Iceberg on the Starboard Side! Avast!
by Shel Horowitz
Icebergs. Hidden giants slumbering and mostly invisible under water, calmly waiting to tear apart even as mighty a ship as the Titanic.
How can your business avoid destruction by its own icebergs? Four FBC members shared their stories at the Center's October meeting at the Log Cabin.
Whalley Computer: Thriving in a Commoditized Marketplace
What to do when your profit per unit shrinks from $1200 to just $42, and any shopper falsely assumes they can find cheaper suppliers in a few minutes online? Paul Whalley of Whalley Computer described how a group of key co-workers helped the company evolve over several years into an entirely different model. The computer hardware business has become commoditized, but opportunities abound for people who don't play the commodity game, but market their expertise and special skills—and partner with other companies that can expand their offerings. Whalley doesn't just push boxes out the door, but focuses on aspects of the computer business that would challenge less skilled companies: integrating computer and communications solutions for larger companies, functioning as a contracted IT department for smaller companies, developing recurring streams of income through long-term repair contracts and remote network monitoring/maintenance, and acquiring their hardware clients as an adjunct to the stellar service that is its hallmark.
And the strategy works. With a client roster that includes such marquee brands as TJ Maxx, BJ's Wholesale, and FBC member Hannoush Jewelers, the company has been profitable in all but one of its 27 years, and is nationally recognized.
Moss Nutrition: Harness the Key Asset
Her business faltered as her main supplier broke one promise after another—and it took an outsider, a successful distributor in her industry, to show Joanne Goding that she had something worth building,
"I burst into tears and said “what is wrong with us? I don’t know what to do!” The General Manager came out, talked to employees, looked around. We had such good staff taking calls. They were answering questions only the sales people did at their organization; some had Masters degrees in nutrition. She said, 'you’ve got some really great people here. We could learn from you.'
Realized that her company's core strength was its knowledgeable, ethical personnel, Goding turned the business around. And now she hires carefully, knowing that everything else follows:
"I’ve got to have truthfulness. The customer doesn't know what it is, what it does. One study says it’s good for you and the next says it’s going to kill you. It could be sawdust—you don’t know! Our competitors take advantage of people, tell you it’s gong to work. The FDA doesn’t regulate it. So my niche is to tell the customers the truth and to sell products that actually have what they say they have."
Thus, she asks questions that identify "ethics, honesty, truthfulness. If they don’t find helping people get healthy interesting, I have no use for them. I ask, 'what motivates you? What makes you feel good about your work?' I hire for character." She looks for passion, interest, a mission to be of service, and specific interest in nutritional products.
This paid off when she parted ways with the distributor that didn't keep promises, and couldn't get product for a while. "The first month, we lost $30,000. But our wonderful people got on the line and called customers, told them what happened and what we would do for them, and we’re still in the game."
Bottaro-Skolnick Interiors: Focus on Your Expert Niche
Like Whalley, Springfield furniture maker Bottaro-Skolnick faced an unpredictable and price-sensitive market. As fewer women stayed home and more joined the workforce, and as cheaply priced but cheaply made furniture swept the market, it became harder and harder to survive serving the discriminating customer who was buying heirlooms and appreciated quality and durability.
And like Whalley, David Rothenberg found niches where he could compete. "Our uniqueness was based on our custom design expertise. I concentrated on areas of the business that were more promising. Onsite drapery and upholstery rooms to provide the independent design community with all the tools they needed. We sought freelance designers, we had events, fabric showings…
"Gross sales increased from 1995-2005, but it was coming from the lower margin divisions. Success isn’t volume, it’s profit. The perfect storm hit in 2004."
Reeling, Rothenberg again re-evaluated, and realized he no longer needed to keep extensive inventory like a traditional furniture store. "80 percent of our sales was special order. Our niche had always been interior design. I lowered my inventory by 50 percent to raise cash and open space in the building. I discussed the plan with associates, staff, family, and the Family Business Center roundtable. But the staff morale plummeted. I began to experience self-doubt."
But he persisted. "I had a vision that my 60,000 sq ft building could become a destination. CJ Sprong moved in, Magnolias, a silk flower arranger, moved in, and a computer artist moved in to the 4th floor. Ten months into the change, things are looking up. I’m sleeping the night through. I embrace the concept that change is good. But I still look ahead because I know my opponents’ armies are massing, ready to strike."
Designworks: Passing the Baton to a Non-Family Member
The last set of panelists were unusual: a daughter who left the family business and started her own, but kept her parents' company as a major account…and an outside General Manager brought in from California.
Amy Scott, daughter of long-time FBC participants Nan and Jim Hurlburt, was for many years an executive in her parents' dance apparel company—which started in Amy's bedroom and eventually expanded to a 30,000 square foot facility in Ludlow.
"Managing the company together was no longer viable, for both practical and emotional reasons. I went on to start my own graphic design business, but I continued to serve them as an outside vendor. And now that I’ve run my own business, I have new respect for them and they for me."
But with Amy out of the line of succession, and the older generation thinking about retirement, how would the business continue to grow and thrive? "My parents were overworked and overstressed and morale was low. So they decided to seek a General Manager. I thought they were crazy. She wanted someone with experience in our industry—where are you going to find that? It was a really lengthy process, but in San Diego there was a man who knows how to make tutus. He had a lot of expertise in the dance and cheer business."
That's putting it mildly. David Hodgins had worked his way up through the dance and cheerleader apparel industry to head a $28 million division of Danskin,
"They said, 'we love your ideas, what’ve you got?' We’re launching private label, launching our own brand...I get to expose everything I know in the industry. They let me play, they trusted in my expertise and empowered me. But I wanted the opportunity to be listened and empowered and possibly ownership down the road.
"Be open to new ideas AND revenue streams. We went from 170 to 274 pages in our book, and we were the talk of the show. Our customer list is 3 times larger, a new thick book and the response was amazing." The lesson? "Bring someone like me to make a difference, and allow them to make the difference."
Says Scott, "Dave’s new sales dollars allow us to add a CFO, production supervisor, others. The cost of dong nothing—if we hadn’t been brave enough to take the step—the company would have just faded away. Sewing used to be a prime industry, and it would also be gone. It’s a lot of jobs in a small town."