Greg Provenzano’s first experience in Corporate America left him with a sour aftertaste. Fresh out of high school, he took a job at a snack food company in Detroit, where he diligently worked his way up to middle management.
Then he hit a ceiling.
It wasn’t long before Provenzano, now president and one of four founders of ACN Inc., learned that his ladder was too short to reach the executive deck.
“I realized there were only a select few who were making substantial income and living a decent life,” Provenzano says.
This first impression of corporate structure turned him off of pursuing a career in a top-down, pyramid-shaped business structure.
It also sparked the idea for ACN. Provenzano and fellow founders Robert Stevanovski, and Anthony Cupisz and Michael Cupisz opted for a business-unusual approach to selling services — a network model usually associated with catalog kitsch. Now, ACN Inc., based in Farmington, is the world’s largest direct-selling company. It achieved annual revenue in excess of $500 million by offering everyday services such as telecommunications, energy and Internet access.
“We are just the opposite of a corporate structure,” Provenzano says.
But being different isn’t always easy, especially when the founding partners must still play in the corporate sandbox. If ACN was going to capitalize on the home-based business boom and tap into sales opportunities in emerging technology markets, it needed a strong infrastructure to support a network of independent representatives.
It also needed the right people — not necessarily the usual corporate suspects — to drive the company’s success.
Creating the business model
Direct marketing tactics are generally reserved for tangibles — make-up, cookware, baskets, candles and other items sold at home parties. The founders had deep knowledge of this selling structure after a combined 85 years in the industry working for other companies, but Provenzano knew that focusing on services such as telecommunications and energy would differentiate ACN from product-focused network sales organizations and give it a competitive advantage.
“People are accustomed to network marketing being associated with pills, potions and the like,” Provenzano says, addressing skepticism that a model like this would work outside the catalog world. “Because we are a service company, we attract a different type of person — someone who is professional and never saw themselves selling products.”
Telecommunications services also appealed to the founders because of the industry’s growth potential; communications is already estimated to be a $1-trillion-dollar industry. Also, such services do not require storage or shipping — two areas in which the founders lacked extensive experience.
“You can’t have a garage (full of) of telecommunications services,” Provenzano says. “Our representatives don’t have to worry about inventory, and there is no delivery or transaction of money. That attracted us to this industry.”
He and the founders were also looking for freedom to succeed, both for them and their employees.
“We had all come from a string of companies where management changed and the culture changed,” Provenzano says. “We didn’t want to risk putting our lives in the hands of other people that didn’t consider our interests or the general interests of the other representatives.”
After all, not all direct marketing structures provide just desserts for representatives at all levels, Provenzano says. From the beginning, he and the founders knew that ACN’s marketing model must fuel growth but also had to feed base-level employees.
“If the opportunity isn’t great for the newest person coming into the business, then it isn’t a great opportunity for anyone but the original founders,” Provenzano says. “And anyone who joins ACN today truly has more of an opportunity to do phenomenally well than when we started 13 years ago.”
Provenzano attributes this success to the telecommunication industry’s growth and the fact that representatives are selling services rather than products. And because ACN representatives sell services that consumers already purchase, customers are more comfortable with the pitch. This means representatives are more likely to bring in business and, therefore, earn a comfortable income while helping to expand ACN’s network.
It all starts with a different kind of selling technique than conventional corporations present.
“Traditional forms of customer acquisition are antiquated,” Provenzano says. “You can no longer spend hundreds of thousands of dollars acquiring a customer and hope they stay in your network long enough for you to make a profit.”
Customer acquisition costs can be next to nothing because the network-based sales model does not rely on traditional marketing methods to attract customers. Instead, ACN depends on its representatives to reach out to prospects, and cutting out acquisition costs means the company can provide services for less than its competitors do.
“Because of the ease of acquisition, we have been able to produce hundreds of millions of dollars in revenue for ourselves and still provide tremendous savings for customers and opportunities for representatives,” Provenzano says.
A strong infrastructure was a critical step for expansion, and Provenzano says that building the skeleton of the marketing machine was a daunting task for four marketing gurus with entrepreneurial spirit but no start-up experience.
“Thinking about the early days of negotiating office leases and setting up computer systems, we didn’t know any of that,” Provenzano says.
At first, the founders tried to build the business and recruit network representatives themselves.
“That was taxing and cumbersome,” Provenzano says.
Once the business grew bigger than four professionals could manage on their own, they knew they needed executive assistance.
“We have always understood our limitations and thus, we have never tried to be something we are not,” Provenzano says. “We’ve never had a problem with trying to attract people who are better than us in certain areas where we lacked. Because of that, the right kind of people can sense that we are not control freaks. We will always relinquish responsibilities to competent people.”
Provenzano says this mentality helped reeled in talent so that operations and sales functions could develop in tandem.
“It was our responsibility to say, ‘We need help.’ You have to ask the right people the right questions to get the right answers,” he says.
People drive the network selling vehicle — more representatives translate into more revenue. But the founders aren’t interested in collecting glossy resumes decorated with high-profile recommendations.
“I don’t trust resumes,” Provenzano says, questioning the validity of paperwork that can be botched or bloated with half-truths. “Just like we are great at network marketing, we are also great at networking in general. That means not just taking a look at someone’s resume but actually networking through references and really digging deep.”
And unlike most employers, Provenzano isn’t looking for skills that applicants learn in college. What ACN seeks in its network representatives are people with passion and a desire to change their lives. To these individuals, ACN provides hope and opportunity.
“I’ve always felt I had a chance to win, but I’m not so sure very many people feel that way anymore,” Provenzano says. “People take the traditional career path and find out it is not as profitable or (is) more demanding than they would like it to be.”
If the right environment isn’t provided for representatives to reap rewards for their hard work, the whole network breaks down.
“This is no longer a W-2 world, this is a 1099 world, in my opinion,” Provenzano says.
ACN’s network representatives are independent but still connected to a central nervous system that feeds them with training, encouragement and a structure in which to thrive.
Everyone rises together.
“There is a saying that it is lonely on top,” Provenzano says. “I learned that it doesn’t need to be lonely on the top. You should have a network of people you can interact with and trust.”
At its core, ACN is essentially a marketing firm for its network of representatives. It must focus on the next big thing while always fine-tuning its current services. It must evolve with advancing technology and tap into emerging industries. ACN’s sales and penetration into new market segments depend on it, especially if it is to reach its $1 billion revenue goal in the next few years.
“Our 13-year track record has taught us that you must always be ahead of the game to be successful,” says fellow founder and Chairman Robert Stevanovski. “You must have future thinking and know precisely the right time to act, whether it’s a new product line such as a (Voice over Internet Protocol) with video phone or a change in our business plan.”
The VoIP market is expected to grow into a $9 billion industry by 2008, and the spread of deregulation in the gas and energy markets opens up pockets where companies such as ACN can step in to sell services.
“When you have a marketing engine as we do, you can be pretty light on your feet,” Provenzano says, adding that marketing services as opposed to products makes the company even more nimble.
Meanwhile, Provenzano says ACN, with representatives in 18 countries on three continents, will continue to expand internationally. In turn, the company will translate services it offers to overseas markets to the United States. For example, Provenzano sees potential to build a strong cellular phone business here after ACN’s mobile services proved successful in Europe.
Gradually, Provenzano and the founders are building a corporate structure that looks much more like a solid, square block than a pyramid. The sign of true growth, Provenzano says, is when independent, hard-working people stand at the top along with ACN’s founders.
“There is a big difference between success and significance,” Provenzano says. “People who are significant look beyond their own personal success.”
How to reach: ACN Inc., www.acninc.com, (248) 699-4000