North Santiam Lumber runs on a slim profit margin when it buys product from sawmills and sells to retail lumber yards.
To have just one of its customers not pay up would be a blow to this privately held, Columbus-based wholesaler of building material products.
Through inflation and deflation, operating with the right tools has kept North Santiam open for more than 30 years. Credit insurance is one of those tools; it protects the companys annual sales of approximately $40 million and the jobs of 30 employees, says CFO Randy Miller.
We deal with extremely small or tight margins and high volumes, he says. Were not making a lot of money on any one sale. So if we have one customer default on their receivables, it could take us quite a while to recover from it.
The amount of insurance North Santiam gets on each customer is based on the customers credit rating in either the Lumbermens Red Book, which lists lumber companies, or Dun & Bradstreet.
The bigger the company and the better the credit rating, the more credit insurance we can get [on that client], Miller says.
We have several key accounts we sell more to and we list them for additional insurance, he adds. That does two things. Obviously were covered for that amount. And, if we dont get coverage, then its a red flag that maybe we shouldnt run their limit up as high as we want.
In the three years Miller has been with North Santiam, there have been no claims on the policy carried through EULER American Credit Indemnity, but he knows there were some in the past. No specific incident prompted the company to pick up credit insurance, Miller adds.
I think at one point in time, the bank requested they get this kind of insurance as protection for their receivables.
North Santiam pays an amount per client it insures receivables on, so the total investment varies greatly. Policy coverage depends on whats purchased. For instance, North Santiam could pay a premium that covers $50,000, but if the debtor owes $75,000, the policy would only pay $50,000.
If, instead, the debtor owes $30,000, a $50,000 policy would cover the $30,000 debt completely, but wouldnt pay North Santiam more than what was owed.
The primary reason to buy credit insurance is to protect your business if you expand into a new market or sell to new customers, says Leah Comas, vice president of marketing for EULER American Credit Indemnity in Baltimore.
We can work with companies of all different sizes, she says. But its probably not cost effective for you unless you have $3 [million] to $5 million in sales.
Any business could benefit from credit insurance, Miller says. You just have to evaluate each companys individual needs. We need it because of our high volume and low margin.
Still, North Santiam does its best to encourage prompt payment by offering a cash discount for payment in 10 to 15 days, Miller says. The majority of its customers take the discount. When one doesnt, North Santiam watches the accounts receivables vigilantly.
Once it gets to be 30 days past due, were on them pretty quickly, Miller says.
How to reach: EULER American Credit Indemnity, (410) 544-0861 or www.aci.eulergroup.com; North Santiam Lumber, 272-8111
Andria Segedy (firstname.lastname@example.org) is a free-lance writer for SBN.
Location, location, location. Prime real estate for any retail product is shelf space. And for smaller companies with a narrow product line, in-store display space is at a premium.
That's why one bootstrapping Central Ohio entrepreneur went so far as to develop an entire line of swim product accessories just to get access to premium retail shelf space.
"Early on, we were a single line vendor," explains Paul Reeder, founder and president of 5-year-old Zura Sports Inc. "We may have had one or two products. It's painful to get shelf space if you don't have a line of product."
So Reeder's Westerville-based company developed four or five related items to market with its signature streamlined kickboards.
"It forced us to have products we might not have done, but it strengthened the category for us," Reeder says, noting Zura now offers the same type of aquatic cross training products as Speedo.
Two years ago, Zura was able to get shelf space for four of its items at Leslie's Poolmart, a specialty chain throughout Ohio. To keep that space, Reeder had to make some serious merchandising changes.
"First, we co-branded our product for Leslie's," he explains. "All the packaging is specific to Leslie's, and we developed a brand called Hydrogym by Leslie's. That appears on the packaging. Zura is on the packaging and on the product."
Reeder says co-branding Zura's products allowed the company to move from four to nine items -- and to take over the entire line of swimming and aquatic aerobic training products, excluding goggles, stocked at Leslie's.
"We doubled our shelf space," he says. "Before, Leslie's was buying from different vendors. Now, we make all those products. We've gotten to be the bully to shove the single line vendors out. To do that, we had to make a commitment to Leslie's by packaging, discounting and dating. We gave them longer than normal payment terms. We agreed on four months, which kills small companies."
But if Zura hadn't done it, someone else would have.
"Someone else would have come along and cut us in half," Reeder says, noting Speedo once had all the goggles on display at Leslie's, but wouldn't co-brand; Tyr came along, did it and got all the shelf space for goggles.
Taking the high road
Robert Rothschild doesn't like to play those games with national retail chains, or any store, he says.
The owner of Robert Rothschild Berry Farm in Urbana sells his berry-inspired sauces, dips and vinegars to 4,000 high-end, niche outlets nationwide with the help of 100 specialty reps. He found the reps by going to the International Fancy Food Show, a convention held in San Francisco, Chicago and New York each year.
"Our main business is selling to specialty retailers," he says. "We do not pay for shelf space. You do not want to buy your way in. You want to have a good enough reputation and quality product. You develop a demand for your product without begging to be in a situation."
Rothschild sells to Kroger specialty stores, but deals directly with local managers rather than the national buyer. He also sells to The Kitchen, a gourmet food store on the grounds of the Longaberger Homestead; Greenbriar Resort in West Virginia; Ritz-Carlton hotels worldwide; and Anderson's General Store locations in Ohio. Sales also go through florists, as well as clothing, furniture and hardware stores -- "any place where it's unique and different where they want something special in their store," he says.
To get his products on the shelves at specialty stores, Rothschild provides his own display racks, which gets him good positioning. He also provides demonstrations or product tasting for customers.
Although being carried by large supermarkets might give Rothschild's products broader exposure, he's unwilling to pay the "slotting" fees requested by many of them.
"We do sell to specialty grocery stores like Wild Oats in New England, but not in Ohio. The minute people start asking for [a fee for] shelf space -- slotting -- we don't work with them."
Working the local angle
Being a local brand has helped Hoster Brewing Co. get its beer on local store shelves, says John Weixel, who was hired as sales manager of the German Village-based brew pub specifically to get its product in grocery stores.
He's done just that -- and without having to hassle with slotting fees.
"For alcohol, it's illegal for them to accept money in any way for putting you on their shelf," Weixel says. "The most profitable aisle in the store is the beer and wine section."
When Weixel signed on with Hoster Brewing almost five years ago, the company averaged $1,200 in retail sales a week or about $62,400 for the year, he says. That came from about a dozen specialty store accounts selling 22-ounce bottles and about 10 restaurants pouring draft.
Now, the company sells six-packs in 260 retail outlets and is on track to retail more than $350,000 worth of product this year alone. That figure does not include tap sales at the 85 restaurants and bars that have draft accounts.
Weixel has accomplished this with the help of distributors.
"You are only as strong as your distributor," he says. "There's a lot of politco that goes on with this. I'm not going to the same distributor as the other local brewing companies. The distributor most aggressive in approaching us bought the brand from us by purchasing a year's worth of profits."
That distributor was Columbus-based Robins Wine and Spirits.
"They have the right to distribute it," Weixel says. "It's like a marriage. You know you'll have a few difficulties along the way, but you work together to make the brand work."
In Franklin County, Hoster beer is carried by Kroger, Big Bear, Meijer, Anderson's and Hills Market, to name a few.
Before he decided to use a distributor, Weixel knocked on a few doors himself.
"I have to understand each and every beer item [already on the buyer's shelf]," he says. "I equate it to paying rent. If you don't pay rent, you either get leniency or you get evicted. I know the [competitors'] items close to getting evicted -- the dogs or slow movers. If you find some dogs on the shelf and point them out, ask for that space and that location for your product."
In addition to knowing the competition, Weixel suggests the following to increase your odds of getting shelf space:
- Start with your most popular product. Once that starts to sell, retailers will be interested in another selection.
- Be prepared to offer seasonal discounts. Work with the distributor and the retail location at least a month in advance of the sale.
- Provide the right incentive to your distributor to keep your product at the top of his list. This could mean bonus dollars based on volume, or awards like TVs or a trip to Las Vegas for top producers.
Finally, let retailers know you are a local business, Weixel says. "Being a local brand helps."
Andria Segedy (email@example.com) is a free-lance writer for SBN.
Actor and singer Michael Pizzuto will run on stage, but don't ask him to include such a fast pace in an exercise program. In fact, don't even ask him about exercise.
"I might be the most out-of-shape man who works here at Shadowbox," says the marketing assistant at this local, for-profit theater company.
Even so, earlier this year, he completed a mandatory 36-hour, 80-mile physical team challenge that helped him and his co-workers identify their individual mental strengths and weaknesses under pressure.
This grueling "Shadow Challenge" is Shadowbox Cabaret's way of uniting employees of the nearly $1.6 million business in mind and spirit -- and determining the natural leaders for management positions, says president and chief executive Steven Guyer.
"At first, my initial thought was that this was just nuts," Pizzuto says of the challenge, which this year included:
- 35 miles of road and mountain cycling;
- 10 miles of canoeing;
- Three miles of swimming;
- 20 miles of hiking;
- A five-mile biathlon with target shooting;
- Orienteering with a map and compass;
- Technical rock climbing.
"But once you experience what it's all about, you understand so much about why it occurs," he continues. "More than anything, it's a mental challenge. Sure, you really have to bust your butt really hard to make sure you are in some physical shape and can run. But more than anything else, it's a mental challenge.
"By hour 32 of the race, personalities come out, there's team work involved, and it really builds and meshes the company together."
That's the point, says Guyer, who was a businessman and amateur athlete before he turned to the theater.
"You always start out with a really competitive attitude," he says. "Everybody's thinking, 'We're going to win this thing.' That lasts until the normal will and energy run out. That's the point when team ethics takes over, not just within a team but team to team.
"We see amazing acts of teams helping one another through difficult sections of the race. It teaches them that there is something far more important than competition."
A tradition begins
The first Shadow Challenge took place in 1998 in downtown Columbus. It took only 17 hours to complete and the events were much tamer, including a three-legged race, an egg drop off a parking garage roof and a scavenger hunt, says Katy Psenicka, who is director of public relations and advertising for the business, as well as a choreographer, comedian, dancer, actress and singer.
All employees work both the entertainment and business side of Shadowbox.
Once employees saw the difference this team-building event made in co-workers, they agreed to an annual event, Guyer says.
"It's not just good for our people as business folks," he says. "Turns out it's great for them as actors. They discover a whole new depth of who they are. That's what acting is about -- uncovering those depths and revealing them as actors."
Most of this year's event took place at Crocket's Run, a resort on the Buckeye trail near the Hocking River. The course also took them through part of nearby Wayne National Forest.
Twenty-eight of Shadowbox's 46 paid staff members participated in the challenge events. The eight-member Creative Team, which designs and runs the course ahead of time, observes during the challenge for safety reasons. Other employees -- some injured during training -- are assigned to support staff at base camp.
Event participants were divided into seven teams. Each team received $200 to spend on supplies. In addition, the company invested $23,000 for necessities such as food, accommodations, climbing instructors and gear, radio communications, canoes and bicycle rentals.
Each team member had to participate in every event and complete the challenge or the entire team would be eliminated.
"I shocked a few people and made the entire challenge all the way through," says Pizzuto.
"I always believed it was important as an artist to become a rounded person," says Guyer, who also is a producer, director, actor and singer. "Every day, they are artists and in the business office. But it didn't assure their business attitude was where it should be. As time went by, we realized it takes more than giving them a title to make them a businessperson."
The practical effects of the Shadow Challenge include:
1. Identifying leaders, not only to themselves, but to co-workers.
"You can't go through this game and not see the cream rise to the top," Guyer says. "That's a phenomenal thing. There's instantaneous respect that goes with it. We have yet to see one of our truly [physically] strongest people come out as a strong leader. It's more mental strength. Everybody gains from it; no title will do it automatically."
2. Impacting the staff's demeanor.
"You can't go through the Shadow Challenge without feeling good about yourself. People are doing things they never imagined they could do," Guyer says. "They come out of it with a pride and willingness to try things that they normally wouldn't have. If they are challenged during the day now, we ask them to remember that 100-foot cliff they rappelled in the dark; the challenge today is nothing."
3. Inspiring camaraderie.
"There's nothing like a sense of accomplishment that comes with this game," says Guyer. "You are wide awake for 36 hours with these people. There's something really special that happens and there's no other way to get it. Day after day, we see it when people reach out and help one another when otherwise they might have said, 'That's your job.'"
Not for everyone
To succeed with such a challenge, Guyer cautions, "You must have a firm understanding of who your employees are. At Shadowbox, we tend to find an awful lot out about one another quickly. It's the nature of theater. In that process of revelation, we have to be honest with one another.
"If you are in the sort of business where that is not necessarily true, you may express things in the game that don't have a proper outlet. It might not be the kind of thing you want to know. Be careful who you select to put into a game like that. At Shadowbox, everybody does it. If I were back in the insurance business, I think I would be highly selective [of who participated].
"There are a lot of people who aren't ready for the kinds of truths that this game might reveal." How to reach: Shadowbox Cabaret, www.shadowboxcabaret.com; 416-7625
Andria Segedy (firstname.lastname@example.org) is a free-lance writer for SBN.
Your market strategy may be superb. Your revenue projections could be outstanding.
But if your psychological evaluation shows you're not even close to CEO material, forget getting your business funded through this venture capital firm.
At Custer Capital Inc. in New Albany, an entrepreneur's communication, leadership and management skills are so important that if they aren't up to par -- or can't get there with minimal work -- Bill Custer will walk away from an otherwise promising deal.
He's done it more than once.
Executives at most venture capital firms observe the management team of a company seeking funds. The team is watched communicating with staff, negotiating with clients and working under pressure. The goal is to see how prepared the members are for the challenges of building a business that will sell at what investors hope will be at least 10 times their financial contribution.
Custer takes its psychological evaluations a step further. It works with Columbus-based Business of People Inc., which is built around the Gestalt theory applied most often to psychotherapy, to do face-to-face evaluations with teams in their workspace.
"We assess how the company is functioning from an organizational life standpoint," says Business of People consultant Jerry Browning. "We do it by an interactive process. It's not what type of personality they have, but how they function as a unit."
"Understanding the communication skills, the visioning of the management team, that's where the problems arise," Custer says.
So while Custer analyzes the business plan, Business of People assesses the organization's strengths and weaknesses. It also observes the dynamics of the leadership, vision, organizational plan, corporate identity, management structure and effectiveness of the team, along with other soft skills -- nontangible things such as abilities and styles.
"We don't say there is a right or a wrong style," Browning says.
Yet, Custer adds: "If they ruled by intimidation, we would be less inclined to be involved in a group like that. If the troops don't know the vision and direction, that can impede the growth of the company. Conversely, for young companies, they are so opportunistic they often lack focus. It's critical to get them on track to know the path and not get diverted. A lot of early stage companies get off their focus."
Using this filtering process, Custer has "elected not to work with" three companies.
"I turned them down because I knew it was going to be an uphill battle," Custer says. "They did not have the right team to lead the company to a big, big win."
In the case of a solid business plan with a management team with a few gaps, the team must agree to work with Business of People, Custer says. That involvement is written into the venture capital contract and Business of People becomes a management consultant for the funded company.
"You can try to size people up," Custer says. "It's our feeling to bring in professionals that do this. There is some real value in it. More importantly, Business of People has the ability to work with them on an ongoing basis.
"The leadership development -- things that take more coaching." How to reach: Bill Custer, Custer Capital Inc., 855-9980 or www.custercapital.com; Business of People Inc., 759-1744 or www.businessofpeople.net
Andria Segedy (email@example.com) is a free-lance writer for SBN Magazine.
Out of state, out of mind. Without Kathy Eshelman on site to train and motivate her young staff, this high-energy entrepreneur couldn’t give them what they needed her vision and style to manage, mingle and make that sale.
So in 1998, the Columbus-based owner of Grade A Notes Inc. closed her branch at the University of Arizona and sold sister businesses at the University of Nebraska-Lincoln and Michigan State University.
She did this to bring profits back to her company after a three-year expansion program put it in the red. Eshelman simply realized she’d stretched herself too thin.
Itching to grow
Grade A Notes Inc. started in 1987 as a class note taking service for students at The Ohio State University. Within a year, Eshelman started a custom publishing service for faculty who needed course reading materials from various sources packaged for students to buy.
In between, she added a copying service, not just for students and faculty, but for the general public and area businesses, too.
Her model was successful at Ohio State. The first year she did $66,000 in gross revenues and the business turned a profit after about two years, she says. Her original expectations: “I thought that I’d be a millionaire in a couple of years and that I’d never work summers again. I haven’t taken a summer off yet.”
For the basic thrill of growing a company, she says, she opened at Ohio University in Athens in 1993. OU was chosen because it was the closest campus with a sizable enrollment: about 20,000 students. Two years later, she opened a satellite location at the University of Michigan in Ann Arbor, where there was no note-taking service and not much competition in custom publishing, she says. There, she partnered with The Nebraska Bookstore Co. chain, whose location offered great visibility for her copying service.
The partnership also offered growth potential since the bookstore had about 85 locations nationwide. That same year, Eshelman opened Grade A Notes within the bookstore’s flagship operation at the University of Nebraska-Lincoln.
Finally, in 1996, she purchased note-taking businesses at Michigan State University and the University of Arizona, from one seller. At both sites, she says, there was an opportunity to develop the custom publishing aspect of the business.
“It’s not worth it to operate just a notes-only business out there,” she says.
Trouble in paradise
With six locations in four states, Eshelman soon ran into problems. She struggled to find the right managers for her Nebraska, Michigan State and Arizona locations. Then a lack of capital to sustain expansion caused a problem.
“When we were undercapitalized,” she says, “we never thought we were undercapitalized. We thought things were going to take off. We had enough capital if things took off like the first location, but they didn’t.
“The note sales were all pretty decent in Nebraska, but that’s only 15 percent of our business,” she explains, adding that custom publishing makes up another 70 percent and copying, the remaining 15. “To run a copy center, you have to sell local businesses on going to you instead of Kinko’s. We needed a real outgoing, sales-oriented manager.”
That type of manager never materialized.
“We had good people working hard; they just weren’t that kind to go out and get the sale in the door,” Eshelman says. This stifled growth on the custom publishing side, too, since managers need to meet faculty and encourage them to try Grade A’s service, she says.
“They are skeptical of us,” Eshelman says of professors who are not familiar with Grade A’s ability to pursue agreements with individual publishers to reprint and resell their reading list items. “Once we get them,” she adds, “they never leave. We have a 95 percent retention rate with our professors.”
Without someone on site to aggressively pursue business for those three satellite locations, however, sales lagged.
“It’s not my point to say I can do it better than anybody else,” Eshelman says, but her presence was an important motivating factor. “If you have a small company, you don’t have all the training tools that you need. I was the head trainer, and the best way to train is hands-on, discussing what went right and what went wrong.”
The long-distance hurt, too. “In that regard, location was a challenge,” Eshelman says. “It cost more to get there. You couldn’t just drop what you were doing to go there.”
She did try to invest in making additional trips, to oversee and guide the people, she says. Realizing she didn’t have the capital to hire the sales talent she needed in Nebraska, Arizona and East Lansing, Mich., and knowing she couldn’t spend more time there herself, Eshelman decided to divest. She chose to focus on increasing business at her remaining three sites: OSU, OU and the University of Michigan.
“In Ann Arbor or here, you get to know people on a personal level. The others didn’t feel like they were part of a team and building a company.”
With her scaled-back operations, Eshelman hopes to earn $2 million in gross revenue this year.
“I don’t think there’s ever been a year we didn’t have double digit growth in revenue,” she says, but the company didn’t make a profit during the last three expansions. Grade A Notes has been profitable since divesting, she adds.
A new strategy
So what has Eshelman learned from this expansion-retraction experience?
“Small business owners don’t take advice very well,” she says with a laugh. In hindsight, however, she realizes financing problems exacerbated many of the other difficulties her company experienced in trying to expand quickly and in far-off places.
“That was our biggest problem not having the capital to properly grow,” she says.
“The growth we’re having now is really sales growth; we just financed it out of our own profits.”
For others looking to expand, she’d advise them to keep an eye on such issues.
“Try not to grow without the right amount of capital, it’s almost a death sentence,” she says. “As far as growing out of state, one of the things people don’t anticipate are all the tax laws and how cumbersome that is. If you don’t have the appropriate staff to deal with that ... we found ourselves in a myriad of hassles.”
As for her three remaining locations, she’s still in a growth mode, but she’s taking a conservative approach.
“We’re moving or opening brand new facilities for all three locations in the next 18 months,” she says, quickly noting, “We will stagger that so we have the capital.”
In addition, she is finding ways to broaden her business without adding more locations.
“We are doing a lot of custom publishing and reprints for out-of-print books for bookstores all over the country,” she says. “We service 30 universities with custom publishing,” but all the work is coordinated through Grade A’s existing locations. “We’ve actually done work with over 100 bookstores around the country ... That’s been a great strategy for us, servicing more bookstores.”
And it’s a strategy that’s keeping Eshelman closer to home.
Andria Segedy (firstname.lastname@example.org) is a freelance writer for SBN.
Employees have come to expect medical benefits from their employers. Dental and vision plans don’t even turn their heads much anymore. Ditto for life insurance.
So how can you wow employees with these days when it comes to benefit coverage without breaking the bank? One Columbus-based utility may have an answer.
AEP started offering prepaid legal plans to its employees four years ago, says senior benefits consultant Curt Cooper.
The cost of offering this somewhat unusual benefit is minimal and it gives employees access to their choice of several prepaid attorneys, Cooper explains.
Any employee electing this benefit, administered through Hyatt Legal Plans of Cleveland, pays the full cost through a payroll deduction. Employees pay $7.95 per month for individual coverage and $16.75 for family coverage, which includes most any type of legal advice except information involving AEP employment-related questions, says Cooper, who is an attorney.
“The only real cost from the company’s standpoint is to get the administration done, which is collecting the money from the paycheck, sending it off to Hyatt and answering employee questions,” Cooper says. “There’s a low cost from a company standpoint and that was attractive to us.”
Setting it up
Before choosing Hyatt as its prepaid legal plan administrator, AEP considered several issues, Cooper says. Among them:
- What legal services are covered?
- What are the employee premiums?
- What is the company’s cost?
- How many attorneys are in the plan network?
- Are those attorneys located where employees are located?
- What is the administration process for the company and employee?
About 750 AEP employees have chosen the prepaid legal benefit and they use the wills and estate planning service most frequently about 40 percent of the time, according to usage reports AEP receives from Hyatt, Cooper says. Wills and estate planning are also the No. 1 services used by employees of other companies offering the Hyatt plan, says Marcia Messett, group sales director in Hyatt’s Cleveland headquarters.
Hyatt, a division of Metropolitan Life, has about 300 corporate customers that offer its prepaid legal plan to employees, Messett says. Other Central Ohio employers using the Hyatt plan include Distribution Fulfillment Services, Rockwell Automation and the Drake Center.
While only 4 percent of AEP employees have elected the prepaid legal plan option, Cooper says, Hyatt marketing materials show that 10 to 20 percent of employee enrollment is typical. AEP employs 17,300, about 3,500 of whom are in Franklin, Fairfield, Delaware and Licking counties.
“With AEP, you have a lot of hourly employees, linemen, people who work out in the field who maybe wouldn’t see the need for legal work,” Cooper says. “With a lot of lower paid folks, they are not real concerned with developing an estate plan or a will. That’s one possible explanation [for the low participation rate].
“Another is that in some of our more rural locations [West Virginia and Kentucky], there aren’t a lot of attorneys in Hyatt’s network. We’ve heard that as a negative.”
Approximately 8,500 attorneys are available through Hyatt’s plan nationwide, although Cooper could not say how many of those are in the greater Columbus area. An employee can choose an attorney outside the plan, he adds, but that attorney would be paid a fee based on the Hyatt fee schedule.
Attorneys on the list do change fairly regularly, Cooper says, but employees can call Hyatt’s toll free number or check its Internet site at http://www.legalplans.com for updates.
At AEP, the popularity of the wills and estate planning benefit is followed by document preparation, then real estate matters. Other ways the company’s prepaid legal plan has been used by employees include:
- Consumer protection;
- Debt issues;
- Defense of civil lawsuits;
- Family law;
- Insurance matters.
Hyatt provides yearly reports on what services within the overall plan are used; however, Cooper stresses that there is never a report showing which employees used which service.
“With a lot of legal issues, they are unpredicted and unplanned and could end up costing a lot of money,” Cooper says. “This would be a relatively low-cost way to guard against those unplanned expenses. We saw it as a fairly valuable benefit to employees and low cost to the company.”
AEP is in the process of merging with Central and South West Corporation of Dallas, which offers a pre-paid legal plan other than Hyatt’s, Cooper says. He expects that after the merger is completed, a prepaid legal plan will remain a benefit to AEP employees.
How to reach: Hyatt Legal Plans Inc., (800) 423-3000; www.legalplans.com
Andria Segedy (email@example.com) is a free-lance writer for SBN.
To save a few jobs after selling a second location, one Central Ohio businessman created what has become a model support system, allowing sales reps to reach more potential customers while still servicing existing clients.
The jobs Jim Dixon Sr. saved at Val-Pak of Central Ohio are now called sales coordinator positions, and the people who fill them help the sales reps at his nearly $6 million business increase sales, as well as customer satisfaction.
They do this by servicing existing customers which account for 80 percent of Val-Paks business while sales reps focus on building on the remaining 20 percent.
We expect them to bill at 10 percent more each mailing vs. the [same months] mailing a year earlier, explains Dixon, who owns the Columbus-based franchise that mails consumer coupons monthly to more than 500,000 homes in Franklin, Delaware, Fairfield, Licking, Madison, Marion and Union counties.
Dixon used to own a Val-Pak franchise in Dayton, which he sold in 1994, leaving him with extra support staff in Columbus. This extra staff understood the business, Dixon says, so he didnt want to get rid of them. They were detailed people who could help a sales rep approve client coupon artwork, coordinate billing and collections, and answer client questions more quickly than a sales rep who is typically out of the office.
Sales reps are good at getting sales, Dixon says. But a highly detailed person is much better for the customer in the long term.
Its also proving to be better for Dixons company. The sales coordinator is part of a business plan that has allowed Val-Pak of Central Ohio to double its sales in six years.
When we made the change, we were at about $2.5 million in sales, Dixon says.
Last year, the company reached $5 million in revenues. This year, Dixon is expecting to boost that total by another million.
Dixon has also increased the frequency of Val-Paks mailings since 1994, going from eight to 12 times a year without increasing his staff. Only now is he beginning to hire more sales reps and sales coordinators.
Dixon says his Val-Pak franchise sales are double that of any sister franchise now.
I have to attribute a lot of that to our sales coordinators, he says. We have such good sales reps, but they can do so much more because of the sales coordinators. Our sales reps are twice as productive.
Heres how he does it.
Affording a coordinator
Dixon determined that once a rep was producing $35,000 a month in sales, that person would be assigned a sales coordinator. Generally, one coordinator assists two sales reps. It takes 3 percent of the reps total monthly sales to cover the coordinators salary. If a rep with a sales coordinator cannot increase sales beyond $35,000 a month, then the rep loses the coordinator.
The objective is for both sales reps to sell in the neighborhood of $50,000 a month each, he explains. When the sales coordinator handles more than $70,000 a month, the coordinator benefits with a 3 percent commission on the additional sales. Coordinators can make up to $40,000 a year on this plan, he adds.
Initially, Dixons reps were hesitant about using sales coordinators.
They were extremely nervous about allowing anyone else to talk to their customers, he says. They were afraid about losing customers. If the sales coordinator says the wrong thing, they might lose the sale. Sales people, in general, are paranoid and have difficulty accepting any change.
It was difficult to turn them over initially, but now they know it makes the relationship stronger.
Jennifer Mills has been a sales rep with Val-Pak since January 1996. After 18 months, she qualified to work with a coordinator.
I still do a lot of the [ad] layouts and getting proofs approved and collection calls, Mills says. But my sales coordinator helps to organize everything and finds more efficient ways of getting things accomplished.
It has made a big difference in my business just from stress management alone, she adds, noting she has 117 active accounts that mail almost on a monthly basis. Mills also is working outside the office four days a week.
My billing has always continued to increase significantly from year to year and I attribute a large proportion of that to the help I get with a sales coordinator, she says. Its pretty essential to managing a large account base effectively.
That doesnt mean sales reps leave all customer care to the sales coordinators. Dixon says his franchise hosts golf and ski outings where sales reps and customers see each other and sales reps still stop by their clients businesses when theyre in the area and its convenient.
It will vary, Dixon says, but at least every six months we want the rep in there saying, Hello, and making sure the customer is happy.
Dixons business model using the sales coordinator position is so successful that it is replicated at other Val-Pak franchises, which number more than 300 in North America.
Obviously, as a company, it gives [us] a more solid relationship with the account, he says. If the sales rep leaves, we have another person still on the account and in a relationship. For the rep, the dividends are greater and more immediate.
How to reach: Val-Pak of Central Ohio, valpak.com or 486-7168, ext. 135
Andria Segedy (firstname.lastname@example.org)is a free-lance writer for SBN.
Cimetric Commerce Inc. promises its clients the world.
The Columbus-based company -- formerly known as Ncom Group -- will, for no up-front fees, design and maintain a Web site, provide online marketing, answer customer questions, process sales, fulfill orders, ship products and even handle returns for client companies. The only hard cost for the client is to make inventory available. Cimetric makes its money by getting a cut of every sale generated on the Web site.
For The Solid Light Co., a Worthington-based retailer, it was the ideal arrangement.
Now the family-owned company has its complete line of contemporary Christian apparel on the World Wide Web at www.ChristianShirts.com under Cimetric's management. The start-up price was the wholesale cost of $12,000 in consigned inventory.
"Our company expertise is in wholesale," says Solid Light president Brian Peterson, "not direct to consumer."
Solid Light will not compete directly with its wholesale clients, he adds, but none of its wholesale clients would carry the entire product line offered by Solid Light, a business started in the '60s selling T-shirts. Www.ChristianShirts.com allows Solid Light to bring all its products before the consumer.
Kingdom Imports of Newark couldn't afford a retail location, instead selling its products -- made by indigenous people in several countries -- on tables set up at conferences and festivals. Since Kingdom Imports is a nonprofit enterprise, the cost of developing a Web site was out of range.
"We give 100 percent of the profits back [to those who make the products] so they can continue the work of their church," says director Phillip Dunfee, pastor of Christ the King Newark Vineyard.
Since there were no up-front costs in working with Cimetric, the project was a go. The business now has its own Web site at www.KingdomImports.com for an investment of $5,000 in product, which Cimetric even warehouses.
The traditional cost just to develop an e-commerce site can run well into six figures, according to Doug Sapp, co-founder and chief executive of Cemetric. He and partner Mark Prevost created e-commerce software that allows them to divide the cost of the technology among an unlimited number of companies that sign up for their service. Those partners also share Cimetric's customer service and fulfillment staffs.
"Our technology is designed on what we call a shared infrastructure," says Prevost, president and chief operating officer. "The reason why our model is profitable is because we have a lot of stores combined that, all and all, add up to a profitable mix, as opposed to looking for four or five fixed, giant stores."
Prevost expects Cemetric to realize actual profits "in either the third or fourth quarter of 2001."
Cimetric typically receives between 15 and 34 percent of each sale, Prevost says, depending on the average price of the product and the total annual sales volume. One client is charged only 9 percent, he explains, because the average product sells for $1,000. The final figure is calculated at the end of each year.
In addition to building and operating a Web store for each client, Cimetric's services include:
- Customer service, both online and with a toll free number specifically assigned to each business.
- Secure transaction processing and 24-hour on-site order fulfillment.
- Data mining and reporting.
- Real-time inventory accounting and reporting.
Solid Light has been pleased enough with its ChristianShirts Web site that it's having Cimetric build a second site -- www.SolidLightCo.com -- which will show consumers a product catalog and list all Web sites and bricks-and-mortar stores that sell its apparel. For wholesalers, Peterson says, it will have inventory management and business-to-business commerce capabilities.
Neither the ChristianShirts nor KingdomImports sites has shown noticeable sales in the months each has been in operation, partly because of limited marketing on their parts, Dunfee and Peterson agree. Cimetric does online marketing, but asks its companies to tie the Web site address into its traditional advertising efforts, Sapp says.
This month, Peterson will start traditional magazine advertising to bring people to the site.
"You need the old media as much as you need the new media," he says. "If you do a search on Yahoo! for 'Christian shirts,' you'll get thousands of hits. How do you stand out in that? It's a real basic question. How do you do it on a small budget?"
Peterson has decided the money that comes in from www.ChristianShirts.com will be placed in a fund that becomes the budget for marketing the site.
As for Kingdom Imports, to keep Cimetric's commission lower, Dunfee didn't take the offer of online marketing when he signed up. He thought word of mouth in the Christian community would be enough. When his one-year contract is up, however, he says he'll add that and give Cimetric a higher percentage of each sale.
"Having a Web site is a wonderful thing," Dunfee says, "but if you don't have the traffic, a Web site is wonderful thing that nobody knows about."
Cimetric, itself, is now working throughout the world via its own Web site, with customers from Chicago to Australia.
As Cimetric grows, its target market evolves.
"I'm not looking for mom and pop shops that are bottling jams out of the garage," Prevost says. "We signed Kingdom up in the very beginning because there is an advantage to building some client accounts. We would not accept another Kingdom Imports today, but we would not dismiss Kingdom Imports today."
Cimetric wants to do business with companies that have annual wholesale sales starting at $10 million, Sapp says.
"With inventory in hand, we can go live in as short as two weeks." How to reach: Cimetric Commerce Inc., 861-6266 or www.cimetric.com
Andria Segedy (email@example.com) is a free-lance writer for SBN.