Kearns's experience matched the Accolas' needs, so they brought him in as an equity partner with a one-third share. "We wanted to keep him around long-term," Harlan Accola says. He rounded out the team by hiring a data-processing expert and a telemarketing specialist.
The Accolas had never set an annual sales goal, but now, with expertise in key disciplines, they established $3 million -- 50% growth -- as the 1993 objective and hit the target handily. With tighter controls, American Images learned to exploit its switch from speculative photography to custom work. Most of its competitors approach potential customers -- owners of homes, farms, or businesses -- with the aerial portraits already in hand. And that had been the Accolas' approach, too, until 1987. Since then, lining up customers in advance has made it easier to schedule the flight crews, each composed of a pilot and a photographer. In 1993 and 1994, through better qualifying of leads generated by mass mailings and telemarketing, the sales closing rate reached 85%, with an average sale of $500.
The company's formal planning commenced in October 1993, when the Accolas, Kearns, and nine department heads gathered for several days to hammer out monthly objectives for 1994.
Like SRC, American Images began with sales goals. "Because we're in a niche, with light competition, we have the luxury of deciding how fast to grow," Harlan Accola says. "But there are constraints. Financing receivables poses one limit because we have few hard assets and our inventory is a database of leads. That's not much use to a banker."
Also mirroring SRC, the managers came prepared with input from each person in their sections. "It wasn't nearly as in-depth as what SRC does," Accola says. "We were trying to figure out what was realistic in sales and production. They asked their people, 'Can you make this number or that number?' It was a start." The group worked through everything from lead-generation costs to financing needs and debt retirement.
Following the SRC model, Accola wanted his employees to share responsibility for the company's success. So in 1994 each pilot-photographer team targeted a "per place" goal of keeping the cost of each job to $72 or less. They knew the cost factors: film and processing, aircraft and fuel, flight insurance, lodging, health insurance, and wages -- $9 per flying hour for the pilots, about twice that for photographers. For jobs that cost less than the $72 standard, crews could earn bonuses of 30% of the savings.
Though each employee understood his or her individual goals, complications developed when few could comprehend how those goals meshed with the company's master plan. Each crew member did collect, on average, about $3,500 at the end of the year. "They really went after that number, but it caused some problems because they didn't know the company's big picture," Accola says. In their haste, photographers occasionally shot the wrong place, or the pictures had long evening shadows, when, to keep hotel costs down, the pilots stayed out late to cram in extra assignments. "They beat the $72 target, and they got pictures," Accola says. "But what if we can't sell them?" This year's revised formula calls for only half the bonus to come from per-place savings. The rest is based on the company's bottom line.
Despite such false starts, 1994 was American Images' best year ever -- it reached revenues of about $4.7 million, a huge leap from 1993's $3.7 million. After-tax profits rose as well, to about 7% -- considerably better than 4.9% the year before.
Kearns attributes much of the improvement to the discipline of planning. Everyone is aware of how mailings and telemarketing help control costs. "We've been diligent about making sure a customer is serious before we do a shoot," says the accountant. "Also, people are coming up with money-saving ideas. One photographer did research and found an insurance company for airplanes that charged 50% less than we were paying. Some motivation was the per-place bonus, but still, it's a dramatic change."
Throughout 1994 Kearns's three-page Thursday reports listed weekly sales, accounts payable and receivable, cash balances, inventory levels, and leads generated. "It's a pulse point," he says, and the vehicle by which the company compares performance against the plan.
Though it's taken some time, department heads are starting to grasp the value of the plan. Accola says, "We all depend on it now. It's essential. Understanding the plan has brought out more dedication from the managers. They can see that we're not getting rich off them. We're all just trying to build something."
Still, because most employees were not with the program, he enrolled in last November's Great Game of Business seminar. He was impressed by Kevin Dotson, the warehouse worker, who spoke to the group. "At SRC, they talk about their successes, but you also hear about the training they've done to get to that point," Accola says. "I realized that our employees weren't going to become as dedicated as Kevin Dotson without education."
Within weeks of the seminar, Harlan and Conrad Accola and Dennis Kearns started working on getting people to think independently. "My frustration is partly my own fault," Harlan says. "In the beginning I wanted to be in charge, the one everybody runs to. But after a while I got sick of it. Our people didn't make decisions because we'd made it clear we didn't want them to.
"I think our planning process will have a bigger payoff as people see more clearly how they affect the big picture," he says. This year the company's managers are embarking on an educational regimen focusing on the income statement, the balance sheet, and the cash-flow statement. "These managers get the financials now, but they need more schooling in what the numbers mean," Accola says. "Once they get a better grasp, we will have them teach their people -- if they know they'll have to teach it, they won't fake an understanding. I can't expect miracles, but I'm looking for commitment and involvement from the bottom up."
Accola recognizes that the ESOP is a big motivator at SRC. "There's a strong feeling here that unless we devise a good bonus plan and eventually a stock ownership plan, our current success won't last," he says. "There's no doubt in my mind that people must have a stake in the action if you want their help. We've wondered recently about giving up equity," he continues. "My view is that if the three of us are smart enough to grow this business to $10 million, who's to say that if we had 100 people all pulling in the same direction, we couldn't do $15 million. I think a lot of entrepreneurs, including myself, have to give something away to get something back. We're dealing with a different workforce now."
