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HUMAN RESOURCES

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Maritime Marketing
Our eight-year-old company custom-fits marine canvases, and our customers are boaters within a 40-mile radius. We'd like to grow the company by marketing our services beyond that radius. What's the next step?

Sandy Price

Owner

Price's Yacht Canvas

St. Michael's, Md.

* * *

Marketing beyond that 40-mile radius will likely increase your market presence , but it's hard to say if it's the most profitable growth strategy. After all, adding clients doesn't automatically fatten profits, says Jim Miller, founder of the Rigging Co., a company in Portsmouth, R.I., that rigs yachts. "We had two consecutive years of doubling sales, but the sales growth had no impact on the bottom line. Plus, as we grew, our quality and commitment to existing accounts decreased, and that created a greater urgency to attract new customers," says Miller.

Miller points to a marketing fundamental you mustn't ignore. "In hindsight, it would have been much less expensive to sell more to existing customers than it was to acquire new ones," he says. He suggests you calculate the cost of acquiring one new customer for each marketing strategy you try. If, say, you spend $1,200 for booth space at a boat show, and you get 40 new customers, your cost per new customer is $30.

Remember, too, that if your company isn't profitable now, any growth could accelerate a depletion of resources. Take an inventory of your internal resources to determine whether you have what you need to support the amount of growth you seek. What's your capital base? How many bodies will you have to hire? How thinly will your resources be spread in your ideal growth scenario?

Once you've taken the caveats into consideration, study the growth curves and marketing strategies of companies in your industry. Did they introduce products or add services that clients needed? Did they explore tactics such as supplying canvas products to original-equipment manufacturers?

Insiders agree that boat shows, expositions, and regattas are rich sources of new customers. At the next such event, hand out self-addressed, stamped postcards to collect basic information from attendees: name, address, phone number, and reason for interest in your services. "It's a great way to build a database of qualified buyers," says Dianna Boyer, chief financial officer of Maritime Services, in Hood River, Oreg., which customizes interiors for commercial vessels. Boyer says that Maritime's managers can't afford not to go to about a dozen such shows a year.

Meanwhile, work at boosting your business's name recognition. Back in 1989 the Rigging Co.'s Miller invested about $8,000 in a black-and-white catalog that doubled as a company brochure, which he distributed at boat shows, yacht clubs, and marinas. He even poly-bagged some to drop on every boat he could reach. All that running around paid off: by 1990 sales had doubled, and a year later the Rigging Co. made it onto the Inc. 500, our list of the fastest-growing private companies.

You can also buoy market visibility with an assortment of direct-mail pieces. Maritime Services includes a company fact sheet with all responses to product or service inquiries so new customers can learn about the company's range of offerings. Boyer also recommends short, focused customer-satisfaction surveys to reveal your strengths and weaknesses. Also, you might hold promotional events, such as an open house to display works in progress. To alert likely attendees, distribute a flyer that quotes your customer-satisfaction creed and includes a list of the services you provide, projects you've recently completed, and types of boats you've serviced.

* * *

Executive Pay 101

I'm opening my own business, and I'd like to know the basic issues other small-company owners consider when they're setting their own compensation levels.

Matt Groescher

Lodi, Wis.

* * *

Here's a great rule of thumb from Randy Kirk, president of AC International, a company in Santa Fe Springs, Calif., that makes bicycle accessories: "I've always tried to pay myself the same amount I'd have to pay someone else to come in and do what I do," he says. "That way I can't go wrong."

Kirk adds that your compensation should be featured in the realistic budgets you set for the start-up years and well into your company's initial growth spurt. You'll have to decide on the rewards you feel you deserve for the risks you're taking. But your budgeted salary levels shouldn't raise investors' eyebrows; if need be, hire an accountant whose independent, professional assessment can help you calibrate those levels.

A few additional angles to think about before you cut your first check:

· The nature of your industry or business. "Executive pay in a service or research-and-development situation is different from that in product manufacturing. For example, if you're in the R&D phase, where you're borrowing heavily, pay would be more conservative. But once you're generating revenues, you can set a salary level based on projected revenues two years out," explains executive-compensation specialist Peter Chingos, a partner with KPMG Peat Marwick in New York City.

· The importance of benefits. "Many owners overlook the immediate need for benefits. Protect yourself and your family with medical, life, and disability insurance. Your first dollar should go toward that," advises compensation expert Frederic W. Cook of New York City.

· Alternative forms of pay. "Compensation doesn't have to be a check. You can compensate yourself indirectly by hiring family members or cutting a deal on the use of the company car and realizing a tax write-off," says Ramond Seaver, founder of Seatec, a professional-recruitment business in Warrior, Ala. Before you do that, Seaver urges you to learn the IRS's rules on current and deferred compensation, so your creative pay tactics don't come back to haunt you. For more advice on paying yourself through cyclical downturns and cash crunches, see "How to Cut Your Own Pay" (Financial Strategies, February 1993, [Article link]) and "Pay Postponed" (Financial Strategies, June 1993).

· Growth aspirations. "Your concept could go national, or it could be a corner dry cleaner. Even if you have serious growth plans, drawing a significant salary shouldn't necessarily be seen by investors as greedy," says James Blakey, corporate counsel for Intercontinental Energy, a project-financing company in Hingham, Mass. (For more ideas, see "CEOs' Pay Strategies," Financial Strategies, June 1992, [Article link].)

· Corporate philosophy. "We hired people and paid them before we paid ourselves. When we were headquartered in Maine, we used an abandoned schoolhouse as a manufacturing space. We've doubled our pay over the past few years, but the rate itself is still modest in comparison with that of other CEOs," says Roxanne Quimby, cofounder of Burt's Bee's, in Creedmoor, N.C. "We're frugal."

* * *

Reviewing the Boss

I work for a small organization (there are seven full-time employees), and we have individual performance reviews with our CEO every six months. Now he wants us to set up a process by which we review him. Do you know of any strategies that will keep everyone happy?

Liz McKeever

Projects Director

National Center for Employee Ownership

Oakland, Calif.

* * *

More and more forward-thinking CEOs like yours are turning to "upward" feedback as a means of achieving the kind of all-around evaluation that strengthens corporate relationships, sweeps away the us-versus-them mentality, and increases productivity. "It's an eye-opener," says William Sheffel, CEO of Community Transitional Resources, in Modesto, Calif., a mental-health-rehabilitation business that has gone that route. "I would never have guessed that managers needed more guidance from me."

The success of an upward-appraisal system depends on unwavering support from the top and on a climate that fosters free exchange of honest feedback. There's also the issue of vulnerability: if it's hard to guarantee 100% anonymity for reviewing staffers (and that would be especially hard at a tiny company like yours), an agreement should be drafted stating that employees can't be penalized for speaking their minds.

The building blocks of any formal performance appraisal are written evaluations (with upward appraisals, those might be based on employee surveys), followed by a formal or informal goal-oriented meeting, which brings together the evaluators and the evaluatee.

In the evaluations a CEO's management skills should be rated by the people in the best position to judge, says John Eggers, program manager for the Center for Creative Leadership's San Diego branch. Using a scale of one to seven, for instance, employees could rate the boss on skills such as the ability to take charge, coach workers, delegate responsibility, establish sound controls, manage conflict, and com- municate clearly and effectively. Similarly, members of the board of directors could evaluate the CEO's adaptability to corporate demands and challenges, personal motivation, occupational and technical knowledge, and problem-solving and decision-making skills. The controller or accountant could measure quantitative and financial aptitude.

For companies in start-up mode, Eggers suggests developing a separate survey to critique the corporate culture -- provided that culture hasn't yet jelled. "If you rate the culture first, it's not as if you're pointing fingers at the CEO. It's a nonjudgmental way to make CEOs aware that they're the creators and monitors of culture." For companies with more than a few management layers, it makes sense to have subordinates evaluate their managers and to have managers evaluate the CEO.

The survey questions should help the CEO answer the following: What am I doing well? What am I not doing so well? What should I be doing more of? Less of? Once the responses have been summarized, write up a report and hand it to the chief a week or so before the meeting. Invite an independent facilitator to the meeting itself. "We asked a university professor to moderate the discussion and clarify the points managers made," says Sheffel.

If you'd rather leave the surveying and synthesizing of evaluation material to a professional the first time around, Sheffel suggests you call consulting firm ODT (800-736-1293), in Amherst, Mass., for a list of its educational tools and publications that deal with upward- and peer-appraisal systems. You should also contact the Center for Creative Leadership (910-288-7210) for its catalog of public and customized programs that deal with executive-leadership development. n -- Reported by Karen E. Carney

Last updated: Jul 1, 1994




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