Before she'd built up her headquarters staff, Rogers had been able to keep her cash flowing from one ad campaign to the next. But now her general and administrative expenses had gotten out of hand. And although she was aware of the problem and had been looking for a good financial manager, she hadn't found anyone who worked out. She had already talked with Tommy Thompson on the advice of one of her grads, a member of a New York investment banking firm who knew that Thompson had turned around another failing company. Thompson had offered to buy the company. "But there was a big problem," says Rogers. "Tommy smoked three to four packs a day." If there was one thing Rogers was adamant about, it was that she would not taint Smokenders' reputation by hiring smokers.
Rogers' advertising costs added to her problem. In 1978, she hired a New York advertising agency and found herself spending huge sums of money on print, radio and television advertising. However, she wasn't signing up enough smokers to cover her costs. Finally, in September 1979, everything came crashing down. The campaign that was supposed to save her and the company flopped. The day she realized her precarious financial position, she put in a call to Tommy Thompson at the La Fonda Hotel in Santa Fe, N. Mex. He was on vacation there, looking for some native Indian art to add to his already large collection of Haitian art. "When she read me her figures from the last ad campaign," says Thompson, "I said, 'Jackie, not even you can do it."
Thompson knew what he was talking about not only because he had reviewed Rogers's situation, but also because he knew the business she was in. He and his partner, Doug Hall, had already succeeded once in the seminar business, taking Evelyn Wood Reading Dynamics from near-bankruptcy in 1974 to selling the company for $7 million four years later.
Doug Hall "was just a country boy" from Seattle, Wash., who hd been in the banking business before becoming one of Evelyn Wood's largest franchise owners. He describes Tommy Thompson as a super-educated financial genius with a 180 I.Q. and an M.B.A. degree from Harvard. The two hit it off immediately when they first met one night in Seattle after Hall had finished running an Evelyn Wood introductory meeting. Tommy was in town to find out whether Doug, who owned 30 franchises, was interested in joining with him to buy out the parent company. He remembers how much energy Doug had: "He was going strong from 11:30 p.m. until 4 a.m. while we had our discussion, and then he was awake two hours later to prepare for the next day's business."
Doug's memory is a little different: "Tommy surely must have thought I had a bladder problem, because every 10 minutes, I had to leave him to go to the bathroom to try to figure out what the hell he was really saying. Finally, I got so that I could translate him." And the two men became successful business partners.
When Jacquelyn Rogers declared bankruptcy after talking with her attorney and Thompson, she was losing $1.6 million on sales of $6 million, and it was the third year she had posted a loss. The New Jersey bankruptcy court appointed Thompson as chief reorganizer. Rogers put him through the Smokenders course on a one-on-one basis and Thompson succeeded in kicking the habit in 10 days. Thompson asked that his partner Doug Hall, who had also recently quit smoking, be brought in to help revive the company. As part of the reorganization, the two partners became majority stockholders.
Smokenders was tailor-made for their talents because it was the same kind of business as Evelyn Wood: The trick is to get people in the door at an introductory meeting to listen to the sales pitch. That was Doug Hall's area of expertise. He'd been doing it at Evelyn Wood for 10 years. Tommy Thompson's job was to bring some financial controls to a company that had been long on product development but short on management. The two of them were brimming over with confidence.
"I always told Jackie that we were good mechanics," says Thompson, "and that we would make her more productive." True to his word, the two focused on productivity after being appointed chief executive and operating officers. They cut out the bureaucracy and cut down on advertising and general and administrative expenses. Their financial strategy in 1980, their first year, was to concentrate on lowering the volume of the company while raising the profits -- and they were successful. Sales dropped to $4 million, but the company posted a profit of $600,000, its first in years.
Smokenders began to rise from its ashes the day Thompson and Hall drove down together to Phillipsburg and cut the headquarters staff to six people.
"When we went into that office on Monday to terminate all those people," says Hall, "we had our tennis shoes on, expecting to be running around answering phones and covering... and nothing happened. They weren't missed."
Fay Fehd concurs. "There wasn't even a ripple," she says. "They were all sitting in Phillipsburg, eating up our profit -- pushing papers. We were like the government, drowning in paper."
It didn't take long for things to get more productive. Since the field staff no longer had to waste time filling out reports, they could get on with the business of signing up new participants. Thompson and Hall dissolved the marketing department, absorbed the distribution operation into the Lafayette, Calif., offices Hall worked out of, and shut down the print shop because it was inefficient.
The biggest change came in the accounting department. "Their accounting structure was antiquated," says Hall. Although there were a lot of figures flying around about how much each chapter was spending, the company hadn't collected the data that would help it make business decisions, like cost per lead, cost per registrant, and other advertising and marketing data. Thompson replaced the 12-person financial services staff with one accountant who came from Thompson's educational publishing company, Mind Inc., in Norwalk, Conn. And then he gave every field manager his or her own checkbook and a budget, and told them to take care of their own bills.
