Catering to the Customer

Becky Ellison catered my wedding in August. Anedotal evidence says she is one of the best caterers in the region. She personally earns ”close to” $200,000 annually but she works very long hours. Becky’s food is always tasty, attractively presented, and fresh. Becky spoke to 29 students at Midwest Entrepreneurs today. 

She discussed the option of opening a resturant at the Monmouth Country Club (MCC) and firmly stands behind her decision to not go that direction. She works with a small staff of 3-4 employees, but grows much bigger to do weddings for 400. She has had as many as 25 seasonal employees for events. Becky is the caterer of choice at the MCC for their weddings and parties  – they recently began advertising together on local radio stations, and she has had a great response. She is completely booked through 2012 on weekends and most of  spring, summer, and fall for 2013 weddings. Becky is not known as the caterer with the fanciest food and/or decorations – just tasty food at a reasonable price. 

Becky was born and raised in Monmouth. She earned a WIU degree in home economics and minor in marketing. She dreamed about being a fashion designer but fell in love and had kids when she was very young. That dashed her hope of designing the latest fashions on the runway.

She is married and has three kids. Becky has had a few entrepreneurial experiences before getting into catering. She started a day care center in her home to care for her three kids and 15 others. One of them included my former student Alex Morgan who now works in Seattle as a marketing manager at Sonosite.

Becky always loved cooking – it’s her passion – a passion that became a business at the urging of her friends and family.

The story of the first wedding reminds me of how we started Above the Rim–we fell into the opportunity. “My friend’s caterer dropped out 30 days before the wedding – the friend begs me  to help her out ; just do this for me”.Becky replied “I don’t know how to do a wedding for 400”  — Her friend begs “you can do this; I need you, please” – she commits to cater the wedding and ends up staying up all night before that first wedding working to it get it right – Becky became an immediate success as word spread.

Word of mouth spreads – “please do my wedding” – one wedding is booked after another. Seasonal business, but she is steadily booked on weekends for nine months of the year.

In the early years, Becky was hiring someone to care for the kids in her day care so she could prepare food. Then she went to catering full time over 10 years ago.

How did she decide to start the business? Her decision to start a catering business was subtle– she bought $200 worth of dishes at an auction in Macomb as her first official step.  Her business is conducted out of her home – never sought any bank financing to grow.

Becky had struggles too. One big piece of her story – Warren County WAS one of the only counties in Illinois without a health department – so legally she could cook at home and sell serve the food. They changed that law on me and I had invested thousands in my home kitchen, and now I could not legally use it without another kitchen location. The Monmouth Country Club was looking to make money in new ways and the partnership has blossomed.

“I did not choose my business, it chose me” she said.

Becky has catered events from Springfield to Peoria to the Quad Cities – catered events as small as dinner parties for 15 people such as “the class of 1936” to weddings as large as 800. She now does weddings out of state and coordinates weddings for Monmouth College couples who marry in Dahl Chapel and hold thew reception out at the country club.

Marketing-wise she relies on word of mouth advertising – Becky takes the first paid contract on a specific date – if a later bigger offer comes in she honors her commitment and says “sorry I am booked” – its a costly decision to honor every commitment but her reputation is too important to tarnish.

She continues to  employs four people in the business – all family members — she was in business with her mother – but health concerns caused her to “slow things down last fall”. Her mother kept track of purchasing and cash flow and turned things over to Becky’s accountant, who does alot for her.   She also carries a lot of special insurance and keeps a lawyer on retainer.

Becky meets each client personally, talks thru the event, type of event, number of guests, type of guests (males, females, farmers, business types, high school kids, etc – I have to know who I am serving in order to know what type of food to make, what would be appropriate, and how much to make).

Everything Becky makes is created from scratch, even when making it from scratch costs more – “if you want cheap food, don’t hire me.”

There are no set schedule of prices like most other caterers – Becky prefers to sit down with her clients. “They tell me what they want, and I will buy all the ingredients and cook it and serve it – you pay for the ingredients and then pay me that much and little more for my labor – I like to balance the bill at about 60% labor and 40% food but sometimes it is closer to 50%/50%. When the event is over, I offer all the extra food to client – I have no room or use for leftovers – How can I ever use so many  leftovers, anyway?” I usually charge a flat fee of $1000-1500 for wedding and provide all of the receipts for the food I purchase. I don’t mark up the food costs and return all of the uneaten food to her client.

“I decided to not work for anyone that will not sit down with me and talk about what they want and what I can do – that process (step) prevents misunderstanding and unhappy customers – customer service is king for me – Tell me what you want, I will tell you what it costs. Then I will deliver what I promised and it will be excellent.”

One of the headaches of the business is its erratic hours and seasonality. This irregular stream of customers – sometimes 60  straight daysof events and then two weeks of nothing can drive other managers crazy when trying to line up help. It is hard for her to commit to full-time help since she never knows what the next week will bring.

She cooks about 3200 days a year – sometimes three or four different events in one day – she already has booked 14 weddings for 2013  – wow!

Becky  felt the effects of the recession last year, but things are picking up. ”most people would not have weddings for more than 150 people during the recission. Now people think nothing of 400 people that often costs $3,500 more than the smaller weddings. She  noticed when times get tough she still get parties booked but  the payers or sponsors skimp on the meals compared to heady days pre-2007. However, she has many steady customers – weekly and monthly such as the Monmouth Rotary, banks, seed corn companies, corporate board meetings, and employee dinners. The changing business conditions has forced her to make some changes to her business model.

Two years ago she served 38,000 meals for Monsanto research farm south of town — That equated to $120,000 of sales.  For 2010 Monsanto was down to $17,000 in sales. Becky said ”The Monsanto corporate belt-tightening really hurt my business. ”

Two years ago the Warren County health department was established – so she was required to organize a commercial kitchen. She operates it separately from her home business through a leasing/sharing arrangement with Monmouth Country Club – Mike Connell and John Twomey – it is a new business model for both Becky and MCC – customers sign a contract with Becky for food & customers and sign a rental agreement with MCC at the same time – this new joint venture is an evolving business model for both sides – she catered and MCC rented to Monmouth College for the recent meeting for 30 faculty members and administration.

Today you will find becky serving food at MCC and at other venues in Western Illinois with similar arrangements.  Becky has no business plan or retirement in mind. She is training new people all of the time and enjoys that part of her business. She learned by doing – followed her passion – but her future is uncertain “I will do the best I can for my customers, and if that leads me down a good path, I will follow it”.

John Twomey Shares His Success Story

 John Twomey spoke today about his entrepreneurial journey which recently concluded in a multi-million dollar sale of the company he founded almost 50 years ago. His business focused on the storage and brokering of corn and soy beans. He operated one of the largest river elevators and loading facilities in Western Illinois. Many of the qualities that all employers seek are embodied in John Twomey. His has been a rock of honesty, steadiness, and community support that made living in this area just a bit nicer.  

John identified himself as a workaholic with an inferiority complex. He was  a small, country boy who grew up on a farm, but excelled in track and field and won the national championship running the mile for the University of Illinois.

John just sold one of the largest grain elevator (storage) businesses in the State of Illinois in November. He is an unassuming gentleman who claims he “just wanted to do what is right and help his neighbors”. His business philosophy was similar.  ”I made sure to hire the best man, even when we didn’t need anyone. My customer is satisfy my customers and do right by my employees–I made sure they were treated fairly. I never want to be accused of gauging a customer or mistreating my workers. We charge what is fair and hustle to deliver more than what is customary”.

If you want to hire or do business with someone ethical, John Twomey was the picture that comes to mind for farmers in Western Illinois. John had that x-factor that made him a multi-millionaire. The diligence, stick-to-it-tive-ness and tenacity came from his Midwestern roots. It is something very tangible, so you know it when you see it. Our 29 students and a few guests saw it clearly today in the classroom in McMichael 308.

John Twomey was the largest grain dealer/handler in Western Illinois.  The farmer could (and some do) deliver their grain to the ultimate user or the barges at river — that is a costly thing to do and an activity at which the farmer has no particuliar comparative advantage.  Given this real world cost, there is an opportunity for an entrepreneur/middleman.  John Twomey  offered that service. He made an art of storing corn and people from all over the world came to study their methods.  His company collected the grain and moved it closer to its ultimate buyer through more efficinent methods and innovative machinery. John had the economies of scale to develop specialized knowledge of the commodity markets and became successful in knowing how and when to sell.

Why Unemployment Lingers

There are too many people who do not want to work, claim unemployment benefits for the maximum period of time possible, or collect food stamps when they could otherwise work. Most people are too scared to get more education to qualify for better jobs because they are forced to take out student loans and risk failure.  It is a precarious situation.

Our country’s leaders have a lot of excuses and few answers to why unemployment lingers (it remains above 8%).

What is the key to creating more value, wealth, and yes, jobs? Entrepreneurism. What makes entrepreneurs so important? They take risks, spend investment capital, and hire new employees that stimulate the economy. President Obama made clear the importance small companies play in job creation in the recent State of the Union address. What proof do I offer that entrepreneurs drive wealth and job creation? Israel Kirzner (1973, 1999 http://www.nyu.edu/econ/dept/vitae/kirzner.htm) along with Grebel, Pyka, and Hanusch (1987) focused a lifetime of research on entrepreneurs as catalysts for market growth and change. These scholars provided the foundation for what should become an environment friendly to the entrepreneur. But most policy makers and citizens are confused about why a friendly environment for entrepreneurism is critical for prosperity.

Entrepreneurs I meet with every day are faced with more regulation, taxes and mandated employee benefits than ever before in our history. The current political enviornment is much more friendly to unions and unskilled workers than entrepreneurs. Entrepreneurs risk their livelihoods, reputations, wealth and family life to create value and jobs. Unions leaders and supporters of the President complain successful entrepreneurs are not doing enough or paying their fair share.

I believe  a friendly environment for entrepreneurs is the catalyst for job growth–it is the essential ingredient missing in our economic recovery.  Suggestions for policy changes are 1) reducing barriers to starting limited liability companies that reduce the risk to the personal assets of entrepreneurs, 2) reduce the mandated employee benefits and strengthen the at-will employment laws. An example is limiting wrongful termination awards and responsibility companies have when market forces cause them to reduce their employee count  3) allow entrepreneurs to more easily protect their intellectual property both home and abroad 4) reorganize the Small Business Administration around accredited schools of business. What are the benefits of these changes? Job growth and greater prosperity.

Even in a tough economy, entrepreneurs are the first to adapt to changing circumstances and keep economic activity at its highest level. Entrepreneurs are flexible and adaptable. When a viable market surfaces, they are willing to adapt their business model to the opportunity, often at the same time larger companies suffer the brunt of market gyrations and downturns.

Modern researchers built upon the theories of “creative destruction” and the entrepreneur as hero put forward by Joseph Schumpeter . Schumpeter provides the most substantive theory to demonstrate how entrepreneurs add value to products and services and most importantly buoy the financial markets.

Entrepreneurs are important because they are willing to risk their capital training and paying for new workers who are not immediately productive. If you want to put your finger on a leading indicator for job growth, take a look at the start rate for small companies who added more than five employees to their payroll in a calendar year.

We need to be competitive with companies abroad. International entrepreneurism involves the added complexity of adapting a product or service to a new market or culture. International entrepreneurs face numerous challenges and barriers that add complexity to any venture such as trade barriers, legal constraints, distribution limitations, and human resource issues not found in their home country. Government can be a help in the area of breaking down barriers to entry and protecting intellectual property.

Entrepreneurs are willing to take significant risks to achieve results. I am working with several right now that recognize incredible international opportunities. By staying abreast on the best methods and products in their respective industries, they could be part of the engine that could help our nation compete more effectively .  Entrepreneurs are the most efficient players in gathering or assembling resources from all over the globe and are both close and accountable to the customer, whether they compete in Canada, India or Brazil.

Based on my experience at three start-ups ventures, Netcentives (1997-2000), Capener Advertising-San Diego (1987-1992), and Above the Rim (1988-1993), I spent a significant amount of time finding, interviewing, and training new employees with entrepreneurial drive and smarts. Those new employees that could deal with ambiguity and change thrived. Those that were willing to change and adapt as we uncovered market opportunities found working in a start-up a thrilling ride. Others hesitated or became scared watching the changing landscape. The speed required to seize these opportunities seemed to be similar to the metaphor of the train pulling into an intermediate stop and the passenger chooses to get aboard or watch the train leave the station as fast as it pulled in. Successful entrepreneurs know when to jump on to (the train) something and when to get off in a hurry.

Block and MacMillan wrote, “The entrepreneurial drive to pursue [opportunities] is a combination of many factors, chief among them motivation and attitude. These attributes in turn, affected by childhood influences, role models, and later workplace environments. Providing they work hard, those with more talent will clearly do better than those with less; entrepreneurial ability can be directly influenced by education, training, and experience. In other words, entrepreneurs are made, not born” (Block). 

Entrepreneurs must be able to influence others to succeed. As a company grows, many rules or cultural norms become large barriers to change or even [continuous] improvement. These barriers prevent entrepreneurs from succeeding unless they can persuade their colleagues to follow them or provide them with support and additional resources, so the best entrepreneurs tend to be skilled at negotiation, diplomacy and mediation.

From my experience in both corporations and start-ups, the typical entrepreneur is more like a “Bull in a China Closet” when it comes to corporate politics until they fail a few times. They can run ruff shod over people who do not have thick skin until it hurts their business or they lose key employees. One example is a successful entrepreneurial relative of mine who  said, “I have no patience or time for these corporate bozos”. If you set corporate policy or work in government, make sure you don’t put up barriers in front of the entrepreneurs or small businessman that are adding employees. Entrepreneurs are the heroes and should be treated as such; they are the engine for economic prosperity. Let’s let our local policy makers know that government is more of a hinderence than a help to creating successful new companies. Let’s reverse the trend towards greater government involvement in regulating and taxing business.  This couse of action will free entrepreneurs to do what they do best: drive productivity, wealth creation, product value, and create jobs.

Will Zimmerman Projects $4 Million Annually

Will Zimmerman spoke to Midwest Entrepreneurs tonight after one year of successful operations selling and maintaining grain bin systems. He graduated last May from Monmouth College majoring in business with an emphasis in Entrepreneurism. Will and I worked closely together to develop his first business plan which he used to successfully obtain $200,000 in bank financing for the purchase of his company he calls Modern Grain Systems from his former employer Bill Thompson.

Will has been building grain bins for Thompson for over six years. Thompson approached Zimmerman since he was such a great worker and maintained excellent re pore with customers. It was obvious to Thompson that Will also had the education and desire to succeed. He learned many things from his mentor, Thompson, who continues as the general manager of the business. He hopes Will can be even more successful than he was helping farmers create storage bins providing opportunities to 25 employees.

Thompson was successful in the business for over 25 years by honoring his word with his farmer customers. He honored his commitments and did what he said he would do. Zimmerman hopes to demonstrate consistent performance too. Will plans to  continue that philosophy. He paid of $105,000 of interest and principal and paid back his parents loan in less than 12 months of operation. He pulled of what all entrepreneurs dream of—profitability in year one. Zimmerman has a dream–to pay off all of his debt and build a lake house near Avon, Illinios in the next two years. He sell both large and smaller systems–check out the link to his supplier-GSI for more information on the products he installs for his customers.

His business model is to not mark up any outside costs and keep his labor charges to a minimum. He often wakes up at 4am to load tractor trailers for job sites so the crew can get right to work in the morning when starting a new assignment. Will often works 80 hours a week to the chagrin of his girlfriend. “I can understand why other entrepreneurs have problems balancing their personal lives”, claims Zimmerman. It is hard enough to keep good relations with my girlfriend. Girlfriends are important but customers are king.

Will’s business is growing as he becomes more customer savvy. He realizes the tax deduction for capital investments in grain storage has gone for farmers from 100% to 50% and that has slowed down inquires for 2012. A sales angle Will uses is the growing cost of transporting corn and soybeans to the grain elevators. The cost of maintaining, owning, or leasing three or four semi-tractor trailers is significant. “It is no longer something a farmer can ignore. It can be upwards of $165,000 annually for a new truck and trailer worthy to transport the maximum loads. Plus fuel costs are expected to rise”.

Another competitor who is 10 times the size of Zimmerman’s operation let Will in on some secrets of successfully bidding large projects.” I found after losing a $1 million dollar job that I was bidding the concrete too high. I knew the structural engineer would require more concrete than the farmer deems necessary. But my competitor lets the engineer be the bearer of that bad news (the increase necessary to pay for 100′s of additional yards of concrete) and consistently underbids his concrete”.  This gave his competitor an advantage over Will who was trying to be more transparent in the bidding process. “That concrete bid cost me hundreds of thousands when I lost the job”.

As the professor that helped Will develop his business plan, I was impressed to hear how much he had learned in the last 12 months. have no doubt Will will continue to succeed. He showed a video from www.youtube.com that demonstrated his work and showed in graphic terms how well his company executes million dollar storage facilities. I look forward to hearing more plans for his expansion into a new company headquarters in Avon, IL and financial success in year two.

Floyd Boykin Jr., Publisher and Poet

Floyd Boykin spoke yesterday to a large audience at Midwest Entrepreneurs. Mr. Boykin was a Communications major at Monmouth College, from St. Louis, graduating in 1993 . At Monmouth he was active in the Black Students Organization (BAAC), and music director for R&B/Hip-Hop at WMCR. His major venture these days is publishing “SpokenVisions” magazine (re-launched recently electronically). He is both a publisher  and an award winning poet. He plans to open a poet’s cafe in St. Louis in the next few years. Floyd continues to produce spoken word raps and poetry exposing the world of drugs, cruelty against women, and “inner beauty”. His last CD won a creative award  and his own music recordings have been used in promotional videos for the health and beauty segment. He was selected for inclusion as one of the 2011 Honorees in the 7th Edition of Who’s Who in Black St. Louis. Mr Boykin is working on his second film project that has to do with violence against women (a long time concern of his in terms of negative attitudes in hip-hop music). He also is an activist and supporter of research for the cure of Lupus (the disease that killed his mother).

MC Student Entrepreneur Jack Donnelly Speaks

Jack Donnelly, owner of the After Dark Nightclub near the square in Monmouth is unique. He didn’t wait until he graduated to launch his own venture. He opened his nightclub almost a year ago. After Dark features a state of the art sound system, lights, and has become an entertainment forum for MC students and even high schooler and others under 21 years old. Come today to McMike 308 at 4pm to hear about how Jack has been successful and what is next for his start-up.

President of Rural King Making Waves in Retail

Alex Melvin, president of Rural King spoke yesterday in Midwest Entrepreneurs. Alex joined the family company just four years ago so his ascension to the presidency has been meteoric. He graduated in 2005 from Monmouth with a degree in Business Administration and was of my favorite former students (we are not supposed to admit we have favorites, right?). Alex, along with his father, Gary, successfully led the Rural King expansion beyond 50 stores in 2011, increasing overall store sales from the $550,000,000 in 2010. Alex plans to open a number of new stores in 2012 with 20 deals “currently on my desk.”

Alex is excited about exclusive deals with some premium manufacturers, but worries that unless they streamline buying and go direct with more manufacturers their margins will suffer. He hopes Rural King’s 55 stores improve their margins from around 27% to closer to 30% by expanding the number of direct relationships and efficient management. “Top management at Rural King are few in numbers but our line people pick up the slack.”. Having low overhead helps improve Rural King’s retail margins that are the envy of the big box competitors.

“We compete directly against Walmart, Home Depot, Lowe’s, and Tractor Supply,” he explained  He continues to be impressed with Menard’s, which he believes is the preeminent competitor in his space. Rural King is vertically integrated ; they own their own trucking company and maintain 40 semi-trucks and numerous tractor trailers.  He believes government regulations, especially those in the trucking industry are “huge impediments” to profitability. “Limiting hours to 10 per driver per day really hurts my business,”he said.

He believes in offering ownership to key employees to keep them engaged and focused. An investment of $2,500 in private Rural King stock four years ago is now worth $50,000. Alex is now focused on opening new stores and increasing their web business. Just two years ago he opened his first new location that he managed and owned and based on that success he was promoted to president in 2011. That original location was in Wentzville, Mo., outside of St. Louis.  

His work with his Internet team has been successful in finding new sources of quality products internationally, and he pushed web sales to their highest levels in Rural King history. Alex believes he can develop a niche to sell outside his geographic area through the web. His business is particularly strong in Texas, where retail prices are higher.

Marketing-wise, Rural King advertises with a weekly circular newspaper insert that “has many products.. He doesn’t believe in radio or TV but may experiment some this year. Recently, they have been collecting ZIP code information from customers and through data analysis, he has created Google Maps that track how much money is spent by ZIP code so they can heavy-up or decrease advertising in less desirable areas.

Alex complained about government intervention and taxes. He called Illinois the least-friendly business state and compared it unfavorably to Indiana or Missouri. He believes Internet retailers have an advantage because they do not charge tax, so he is investing in his Internet store business. He predicts online sales will go up dramatically in 2012. “My biggest mistake is that we didn’t push online sales two years ago”.

Alex says it is challenging to work with family or help find a job for a friend. “If they know you, they may try and pull things others wouldn’t consider. They want a favor. They think I would hesitate to let them go if they didn’t perform. But that isn’t the case. From my experience the people you help the most, disappoint you the most [and are usually the least grateful].”

Buyers at Rural King are part of a buying co-op. They are prohibited from accepting gifts, lunches, or boondoggles from sales representatives. “It compromises our focus on lowering costs and finding the best values for our customers”.

 

McDonald’s Entrepreneur Visits Campus

Mike Luna’s story is an American dream come true, for him and his hundreds of employees that got a start in one of his four McDonald’s franchises (he has sold all but two as of 2011). He spoke to my 29 students yesterday on the 3rd floor of McMichael Academic and gave the advice, “listen your mentors who have been successful”. Like other teenagers looking for some extra spending cash, Mike started in the Galesburg McDonald’s flipping burgers  for Connie Miller Sr. in 1960. “I wasn’t any good on the front counter, so I found a home “getting orders filled in the back”. I was a condiment expert, but I did not know what the word condiment meant at the time. Mike got so good at what he did he trained hundreds of employees for the Miller Family over a 20 year career. Connie Miller was a personal friend of McDonald’s founder Ray Kroc.

Mike learned the business he dreamed to own by working for someone else until he got his break. “I borrowed $18,000 to get my first store. Today it would take over a million.”  Luna was asked to open up a series of new stores all around Western Illinois and helped open one of the first drive-thrus for McDonalds. He gained a great reputation and that led to his big break-an offer to purchase his first franchise in Monmouth.

Later Luna invested in three other franchises.  He now maintains the highest standards in his Monmouth location and in Aledo, where his son leads the team there. You can find Mike filling orders today alongside teenage workers if you come in during a busy time. He realizes that being there (in the store) instills confidence and a little fear factor in the average McDonald’s employee. “They see I can do every job in this place and I expect the same from any of my managers”.

Luna explained the power of a great entrepreneur. I was inspired by Connie Miller Sr. my boss even though he rarely said a kind word. Mike also met Ray Kroc (McDonald’s Founder) and Fred Turner (McDonald’s Original President) on several occations and his relationship with Turner was key to obtaining his first franchise. “Your reputation and integrity are so valuable.

The McDonalds founders were genuine heroes for people like Luna. “I can tell you countless stories of people who became rich from following the lead of these everyday heroes. These men that changed people’s lives for good. Now Luna gives young people a start, experience in management, and training that becomes the foundation for success in a variety of fields. “My former employees are doctors, lawyers and actuaries.”

“In the 1960′s we could get a franchise location if you had a good reputation as a hard worker and a few thousand dollars. That isn’t true anymore”. But he believes there are great opportunities for young people today. If you can find a great boss, you should be patient and good things can happen. I worked to earn that level of trust under the steady management of Connie Miller.

Miller was the key contact for Mike Luna that secured his first franchise. “It was an incredible opportunity I earned because I had worked under Connie Miller Sr., a man Ray Kroc and Fred Turner respected. Plus I had the patience and stamina to wade through the process of getting a great location like Monmouth”.

How did he know he would be successful? He had a “hunch” Monmouth needed a quality, inexpensive place to eat. “I waited in lines outside of the local Hardees (the competition) for 30 minutes one day”. He said ”Monmouth was exactly the kind of place he had dreamed about owning”. He opened on highway 34 in 1980 and knew after the first day, it was going to be a great ride. One young employee left for college telling Luna, “I am going to college so I don’t have to work like this anymore”. She came back the next summer and apologized telling Luna, “I learned how to work, how to take instruction, how to succeed from you. I am so sorry for what I said last year. Its people like you that make success possible for a lot of us” She is now a successful lawyer in Washington D.C. area.

What happens for Mike now? “I keep learning” , says Luna. I spent an hour studying In and Out Burger in California. “They are doing great things with training, plus the product is stellar”. ”They push what we considered management decisions down to the staff level. Their staff is a cohesive, capable group of young people. We need to be ready for that kind of competition”. From what we heard today at Midwest Entrepreneurs at Monmouth College, Luna will be more than ready for the next challenge.

Founders of Advanced Rehab Speak Out

On Thursday, we welcomed Chris Byers and Mike Salaway, 1989 Monmouth College graduates and entrepreneurs in Central Illinois back to our class. Both Chris and Mike earned degrees from Monmouth and then Physical Therapy degrees before launching their careers. Each had been successful in their own ventures before realizing they shared a similar vision for how to provide the best rehabilitation and sports medicine service. Of course they were friends at Monmouth College too. The network of common friends and philosophy resulted in a great partnership that grew from one clinic in 1997 to nine clinics in 2011. See the link to their website for more information on their successful company :

http://www.advrehab.com/about-us/about-us.html

Chris talked about the medical doctor that was their “angel investor” when they started since they did not have the start up capital to aggressively launch the clinics. They were grateful for his involvement that made the business possible. But this angel wasn’t always helpful. This silent partner who owned 51% of their business until 2006, let Mike and Chris sweat out every monthly payroll in the first few years as their full-time staff grew to 60 physical therapists and about 65 professional staff.  Philosophically, they differed in their approach and what they believed to be ethical and fair. Chris and Mike differed from their investor in their approach to patient care and how to train and handle staff. One example is the way Advanced provides incentives for profitable clinics. “in the early days, everyone in health care didn’t pay much attention to cancellations or a poor repeat visit record. We track those metrics and reward our staff based on hitting certain numbers or thresholds. One key metric is customer satisfaction and willingness to refer us to their friends and neighbors.” We had a philosophy about patient care, too. One thing we found is when the the therapist sits down with the patient (rather than standing while they are talking) and spends a few extra minutes listening the patient will respond much more positively than if they are hurried in and out.” One big issue is the new health care legislation and the poor rates of medicare reimbursement. Advance has had to adjust to a myriad of changes in how insurance and healthcare is billed and collected. “We could depend in the past that for every $100 we billed, we would get $85 back in payment for our services.” Now we collect less than 40% with the usual and customary charge adjustments from insurance companies and reduced medicare payments. “We don’t know what will happen in the future, but the advent of Obama-care was a terrible thing for most medical practices and specialists– its too hard to earn creditably and licenses over years of school and professional practice and then collect 10 cents of the billed dollar from government customers because of this mandate. It will severely hurt our business.”

Advanced has been successful in three key ways: 1. They focused on smaller towns and hired people with strong local ties and contacts. 2.  They worked closely with other health care providers as an outsourced solution and revenue source. One example is their management of Cottage Hospital’s PT services. 3. They worked with their patients so that they could afford their co-pays and deductibles.

“Workman’s comp is another key area of our business because so much of our marketing is tied to physicians and their practices. We depend on their referrals and referrals from sports coaches and trainers”

Chris and Mike are paying back their good fortune to Monmouth College too. “We sponsored the new football scoreboard and we have hired 15 Monmouth graduates in various staff positions.” Despite the unclear future, it was obvious they love what they are doing. As Monmouth College completes construction of its new science and business building, Chris Byers and Mike Salaway are perfect examples of why these two disciplines belong together.

The Power of Consultative Sales

What is the value of consultative sales in a digital world? Even more valuable than it was before the Internet age. In our fast pace world, it is hard to keep up with the challenges and opportunities of our customers. Young salespeople learn quickly that today’s customers are looking for solutions, not their company’s product. Products are simply tools to solve problems or take advantage of opportunities.

When you come knocking on a customer’s door, you better be prepared to add value by talking about solutions to their needs or problems. You will have to take some time to learn their business. You must find a way to gain trust so that customer will share their concerns or plans for growth markets. That customer may be losing traction in profitable, vertical markets or have recently fallen out of favor with end users, but they won’t share that information without their trust.

My experience is that the best salespeople are solutions providers even when it does not involve an immediate incremental sale. These consultative salespeople become a valuable resource worth spending time and energy on. Why? These individuals find a way to add value. They are relentless about finding new ways to use their current product mix or new products to solve the customer’s issue.

At my second start-up venture Netcentives, I experienced the necessity of being open and flexible to market shifts. We developed Click Rewards to securely distribute airline miles as rewards for e-commerce purchases. Our business model was to buy the miles for $0.02 per mile and distribute them for $0.04 each. Merchant volume was the critical ingredient in our success. Since our only customers were online retailers we were banking on an explosion in e-commerce in 1999. That explosion never came. Those involved in only e-commerce began to die off. Only Amazon, e-Bay and Dell seem to be doing well. Despite that, Amazon was losing money along with almost every other retailer.

After a number of Netcentives’ sales presentations we found that even the best online retailer in 1999 projected very little increases for 2000 sales. Plus their margins were constrained severely by high shipping and handling costs. It was clear we had to find a new sales channel because the Netcentives mileage incentive for e-commerce was before its time and it never really took off. What did work well was selling large banks of miles to distribute to companies as incentives–using miles as quarterly or annual bonus to top-off a cash bonus that did not get taxed. It also became a retention strategy for certain companies who wanted to reward loyal personnel.

My first start-up was a marketing agency in San Diego with a creative name: The Capener Company. We were struggling as an agency to get more business. We found that finding talented personnel was not cheap or easy. It was also difficult to keep the top performers happy since they were always getting calls from competitive firms. We needed our talent to bill more hours to clients, but the more we pushed the faster we burned people out.

It was similar to the model law firm use when they offer partnerships to sixth year associates. They bill on a muliple of salaries too. At The Capener Company, we pitched and won the Ocean Pacific (OP) business. One of our first recommendations to our new client was the development of a new basketball apparel line with long board shorts and t-shirts with a basketball theme. OP did not like the concept for their brand but helped us develop it into what became Above The Rim. It is how ATR got started. I would like to say the idea came to my brother or I as a stroke of genius in the shower, but it didn’t happen that way. ATR became an alternative source of revenue for the agency and quickly grew. Three years later we sold it to Reebok.

My recommendation to new ventures is be open to new business models and sources of revenue. You are likely to find opportunities in your efforts to satisfy the needs of key customers. It created a lot of value for The Capener Company.