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news Sixty-Five Years and Counting for COFCO Office Furnishings, Philadelphia Dealer Congratulations are in order for Alan Einstein and his team at COFCO Office Furnishings, which this year is celebrating 65 years of service to the greater Philadelphia business community.
Outstanding Dealers Wanted!
COFCO was founded in 1946 by Alan’s father, David Einstein, who started the business as Commercial Trading Company after World War II with a trailer load of government surplus from a military aircraft supplier.
If you’ve been in this industry for any length of time, you’ll already know it is blessed with some truly exceptional entrepreneurs doing some truly amazing things—even in the face of all the challenges that we’ve seen in the past few years.
David found office furniture was one of the fastest-moving items in his inventory and the rest, as they say, is history. COFCO is one of the country’s oldest Allsteel dealers, having first started representing the company back in 1953.
Starting this year, OFDA will be highlighting some of those accomplishments, with a newly created Dealership Achievement Award.
Alan himself came into the business full time in 1970 and became president in 1976. Today, the company is 45 employees strong and operates out of over 125,000 sq. ft housed in two separate locations. Remarkably, Alan’s father, now 91 years young, still comes into the business every day and, says Alan, the basic principles and business philosophy that he laid down 65 years ago remain strong. “We pay our bills on time, we re-invest in the business and believe in cultivating strong, long-term relationships with our customers and our suppliers,” he proclaims proudly. Even in these tough times, it’s a management approach that still works well. “We had an excellent year in 2010 and bounced back very nicely from the downturn,” Alan reports. Sounds like he and his team will have even more to celebrate this year!
Now through July 31, industry manufacturers, service providers and dealers can nominate companies they feel best exemplifies an engaged office furniture dealership that supports their association, their industry, their community and their planet. All nominations will be reviewed by a panel of respected industry professionals who will use a blind review process and will evaluate entries solely on the strength of their submission. Each application will receive a numeric score from each member of the review panel. The nominee with the highest score will be selected as the recipient of the award, which will be presented at the association’s 2011 Dealer Strategies Conference in Tucson later this year. If you know of a dealership that deserves this kind of recognition, please let us hear about it. You can find the nomination form on the OFDA website at http://www.iopfda.org/index.asp?bid=3563. Or for more information, contact OFDA’s Billie Zidek via e-mail or call 800.542.6672.
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Dealer News - continued from page 3 Tangram Interiors Helps Make Sweet Music at Symphony Orchestra Fundraiser In Orange County, CA earlier this month, Steelcase dealer Tangram Interiors was helping to make sweet music for a good cause as a sponsor of the fourth annual Pacific Coast Wine Festival, the major fundraiser for the Pacific Symphony.
Perkins Eastman Architects won the “Power Play” award, given to the firm who most personifies the spirit of the games. A first-time participant, Perkins Eastmen named their team “Hatrick Swayze and the Slambonis”, embellished their uniforms with original art and thematic names and had their entire design group in attendance.
Tangram CFO Nick Greenko studied classical music before entering the business world and, he says, the symphony is a cause that’s very important for him personally.
The real winner, though, was the Special Olympics organization,
In addition to spearheading Tangram’s efforts for the fundraiser, Nick serves on the organization’s board and currently chairs its strategic planning committee.
floor hockey tournament held every November in Chicago. So far,
“It’s a gem of an orchestra and we’re very proud to support it,” he says. Evidently, Nick and his team are not the only ones who feel
erosity of the participating teams, spectators and a long list of
that way. The event drew close to 300 attendees and raised more than $150,000 for the organization’s artistic and education programs.
subcontractors.
Chicago Area Dealer Interior Investments Hosts Fifth Annual Office Chair Hockey Tournament
of us here,” commented Interior Investments’ Michelle Weiner. “It
Competition was fierce in Chicago earlier this month, as teams drawn from some of the city’s top A&D and real estate companies faced off against each other for the top prize in Herman Miller dealer Interior Investments’ fifth annual Office Chair Hockey Tournament.
November event, but meanwhile, planning is already underway for
which benefitted to the tune of over $30,000 from the event. Funds raised are earmarked for the Special Olympics’ own state more than $140,000 has been generated through the Interior Investments Office Chair Hockey Tournament, thanks to the gensponsors including many furniture manufacturers, vendors and
“Like most dealers, we want very much to give back to the community and Special Olympics is a cause that’s important to many celebrates inclusiveness and also honors athleticism and fellowship,” she added. Interior Investments will be providing volunteers to help staff the next year’s office chair tourney.
More than 600 hard-charging chair hockey players and spectators from the architectural, interior design, construction and commercial real estate communities attended the event, which saw 28 teams careen across rinks built from workstation panels in high performance Herman Miller office chairs to survive the double elimination tournament and achieve ultimate chair hockey victory. When the dust settled, VOA Associates claimed the championship title after a grueling 1-0 victory over a team from Jones Lang LaSalle, winners of the real estate division. Champions VOA Associates beat out Jones Lang LaSalle in a grueling final.
MARCH 2011
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BIFMA JANUARY NUMBERS:
Orders Up 23%; Shipments Up 22% Earlier this month, the Business and Institutional Furniture Manufacturers Association (BIFMA) released its market statistics for January and once again, the news was mostly positive.
against positive growth in the previous year. Shipment growth, however, is likely to remain strong given robust recent order trends and improved backlog, Bugatch argued.
BIFMA said January orders increased 23% year-over-year compared with a 24% increase last month and the eleventh consecutive month of year-over-year order growth.
Longer term, Bugatch offered a more encouraging scenario. “Over the next few years, we expect the industry to rebound from just more than $8 billion to nearly $10 billion driven by a recovery in corporate profits, improving business confidence growth in white collar payrolls, and positive net absorption of office space,” he predicted.
January shipments increased 22% year-over-year, accelerating modestly versus a 19% increase last month. Despite that strong performance, analyst Budd Bugatch of the Raymond James investment house offered a note of caution for the near future. He suggested February order growth should decelerate as comparisons get tougher and noted that beginning in March, industry orders will be comparing
Herman Miller to Acquire POSH Office Systems, Hong Kong Mfr. Herman Miller has announced an agreement to acquire POSH Office Systems Ltd., a Hong Kong-based designer, manufacturer, and distributor of office furniture systems, freestanding furniture, seating, and filing and storage. POSH posted annual revenues of approximately $50 million in 2011 and is a market leader in commercial furnishings in both Hong Kong and the People’s Republic of China. The company operates five major showroom locations, including a newly opened commercial furniture showroom in Hong Kong, and distributes through a POSH franchise network in China and more than 30 international distributors worldwide. Completion of the acquisition is pending Herman Miller’s establishment of a legal structure in China necessary to complete the transaction. The company anticipates this process will be completed early in the first quarter of fiscal 2012.
Earlier, BIFMA updated the periodic industry forecast it publishes in conjunction with the Global Insight research firm. BIFMA said it now expects 2011 orders and shipments to increase 9.1% and 14%, respectively, up from 5.6% and 8.3% previously.
The announcement follows a successful alliance between POSH and Herman Miller begun in September, 2008.
Lencore Announces New Marketing Manager Sound masking and speech privacy systems manufacturer Lencore has announced the addition of Katherine Rupp as marketing manager. Rupp, a recent recipient of a “40 Under 40” award from the Long Island Business News, comes to Lencore with over a decade of experience in marketing communications, training, event planning and public relations. In addition to her marketing work, she is actively involved with a number of local business and community organizations, serving as the chair of a local government business development council and sitting on the boards of both Public Relations Professionals of Long Island and Enterprising and Professional Women—Long Island.
Inscape Appoints Bob Theodore VP of Dealer Development and Client Relations Inscape has announced the appointment of Bob Theodore as vice president, dealer development and client relations, a new position. Theodore will be responsible for developing and solidifying distribution and dealer networks and will liaise on a regular basis with Inscape’s major customer accounts to ensure ongoing relationships and communication. Most recently Theodore was director of dealer development with Kimball Office where he was instrumental in developing their dealer network. His experience includes serving as president of an independent sales representative organization, vice president of sales and marketing at one of the largest dealerships in the U.S. and division manager with a major manufacturer. continued on page 7
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Theodore has also been an active participant in OFDA, providing leadership on committees, chairing its Strategic Issues task force and serving on its Board of Governors from 2003 to 2010.
Steve Schwarz Named General Manager, United Stationers’ Furniture Division Wholesaler United Stationers has appointed Steve Schwarz general manager of its furniture division, effective March 1. Schwarz will lead the development and execution of the division’s strategy as it expands its programs and services for furniture product resellers. He reports to Todd Shelton, president, United Stationers Supply. Schwarz brings significant office products and furniture industry experience to the role, including a 20+ year professional history with United Stationers. Prior to leaving United in 2001, he was executive vice president, United Stationers, and president of the company’s Supply Division. After leaving United, Schwarz held various
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leadership roles including co-chairman/business partner at Prime Office Company, senior vice president, strategic markets, for OfficeMax and executive vice president, corporate development and strategy for Clover Technologies Group.
HON Rolls Out Voi, New Workplace Solution The HON Company has introduced Voi, a new integrated solution for multiple work styles.
selection of supports, such as a simple Oleg, plus pedestal and cabinet options that incorporate storage. Additional storage choices let you build vertically (both above and below) as well as horizontally from the desk. The new series will be featured among HON’s NeoCon introductions in June. Meanwhile, for more information, visit the company’s website at www.hon.com
Voi offers a collection of layered work surfaces and storage components designed to meet the personal needs of any user in any type of workplace application—from private and semi-private office to teaming, touch down and open plan. Work surface options include four basic forms— rectangle, rudder, saddle and wedge. There’s also a
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OFDA's 2011 Conference Will Highlight Best Practices in Business Transformation This year’s OFDA Dealer Strategies Conference will be held September 25-27 at the Marriott Starr Pass Resort & Spa in Tucson. Since January, OFDA’s Conference Planning Task Force has been developing a compelling educational program focused on this year’s theme, “Transforming Your Business for Future Success.” OFDA’s annual conferences are designed to bring together a broad cross-section of industry dealers and their key business partners for timely and lively exchanges of promising new business ideas and emerging best practices in the areas of strategic planning, general management, marketing and sales, operations and use of technology.
Keynote Speaker Jaynie Smith Speaker, radio host and CEO of Smart Advantage, Inc., a marketing/management consultancy whose clients range from midsized companies to Fortune 500 companies, Jaynie Smith’s customized keynote presentation will focus on helping attendees uncover and clearly define true competitive advantages and to realign marketing and other management strategies and processes. In an industry and general economic environment characterized by unprecedented competition and extreme margin pressures, her focus on differentiating your company from the competition will help close more sales, improve margins and retain more customers.
Paul Barr, OFDA board director and principal of Premier Office Solutions, a Herman Miller dealer in Hatboro, PA, will join with Gil Cargill, a highly acclaimed sales and marketing management consultant with whom he is working, for the first workshop which will outline their experiences in implementing “closed-loop” marketing in Paul’s dealership. Randy Kloostra and Valerie Atkin will present the second OFDA workshop on change management which they have entitled “Nothing Endures but Change.” This workshop will focus on a process of personal development that will help you ‘walk the talk’ when it comes to sharpening the skills needed to succeed in today’s fastchanging furniture dealership world. The session will share knowledge and best practices on how to lead the way, be it pursuing a new vertical market, changing the comp plan, re-skilling your senior salespeople or any of the myriad changes a thriving dealership must address competently.
OFDA Breakout Sessions Extended to 90 Minutes In addition to our Sunday workshops and Monday keynote speaker, OFDA will offer three more general session programs, topics to be announced soon. Based on input from members like you, this year OFDA is increasing the length of all breakout sessions from 60-75 minutes in prior years to 90 minutes this year. The goal is to encourage more dialog among speakers, panelists and conference participants. Informal networking breaks also will be lengthened to permit more one-on-one informal interaction with industry business partners, presenters and dealer peers between
Afternoon Workshops Will Kick Off Conference Program Last year, OFDA opened its conference with three Sunday afternoon workshops that provided in-depth interactive presentations on leadership, sales and understanding emerging workplace trends. These hands-on, practical sessions were among the most highly rated features of that event, and OFDA will continue this format this year with a new set of topics to highlight dealer and small business best practices in the areas of closed-loop marketing and leadership in change management. An additional workshop will be announced soon. MARCH 2011
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OFDA News - continued from page 8 educational sessions—one of the key benefits of attending our industry-wide conference. Twelve breakout sessions covering industry and general business best practices will help conference participants transform their thinking in four key management areas: • Strategic Planning and Leadership • Operations and Technology Implementation
• Practical LinkedIn Training for Novice and Experienced Users • Low-Cost/High-Impact Marketing/Branding Using Social Media and Local Media Outreach
• Strategic Talent Management for Long-Term Business Success
• Organization Development and Succession Planning There will be valuable educational content and networking opportunities for dealer and service company principals, as well as sales, marketing and operations managers who wish to remain ahead of their peers in finding new opportunities and understanding emerging best practices. A number of specific breakout sessions have been confirmed, with presenters and moderators identified and dealer, installer and other panelists now being invited to participate. Here are highlights of the breakout session topics currently planned:
• Leveraging Technology to Transform Business
• Dealer Benchmarking: Applying 2011 OFDA Survey Results to Drive Improved Profitability
• Collaborative Operations Streamlining for Dealers and Installers
• Sales/New Business Development and Marketing
• Creating a Sustainable Business Model/Entry into New Lines of Business
Processes and Boost Profits
• Customer Loyalty Management – More Critical than Ever • Successful Exit and Business Transition Strategies The OFDA conference planning task force welcomes further input from dealers, installers and industry business partners on key topics and recommended speakers to address them (including dealers and other volunteers willing to share their management best practices and creative new business initiatives). Please call 703.549.9040, x 100 or email Chris Bates, OFDA president, with your topic ideas and speaker/panelist suggestions. Please reserve September 25-27 (join us earlier if you enjoy golf or other recreation) on your calendar now. Registration at special early-bird rates is open now.
Will your Dealership be the First Recipient of OFDA’s De D alership Achievement Award? OFDA is looking fo or an exceptional offfice interiors dealer-ship fo or its first-ever Dealership Achievement Award. This prestigious new n annual award wi w ll honor a dealership with a distinguish hed record of engagement with and cont butions to the su uccess of OFDA, our industry as a whole, and their own local c communities. For detailss, click here or call 800.542.66 672. Deadline for Entries is July 31, 2011. MARCH 2011
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Show Me the Money: Navigating the New Financing Environment By Scott Cullen
Itʼs always nice to give credit where credit is due—unless youʼre an office furniture dealer and finding financial institutions that once used to provide you credit with ease are making it far more difficult today.
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Cover - continued from page 11 Yes indeed things are different now. Just ask Dave Branch, one of the owners of Facilities Connection in El Paso. “Access to credit has changed dramatically,” says Branch. “Obviously cash is king and in the past you’d get all the money you wanted, but with what’s happened in the financial markets the past few years, we’ve had to rely on our manufacturers with credit terms and assignment of contract to make sure everybody got paid.” And the more complex it got for dealerships like Facilities Connection, the harder it got to work in that envronment.
The secret was taking ownership of the contracts. “We went to local banks and the bank we dealt with for years, and found that because of the complexity of the dealership
“When we went to a community bank we got turned down every single time because they could never understand how a company based in El Paso could be selling worldwide global projects to the government. Whereas the big banks completely understood it once we got to the right people.” Michael Moore, president of Synergy Business Environments in Nashville and Knoxville, TN saw this downturn coming from a mile away and decided being selfcapitalized was a key component to successfully bidding on large projects.
“If you don’t borrow enough money, they don’t want to extend the line of credit because they can extend it to another client, and if you borrow too much, they see you as a risk because our industry has slowed down.”
“We really came full circle and in the last year, we were told by our manufacturer that we could no longer rely on them to be our bank,” says Branch.
Branch didn’t take this news lying down, however. He did something about it. “The first thing we did was try to understand the capital market more,” he reports. “We thought we understood it until we went for some executive education at Dartmouth that opened up a whole new window for us. We found out about the private equity market, venture capital, angel investing and the hundreds of thousands of resources that are out there that we didn’t know enough about.” Facilities Connection had a general knowledge of the resources, but they just didn’t know how to get to them. The education they received led to an Inner City Capital Connections training session sponsored by Bank of America. Through that training Branch learned how to prepare a pitch to access a broader range of financial options. MARCH 2011
Facilities Connection now had a better understanding of what the banks were looking for and with that information in hand they soon had two banks competing for their business.
and the dealer model, unless we owned the contracts we could never get financing,” says Branch. “That was a big eye opener for us after being a Haworth dealer for 25 years. No matter what we did, the banks would not even remotely entertain working with us because the balance sheet was so poor.” Facilities Connection does a lot of business with the federal government and that was part of the problem. “As an aligned dealer, the majors owned the contracts,” explains Branch. “You get paid your dealer service fee when the product ships but you never own the contract so you never have any assets. Once we understood that process and worked o Being in a tertiary market such as El Paso, Branch realized community banks and branches of large banks weren’t a good option since those operate as a community bank. Instead he had to go to the main offices of the big banks.
OFDEALER
“Because we are self-capitalized, we don’t rely on banks that much and don’t borrow money as a rule of thumb,” states Moore. “We keep a pretty low line for the size of our business; we carry a $1.5 million credit line between two locations that do $20 million annually, but we hardly ever use it.” Synergy specializes in large hospital projects and those often rely on bond money, which sometimes means waiting for that to free up so Synergy can get paid. So occasionally Moore has to use his line of credit to pay his vendor and contractors. But that’s a luxury many other dealerships don’t have. “I know dealers who have had lines called,” he says. “It’s that fine line, if you don’t borrow enough money, they don’t want to extend the line of credit because they can extend it to another client,” says Moore. “And if you borrow too much, they see you as a risk because our industry has slowed down.” Moore understands lending requirements have changed while acknowledging the continued on page 13
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Cover - continued from page 12 furniture industry goes through cycles like this from time to time, which doesn’t make it any easier for the dealer looking for financing. “Dealers who live in their line and are maxed out all the time are probably the guys most at risk,” opines Moore. “If you’re living in that line when everything’s good, the bank feels you’re a viable client, but as business slowed they got scared of folks who were too close to the line all the time. They want to loan money to people who are perfect, but dealers with really good credit aren’t the ones that need the money, so it’s kind of a Catch 22.”
not, and belts being tightened and nooses being placed around peoples necks by banks who themselves were under increasing pressure from regulators.
they got hammered by an interest rate minimum, which meant they’d have to pay a fee for any unused portion of the credit. “Hypothetically, if you have a $5 million line of credit and you only use $3 million, there are fees not just on the interest you draw out but a fee for the unused portion,” reports Noel. “We went through an expansion in 2009 and put a significant capital investment in it as well as a significant technology upgrade and to get that deal done was more painful than normal. There was an awful lot of justification, a lot of hoops, whereas in 2006 I probably could have picked up the phone, given them a brief summary of our plan and they would have blessed it.”
“Hypothetically, if you have a $5 million line of credit and you only use $3 million, there are fees not just on the interest you draw out but a fee for the unused portion.”
David Noel of Modern Office Interiors in Baltimore had heard the stories about businesses on the ropes, which MOI was
“Things quickly became a lot more formalized with more requirements and rules,” he says. “When we had our last renewal, despite the fact that the prime was low and our liability was low, they couldn’t give us an interest rate like [we had before].” It was an eye opener. Even though MOI was presented with a large line of credit,
How Satisfied are You? The Annual OFDA Dealer Manufacturer Satisfaction Index (DMSI) survey is your opportunity to evaluate the products, policies, service and support of your manufacturer business partners to improve dealer-manufacturer relations. Strictly confidential and open to all dealers, evaluate up to four of your primary suppliers in six key categories: training, product lines, service and support, sales and marketing, management, and technology.
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How Does Your Dealership Compare? Compare your company’s financial performance to the industry’s best players by participating in the OFDA’s free online
Dealer Financial Comparison & Benchmarking Guide Survey Participating dealers can compare revenue & expense structure, and profitability with: Top 10% of most profitable dealers Dealers with comparable total revenues Dealers in markets of similar size Aligned vs. non-aligned dealers Dealers with equivalent service revenue shares
Top ranked manufacturers will be receive OFDA Dealers’ Choice Awards at the June NeoCon show in Chicago.
And, receive a FREE custom report aligning your data with relevant benchmarks for easy use in improving performance! To participate, click this ad or call 800.542.6672
As a thank you for participating, you’ll receive a FREE copy of the final report so you can compare your suppliers with others in the industry. Click this ad for a Link Directly to the DMSI Survey or call 800.542.6672. MARCH 2011
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Cover - continued from page 13 When talking to his financial institution, Noel has found that MOI has had to spend more time positioning what they’re doing, why they’re doing it, and what they hope to accomplish from it. Plus if he was asking for $400,000 the financial institutions were more likely to commit to $300,000. “My sense is they’re still living under that intense regulatory scrutiny,” he opines. “They haven’t recovered and still have a fairly significant chunk of non-performing loans. Although money is still fairly inexpensive, getting access to it is extremely difficult. The renewals are fine but when you’re trying to do something new and different, the flexibility banks may have had once is now completely gone, and trying to tap into new credit is more difficult.” Like so many business owners, Lyn Patrick, president of Florida Business Interiors in Lake Mary, FL, has found many banks are not as interested in lending as they used to be—even banks he’s been doing business with for a long time. When the two loan officers he’d been working closely with at his primary bank left, he followed one of them to that new institution, an institution that was more interested in lending. Not that it was a smooth transition. Patrick still had to jump through a few hoops. “The first thing I would tell someone, even though they may not find their banker the most interesting or exciting person on the planet, they should certainly develop as close a personal relationship as they can because they are their advocate within the bank. When they take it to the bank’s lending committee, they’re doing a sales job on your behalf,” says Patrick. That made a huge difference, but Patrick still had to establish relationships with
other decision makers at that institution. “We still ended up in meetings with the new bank’s decision makers to introduce ourselves so the relationships we had before didn’t all carry over,” he notes. Even though Patrick had an in at the new bank, he found from experience that when banks are looking at you as a potential new customer they want to visit your site, see what you’re all about, look at your customer list and review financials.
to make a capital purchase like furniture,” he reports. “It’s not so much about how we’re dealing with our banker as it is about how our customers are dealing with their bankers. Companies are hoarding cash and are not as willing to spend, and their interest in buying furniture is down right now. “People don’t buy furniture for people they don’t have.”
“They’ve always done that, but they’re looking deeper into it now and asking more questions,” reveals Patrick. One thing that was helpful for Florida Business Interiors in working with this new bank was that they had a fair amount of capital in the business over the years. “Of course banks like that, so that helps their leverage ratios and some of the things they’re attracted to, but we also try to be pretty open with our books and tell them everything we felt comfortable telling them,” reports Patrick. Patrick isn’t so much frustrated with the way things are when dealing with financial institutions, but what’s most frustrating for him is how it’s impacting his customers. “It’s harder for our customers to get loans and that makes it less likely they’re going
Scott Cullen has been covering the office furniture, office products, and office technology industries since 1986. He’s a frequent contributor to OFDealer. MARCH 2011
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VISIBLE
with LinkedIn By Wayne Breitbarth
LinkedIn operates the world’s largest professional network on the Internet, with more than 90 million members in over 200 countries and territories. It is defined as “your network of trusted professionals.” This is where LinkedIn differs significantly from social media sites like Facebook, where members attempt to get as many “friends” as they can—and where the word friend is loosely defined. With LinkedIn, the goal is to connect with only those people whom you consider to be trusted professionals.
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Visible - continued from page 16 You need to personally decide whom you will consider a trusted professional based on the strategy you intend to pursue on LinkedIn. Some people choose to focus on expanding their networks even if this means embracing a loose definition of the word trusted. I like to say a person is trusted if I can pick up the phone and ask him or her for a favor or an introduction and be confident that he would say “yes” or if he is someone for whom I would do the same. LinkedIn enables you to visualize those in your network who are one, two and three degrees removed from you. The first group, which is one degree away from you, are your personal connections. Here is an example of how first-degree connections work: Let’s say I have a friend named Joe Smith. Joe and I have been friends for a long time. Maybe we hung out in the rain at our kids’ soccer games or perhaps we are close business associates. I decide that Joe and I should connect on LinkedIn. I search for his name, find him and extend an invitation to Joe, asking him to join my LinkedIn network. Once Joe accepts my invitation, we are both connected to each other at the first level. Your first-degree connections should be people who are already part of your offline network. You have a network that you have built over the course of your lifetime, whether that be high school, college, places you worked, clubs to which you belong or business acquaintances you have made in your day-to-day life. This is what I call your “flat” network. The premise of LinkedIn is that you transform your “flat” list of contacts into a dynamic, multidimensional network. Putting your contacts into LinkedIn will enable you to access additional degrees of depth within your network and will allow your contacts to assist you in new and valuable ways. MARCH 2011
Let’s go back to Joe Smith, my first-degree connection. If Joe or Joe’s company were constructing a building and needed office furniture and related services, he would probably call me, since I know him so well.
Let’s say Joe Smith knows Bob Anderson. I have never met Bob Anderson. However, let’s say that Bob is going to build a new building in town and rumor has it that this building will contain over a million cubicles. Let’s say I hear that Bob’s company, The Anderson Company, is going to construct this building. I put either “Bob Anderson” or “The Anderson Company” into the LinkedIn search engine and find out that my friend and first-degree connection Joe Smith is connected to Bob Anderson (thus making Bob one of my second-degree connections). I may know some of Joe’s friends—having golfed, gone to parties or hung out with many of them—but I definitely don’t know all of them. For this example, let’s assume that I do not know Bob and do not know how he knows my friend Joe. So, learning of this connection after searching LinkedIn, I excitedly call Joe and ask him if he would connect me with his friend Bob Anderson, to which he replies, “Are you kidding? Of course. He’s a good friend of mine. We’ve been friends for a long, long time. If my connecting you with Bob can help you, I’d love to do it.” Isn’t that what networks have always done? The added benefit of LinkedIn is that I can now see a list of Joe’s connections and request an introduction to any of his connections I would like to meet. Stop and think about the power of that. Without LinkedIn, what are the chances I would know that Joe Smith knows Bob Anderson? But with this tool, I can find it out almost immediately and can then use my network to connect with Bob.
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Imagine that Bob Anderson is friends with Jill Jones. Remember that I don’t know Bob or Jill—I only know Joe. However, I now have the ability to search Jill Jones and The Jones Company, only to find out that Jill is building a building with—you guessed it—a million cubicles. I now have a chance to talk with her by contacting Joe, who contacts Bob, who contacts Jill. Remember the good old-fashioned method of networking? If I wanted to get a hold of either Bob Anderson or Jill Jones to talk about a potential business opportunity, I would be calling them (if I even knew their names) and sending e-mails, letters, postcards, whatever. And the other thirteen furniture dealers who are located in my town would undoubtedly be using the same tactics. This would probably result in Bob and Jill screaming, “No more furniture guys!” With LinkedIn, I can have a friend or a friend of a friend assist me in making a contact that would typically be extremely difficult to coordinate. This is the number one power of LinkedIn: It takes connections that would normally be invisible and makes them visible. Make your connections visible by transforming your “flat” offline network into a dynamic, multi-dimensional network of trusted professionals and you will be on your way to securing that million-cubicle project. Wayne Breitbarth is coowner and co-president of M&M Office Interiors in Pewaukee, Wisconsin. He has released a book entitled The Power Formula for LinkedIn Success. Contact Wayne at wbreitbarth@mmoffice.com, www.powerformula.net, or www.linkedin.com/in/waynebreitbarth
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>>If former Harvard management guru Theodore Levitt is right and the purpose of business is to create and keep customers, why is it there so much more focus on the creation rather than the keeping?
New Business Development May be Filling a Leaky Bucket
The growth in office furniture consumption has generated a mad scramble for new customers, often at the expense of those customers who actually kept the lights on for the last few years. Despite a widespread understanding that it costs quite a bit more—some say as much as five times more—to get a new customer than to keep a current one, the thrill of the hunt often trumps keeping the home fires burning. If you’re only focusing on new business development without an equivalent focus on customer loyalty, then all you’re really doing is filling a leaky bucket. Typically, sales growth plans exceed the projected growth of the industry, implying an intention to win competitively-held accounts. This plan only succeeds if you manage to keep those you already have. While you’re pursuing the competition’s accounts, they’re pursuing yours. Your best customers are their best prospects.
By Valerie Atkin
If you are judging success by market share, and your share improves, all you know is that you have more. You don’t know if you have more of the right type of customers—those who are likely to become loyal. continued on page 19
MARCH 2011
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Leaky Bucket - continued from page 18 Who are your best, most loyal customers? Do you know? Without a focused effort to create loyalty, the bucket will continue silently to leak profit. A final compelling reason to make customer loyalty a priority is to ensure the sustainable value of your business when you leave it ... and you will leave it someday. Having an effective leadership team, engaged employees, and loyal customers will make your business far more attractive. Hopefully you’re thinking, “Okay, where do I begin?” The first step is to undertake a serious gut check. How serious are you? As Jeanne Bliss, author of Chief Customer Officer, says, “This work is not for the faint hearted or the quarterly inclined.” There are four customer-oriented levels: 1. Customer Service
an agreement that everyone answers the phone so it won’t ring into the vast depths of voicemail. Admittedly, it’s a small branch, but salespeople answer each others’ calls so the customer knows that someone is on their side. Without explicit attention at this level, the customer’s contact with individuals and their personal skill level determine the dealership’s brand. This includes everyone from sales, design and finance to installation and perhaps even the manufacturer. This level typically requires training in the fundamentals we’d all love to believe people don’t need but often do.
>>Customer Focus “The surest way to own a small business is to buy a big business and pay only lip service to customer loyalty.”
2. Customer Focus 3. Customer-Driven 4. Customer Loyalty
- Jim Clemmer Delivering impeccable customer service doesn’t guarantee there’ll never be a mistake or problem. A dealership’s service recovery ability is crucial.
>>Customer Service
Do customers feel as if they have your team on their side working to resolve this issue? Does sales complain about the manufacturer, or does design complain about installation?
“Unhappy employees are terrorists. Whether they mean to or not, they destroy customer loyalty right at the grass roots.” - Paul Goodstadt The Customer Service Level is the vitamin C of customer loyalty. Some will benefit; none will be harmed. Focusing on customer service means ensuring that each customer contact or ‘moment of truth’ is executed in a polite and consistent way. Many dealers start with how the phone is answered. No customer wants to chase a salesperson through a maze of cell phone, voicemail and prompts before being allowed to talk to a real person. Differentiate your dealership by making it easy to get answers and encourage employees to make the customer’s issue their own until it’s resolved.
“Siloed” organizations eliminate all possibility of customer loyalty. Each department may focus on the customer, but unless they do it together, you get “goal potluck” with each group bringing its own goal to the situation and, like many potlucks, ending up with too much of one thing and not enough of another. To improve the smooth flow of customers through their purchasing experience, a dealership must map that journey. Lay out all the customer contact points and the handoffs to be certain no customer falls into the chasm that sometimes separates departments. Staple yourself to an order and observe your dealership as a customer does.
One dealership branch I’m currently working with has
continued on page20
MARCH 2011
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Leaky Bucket - continued from page 19 >>Customer-Driven “If we aren’t customer-driven, our cars won’t be either.” - Donald Peterson, former president of Ford Motor Company The Customer-Driven Level acknowledges that it takes a village to satisfy a customer. You can recruit and hire the best individuals but without a game plan (and a good coach), you’re unlikely to win. Without a strong focus on employee satisfaction and engagement, you’ll never rise to the level of cooperation necessary to become world class. Employees must treat one another as customers and apply the same commitment, concern and care internally and externally. This is only possible when such behavior consistently modeled from the top down. All interface issues between employees, departments, and manufacturers must be addressed and resolved BEFORE problems arise.
>>Customer Loyalty “It never ceases to amaze me that companies spend thousands of dollars to attract new customers (people they don’t know) and spend next to nothing to keep the ones they’ve got.” -Jeffrey Gitomer How is loyalty created? The best way to begin looking for an answer is to flip the question. Ask yourself, to whom am I loyal? Not your financial advisor, lawyer, or doctor— those who can save you money or even your life—but businesses like yours. If you can think of one, ask yourself why you’re loyal? The company that has earned my loyalty these days is Apple.
MARCH 2011
Imagine if your customers boasted about their loyalty the way we “Mac-iPhoneiPad/iPod-philes” do. It’s easy to dismiss Apple by saying, “Look at all the resources they have.” But doing so ignores how many employees Apple has and that they are able to replicate this positive customer experience from store to store and phone call to phone call. Also bear in mind, Apple doesn’t hold sales or discount product. They create loyalty by excelling at all of the above levels and by knowing exactly who their ideal customers are. They have established an intimate relationship with customers through contact, metrics, and responsiveness—and we customers don’t mind! I’m happy to share my preferences because I know they will translate into better support and products. A perfect marriage. The significance of customer loyalty isn’t new, nor is achieving it easy. But once achieved, it yields increased profit and enjoyment while lowering blood pressure for all involved.
“Consumption is the sole end and purpose of all production; and the interests of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.” -Adam Smith, 1776
Valerie Atkin is founder and principal of Wells Street Consulting Group, an organization whose mission is to assist in the development of balanced, fully functioning individuals who can create successful organizations of their own. For more information, visit www.WellsStreet.com or email Valerie directly Valerie@WellsStreet.com.
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2011
Come see. m|t|w
June 13–15 The Merchandise Mart Chicago Pre-Register by June 11th & Save | Onsite Registration is $25
neocon.com
Why Exit Planning? By Ken Stiefler
Did you know the majority of closely-held and family-owned businesses will change hands within the next five years? Are you like many business owners who are simply too busy working to think about how you would transition the ownership of your company, think you’re too young to consider exit planning or just do not know where to begin? Consider the case of two brothers who were the owners of a multi-million-dollar office furniture dealership. Instead of planning ahead, the brothers grew tired of government regulations, changing tax codes and the day-to-day grind of running the dealership and decided to get out of the business. continued on page 23
MARCH 2011
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Exit Planning - continued from page 22 Sale to a third party was not an option because Tim and Jim were not willing to stay on after the sale—and they had failed to develop a strong management team, which any savvy purchaser would require as a condition of purchasing the company. Transferring ownership to a group of key employees was also out of the question. None had been groomed to take on this type of responsibility and nothing had been done to fund this type of buy-out. Both owners were too young to have business active-children, so their only option was to liquidate. Their highly profitable company, however, had little worth beyond the value of its tangible assets and with the sale of those assets, dozens of employees lost jobs, the business disappeared and the brothers left millions of dollars on the table. Whether you’ve thought about transferring ownership to family, co-workers, a third-party or liquidating, your education about the exit planning process begins now and your knowledge and preparation can possibly mean millions of dollars to you when you ultimately leave your company.
by subjecting the sale proceeds to one level of taxation versus two levels of taxation as with a C corporation. That means more money in your pocket at the end of the day.
5. Do you know how to transfer your business to family members, co-owners or employees while lowering taxes and potentially enjoying financial gain? Insiders rarely have the one thing you need to successfully exit your business—money! There are time-proven techniques that can make this type of transfer a successful reality and strategies that can mitigate the tax burden. This planning takes time, however, so start NOW!
6. Do you have a continuity plan for your business if the unexpected happens to you?
I want to encourage you to work on—not in—your business. By engaging in an exit planning process that you control, you can help to avoid the sad but all too common fate of the dealers above.
What will happen to your business should tragedy befall you? What would you want to happen with your business under those circumstances? Will the value you have built up in your business be lost or will your family be able to get that needed value out to maintain their current lifestyle? A well thought out business continuity plan is critical to being able to answer those questions in the affirmative!
An exit planning process begins by asking yourself the questions below. As you work through them, you’ll see that it’s never too early to start planning.
7. Do you have a plan to help secure finances for your family if the unexpected happens to you?
1. Do you know your retirement goals and what it will take—in cash—to reach them? It is possible to determine what annual after-tax income you will want during retirement (in today’s dollars), that takes into account expected longevity, inflation, medical and long-term care considerations, reasonable rates of return, as well as realistic costs for living the “good life” that you are envisioning.
2. Do you know how much your business is worth today, in cash? Having your company properly valued to meet stringent IRS requirements will give you a true idea of where your company is and where it’s going.
3. Do you know the best way to increase the income stream generated by your ownership interest?
If you don’t, and if you are like most business owners, where your business represents 70% or more of your investible estate, you are probably looking at a serious problem. Your business may be the best investment you ever made, but it shouldn’t be your only investment. Diversify and grow additional wealth outside of your business. In effect, estate planning becomes a part of your business planning. Creating and implementing your exit plan may be the most important business and financial event of your life. Work with qualified professionals who can effectively and efficiently provide clarity in helping you define all of your objectives, who will organize all the planning steps and people involved including integrating your estate plan, personal financial plan, business development and transition plans, cash flow, projects, etc. The result: specific recommendations (a road map) to achieve your objectives!
Identify the drivers that will help you increase the value of your business and act as a guide to your continued effort to boost income.
4. Do you know how to sell your business to a third party and possibly lower your taxes? If you are an S corporation and have been for a while, selling to a third party can substantially mitigate the tax burden MARCH 2011
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Ken Stiefler, CLU, ChFC, CExP is president of eXITS LLC, a business exit planning company and member of the Business Enterprise Institute’s Network of Exit Planning Professionals. In the financial services industry for over 26 years, Ken's clients are primarily business owners seeking to protect and build their wealth with a focus on business transition and exit planning strategies. Contact Ken at ken@theexitfactor.com. PAGE 23
Uncover Your Competitive Advantage Realign Marketing and Management Strategies to Transform your Business for Future Success OFDA Dealer Strategies Conference Keynote Speaker Jaynie Smith Jaynie Smith’s customized keynote for this year’s OFDA Dealer Strategies Conference will focus on helping you uncover and clearly define your true competitive advantages and realign marketing and management strategies to “transform your businesses for future success” – the theme of OFDA’s 2011 event. In an industry and general economic environment characterized by unprecedented competition and extreme margin pressures, her focus on differentiation of your organization from the competition will help your company close more sales, improve margins and retain more customers.
Keynote Speaker Jaynie Smith Founder & CEO Smart Advantage, Inc.
Jaynie Smith Highlights: 15 Top Performer Awards for CEO Coaching Contributing Business Expert Columnist to Affluent Magazine Featured in telecast with Jay Conrad Levinson of Guerrilla Marketing Association Guest on Bloomberg Radio, WABC Radio "Brinker Show,"& NPR affiliate WLRN Featured in Entrepreneur, IndustryWeek, Investors Business Daily & Business Strategies Author of the best-selling Creating Competitive Advantage (2006) - now in its 10th printing Radio host of Mind Your Biz Today on The Biz - South Florida’s only business radio station
www.ofdanet.org/conference