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news Sixty Years and Counting for Dekalb Office, Atlanta Area Steelcase Dealer Our congratulations go to John Rasper and his team at DeKalb Office in Alpharetta, GA, which this year celebrates its 60th year of service to the local business community. DeKalb Office has come a long way since opening its doors for business in 1952 in Decatur, GA. Today, it is 120 hardworking industry professionals-strong, with a second location in Birmingham, AL in addition to its Atlanta-area headquarters. Rasper himself will be celebrating an anniversary of his own next year, having bought the business from its original owner in 1983. He says DeKalb Office today functions as five separate businesses under one roof. “We made the decision several years ago to diversify into a number of vertical markets and run each one with separate management and a separate cost structure and it has paid off very well,” he says. The separate business units focus on healthcare, higher education, major accounts, new business development and furniture-related services and, says Rasper, that structure has helped keep the dealership strong and growing. “We had an excellent 2010, last year was still good and so far, we are off to a good start for 2012,” he reports. Sounds like Rasper and his team will have even more to celebrate this year!
Innovative Commercial Environments, CA Dealer, Wins Best of NeoConnect Award Congratulations also to San Diego-based Innovative Commercial Environments, recent winners of the Best of NeoConnect award. NeoConnect is an annual local interior design competition which honors and showcases the best in reOne of the projects that helped Innovative Commercial Environments win a Best of NeoConnect gional interior design products sponsored by award recently. the San Diego chapter of the International Interior Design Association (IIDA).
Membership in OFDA: The Right Thing for Your Dealership When times are as challenging as they are right now, it's very tempting to look on your annual dues in an organization like OFDA as an opportunity to save money. That would be a big mistake. In addition to its dealer-focused fall conference, financial benchmarking and members-only services, OFDA is the voice of the dealer in the office furniture industry. It's the only organization in our industry that embraces the dealer community in its entirety––aligned and nonaligned––and over the years, it has served as a powerful advocate for the dealer community before government and throughout the industry at large. There's no question that Federal Prison Industries today would be far more of a competitive threat without the lobbying campaigns and ongoing vigilance of OFDA and its allies in recent years. Within the industry, the association's annual Dealers’ Choice Survey and related awards to manufacturers provide an effective platform for the dealer community to let manufacturers know about their key concerns and priorities and encourage a more productive relationship between dealers and their key business partners. In the weeks ahead, with help from its board and committed dealer “ambassadors,” OFDA will be reaching out to companies throughout the industry who are not yet members and inviting them to join. Dealers face common market challenges, and OFDA is building greater critical mass to pursue a larger mission to help dealers elevate their industry role and better communicate their full value to end customers. So what are you waiting for? Point your web browser to www.ofdanet.org, make the investment and join or renew your membership today.
ICE showcased two different custom workstations during the competition, using furniture fabricated by local manufacturers. “We were honored to have won the Best of NeoConnect award,” said continued on page 4
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Dealer News continued from page 3 DeLinda Forsythe, founder and president of ICE. “It was uncanny timing that we completed these locally fabricated and unique solutions in time to display at NeoConnect. Both installations clearly represented our furniture design philosophy which is to reinforce their corporate culture through their furniture branding. Our goal with both projects was to stay within budget and to ‘keep it local.’ The more we work with local companies, the more we support the California economy.” Held annually, NeoConnect is modeled after NeoCon Chicago and draws over 200 attendees and 80 exhibitors.
McCoy Workplace Solutions Leads Charge for Breast Cancer Fundraiser In Houston, architect and design liaison Debby Leighton and the rest of the team at McCoy Workplace Solutions will be going pedal to the metal over the next few months in support of breast cancer research and patient care. Leighton is currently serving as chair of the 2012 Pink Ribbon House, a major fundraiser in support of the Lester and Sue Smith Breast Center at Baylor College of Medicine. Since it started in 2003, the Pink Ribbon House program has raised almost $2.5 million for the Center. The goal for the 2012 house is to add another $500,000 to that total, and they are well on their way. The centerpiece of the campaign this year is a 5,000-sq. ft. home, currently under construction, that will feature rooms designed by leading Houston interior designers. Funds are raised by home tours, sponsors and, new this year, a luxury car raffle, courtesy of Houston-area Lexus dealers. A “preview party” is scheduled for April 20, and the home will be available for public tours on the weekends of April 27 and May 4. “It’s a remarkable statistic, but one in nine women will be diagnosed with breast cancer. That makes the work of the Lester and Sue Breast Center particularly important today,” says Leighton. “At McCoy, we are committed to giving back to the community, and the Pink Ribbon House is one way we can make a lasting impact on the health and survival of women diagnosed with breast cancer.” Would you like to find out more? Visit www.bcm.edu/advancement/pinkribbonhouse. FEBRUARY 2012
Denver Dealer EON | Today’s Office Helps Out on Customer’s School Lounge Makeover Contest
What do you call a business that comes up with a way to strengthen customer relationships, gets a little free PR along the way and does some good in the community, all at the same time? If you’re anywhere near Denver, you might call them EON | Today’s Office, since that’s just what Elena Sirpolaidis and her team are doing through their involvement in a contest to provide free School Lounge Makeovers to deserving schools across the country. The contest organizer, California Casualty, has a long record of service to educators and other public service professionals and they also happen to be a longtime EON client. So when they went looking for someone to handle the makeovers for the lucky winners, EON was a logical choice. The first winner, a local Denver elementary school, received a $5,000 makeover featuring design work by EON’s Ashley Ballard and product from Global - The Total Office and Safco, among others. But they’re just the first of what looks like a long line of winners, with four more makeover projects already in the works. Like to find out more? Check out the You Tube video on the first makeover here.
Kentwood Office Furniture Adds Account Manager Grand Rapids-based Kentwood Office Furniture has announced the addition of Denise Byrwa as senior account manager in its Novi, MI office. Byrwa holds a BS in Interior Design from Eastern Michigan University and has over 15 years of industry experience. She comes to Kentwood from Herman Miller dealer WorkSquared. OFDEALER
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BIFMA December Numbers: Orders Down 6%, Shipments Off 2% Earlier this month, the Business and Institutional Furniture Manufacturers Association (BIFMA) released its market statistics for December 2011 and while December is often an uncertain indicator of trends as one of the industry’s historically slow months, analyst Budd Bugatch of the Raymond James investment house described the numbers as “modestly” disappointing. December orders declined 6% year-over-year, down further from November’s 3% decrease, while December shipments were off by 2% year-over-year.
Ten Years and Counting for Phoenix Safe Lebanon, Indiana- based Phoenix Safe International, the American arm of a multinational file and safe company, last month announced its tenth anniversary. Phoenix president Jeff McQueen launched the business with Janet Pape, vice president of marketing and operations, and Penny Cooper, vice president of sales. Joined by office manager Sharon Maish, the trio still comprises the core team at the company. “Starting Phoenix was a dream come true for all of us,” says McQueen, who, with Pape and Cooper, formed Phoenix after they left Schwab Corp. “Our passion to pursue a more personal and profitable business has brought incredible success and proves what a small group of enterprising and enthusiastic people can do.” McQueen says Phoenix largely owes its prosperity to the customer service it provides independent dealers. By selling directly to independent dealers and following a business model of outsourcing, Phoenix also has helped its partner companies grow, the company said. FEBRUARY 2012
Bugatch predicted continued “choppy order rates” for the next few months, though he said he expects the industry will ultimately experience modest positive order growth in 2012. Bugatch suggested the industry is in the early to middle innings of a multi-year expansion and pointed to healthy activity among corporate customers fueled by strong profit growth, record cash balances, improving business confidence and pent-up demand from an aging installed furniture base as positive indicators.
“Working with independent dealers helps manage costs and improve profitability,” McQueen says. “Plus, we’ve built great relationships with dealers, offering sales training and competitive pricing to help them compete with, and thrive against, big-box stores.” “And as Phoenix prepares to launch a new product line at the start of 2012, we’re looking forward to everything that’s new in store for the next 10 years and beyond.”
Khameleon Software Forms Executive Advisory Board Khameleon Software recently announced the formation of an Executive Advisory Board to help add to the company’s expertise and provide insight on how to align software initiatives with client priorities. “As a client-focused company, Khameleon places a high priority on collaborative dialog and feedback from our customers. We believe these conversations are critical for Khameleon to continue to evolve as a business system technology leader,” said Khameleon president Doug Angelone. The new advisory board members are:
I Bob Bacic, Furniture Marketing Group (FMG), Plano, TX I Matthew Danyliw, OFI, Newington, CT I Dru Duffy, CTR Systems, Warrendale, PA I Peter Kordus, Building Service Inc. (BSI), Milwaukee, WI I Bryan Lindholz, River City Furniture, Cincinnati, OH I David Solomon, Solomon Coyle, Alexandria, VA I Amee Zetzman, All Makes Office Equipment, Omaha, NE
Teknion's Washington D.C. Showroom Earns LEED-CI Gold Teknion Corporation’s new Washington, D.C. showroom has been awarded LEED for Commercial Interiors 2.0 Gold by the U.S. Green Building Council (USGBC). The 6,500-sq. ft. space was designed by Vanderbyl Design to continued on page 6
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Industry News continued from page 5 Knoll CEO Andrew B. Cogan said, "The acquisition of Richard Schultz reflects our ongoing interest in remixing our business with high design, high margin specialty offerings which appeal to both commercial buyers and consumers worldwide." "Richard Schultz began his career as a designer with Knoll and cofounded his company with his son Peter in 1992. Together, they have built an international reputation for exploring new materials and forms for outdoor furniture. We look forward to the continuous success of the Richard Schultz brand."
maximize the potential of the space, light and materials used and all furniture displayed is Greenguard Certified for indoor air quality and in line with LEED credits for low-emitting materials.
Knoll to Acquire Outdoor Furniture Manufacturer Richard Schultz Design Knoll has agreed to acquire Richard Schultz Design, makers of outdoor furniture for the residential, hospitality and contract office furniture markets.
continued on page 7
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Industry News continued from page 6 20-20 Introduces New inSight Module
Configura releases CET Designer 2.7
20-20 Technologies recently introduced a new module that it says will allow Enterprise inSight users to save time and reduce errors when creating catalogs.
Configura has released version 2.7 of its CET Designer design, specification and ordering software. Enhancements include a new Reconfiguration Tool, a free utility extension that provides an easy way to manage product inventories and reconfigurations of complex facilities.
The module allows users to reuse existing engineering data to export graphics and data for 20-20 CAP and Giza commercial catalogs and also supports “specials” by allowing users to export individual products on request and include them in design drawings. Data can then be enriched for Visual Impression using catalog enrichment products. According to 20-20, eliminating the need to recreate graphic symbols can reduce the time to market for new catalogs by up to 80% and get 100% accuracy in the process. Plus, the company says the new feature allows manufacturers to increase the frequency of catalog updates for new product introductions, expansions, or price changes. For more information, click here, call 800.227.0038, or e-mail commercial.sales@2020.net.
@theOffice Launches New Line of Workplace Seating
The Reconfiguration Tool uses simple graphical representations in flow-chart form that let the designer track, in real time, which products are warehoused or installed in which locations, create different reconfiguration scenarios in order to optimize the reuse of warehoused or installed products, prioritize the pulling of products from specified warehouses or already installed locations and retain an accurate, historical record of product-inventory data in a single, accessible and easily updatable database For more information, visit www.configura.com or call 877-2380808.
National Expands Healthcare Offering National Office Furniture has expanded its healthcare furnishings line with the introduction of Tag Bariatric, the company’s fifth bariatric chair supporting up to 500lbs. “Offering bariatric options within existing product series presents choices to satisfy a range of styles and budgets for designers and facility managers while providing specific needs-based solutions to patients and visitors,” says National VP of marketing Kourtney Smith.
@theOffice is introducing a new line of office seating positioned to compete against high design product lines. The new collection, in stock in the company’s distribution center in Tempe, includes The ONE Series chair (which represents the highest level of design and quality), the 2 Series (economicallypriced with its sister series 2 Lite), the 4 Series (featuring an integrated lumber pillow for ergonomic support and comfort) and the 5 Series (with an upholstered back with an inset mesh panel for extra breathable comfort). For more information, visit www.AtTheOffice.com or call 480-607-4468.
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Meet Steve Lang, OFDA’s New Board Chair With a college degree in marketing, an MBA in finance and 15 years of office furniture industry experience, Steve Lang is uniquely qualified not only to assume duties as the new chair of OFDA, but to bring growth and new direction to the association. Steve is the Principal of Dancker, Sellew & Douglas (DS&DS), a Somerville, NJbased Steelcase dealer with a tradition of service that dates back all the way to 1829. Steve joined DS&D in 1997 after serving as a dealer business consultant for Steelcase, where he was responsible for the creation and implementation of strategic distribution plans throughout the Eastern United States. Steve served as the manufacturer’s key focal point and facilitator for best practices, ownership transitions and M&A activity within the dealer community. Today, Steve leads all activities of the $90-million dealership including all sales, design/engineering, operations, accounting, project management, human resources and administration for all the company’s operating divisions. A long-time member of OFDA, DS&D and in particular, Steve caught the attention of then OFDA chairperson, Carlene Wilson, who recommended Steve’s appointment to the 2010 board. “I felt the need to help shape the contract office industry and our industry association for the betterment of all our businesses,” said Steve about just why he took on his OFDA role. “I truly believe that with the help of the board and our member taskforces, we can improve the presence and participation in OFDA in its representation of the dealer throughout the industries we work alongside of and customers we serve. We need to dramatically expand our membership base of both committed dealers and manufacturers who support our distribution channel.”
FEBRUARY 2012
With the industry today as challenging as it’s been in a long while, Steve sees a critical role for the association as an industry-wide dealer advocate. “Business today is changing at an increasingly rapid pace and our industry association not only needs to keep pace with that change but also focus on reinforcing the value of the contract office dealer in the food chain of our industry,” Steve contends. “Today more than ever there are many competing interests in the commercial interiors space. Manufacturers are good at manufacturing but not at servicing a client on a daily basis with all their facility-related needs,” he points out. “The role of the dealer before, during and after the product sale makes for a better partner for the client and recognizes the true total cost of ownership of the clients’ interior assets. And after the sale, the dealer is still there with their client for all the moves, adds and changes that are inevitable in today’s business environment.” As 2012 board chair, Steve will provide leadership with the Board of Governors and OFDA President Chris Bates in prioritizing and developing a strategic 3-5 year plan to increase membership and improve OFDA’s unique value to the dealer community as an industry-leading association. “My goal as chair is to help our industry association reach ‘critical mass’ as THE voice of contract office dealers in North America,” said Steve. He warns that while, in most cases, manufacturers are vested partners in the dealer’s success, the dealer community at large, as independent businesses, often finds itself under attack and needs a collective voice coupled with a strategic effort aimed at improving how both the industry and the end user universe perceive the value dealers bring to the table. “OFDA needs to make this more visible and help the dealers improve awareness of the role they play and the contributions they make in the commercial interiors industry,” explains Steve. “When the dealer community (at large) is stronger, we can attract the future talent needed and continue to create the programs necessary to propel our members toward greater success and profitability.”
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Are You Missing Out on Government Sales Opportunities in Your Own Backyard? Bob Broderick
As I travel the country and talk to a variety of dealers, I am often surprised how little awareness some have for how much federal government business is in their market. When dealers tell me there are few if any feds in their market, I usually respond with a series of questions: No military? No post offices? No IRS or Social Security offices? How about VA hospitals and clinics? Do you know who is eligible to use the schedules? Are you aware that law enforcement agencies and fire departments are sometimes eligible? The federal government is the single largest buyer of office furniture in the country so why not participate in that market? Selling to federal government customers can be both profitable and rewarding for dealers wanting to expand their customer base but many dealers who lack experience in that market express a fear of getting involved. Their fear is usually due to lack of knowledge about how the government is structured to procure the goods and services it needs. The government market is different but it’s certainly not different enough to make it impossible for virtually any dealer to find opportunities. The following 10 points can help you get started to compete in this lucrative market. Point One: Allay your fears. Learn the do's and don'ts for using the GSA Schedules which define the rules of engagement for federal government customers and contractors. GSA offers excellent on-line training for new contractors and vendors through the FEBRUARY 2012
GSA website (www.gsa.gov). It also offers online webinars for mentoring small businesses that are a good way to start learning about contract compliance and use. "Pathways to Success" offers an in depth guide to using GSA’s Multiple Awards Schedule (MAS) contracts. U-Mas Virtual Campus (http://apps.fss.gov/umas) is another useful site designed to provide a working knowledge of subjects such as ordering procedures, performance based contracting, blanket purchase agreements and team arrangements. Whether you are in management or sales, knowledge of the MAS contracts and how they work can give you the confidence you need to participate in this dynamic market. Point Two: It is important to know who is eligible to use the MAS contracts. You can access the current eligibility listing on the GSA website at GSA Order ADM 4800.2G - Order of Eligibility to use GSA Sources of Supply and Services. In addition, where federal funds are available, eligibility has also been extended in some circumstances to local governments recovering from natural disasters and for projects funded under the American Recovery and Reinvestment Act (ARRA). Information on ARRA and the Recovery Purchasing Act, and who is eligible to use them, is available on the GSA website. Point Three: Canvas your current suppliers. Ask for authorization to sell through their contracts. Many office furniture manufacturers hold GSA contracts that allow for dealer participation. Vendors with GSA OFDEALER
contracts can be identified on the GSA website through the eSchedules Library. Each contractor's contract has its own terms and conditions that outline the discounts and the terms for selling their products. Dealers can earn a commission and provide and charge for local delivery and installation services under these contracts. Point Four: Ask for help. Local factory reps are often experienced in selling in your federal market and they can provide valuable training and marketing support. Factories holding contracts typically have GSA CSRs who can provide information and support for establishing you as one of their authorized dealers. Point Five: Research your market. Military bases and government agencies host their own individual websites. These websites offer a window into the force structure on a military base or instructions on how to do business with an agency. Networking events are often posted on these sites, offering opportunities to meet and interface with potential customers. Point Six: In many ways, selling to the feds is not that much different from selling B2B. Like commercial accounts, sales calls and service work are critical to gain and retain GSA customers. Prospecting and setting up sales calls are where the process begins. Most military bases and agencies have small business a dvisors who can sponsor you on their base and provide guidance on where to go and whom to see. continued on page 11
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Government continued from page 10 The federal government is committed to supporting small business and the Small Business Advisor’s job is translate that support into solid action.
tory. Blanket Purchase Agreements and the FSSI initiative have often taken the purchasing decisions away from a local contracting office.
ing your competition and how they interface with your potential GSA customer can be an important factor for planning a sales and marketing strategy.
Point Seven: Follow the money. Understanding how the government prioritizes spending in a given fiscal year can be extremely useful when prospecting and planning your calls.
Understanding how procurement tools like GSA Advantage, eBuy and FedBid are used can help you develop a strategy for success. Knowing how the buy will be made in advance of a posting is a proactive way of tracking potential sales.
The federal government is not going out of business! Purchases of office furniture by federal agencies will continue to represent a large chunk of our industry’s overall sales.
Agency funding may vary depending on priorities and politics. For example, as the war in Iraq winds down, returning veterans will need care and benefits from the Veterans Administration. VA budgets will increase proportionately. Point Eight: Register your firm in the Central Contractor Registration (CCR) data base. The CCR is where a government contract officer goes to identify your firm as an acceptable vendor. Not having a current registration may disqualify you from participation on a project. You can register at www.ccr.gov using your DUNS number. Point Nine: Pressure for GSA sales often comes from sources outside of your terri-
Point Ten: Know your competition and try to learn as much as you can about them. In addition to other local dealers, there is a cadre of non-traditional operators who specialize in calling on federal customers. These are often firms you don't find listed in the Yellow Pages and they are largely invisible in the commercial market. Some may hold their own GSA contracts while others use factory contracts and live off of the commissions they earn. These dealers know how to influence buying decisions and know how to steer potential buys through a purchasing system unique to that base or agency. Understand-
Even with threatened budget cutbacks, political infighting and a potential change of administration, those purchases will continue. Knowing how the system works and learning how to participate in this dynamic market can help you tap into some exciting new sales and profit opportunities for your dealership. Bob Broderick is president of North American Marketing, a consulting firm that specializes in marketing to the federal government through the Multiple Awards Schedules. For more information, visit www.namarketinginc.com.
WE’RE FIRED UP ABOUT OUR BIRTHDAY. At Phoenix, we’re celebrating a decade of on-site records protection.
Since 2001, Phoenix has covered a lot of ground helping independent dealers discover the potential of our fire-resistant files and safes. Our decade of traveling has made Phoenix your destination for better sales, higher margins and a strong reputation for protecting your customers’ most valuable assets. It’s been a terrific 10 years at Phoenix, and our journey is just beginning.
(clockwise from top)
SAFE INTERNATIONAL, LLC
Jeff McQueen Janet Pape Penny Cooper Sharon Maish
10th Anniversary
FEBRUARY 2012
800.636.0778 | www.phoenixsafeusa.com OFDEALER
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OUTLOOK 2012 The Fight for Business Continues
By Alicia Ellis It’s always interesting to look back on the office
respond to industry challenges and where they see
furniture industry every year and see where we
new opportunities and threats for the coming year.
were, where we thought we would be, where we are
In our last issue, consultant Bill Kuhn looked ahead
and where we think we will be. Over the past four
five years into the future of office furnishings. This
years surveying dealers, we’ve reported on the
month, we take a look at the immediate future of
highs, the lows, the opportunities and the struggles
an industry that’s become increasingly less pre-
of our industry. Every year we’ve asked dealers
dictable in recent years and that continues to
about the most effective things they’ve done to
astound today. continued on page 13
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Cover continued from page 12 By the end of 2008 it was apparent that the industry was in for some major changes but exactly what was in store for 2009 was unknown.
Half of the dealers surveyed that year reported staff reductions. Disciplined financial management and cost control and building new, services-related revenue streams were among the keys to weathering the storm that was 2009.
On the sales front, the picture was mixed at best, with more than 50% of dealers reporting decreases. The economy was the primary focus of concern for dealers moving into 2009, with more than 60% of dealers expecting sales to be down.
Realistic yet optimistic were the catchwords moving into 2010, as 60% of dealers said they looked for the industry to come out of the recession and with the worst behind them, felt they could finally start to see a return to more profitable times.
When asked about the biggest opportunities back then, an overwhelming 65% of surveyed dealers mentioned healthcare, government and education as the most viable markets for the coming year.
And that’s exactly what the dealers got. According to BIFMA, 2010 shipments were up almost 6% on the previous year and while consumption was nowhere near the highs of 2007, movement in the market was unmistakable and it was mostly in the right direction.
Learning from the Past
What 2009 actually brought turned out worse than anyone could have expected. After starting out with an initial forecast for the year of a 12% drop in shipments, BIFMA spent the rest of 2009 ratcheting that forecast ever lower before finally settling on a decline of fully 30%.
The dealers we surveyed at the end of 2010 were more positive about their near term future, with fully 76% expecting sales to be up and 69% predicting profit increases. continued on page 14
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Cover continued from page 13 2011: The Comeback Many dealers who had the foresight to invest in new market and service opportunities were finding success but interestingly, while dealers moving into 2011 still cited the economy as their number one concern, the second largest source of anxiety came from the threat of competition from other dealers. Survey respondents lamented there were still too many dealers for the business available and complaints about other dealers moving beyond their traditional territories and underbidding were common. So how was 2011 for most dealers? According to BIFMA, industry production was up nearly 15% and 65% of the dealers we surveyed recently reported sales and profit increases for the year. continued on page 15
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Cover continued from page 14 2012: Keeping the Pace Looking ahead, BIFMA’s projections are relatively flat and most dealers we surveyed sounded cautiously optimistic, with 78% expecting both sales and net profit increases of 5 to 10% in 2012. And as for strategies to respond to what looks to be a continuing tough environment, it looks like the same things the dealers did in 2011 are the same things they’ll continue to do going forward. Streamlining operations, keeping expenses in check and investing in marketing and the workforce top the list of priorities. “We focused specifically on gaining market share this year and as a result, our sales were up considerably over 2010,� said Free Taylor, president of Pacific Office Interiors, a Haworth aligned dealership located in
Agoura Hills, CA. “This success was a result of investments in headcount, strengthening relationships and sharpening our pencil time and time again.� David Noel, president of MOI, a Knoll dealer headquartered in Baltimore, took a similar approach. “We spent aggressively in the recession on marketing and business development so that when the market recovered, we were in a position to capitalize.� “We changed the way we went about getting leads,� said Mickey Spooner, vice president of Allstate Office Interiors, a Haworth dealer in Hamilton, NJ. “By increasing our continued on page 16
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Cover continued from page 15 marketing efforts and focusing on specific markets, we were able to compete.” According to Sandi Jacobs, president of SideMark, a Teknion dealership in Santa Clara, CA, the most effective thing the dealership did during 2011 was “hire top talent and focus on streamlining processes while growing the sales teams in all our markets.” So too did John Sorteberg, president of Commercial Furniture Services, a Herman Miller dealership in St. Louis Park, MN. “We developed our sales force and worked them hard this past year,” said Sorteberg. “We also kept close to our core customers all throughout the downturn.” According to Sorteberg, this year large companies will start to spend some of the cash they have accumulated and small companies will continue to look for new opportunities and try to attract employees away from the larger companies with newer, cooler and more collaborative workspaces. “We continue to make money in vertical markets like healthcare, higher education, and government but corporate America, which was a non-player during the recession, is now entering the game again,” said Mark Eley, CEO of ID&A, a Louisville-based Herman Miller dealership. Eley warns that “great salespeople will have their choice of where to work over the next couple of years and we need to ask ourselves whether we are we doing all we can to retain them.” In regards to salespeople, Paul Hannaher, president of Hannaher’s Inc., a Fargo, ND-based Steelcase dealer, has spent the past year making investments to enhance the skills of his people through technology and education. “We expect market expansion and new market opportunities in 2012,” said Hannaher. “Business is still up and down but the valleys are not as low as they used to be and the highs are a little higher.” “The mandate today is the same as always... working smarter,” said Taylor. “Adding value, streamlining the ways we work, ensuring quality, staying engaged and connected. There's more pressure to execute today but the payoff is worth it.”
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Business Furniture Corporation of Indianapolis Steeped in Tradition but Focused on the Future
Business Furniture Corporation in Indianapolis has the distinction of being the oldest Steelcase dealership in the world. The company is celebrating its 90th anniversary this year, but remarkably, the dealership has only had two owners in all that time and its current board chairman, 68-year old Dick Oakes, has no plans to retire anytime soon. Oakes’s predecessor, Cy Ober, started the company in 1922 and owned it until 1987. As Ober told Oakes, David Hunting, one of the three founders of The Metal Office Furniture Company, known today as Steelcase, was looking for a dealer to help expand his business. At the time, Hunting had five salespeople who were touting a steel filing cabinet, an eight-legged desk and a wastebasket that looked like wood. “Why did the trash can only look like wood?” Oakes quizzed. “Because back then, many men were cigar smokers and when they threw them out in wooden trash cans, it started some pretty serious fires.”
By Alicia Ellis
As the story goes, in 1922 Hunting took the train to Indianapolis, shared a bottle of whiskey with Ober, they shook hands and the first Steelcase dealership was born. “We’ve never had a written contract or formal agreement with Steelcase,” said Oakes who bought Business Furniture in 1987 after a career with Steelcase that spanned 17 years. “It was Hunting’s word and Ober’s word and a handshake agreement that continues to this day. And, while many things have changed over the years, we still believe in the core values of business and the idea that a man, and a business, is only as good as his word.” Today, Business Furniture has grown into a $40million operation with 100 employees and locations in Indianapolis, West Lafayette, Bloomington and Terre Haute, IN. The company’s sales are divided evenly between corporate, healthcare and educational clients, a diversified mix that Oakes says is directly responsible for the company’s continued success over the past several years. “We never lost money though the economic decline because we invested in vertical market opportunities early,” said Oakes who points proudly to a 12% increase in sales last year. “We got involved in healthcare in 1994 and higher education in 2000. When corporate sales went down, we continued on page 18
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Profile continued from page 17 expanded our services and product categories and were able to stay on course.â&#x20AC;? According to Oakes, the diversification path that Business Furniture has taken is no accident. â&#x20AC;&#x153;Our company philosophy is to ask questions and listen to your customersâ&#x20AC;&#x201D;they will tell you what you need to do,â&#x20AC;? he said. As a new owner back in 1987, Oakes came to the business feeling like he understood the economics for running a dealership but needed an education on the marketplace and its particular demands and opportunities.
the past several years. According to Oakes, technology products, especially Steelcaseâ&#x20AC;&#x2122;s PolyVision line, represent the fastest growing segment of his business. Oakes credits this success to the ingenuity and creativity of Steelcase president and CEO Jim Hackett, a personal friend who actually worked for Oakes in the Steelcase organization while on his way to the top.
â&#x20AC;&#x153;One of the first things we did was put together a customer advisory council of local customers and businesspeople,â&#x20AC;? he recalls. â&#x20AC;&#x153;I told them I was new in town and because they knew my company better than I did, I asked for their help and advice.â&#x20AC;?
â&#x20AC;&#x153;Our showrooms and headquarters are real life, working examples of how we see the best in the world of office design,â&#x20AC;? said Oakes. â&#x20AC;&#x153;We are members of every networking organization known to man and weâ&#x20AC;&#x2122;ve got hundreds of people coming to visit from all types of different communities and markets to see the way we work. Now if we could just find and keep successful salespeople, life would be perfect.â&#x20AC;?
This council, which continues to provide input on a quarterly basis, has been an important influence on Business Furnitureâ&#x20AC;&#x2122;s foray into new markets and services over
â&#x20AC;&#x153;Attracting salespeople, especially young people, is not just a company problem, itâ&#x20AC;&#x2122;s an industry problem,â&#x20AC;? said Oakes. â&#x20AC;&#x153;Letâ&#x20AC;&#x2122;s face it. Weâ&#x20AC;&#x2122;re not the most attractive indus-
try to begin with so training, productivity tools and support is vitally important to attracting top rate salespeople.â&#x20AC;? While many talk about todayâ&#x20AC;&#x2122;s younger generation as being selfish or unfocused, Oakes sees bright men and women who are energetic, driven and donâ&#x20AC;&#x2122;t remember the â&#x20AC;&#x153;good old daysâ&#x20AC;? of high margins, executive offices and $5,000 workstations. â&#x20AC;&#x153;The driving force and the energy come from the young people,â&#x20AC;? says Oakes. â&#x20AC;&#x153;They want to do better and with the right tools and training, they are succeeding for us.â&#x20AC;? â&#x20AC;&#x153;We always teach everyone in our company that we are in the people business,â&#x20AC;? he adds. â&#x20AC;&#x153;I donâ&#x20AC;&#x2122;t care what kind of furniture youâ&#x20AC;&#x2122;ve got, itâ&#x20AC;&#x2122;s not going to matter if you donâ&#x20AC;&#x2122;t care about your customers and make them your priority. Our job is to know everyone in town and â&#x20AC;&#x2DC;live it.â&#x20AC;&#x2122; And if you donâ&#x20AC;&#x2122;t â&#x20AC;&#x2DC;live itâ&#x20AC;&#x2122; you wonâ&#x20AC;&#x2122;t be too successful.â&#x20AC;? â&#x20AC;&#x153;Are we successful? Yes, every day,â&#x20AC;? said Oakes. â&#x20AC;&#x153;But, do we work hard? Yes, every day.â&#x20AC;?
&UHDWLQJ D &XOWXUH RI 6XFFHVV 2QH 3HUVRQ DW D 7LPH .ORRVWUD &RQVXOWLQJ *URXS DUH ([SHUWV LQ WKH 6FLHQFH RI (PSOR\PHQW 6HOHFWLRQ DQG 7DOHQW 'HYHORSPHQW :LWK RYHU \HDUV RI &RPPHUFLDO 2IILFH )XUQLWXUH ,QGXVWU\ H[SHULHQFH RXU H[SHUWV FDQ KHOS \RX i 6HOHFW 4XDOLW\ (PSOR\HHV i %XLOG PRUH (IIHFWLYH 7HDPV i 6WUHQJWKHQ /HDGHUVKLS &DSDFLW\ i 'HYHORS &RPSUHKHQVLYH 7DOHQW 3ODQV i ,PSURYH 3URGXFWLYLW\ DQG 5HWHQWLRQ 2XU 6HUYLFHV ,QFOXGH i 7DOHQW 3ODQQLQJ WRROV SURFHVVHV DQG IDFLOLWDWLRQ i 6HOHFWLRQ 6\VWHPV - ZRUN SURILOLQJ DVVHVVPHQWV LQWHUYLHZ JXLGHV WHFKQRORJ\ VROXWLRQV i ,QGLYLGXDO DQG 7HDP 'HYHORSPHQW i 7DOHQW 'XH 'LOLJHQFH WR VXSSRUW PHUJHUV DQG DFTXLVLWLRQV i 2UJDQL]DWLRQDO &RQVXOWLQJ :HÂśOO KHOS \RX ILQG WKH DQVZHUV WR \RXU WDOHQW PDQDJHPHQW TXHVWLRQV DQG ZH GR LW LQ D FOHDU DQG VLPSOH ZD\ WKDW SRZHUV EHWWHU KXPDQ UHVRXUFH GHFLVLRQV
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Kloostra Consulting Group ¸ /DNH 'ULYH 6( ¸ *UDQG 5DSLGV 0, ¸ -540-3015 FEBRUARY 2012
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While most dealers celebrated a solid 2011 and are anticipating a prosperous 2012, in addition to your strategic business plan, your comprehesive financial plan and your well-designed sales plan, what if I aksed you what kind of talent plan you have in place? The most significant part of any dealership’s operating expense is represented by people costs. When you consider all of the expenses related to people—wages, benefits, sales commissions, T&E, training costs, payroll taxes—the percentage approaches 65-70% of a dealer’s total operating expenses. For that reason alone, it would only make sense to build a plan related to this aspect of the business. So what are the elements of an effective talent plan and how would you go about building one for your dealership? One proven way to develop your talent plan is through a six-step approach that defines it in terms of a basic equation: Business Strategy Review + External Environmental View = Future Talent Needs - Current Talent Status = Talent Gaps (Build? Buy? Bump? Borrow?) Action Steps and Specific Plans Let’s take a little deeper look at each of these steps to make sure that we have really thought through the talent implications for each.
Business Strategy Review: As you look out over the next
Talent Planning
for 2012 By Randy Kloostra
3-5 years, what are the critical business strategy issues that need to be considered from a people or talent perspective? Is there a leadership succession issue that needs to be addressed? Are there new vertical markets, services, capabilities that the business is planning on getting into in the future? Are there plans to expand current capabilities? Are there plans to shut down or get out of a particular line of business or a location that will be sold? All of these questions and issues have specific people implications which need to be identified early on in order to make informed decisions later.
External Environment Scan: As you examine the position of your dealership in your local market you will need to determine what the local talent environment looks like. Are you in a market which has been hard hit economically and where talent tends to be leaving rather than coming into the area? I have two daughters who are both in their twenties. They have already left the state of Michigan where they grew up to move to Nashville and Denver, both cities that are very much alive with a lot of young talented professionals moving into those markets. What is happening from a competitive situation in your market? Are you the “dealer of choice” in your market from an employment perspective? If so, you will find it naturally easier to attract and recruit talent. continued on page 20
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Talent continued from page 19 If not, you will have to be honest with yourself and accept the fact that it might take longer and be more expensive to fill those critical positions you might need in the future. Are industry trends like the growing importance of LEED certification, for example, driving you to reevaluate the kinds of talent you have on staff today? Taking a good hard look at these and other external environmental issues will give you another set of issues to add to the equation.
Future Talent Needs: Putting together the findings from these first two elements will provide a comprehensive view of your future talent needs. This will include leadership roles and sales roles, as well as the support, operational and technical talent roles required. It will also provide you with insight into any critical skill or knowledge requirements that will need to be developed within the existing workforce.
Current Talent Status: Now that we know what we need for the future, the next step is to take inventory and determine what we currently have from a talent perspective. There are a couple of tools or processes that you can use to do this kind of work. One is to simply develop a comprehensive inventory of your current talent by identifying elements like age, gender, experience levels, educational levels, special skills, training or certifications, retention risk, etc. Another approach is to develop what is known as a Talent Matrix, often referred to as a “9 Box methodology” to conducting talent reviews. This involves bringing together the leaders of the organization to go through an exercise that evaluates current talent in terms of two specific dimensions: Performance and Potential. Each individual is identified in each dimension as being in the “Top, Middle, or Bottom Third” relative to their peers in the same role. By putting together the two dimensions with top, middle and bottom thirds for each dimension, you end up with a 3X3 Matrix or “9Box” view of where your talent lies. The value of this type of exercise lies in the way that it enables leadership to really focus more specific developmental efforts on the right people in the right way. When facilitated properly it also provides an excellent forum for discussion amongst the leadership of the company which many times does not happen at the level required when talking about their people. Many dealers I have worked with have made this exercise something that they do religiously on an annual basis and review it quarterly as a management practice.
1. Build Talent: You may have identified some great talent that exists today in your organization and with some focused development, coaching and time, you can build those individuals up into more critical roles. This is always the preferred approach if you have the time. It is typically less costly and goes a long way to build loyalty to the organization. 2. Buy Talent: You may not have the internal talent to build or you may not have the time that it might take, or you have identified some outstanding external talent that could be a game changer for you. As such, you determine you are going to “buy” the talent you need. There are a number of considerations to factor into this decision—including impact on the current team—but it is a very viable option. 3. Bump Talent: You may have individuals in roles today that simply are not going to be the right people in those roles going forward. They may be loyal and long term employees but simply not the right people for the future. Consider both the impact of “bumping” them—either into another role where they will be successful or out of the organization completely. Both scenarios require thoughtful assessment of their impact, both on the individual and on the overall organization. 4. Borrow Talent: Many dealers have made the decision to outsource contract labor in a variety of situations, typically involving areas such as design, IT or human resources. With the changes that are occurring in the broad labor market, this option is becoming increasingly viable and many dealers are implementing it very effectively today. This option has been written about in previous OFDA articles and is a common topic for breakout sessions at the annual OFDA conference.
Action Steps: Now that a thorough analysis has been conducted, it comes down to putting it all together into an action plan that will detail who on the leadership team will have the responsibility for what and in what time frame. Like a sales or financial review, having pre-determined checkup dates will help insure accountability for moving the overall talent plan forward. So, if you’ve built your business, financial and sales plan for the year, do you also have a talent plan that supports those efforts? If not, 2012 would be a good year to begin building it into your management practices.
Talent Gaps: Knowing what you need for the future and knowing what you currently have will quickly help identify some fairly obvious talent gaps that will need to be addressed. The key question is “What is the best way to fill these gaps?”
For the past 21 years Randy Kloostra has held various Executive level HR roles at Herman Miller Inc. and is the owner of Kloostra Consulting Group in Grand Rapids, MI. Randy has been the Director of HR and Training for Sales and Dealer Distribution, he was the VP of HR and Training for Coro Inc. a subsidiary of Herman Miller which at one point owned more than twenty separate office furniture dealerships. Randy can be reached at 616. 540.3015.
The answer to that question usually comes from one of four different solutions: FEBRUARY 2012
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Key Elements of a Successful Plan to Sell to Insiders By Ken Stiefler
At last year’s OFDA annual conference attendees were treated to an excellent panel discussion on ensuring a smooth transition in dealer ownership that featured top executives from Knoll, Haworth, Herman Miller, Teknion and Steelcase offering the aligned manufacturer’s perspective on the issue.
I Continuity Planning. If you die or become permanently disabled you need to have a plan for ownership transition and operational continuity.
For this issue’s article I was asked to review that session and put it into the context of the overall exit planning process.
I Professional Help. You need advisors who have experience in exit planning. For most of you, your exit will be the single most significant financial event of your life and one that most likely you have never done before. Seek outside help, it pays for itself.
After listening to the podcast, I can tell you that the panelists basically hit a home run! They strongly emphasized most of the key elements needed for a successful exit from your dealership.
I Personal Factors. It won’t do you any good to successfully transfer your dealership if you don’t have a good plan for what you want to do with the second half of your life.
Here are the key takeaways from the session:
As I listened to the podcast, it became clear that most dealers in attendance understood what they heard, but few really seemed to grasp how to tie it all together.
I Inside Transfer. Although there are three basic types of dealership ownership transfers, it was the panel’s belief that most of you will transfer your dealership to an internal candidate (family or a groomed successor). For this reason, later in this article, I will focus on giving some structure to the planning process for an insider transfer. I Orderly Transfer. A transition can be orderly or disorderly. The panelists showed great concern that for most of you, it will be the latter (disorderly) and typically come about as a reaction to either economic or health-related issues. I Timing. The panel stressed that a successful plan requires that you start as early as possible to groom your successor. I A Plan. The panel expressed the belief that while most dealers have a business plan, few have an owner plan. As the saying goes, “You gotta have a plan” that should look out at least over a five year time frame. I Dealership Valuation. The panel stressed the critical importance of having a clear idea of what your dealership is actually worth. It was stated accurately that all too often there is a major disconnect between what you think your dealership is worth and what it is actually worth. I Value Drivers. In order to exit successfully you need to have in place the items that drive value such as grooming a successor, cleaning up your financials, fostering a “team” vs. “rainmaker” sales environment, incentivizing and motivating key employees while at the same time tying them to the dealership through golden handcuffs, such as deferred compensation. FEBRUARY 2012
That’s understandable, since most dealers have never even seen, much less developed, an “Owner Plan.” For the remainder of this article we will discuss the key elements that would spell success when transferring your dealership to insiders in a way that keeps you in control until you are paid your sale price. If you suspect that the children, key employees or co-owners you would pick to succeed you do not have the funds to cash you out, consider the following ten elements that make insider transfers successful.
Element 1: Time A transfer to insiders takes time: time to plan, time to implement and time to pay the departing dealer. Typically the more time dealers take to transfer their business, the less risk they incur and more money they receive from the new owners. For that reason, the first question an owner must answer is: Am I willing to take time (typically 3-8 years) to execute and complete an insider transfer while maintaining control? If the answer is no, then it is probably best to consider other exit paths.
Element 2: Defined Owner Objectives If dealers are willing to devote the time necessary for this exit strategy, they also must define and or quantify their objectives. These may include:
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Selling to Insiders continued from page 21 I Financial security and independence
of the cash flow from this type of double taxation.
I Departure/retirement by a chosen date
One-time taxation also means dealers receive more money more quickly and thereby reduces the risk of non-payment.
I Keeping family legacy or company culture intact I Rewarding key employees; and/or
Element 7: Regulate an incremental transfer of ownership
I Taking the business to the next level—on someone else’s dime.
One of the most important advantages of a well-designed insider transfer plan is that it gives the dealer the ability to regulate how ownership is transferred, when it is transferred and how much ownership is transferred.
In a well-designed transfer plan, these objectives are met before control is transferred.
Element 3: Cash Flow Healthy cash flow is critical to any sale. No buyer, (whether outside third party or insider) wants to buy a company with anemic cash flow. In a transfer to insiders, however, cash flow assumes gargantuan importance because initially it is the major, if not sole, source of your sale proceeds. You need to know what your business is actually worth and to do that you need to have it professionally valued.
Element 4: Growth in Business Value Buyers look for and are willing to pay top dollar for dealerships that have the potential to grow in value. In transfers to insiders, only if cash flow continues to grow does the dealership transfer generally occur. For this reason, it is vitally important that dealers contemplating an insider transfer install and cultivate value drivers before and during their exit transition.
Element 5: Capable management desiring ownership Having a motivated management team in place and capable of replacing you is enormously valuable to any buyer. In a transfer to insiders, such management is essential. That management group must desire ownership and be willing to sign personally for any acquisition financing or ongoing company debt. Dealers often assume that their management teams want to own their dealership ,only to find out their team takes a very different position once they realize that they actually have to pay for ownership.
Element 6: Minimize Taxes While no dealer we know wants to pay more taxes than absolutely necessary, those contemplating insider transfers must focus on minimizing taxes. In an insider transfer it is imperative that you and your advisors structure the sale to minimize taxes on the company’s cash flow (pre-tax income). Without the proper planning, the cash flow is taxed twice: Once when the insider receives it (as the new owner) and then pays taxes before paying you to purchase the company; and again when you pay taxes on the proceeds you receive.
If dealership performance falters, employees stumble or if the owner chooses instead to sell to a third party, a well-designed insider exit plan keeps the owner in the driver’s seat.
Element 8: Increased Control = Decreased Risk While business owners take risks every day, they don’t relish risking their own and their family’s future financial security. Therefore, we use strategies that maintain voting and operational control in the hands of the dealer and shift operational business risk from his or her dealer’s shoulders to those of the incoming owners. The goal: to keep dealers in control of their dealership until they receive the entire sale price.
Element 9: A Written Road Map with Deadlines To succeed, we believe that you must put your transfer plan in a written document and communicate it clearly and regularly to the eventual owners. If the plan is not in writing, it simply is not credible and neither you nor your employees will take it seriously. More importantly, the written plan provides a playbook for your exit that you’ll use to coordinate your actions with those of your advisors (thus reducing delay and cost). The plan should include a timeline, provide accountability and spell out who will do what and when for all participants, including the dealer. Without incremental, staged checkpoints, don’t bother starting. You’ll never finish a marathon if you don’t have mile-bymile goals to meet.
Element 10: Education (Yours) You need to understand the ins and outs of insider transfers because, unlike sales to third parties, you will control your dealership and the exit process until you’ve gotten all of your dough. That education begins as you read this article!
One goal of tax planning is to subject the dealership’s cash flow to taxation only once. Accomplishing this feat takes considerable planning, but it’s worth the time and trouble to save a third or more
Ken Stiefler, CExP is a member of the Business Enterprise Institute’s Network Of Exit Planning Professionals. For more information, contact Ken via ken@theexitfactor.com or visit www.theexitfactor.com.
DISCLAIMER: The information contained in this article is general in nature and is not legal advice. For information regarding your particular situation, contact an attorney or tax advisor. The example provided is hypothetical and for illustrative purposes only. It includes fictitious names and does not represent any particular person or entity. In addition to unique content created by its author, this article includes a compilation of content originally published (and copyright maintained) by Business Enterprise Institute, Inc. ("BEI") and is used here with permission from BEI. © 2011 Business Enterprise Institute, Inc. FEBRUARY 2012
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BIG THINK
June 11â&#x20AC;&#x201C;13, 2012 The Merchandise Mart, Chicago NeoCon.com
Pre-Register by June 4th & Save Onsite Registration is $25