As CEO of ATEN Technology Inc., Sampson Yang knows all about making good connections.
His business model involves the right mix of people and innovation to bring quality products to the customers of his company, a manufacturer and distributor of KVM (keyboard/video/mouse) and remote connectivity solutions.
“We’re not happy just to compete for market share with established products,” says Yang. “We want to develop products that meet the needs of our customers that no competitor has imagined yet.”
Since its founding in 1996, the company has doubled its revenue every two years, going from $46 million in 2004 to $62 million last year, while the number of employees has risen from two to 101.
Smart Business spoke with Yang about how he has grown ATEN Technology and how he differentiates his company from its competitors.
How have you grown your company?
Being a manufacturer, we are able to control the quality and cost, and we can react quickly to the demand of the market. The result is we can provide solutions to our customers in a more cost-effective manner.
We try not to diversify our business too much. We stay focused, making sure that we can do one thing well before we move on to others. We just recently turned down a half million (product order) from Asia because we are not perfectly comfortable with the fact that we can service the customer well.
The other thing is our commitment to providing excellent customer service. We provide dedicated tech support to all of our business partners and to the end-users. Our tech support hotline is 24/7/365. We think that’s a part our customers very much appreciate.
We have a group of hardworking people who really care about our company, and in fact, many of our employees have worked for the company since it was very, very small. They are still very loyal to the company. And the new employees, they are as good as (the old).
How do you attract those kinds of people?
I think it’s our philosophy. Innovation, creativity, fun are the three components of it. People are not necessarily coming looking at just the salary. They want to feel that they can do something; they are in a fun environment.
How do you promote that philosophy internally?
I have an open door policy. Whenever any employee has a new idea or product some business process, anything, even if it’s a crazy idea all those are welcome. Sometimes we go out to lunch together in a more casual, nonbusiness environment to brainstorm about new ideas.
Everyone is encouraged to try new things. Sometimes the result may not be as good as we expected, but we appreciate the passion and the willingness to try new things. You learn from mistakes sometimes. Next time you come up with something new, you learn from your experience.
How do you ensure the quality of your products?
Every product we ship out of the door needs to pass 26 stations. Each station has its functional tests, feature tests and electronics tests.
Quality control is important to us because of the commitment we have made to our customers to provide products that are economic, user-friendly and highly dependable. Our focus on quality actually starts during research and development. We aim our R&D efforts at creating new products that are both creative and reliable. We question our designs at every phase of development and constantly look for ways to keep them simple and efficient.
How do you differentiate your service from that of your competitors?
The tech support hotline is one way we can add value. We recognize that there is often a learning curve in using technology. Our customers can be confident that if they buy one of our products, someone will be available to answer their questions and provide advice.
We sell our products around the world. It doesn’t matter where a customer makes a purchase; he or she can receive help 24 hours a day, seven days a week.
We’re very proud of the quality of our technical support. Our commitment ... begins with training. The team receives its training from our product managers, who know their equipment from the ground up. Each product manager has a solid understanding that extends to initial research and development.
In addition to passing on their technical knowledge, the product managers communicate something else of critical importance. I call it the customer mindset. They teach the tech support reps to constantly think about our products from the end user’s point of view.
Another way we make a strong commitment to technical support is by ensuring all of our reps have hands-on experience. In fact, they work only steps away from a lab where they can test our equipment any time.
How do you come up with new products?
We do listen very carefully to what our customers say ... what they are using, what they see the future will be. We do have a survey after each call, which asks the customers if there’s anything they would consider buying in the near future.
That is very helpful to our R&D and product management team to determine what will be the next product we want to introduce to the market.
HOW TO REACH: ATEN Technology Inc., www.aten-usa.com
Mike Rudd, director of client services for International Profit Associates (IPA), spoke with Smart Business about how to control business costs.
Why do business owners look to increase sales when the company is under-performing?
The vast majority of business owners are from the entrepreneur mindset. They built their businesses with vision, hard work and an innate ability to sell themselves, their ideas and the product or services of the business. Increased sales create a positive cash flow that allows the business to survive and, in some cases, actually produce a profit.
What are some issues that cause a company to have eroding profitability in spite of increasing sales?
When a company is in start-up mode, it is generally under-capitalized. Every dollar is treated like a precious commodity. The entrepreneur knows where every penny goes. In that environment, $100 can literally be the difference between success and failure.
As the business grows, the demands on ownership’s time is geometrically increased, and the ability to micro-manage the operations is supplanted by reliance on ‘gut’ feeling. Questionable feedback from employees provides a false sense of security. ‘Throwing money’ at problems becomes the norm instead of controlling the critical variables that drive the company’s profitability and operations.
As companies mature, ownership relies on key employees to maintain operations at a profitable level. However, systems and controls consist of ‘tribal knowledge’ and the perception that ‘working hard’ will produce profit. There is nothing in place to actually measure performance, and rewards are based on the ‘benevolent bonus’ system. Invariably, this leads to a feeling of entitlement and increased costs across the board.
Which is easer, reducing cost or increasing sales?
Sales figures can be somewhat deceiving. High sales dollars mean nothing if the sales volume does not allow for the company costs to be recovered and profit required to fund growth. Choosing whether to increase sales or reduce costs as a strategy requires some basic understanding of how costs and revenue impact the financial statement.
When looking at the impact of cost reduction on general and administrative overhead, each dollar of cost reduction goes directly to the bottom line as profit. For every dollar of revenue, only a small fraction goes toward the bottom line due to fact that variable cost must be covered.
What are the best methodologies to control business costs?
First, identify the critical variables in the business. Every business has specific key indicators that give management the ability to monitor the company’s pulse and activities. This includes what you need to know and when you need to know it.
Second, develop a chart that reflects actual operations. Typically, a chart of accounts is developed by an accountant. Although this is adequate for tax purposes, the information is generally limited to revenue and expenses with little or no regard for actual operations. Revenue categories should reflect the actual income streams of the company. Direct variable expense should include all of the expenses involved in the production of the product or service, such as labor, material, sales commissions, royalties, equipment rental or any other cost that fluctuates with revenue. Indirect overhead consists of costs that may be semi-fixed and semi-variable but must be allocated to all of the production components, such as estimating wages, sales wages, fuel and oil, training expense, small tools and supplies. General and administrative overhead are expenses that occur regardless of revenue, like rent, utilities, depreciation, owner’s wages, utilities and interest expense.
Third, measure the percentages, not the dollars. Variable discrepancies can only be measured by comparing percentages. For example, labor during a particular month might be $25,000, and 23 percent of that is revenue. The next month, the labor expenditure may be $19,000, but the percentage of revenue is 24.5. In this case, the company actually does worse the second month but spends fewer actual dollars.
Percentages are the only way to identify and track the company’s critical variables. By comparing the variation between the critical variables, you can effectively control costs and manage for profit.
Fourth, implement excess-based profit incentives. If you do not provide incentives, employees will create their own by stealing time and materials. Keep them simple.
Incentives must be tied to factors the employees have control over such as labor, overtime, waste, small tools and supplies. The incentives should have positive and negative components to force employees to focus on cost. As well, the incentive plan must reward the employee group as a whole. Performance will improve as each employee’s performance affects the group as a whole.
MIKE RUDD is director of client services for International Profit Associates of Buffalo Grove, Ill. IPA’s 1800 employees offer consulting services to businesses throughout the United States, including Alaska and Hawaii, as well as Canada. Reach Rudd at (800) 531-7100 or firstname.lastname@example.org. or at www.ipa-iba.com.