Network questions and answers.
Now that risk and hard work have paid off, a CEO wants to reward himself but worries employees will resent his conspicuous consumption. Read his letter and tell us (by mail: Inc. Network, 38 Commercial Wharf, Boston, MA 02110; fax: 617-248-8090; or phone: 800-238-1756), should he stop worrying? Or should he feel guilty? And what kind of car do you drive?
My wife and I want to lease two Lexuses at $2,000 per month. The company can easily afford it, but my workers all drive clunkers. No one earns more than $40,000, while my wife and I take out $200,000, combined. How do I reconcile my upscale lifestyle with the fact that employees earn so much less?
"Your concern is one of morale, not morals," says Gary Edwards, president of the Ethics Resource Center, in Washington, D.C., which provides consulting to businesses and government. "You have an obligation to pay employees fairly," he says, "but as an owner, you took the risks and should reap the rewards." The real question is not, Is it fair? but, Is it wise?
Chuck Piola, executive vice-president of sales for NCO Financial Systems, a $3.9-million collection agency in Blue Bell, Pa., drives a Mercedes but makes sure everyone knows his story. "Apologize for getting rich. Say, 'Listen, I'm uneasy with something. I've worked hard, and I want to reward myself.' " Piola also lends out his Benz occasionally; that, he says, forestalls resentment. But Piola may be blind. Joe McGowan, NCO's vice-president of operations, says, "Come raise time, employees see that success and want a piece of it. All they deal with is perception."
Mirit and Josef Rabinovitz, founders of JMR Electronics, in Northridge, Calif. (#268 on this year's Inc. 500), heard grumbling when they bought a Mercedes. "We laughed it off. If you become defensive, that legitimates their objection." The episode underscored a change many start-ups go through: as a company grows, owners and employees grow apart, financially and socially.
Jack Stack, CEO of Springfield Remanufacturing, in Springfield, Mo., and author of The Great Game of Business (Doubleday/Currency, 1992), worries about the long-term consequences of such division. It damages credibility, he says. "And if your business goes down, there will be no negotiating for concessions." Stack drives a 1989 Buick Regal with a dented front fender. "I know how easy it is: banks offer you lines of credit, and it's easy to suck that money right through the company. But are you building value? Are there retained earnings in case of a downturn? Or will you have to lay off one of those $40,000 workers? Do you send back the Lexuses and then ask the employees to help you? I can always look employees in the eye and say, 'We're equally involved.' "* * *
I am about to launch a line of hair-care products for the Asian market. How can I get ethnic-marketing expertise?
San Gabriel, Calif.
You can explore a market cheaply by making contacts within the target community. Develop personal relationships, not just business contacts, says Arlyn Morse, president of Kayla Cosmetics, in Burbank, Calif., which specializes in cosmetics for the Asian American market. Use those contacts as an informal focus group. Most ethnic groups have business organizations and chambers of commerce. The U.S. Pan-Asian Chamber of Commerce (in Washington, D.C., 202-638-1764) and the U.S. Hispanic Chamber of Commerce (in Washington, D.C., 202-862-3939) can direct you to local chapters. Or call your local chamber of commerce.
The Minority Market Series compiles American Demographics and Numbers News, featuring articles from the past three years on Hispanics, Asians, and African Americans (800-828-1133, $17 to $29). The ethnic yellow pages list publications, organizations, and businesses within particular ethnic communities. Find it through ethnic chambers of commerce.
Remember that ethnic groups are not monolithic. Marj Pendergraft, a director at Erlich Transcultural Consultants, a Los Angeles ethnic-marketing-consulting company, says, "Within the category 'Asian' fall several distinct cultures, including Japanese, Chinese, Vietnamese, and Indian. You wouldn't want to market to them all in the same way."* * *
Running On Empty
My small trucking company can no longer afford to pay the salaries and expenses of our sales force. We may switch to independent reps. How can we build and maintain a successful independent sales organization?
Warren L. Ellis
Laguna Niguel, Calif.
First make sure independent reps are the answer. The Small Business Administration publishes a 50¢ checklist, "Is the Independent Sales Agent for You?" (SBA Publications, P.O. Box 30, Denver, CO 80201-0030), which gives tips on choosing reps. (See also "Reps or Sales Force?" Sales and Marketing, December 1991, [Article link]). And don't fire staff reps too soon. Ed Bobrow, founder of marketing specialists Bobrow Consulting, in New York City, says, "You'll need someone who's experienced enough to supervise, train, and motivate the group." He recommends Harry Novick's Selling Through Independent Reps (AMACOM, 1988, $69.95). Also try Managing Mavericks, by Leslie J. Ades (McGraw-Hill, 1992, $22.95); it has a checklist for choosing agencies.
Lucinda Seigel, president of Dark-to-Light, a maker of light controls in Pembroke, Mass. (see "Looking for Reps in All the Right Places," Sales & Marketing, July 1992, [Article link]), found half her independent reps through such industry groups as the Manufacturers' Agents National Association (MANA, 714-859-4040). Its 1992 membership directory ($85 for nonmembers) organizes agencies by product and region; complementary reports include hints for choosing and motivating reps. Ask for the group's free index of Agency Sales magazine features (back issues, $5; single articles, $3.50).
Also scout membership directories of trucking organizations, such as the American Trucking Association (ATA, 800-282-5463), which publishes Trucksource ($30 for nonmembers), a directory of more than 400 associations, agencies, publishers, and manufacturers. The association's weekly, Transport Topics ($59 a year, 703-838-1770), is full of sales agencies' ads. Attend an ATA gathering and tack a note specifying your marketing needs on a bulletin board there. (For a conference schedule, call the ATA's Sales and Marketing Council at 703-838-1926.) You can find reps in complementary industries, too. "Using Others to Sell Your Products" (Sales and Marketing, August 1991, [Article link]) tells how.
Moira Toner, public-relations director for Northwestern University's Transportation Center (1936 Sheridan Rd., Evanston, Ill., 60208-4040; or fax to 708-491-3090), has launched a "Dear Abby"-like service for truckers, soliciting advice from faculty members.* * *
Jewel in the Rough
I run two jewelry stores. How do I analyze expenses and write a business budget? My accountant can't do this.
Frank Anson Jewelry
New York City
First you need a business plan, especially in the jewelry business, where inventory turn is the key to cash flow. Both David H. Bangs Jr., author of The Business Planning Guide (Upstart Publishing, Dover, N.H., 1990, $18.95), and Joe Mancuso, author of How to Write a Winning Business Plan and How to Prepare and Present a Business Plan (Simon & Schuster, 1991, $14 each), suggest a visit to the library to read about how to prepare a business plan. For industry-specific information, contact Jewelers of America (800-223-0673), which offers workshops and publications to members. Also call editors of such trade magazines as Jewelers' Circular/Keystone (215-964-4000) and National Jeweler (212-869-1300).
Then check out business-planning software. FisCAL ($99, 800-248-5550), used with Halcyon's Current RMA Industry Standards Data Disk ($150), compares your company with industry norms; Success Inc. ($129.99, 714-720-8462) leads a question-and-answer dialogue. (For a look at other software, see "Running the Numbers with Software," Banking & Capital, April 1991, [Article link].) Once you have a business plan, an accountant should be able to help you write a budget. If yours still can't, get a referral for another one from the American Institute of Certified Public Accountants (212-575-6200). n
-- Reported by Michael P. Cronin, Karen E. Carney, Christopher P. Fontes, and Rachel S. Tsutsumi