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You’re the Boss Blog: How Our Sales Process Broke Down

June 18, 2013 by Leave a Comment
Staying Alive

The struggles of a business trying to survive.

Editor’s note: Paul Downs is writing this week about his decision to hire a sales consultant. The series started with this post.

At the beginning of 2012, I had set a sales target of $200,000 a month, and in the first two months of the year, we hit that number. But March came in weak: we sold only $135,732. April was almost as bad, with just $146,677 in new orders. And May was even worse: $114,042. By the end of May we were $200,000 behind our target, and I was worrying about running out of work.

We can generally handle a down month now and then without difficulty, as these are often followed by months in which we far exceed the quota. But three weak months in a row means a serious mismatch between our production capacity and the amount of work we actually have on hand. That’s bad in two ways: first, the missing sales mean less cash coming in from deposit payments, and second, we will eventually have no work to do. I had hired five people in 2011 to ensure that I could get $200,000 worth of work out the door each month. That was now looking like a big mistake. Would I have to lay off all of those people?

Naturally, I spent a lot of time thinking about what was happening, and eventually I decided that my problem was the economy. In the spring of 2012, there was quite a lot of chatter in the media about poor job growth and the possibility of a double-dip recession. I latched on to that story and convinced myself that the problem was out of my hands. I was ignoring the possibility that we simply weren’t doing a good job with sales, mostly because my method had worked well in the past. I hadn’t changed anything about how we made sales, and it just seemed as though that couldn’t be the problem.

But now, when I look back at what was happening, it’s clear to me that there were danger signs I ignored. In particular, I downplayed a couple of big jobs that slipped through our fingers. One, for a large company in California, had seemed to be a lock. Our contact at that company had even told us that we had the job and promised a deposit the following week. But it never came. Instead, I got a call from an office furniture dealer who was providing furniture for the rest of the project, a major office expansion.

He had seen our proposal and said he was very impressed. He called to see if there was some way we might work together on future projects. Or so he said. I spoke to him about how we might collaborate and left with the impression that we would work together soon. But I never heard back from him, and the job we had been counting on didn’t come through either. Eventually, we heard from the client that it “had decided to go in another direction.” The dealer had simply bought the job out from under us. Having seen our product and our pricing, he had come up with a competing offer and price that the client accepted.

In another instance, we put a great deal of time into working with a military client, doing extensive design work, revision after revision, that the client took and used as the basis for its bid package. It went on to award the job to another company, one it had worked with previously. Both of those jobs were large enough that, had we received either of them, we would have exceeded our targets for April and May. And in that case, I might not even have noticed we had a problem. But we are vulnerable when we lose the big ones, because a bunch of smaller orders may not take us to our target. And in this case being played for chumps made a real difference.

As I wrote in my posts last fall about my AdWords debacle, I took my sales problem to my Vistage group in May 2012 and got some good advice — namely, that the problem was not the economy and that I needed to look within my own organization. At this point in my AdWords posts, I spoke about what I did with my campaign to restore a particular type of incoming call.

But I left out the other big change I made in response to a recommendation from one of the members of my Vistage group, Sam Saxton. Mr. Saxton owns a custom stair-making company, Salter Spiral Stair, that is in many ways similar to mine. It manufactures custom items and sells them over the Internet. He told me that he had hired a sales consultant who had helped him double his sales volume in the previous two years, and he suggested that I follow his path.

Wednesday: Meet the Sales Consultant.

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside Philadelphia.

Article source: http://boss.blogs.nytimes.com/2013/06/18/how-our-sales-process-broke-down/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

With Bleak Job Prospects, Parents and Children Buy Into Franchises

May 8, 2013 by Leave a Comment

Late one night in January 2012, Paige Palmer called her mother at home, crying. She was entering her final semester as a communications major at St. Mary’s College of California in Moraga, and neither she nor her friends were finding work. The job market was terrifying.

“In this culture, your whole life is planned out until you graduate from university,” Ms. Palmer, 22, said. “That time had come, and I didn’t know what was at the end of the tunnel.”

Ms. Palmer’s concerns found a receptive audience in her stepfather, Tony Uzzi. In June 2010, after 25 years in the pharmaceutical industry, Mr. Uzzi, 55, had been laid off from his job as senior vice president for sales at a pharmaceutical company based in Switzerland.

He had spent a year playing golf and trying to start a consulting career, but he had grown bored; going back to the corporate world was not really an option. “Not a lot of attractive job offers came my way,” he said. “None. I was 53. I had been making several hundred thousand dollars a year, and no one wanted to pay me that.”

Eight months later, Mr. Uzzi and Ms. Palmer put down $130,000 of Mr. Uzzi’s money to open in Mission Viejo, Calif., a franchise of Nurse Next Door, a home health care service based in Vancouver, British Columbia.

With that, they joined a growing number of parent-child partners who have responded to poor job prospects by buying franchises together. During the first month in operation, Mr. Uzzi said, they took in $23,000 in revenue, a first-month record for Nurse Next Door. Six months later, he said, they were averaging about twice that amount.

Concrete figures on multigenerational franchises are hard to come by. But anecdotal evidence suggests they are becoming increasingly common for job-seeking parents and children who have an entrepreneurial urge but not the experience or confidence to start a business alone.

Rick Bisio, a franchise consultant in Bradenton Beach, Fla., and the author of “The Educated Franchisee,” said that 10 to 20 percent of the franchisees he places start as parent-child pairs and that the number has risen since the economic turmoil.

An analysis by The Associated Press found that in 2011, 53.6 percent of those with bachelor’s degrees under the age of 25 were jobless or underemployed, up from 41 percent in 2000. And according to the Bureau of Labor Statistics, the average length of unemployment for workers over 55 has risen to more than a year.

“In the U.S., the economy has been rough since 2008,” said John DeHart, co-founder and chief executive of Nurse Next Door. “You have a lot of seasoned executives getting packages, and they’re looking for new careers. And you have this disproportionately high unemployment in the under-25 group. With that you get the dad/grad trend.”

Mr. DeHart said that four of the 11 franchises his company has opened in the United States in the past year have combined parents and recent graduates.

Larry Leonard is one such older worker who turned to opening a franchise with his children after a job loss. Mr. Leonard, 59, had been in the steel business for 38 years when he was “down-sized” from his job as president of a small steel company in Chicago Heights, Ill.

After an executive search firm told him it would take at least eight months to find another job, he and his family turned to CPR Cell Phone Repair, a telephone- and tablet-repair franchiser. The expected cost for the first store is about $125,000, said Mr. Leonard, who bought the rights to open eight stores over the next five years.

His wife, Paula, will run the front desk, Mr. Leonard said, while his older son, Russell, 29, will be responsible for marketing; his younger son, Philip, 27, for technology; and his daughter, Carolyn, 24, for social media. That division of labor is common among multigenerational franchisees, with parents typically handling jobs that require local connections and the children taking care of day-to-day operations and online marketing.

“I thought, I’m going to be 60 and if I could spend the last five to 10 years of my working life building up a company that would help me in retirement and help my children, I would investigate,” Mr. Leonard said from a soon-to-open branch in Orland Park, Ill. “We could make $30,000 to $50,000 per store in profit. It will take a few stores to match my old salary, but I’m building for the future, not just for today.”

Laid off parents and their unemployed children are often attracted to franchising because it offers easy-to-follow systems. But that guiding hand has a price. The overall cost of opening a franchise can range from roughly $50,000 for a pet-services store to some $445,000 for a restaurant, according to data from the industry magazine Franchise Business Review.

In addition, franchisees usually pay 5 to 8 percent of their revenue in royalty fees to the franchiser, said Eric Stites, chief executive of Franchise Business Review. “While franchising can be profitable, it’s a long-term investment,” Mr. Stites said. “Most franchisees will need seven to 10 years or longer to grow a successful business to a point where they can potentially sell it and make a solid return on their investment, and clearly, there are no guarantees.”

When Greg Galvez, now 52, took early retirement from his job as general manager of imported beverages at Coca-Cola after a 2011 reorganization, he bought the rights to open Proshred Security document-shredding franchises in Georgia. He operates his first in Norcross, Ga. with the help of his 16-year-old twins, who may join the business full-time after college.

Article source: http://www.nytimes.com/2013/05/09/business/smallbusiness/with-bleak-job-prospects-parents-and-children-buy-into-franchises.html?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

Economix: Should You Worry About a U.S. Default?

April 20, 2011 by Leave a Comment

Carmen M. Reinhart says ratings agencies have a poor track record in predicting financial crises.Mary F. Calvert for The New York Times Carmen M. Reinhart says ratings agencies have a poor track record in predicting financial crises.

Standard Poor’s, the ratings agency, lowered its outlook for the United States to “negative” on Monday, a warning that the country’s top-notch, triple-A credit rating may be lowered. Credit ratings are supposed to give crucial insight into a debtor’s likelihood of default, so a lot of investors and pundits made a big deal about this announcement.

Given the lackluster job that S.P. and other agencies did in rating mortgage-backed securities before the financial crisis, some critics have questioned the relevance of the agency’s latest pronouncement. But the toxic-assets track record aside, there are other reasons to discount this latest S.P. call.

In a recent interview, the financial crisis historian Carmen M. Reinhart said that ratings agencies had historically done a poor job at predicting sovereign debt defaults, currency collapses and other financial crises.

That is because, as she wrote in her paper, “Default, Currency Crises, and Sovereign Credit Ratings,” ratings agencies — like so many other professional forecasters — tend to focus on the wrong variables in calculating their ratings. In other words, S.P.’s announcement may not actually tell us very much.

Whatever the historical record of ratings agencies, markets nonetheless reacted strongly. And today the Obama administration has come out in full force to reassure investors.

As my colleague Christine Hauser wrote, Treasury Secretary Timothy F. Geithner tried to soothe foreign investors who might be concerned about the security of United States debt.

Mr. Geithner offered the following words of comfort: “Look at the price at which we borrow.” In other words, don’t worry, because interest rates are still joyously low.

But run this observation by economic historians, and you will find that it also provides little assurance.

In other research Professor Reinhart has found that that interest rates are surprisingly bad at predicting debt crises in the near future. The painful rise in the cost of borrowing that is typical in a sovereign debt crisis often comes on extremely suddenly, Professor Reinhart says. (After all, the assumption that just because things have been trending a certain way for a long while means they will stay that way forever is exactly the kind of logic that led to the housing bubble.)

In other words, there are a lot of things to pay attention to when you are trying to predict whether the United States is likely to default. Unfortunately, despite what you may have read lately and seen in the markets, sovereign credit ratings and current interest rates may not actually lend you that much insight.

Article source: http://feeds.nytimes.com/click.phdo?i=18d107a88d1f7e29f1d4bd3f85acb0a0

Filed Under: Economy News Tagged With: , ,