March 29, 2023

You’re the Boss Blog: The Challenges of Raising Prices and Competing With Online Retailers

She Owns It

Portraits of women entrepreneurs.

Jessica Johnson doesn't mind letting some customers go.Sara Krulwich/The New York Times Jessica Johnson doesn’t mind letting some customers go.

At the last She Owns It Business Group meeting, the owners talked about several issues related to pricing. This post focuses on the prices charged by the two family businesses in the group, and the particular challenges of selling a product that is sold online for less.

Deirdre Lord, who owns the Megawatt Hour, had a question for Jessica Johnson and Susan Parker. Both took over businesses handed down from their parents, and Ms. Lord wondered whether they inherited pricing schemes as well.

Ms. Johnson, who owns Johnson Security Bureau, said she inherited the terms on certain contracts that were not yet up for renewal. When she eventually approached at least one of those clients to discuss rate increases, the client protested that other companies offered to handle the job for less. As she has said previously, Ms. Johnson doesn’t mind letting that kind of customer go.

She said her more savvy clients understood that external factors affected pricing and they would incorporate rising costs into their contracts. “That’s the kind of business we prefer to go after now, as opposed to, ‘No, you signed the paper, you’re stuck with it forever,’” she said.

In light of the Affordable Care Act, which will require businesses with more than 50 employees to provide health insurance for those employees, these considerations will become even more important, said Ms. Johnson, whose company had more than 100 employees and had not previously offered health insurance. “I’ve been running the numbers for several of our contracts looking at what’s going to happen when health care kicks in next year,” she said, adding that she had been proactive about talking to clients about how her prices could be affected. “We can kind of set the table and let them know that a price increase may be coming and see if that means that they’ll stay with us or they’ll go to someone else.”

Ms. Parker owns Bari Jay, which manufactures bridesmaid and prom dresses. She’s the only owner in the group with a company that sells a product, not a service. When she and her sister took over Bari Jay, the prices of the dresses already on the market remained the same, she said. But soon after, their factories raised their prices, and they, in turn, raised theirs as well.

“I had no one to teach me how to price a dress, so I came up with my own formula,” she said.

“Is it working?” asked Beth Shaw, who owns YogaFit.

“Really well,” Ms. Parker said.

“Do you take your fixed costs and then do you divide that up by the number of units you sell a year?” Ms. Shaw asked.

“Yes, and then I add a margin on top of it,” Ms. Parker said. While stores have complained that her prices have gotten high, she said higher prices are a bridal-industry phenomenon. “Making a dress in China has gotten really expensive,” she said.

Like other bridal companies, Bari Jay sells a sample dress to its stores, which then place orders based on the sample. About 10 years ago, Ms. Parker said, many of Bari Jay’s competitors started giving away free samples. “My father tried it, and it almost put him out of business,” she said. So, instead, Bari Jay offers volume discounts.

“That’s a great idea,” said Alexandra Mayzler, owner of Thinking Caps Group.

“There’s an incentive to buy more dresses, and if you buy less than the minimum, then you’re going to pay full price,” Ms. Parker said.

“With pricing, you definitely have to do what Susan was saying: think about cost, all of the math, but then you have to say to yourself, ‘Who am I going to sell it to?’” Ms. Mayzler said. You have to determine what they expect and whether you’re willing to “deal with the relationships that come because you’re in a particular price bracket,” she continued.

Ms. Parker agreed and explained that she doesn’t rely exclusively on her formula. For example, if her formula demands that a certain dress be priced $10 more than another, but the lower-priced dress looks more expensive, she will “tweak” the prices accordingly. She also explained how price perception affects her business. Bari Jay sells to stores, which then sell to customers. “All of our stores pretty much adhere to M.S.R.P.,” she said, referring to the manufacturer’s suggested retail price.

But on the stores’ Web sites, it’s a different story. Customers buying online can get the same dresses for less, said Ms. Parker. But they don’t receive the services, like a fitting they would get at the physical store. When you buy online, Ms. Parker said, “They’ll send it to you in a ball and if it has a stain or damage, it’s on you.” This annoys the stores that carry Bari Jay but don’t sell online. And it bothers Ms. Parker and her sister. “It cheapens our name,” she said, adding that customers who are willing to pay more don’t want to wear a dress that someone else was able to buy for half the price.

You can follow Adriana Gardella on Twitter.

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You’re the Boss Blog: Further Thoughts on Employee Rehabilitation

She Owns It

Portraits of women entrepreneurs.

In a recent post, the members of the She Owns It business group talked about the prospects of successfully rehabilitating an employee who isn’t working out. That discussion continues in this post.

Susan Parker, who owns Bari Jay, said she had come to realize that rehabilitation simply doesn’t work. Rather, she said, you need to hire the right people from the start. To do that, Ms. Parker said she knows she and her sister, who co-owns the company, will need to improve their interviewing techniques.

“I hate how we interview,” she said. “I feel like we talk, talk, talk, and the other person barely says anything, and then when they talk, they’re kind of hearing what we want,” she said. Going forward, she plans to change that, by experimenting with the interview techniques described in “Who,” a book on hiring that she’s finding helpful.

But becoming a great interviewer isn’t guaranteed to solve the problem. “You might not always find the right people because sometimes, especially when you’re growing, you don’t know what that person looks like,” said group member Jessica Johnson, who owns Johnson Security Bureau.

“And you’re also going to settle for a lot less because you don’t know any better,” said Beth Shaw, who owns YogaFit.

“But then you don’t keep those people on indefinitely when you realize that they may be better served in a place that’s a better match for them,” said Alexandra Mayzler, who owns Thinking Caps Group.

Deirdre Lord, who owns the Megawatt Hour, said that, while an owner must set expectations for each role and employee, “it’s not something you should have to do over and over again.” People make mistakes, but they shouldn’t keep making the same ones — and if they lack the right attitude or work ethic, there isn’t much hope that their performance will improve, she added.

Ms. Shaw agreed, but stressed the importance of sharing “nonnegotiable expectations” with employees. People may need to be told — once — that they have to respond to calls and e-mails within a day, she said.

Some employees may have never worked in a corporate environment where that’s the norm, Ms. Johnson said. “Particularly when you’re dealing with younger people who are relatively fresh out of school, their norms are very different so we have to have a sensitivity to that,” she said.

Ms. Shaw pointed out that employees with a corporate background may come with their own set of problems. Sometimes, she said, “those people end up not being able to perform in an entrepreneurial environment.”

“Correct, they don’t know how to operate,” Ms. Lord said.

A related issue arises when employees who excel at their day-to-day jobs are promoted to management — and fail, Ms. Parker said.

“That’s a big one,” Ms. Lord said. Getting an employee to return calls and e-mails promptly is one thing, but “you cannot teach people emotional intelligence, people skills,” she said. “People get elevated all the time who are so ill-equipped for management. Then what do you do?” she asked.

“You can’t demote them,” Ms. Shaw said.

They’ve become overcompensated, Ms. Parker added.

In future posts, we’ll revisit the owners’ management challenges and provide updates on the issues facing their businesses.

You can follow Adriana Gardella on Twitter.

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You’re the Boss Blog: An Owner Gets a Lesson In Managing Sales Reps

She Owns It

Portraits of women entrepreneurs.

Susan Parker: Keeping the reps honest.Earl Wilson/The New York Times Susan Parker: Keeping the reps honest.

At the last meeting of the She Owns It business group, Beth Shaw, founder of YogaFit, wondered why her recently hired sales representative was not meeting expectations. As that conversation continued, Ms. Shaw came to see the importance of a good customer-relations management system. She also considered putting role-playing exercises in place for her sales representatives and setting clear goals for them — from Day 1.

During the same meeting, Susan Parker, who owns the dress maker Bari Jay, talked about her company’s approach to sales. She uses independent contractors who are paid on commission. They represent other brands as well, and travel from store to store. Additionally, Bari Jay has one salaried sales manager on the staff to oversee them.

Ms. Shaw asked Ms. Parker if she offered any sales incentives to her customer-service people.

No, Ms. Parker said, although she does give year-end bonuses when the company does well, and she also offers profit-sharing. “When you offer them a carrot, then they try to sabotage your road men to get those accounts themselves,” she said. For example, someone in customer service might report that a certain bridal shop had called, complaining about its sales representative. Seeing an opportunity, that person might then offer to handle the account.

“The other thing they do is, then they stop paying attention to some accounts because they don’t see a big commission opportunity,” said Deirdre Lord, who owns the Megawatt Hour.

Ms. Shaw asked Ms. Parker how she knew her shared sales representatives were out there actually trying to sell Bari Jay.

That is where her “phenomenal” sales manager comes in, Ms. Parker said. He was previously Bari Jay’s sales representative for the Northeast region. He retired from that role — he is in his 70s and sold Bari Jay for some 40 years — and Ms. Parker created the sales manager position for him in September.

“Good idea,” Ms. Lord said.

Initially, Ms. Parker said she wondered whether she needed him. She now says hiring him was “the best thing we’ve ever done.” He keeps the sales reps honest, she said, because they can’t argue with him.

For example, Ms. Parker thought one particular rep had a great year because his sales were up 15 percent. Her sales manager helped her put things into perspective. “He’s like, ‘Susan, he has like 100-and-something stores; he physically set foot in 30-something of them,’” she said. Those few stores were already Bari Jay customers. The others represent a huge missed opportunity. “It’s been a big learning curve for me,” she said.

Ms. Parker said her sales manager knew every angle. When he saw frequent orders for eight dresses, he began asking the reps why they were not pushing for larger orders. Stores that sell Bari Jay dresses get volume discounts. “If you buy 12, you get 40 percent; 18, you get 45 percent,” she said. “You buy the whole line, you get 50 percent off.” And the more dresses the sales reps put in a store, the more money they make. Still, they were not rising to the occasion. The manager wound up calling the stores himself. He learned from the thankful owners that they had not even been told about the discounts.

“So, he’s kind of doing their job for them,” Ms. Shaw said.

Ms. Parker acknowledged that Bari Jay needed to do some housecleaning. She let one sales rep go, but her sales manager does not recommend getting rid of everyone at once. “We kind of have to focus on one territory at a time,” she said.

You can follow Adriana Gardella on Twitter.

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You’re the Boss: After a Year, Business Group Members Discuss Their Progress

She Owns It

Portraits of women entrepreneurs.

About a year ago, the She Owns It business group began meeting with the goal of exploring the day-to-day challenges faced by four women who own and run companies. Since then, the group, which now has five members, has gathered regularly to discuss topics such as hiring and managing employees, health insurance, manufacturing, growing pains, and customer service.

Over time, the group’s composition has changed. Former member Carissa Reiniger left because lof scheduling conflicts. New members Deirdre Lord and Beth Shaw stepped in, joining veterans Jessica Johnson, Alexandra Mayzler, and Susan Parker.

The women’s businesses have also evolved. This post provides snapshots of three of the original businesses, and the two more recent additions.

Owner: Jessica Johnson.

Company: Johnson Security Bureau provides security services to government and commercial clients.

2011 Sales: $1 million-plus (up from $700,000 in 2010).

Employees: 100-plus (up from 60 in 2010).

The 50-year-old company was founded by Ms. Johnson’s grandparents. Last year, it increased both its annual sales and employee count. Ms. Johnson attributes this success to factors including a focus on customer service, more time spent on the hiring process, and expanding operations into New Jersey.

She recently said job creation had been her most important metric for measuring her company’s success. But looking ahead she said, “I may need to consider different metrics because my focus for 2012 isn’t as much on growth as it has been.” It has shifted to determining which business opportunities make the most sense for the company to pursue. The new metrics Ms. Johnson is considering include rates of employee turnover and sales closed.

Owner: Deirdre Lord.

Company: The Megawatt Hour is an online subscription service that helps commercial and industrial clients manage, track, and forecast their energy use and expenses.

2011 sales: The company, a start-up, began operating in December 2011 and had sales of $2,000 that month.

Employees: five.

For now Ms. Lord, who founded an earlier company and has an extensive background in the energy industry, is focused on building the business and continuing to tweak its products to meet the needs of customers and prospects. For example, after some experimentation, the Megawatt Hour is offering three service models: a transactional model for businesses that want to use the product only when they are about to make an energy-buying decision, and free and premium models that allow customers to monitor their ongoing energy use and costs. The company is also exploring various sales channels and recently started working with energy consultants who will offer the Megawatt Hour’s product to their clients. The product will be marketed with the consultant’s name and the information that it is “powered by the Megawatt Hour.”

Owner: Alexandra Mayzler.

Company: Thinking Caps Tutoring offers study-skills coaching, subject tutoring, and test preparation to middle- and high-school students.

2011 Sales: about $780,000 (up from about $700,000 in 2010).

Employees: five full-time, 45 part-time tutors (up from four full-time and 40 part-time tutors in 2010).

Ms. Mayzler started Thinking Caps from her dorm room at New York University in 2003. To determine how well the company is doing, she said she tracked the hours worked by her tutors, the number of client families, payables and revenue, looking for annual increases in all. By those measures Thinking Caps had a good year in 2011, she said. Additionally, after opening an office in Austin, Tex., last fall, Thinking Caps expanded into Houston in January of this year.

Owner: Susan Parker.

Company: Bari Jay manufactures and sells bridesmaid and prom dresses to retailers.

2011 Sales: $8.3 million (up from $7 million in 2010).

Employees: 17

Ms. Parker and her sister became co-presidents of their father’s business in 2008, following his death. With no garment industry experience, it was rough going initially for the sisters. But they sought guidance from some of their father’s longtime friends in the industry and managed to increase sales by 20 percent from 2009 to 2010. To determine how well Bari Jay is doing, Ms. Parker said she considered revenue, profit margins, and booked orders. Revenue and booked orders rose in 2011, and margins stayed about the same — as planned, she said. Still, there are challenges, most notably finding a way to keep up with orders and addressing production issues that arise partly from the increased cost of manufacturing dresses in China.

Owner: Beth Shaw.

Company: YogaFit trains yoga instructors, entering into exclusive partnerships with yoga studios and health club chains. It also hosts fitness conferences, teacher-training seminars and retreats.

2011 Sales: $4.4 million (up from $4.2 million in 2010).

Employees: 13 at company headquarters and 60 trainers (independent contractors).

Ms. Shaw, a former magazine advertising sales representative, founded the company in 1997, after becoming interested in yoga as a hobby. To measure YogaFit’s success, she said she looks at revenue. “I always want to beat the previous year,” she said. But sales are down since their high of $5 million in 2009, a fact Ms. Shaw attributes to factors including a more crowded market and the company’s unprofitable merchandising division, which is being trimmed. To get back on track, Ms. Shaw said she hired a chief operating officer who has “dramatically cut expenses” and added an experienced fitness industry marketer to her staff.

In future posts, the group will continue to discuss the realities of business ownership. Are there any issues you would like to see raised?

You can follow Adriana Gardella on Twitter.

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