get finished on time, but Warren is quick to point out, Ive never had to pay one.
By having conversations about expectations, and how long it takes to pay, it makes the end of the project go smoother, Warren says. Besides, he adds, its fairer to get everything out in the open from the beginning.
Dan Crowley, division senior buyer for Time Warner Communications in Columbus, seems to agree.
Ive been in purchasing and buying for 12 years and working in inventory and Ive never, ever seen anything like that, Crowley says. I think its a great idea. When youre dealing with people, trust is a great part of doing business. When you know theyre disclosing that sort of information and laying it right on the table for you, it takes out part of the mystery of doing business with people.
Time Warner has been a customer of Excels for about a year, and in that time, has purchased a couple hundred thousand dollars worth of products from the company.
Its like buying a car, Crowley says. Do you really know if you got the best deal? This takes some of the guesswork out of it.
One of Excels competitors, Mike Gorman, president of Thomas W. Ruff & Co. in Grandview Heights, also compares Warrens lay-it-on-the-line pricing strategy to the car-buying experience but in a whole different way.
Do you believe $1 over invoice? Gorman asks. Do you believe $100 over invoice? You dont believe any of that stuff. I think its just a smoke-and-mirrors marketing and sales ploy. The marketplace dictates the price.
Customers dont need to make a decision based on what our markup is, what our efficiencies are. Its the product. Its the right stuff at the right price with the right processes around it. Free enterprise and competition bring the best value to the customer. I cant say it any better than that.
A harder sell
Warrens extremely detailed pricing approach has created at least one significant challenge for Excel. Its harder to work with office managers and junior purchasing executives wanting to gather price quotes for their bosses, who ultimately are going to make the buying decisions. Excels system simply is too different and sometimes confusing for lower-level executives to grasp.
We need to be in front of decision makers, people who are used to looking at profit/loss statements, Warren says.
He points to a recent bid request from Ricart Ford.
Theyve been talking to Thomas Ruff and Continental [Office Furniture] about this project for a while, Warren says. Now they have two bids from large dealerships and were going to upset the process because were going about it in a different way.
Even as an existing customer, Crowley sees the potential for initial apprehension by his higher-ups at Time Warner when trying to compare costs under Excels radically different system.
When I present it to my supervisors for approval along with other quotes, I think their eyes will open up a little wider and theyll say, What is this? Crowley says. Im sure it will take a little getting used to. I think its going to be a selling [job] on my part, too.
But in the long run, I think people will become more accustomed to having that relationship; people will be more accepting to it over time.
Warren began practicing his new pricing method on select Excel projects in August 1998, and only started using it on a more widespread basis in January.
I wasnt sure what the reaction was going to be, he says.
Warrens decision to try open-book pricing came easier once he spoke with other companies who have tried bucking traditional systems within their own industries. These trendsetters included Saturn Corp., the Spring Hill, Tenn.-based subsidiary of General Motors, and Gateway2000 Inc., the South Dakota-based computer retailer.
There were some parallels, Warren says. Theyre in huge industries that, after all these years, are changing how they distribute products. It gave us some confidence.
When Warren rolled out Excels line-by-line pricing structure, however, he quickly learned he couldnt convert everyone to the new system.
Not everybody wants to do it this way, he admits. Some people still want a bid. We have to do what the customer wants us to do ... but theyre crazy not to do it this way.
Gorman begs to differ.
Would I feel any better buying a copy machine from IKON if they told me, This is what I paid Toshiba for it and this is how much money I want to get from you for it? Gorman asks. Im still going to compare it to a Canon. A customer ought to question, Why do you need that much money? and Is this the right price from the manufacturer?
He could inflate any of those numbers as well, Valentine agrees.
All the same, Crowley remains fascinated by the whole concept.
I think its good for people to actually see all the components of whats involved in a business arriving at a price for an item: payroll, delivery, actual cost of the item, he says. Every step involved in getting the item to the customer, theres a cost involved in all of that. Its good when you can see the nuts and bolts of all of it. Its amazing to me hes going to take this step and disclose this.
Its obviously not the standard, adds Valentine.
So has exposing Excels financials been a good move for Warrens youthful furniture company? He says its still too early to tell.
Company revenues havent increased or decreased, for that matter due to the new system, he says, but hes getting more project work rather than single-item orders. That, he says, is a step in the right direction. In addition, Excel is on track to repeat last years $10 million performance, despite an office move that disrupted business. Its not about growing sales each year, he says. We wanted to make an impact.
Thats exactly what Valentine figures Excel is trying to do. Theyre fascinating to watch because theyre really trying to position themselves apart from other dealers, he says.
This move may accomplish that, since Gorman says Excels willingness to disclose profit margins and operating costs wont change the way Thomas W. Ruff & Co. does business.
Were not at all embarrassed by our efficiencies or by the prices we charge customers, Gorman says. I wish him a lot of luck ... but I just dont get it. I dont think its relevant to the customer.
Warren insists disclosure is, in fact, important to customers. And hes determined to make his new pricing system a success despite the initial obstacles.
Its hard to sell this way because its different, he says. You have a lot more explaining to do. People are resistant to change. But I know were trendsetters.
Nancy Byron (email@example.com) is editor of SBN Columbus.
When Paula Inniss started Ohio Full Court Press just four years ago, the company consisted of only her and one employee. Since then, it has blossomed into a full service digital print shop employing 32 full-time and four part-time employees. Revenues stand at approximately $3.6 million, showing a growth rate of almost 100 percent each year since the business began.
Today, Ohio Full Court Press provides services ranging from digital and full color printing to bindery, document management and fulfillment. Says Inniss, If a job involves being able to provide all services, I can do it.
Inniss credits her companys tremendous growth to several factors, the most important of which is a strong foundation.
I went into a business that I knew a lot about, she says, mentioning that her 15 years working with high-volume sales at Xerox Corp. taught her plenty about digital printing and quite a bit about big businesses. Still, it required more than her expertise to make the company soar.
It became clear that if we were going to do business with major businesses, we had to be more than a quick copy shop, Inniss says. Thats why Ohio Full Court Press is now positioned to provide a complete line-up of services.
Inniss learned early on to take advantage of some powerful mentoring relationships. One of these was Craig Taylor, owner of Marketing Services by Vectra Inc., who teamed up with Inniss to provide traditional printing services. Another mentor, Stampp Corbin, president and CEO of Retro Box Inc. and Resource One Computer Systems, taught her about the challenges of running her own business. In the beginning, Inniss says she sought out mentors such as Corbin, using a straightforward introduction like, I need you to mentor me. He and others did.
Last year, Inniss put all her experience and knowledge from mentors to work when the company signed a contract with the State of Ohio Department of Education, raising revenues dramatically.
My plans for next year are to have Ohio Full Court Press II at another location, Inniss says.
The current office will mostly likely become the hub or main office, with a smaller office at another location.
Written by Lori Murray, a Columbus-based free-lance writer.