From the Front Lines: A CEO's take on technology
When it comes to going high tech, the child is often father to the man
The end of the last fiscal year was a nightmare. We thought we could do it: easily combine the year-end financials of our two interlocked businesses. How wrong we were. With me wired to the hilt and you reconciling bank statements and cash accounts by hand at the 11th hour so we could input your numbers into our system, we didn't have a snowball's chance in hell of making that June 30 deadline. It was then that I realized that EZRider, my five-year-old retail and mail-order snowboard business, couldn't function fiscally as a subsidiary of the Ski and Sport Shack, your 26-year-old ski and sporting-goods store, unless you were technologically up to speed, too. So we cut accounting ties. I hope, with this letter, that I can help you understand more clearly why I've chosen the high-tech road--and what you'd stand to gain by following it, as well.
Make no mistake--this is not an easy letter to write. After all, without you, I wouldn't even be in a position to make the arguments that I've so carefully laid out below. For it was from you that I learned the values necessary to run a successful retail shop--among them, to be customer oriented and to know my merchandise inside and out. Remember, I was born just one year before you opened the store, in 1970, and literally grew up on its floor--crawling around your and Mom's feet in the early years, working as a grunt in the maintenance center in my teens, and later selling skis upstairs and even standing in as manager. And it was as much your belief in me as it was the credit history you let me draw on that allowed me, in 1993, to start EZRider. The fact that this year it began operating independently in no way diminishes the gift you gave me: the chance, at 23, to make not just a business but a sport I love grow.
And it is growth that I want to talk to you about now. When we first opened EZRider, in a warehouse just five miles from the Ski and Sport Shack, in Wakefield, Mass., I was driven by one central principle: Go big or go home. I had dreams of a chain of retail stores and a mail-order business with a global reach. But I knew that to get there I'd need a state-of-the-art computer system, not just to link all the parts, but to enable me to analyze my progress as I went along so that--if need be--I could revise my strategy in midstream. The system would allow me to do things like track what was hot and what was dogging every day (or even every hour) so I could manage my inventory on a continual rather than a periodic basis; bank my customers' purchasing histories for direct-mail campaigns; and, for mail-order customers, track shipments and instantly access the brands, styles, colors, prices, and sizes of equipment available.
So from Day One--with your encouragement--I invested in technology. I acquired a $25,000 integrated RealWorld and Synchronics system running on a Novell network that has seven point-of-sale (POS) terminals, a customer database, and integrated modules for POS, inventory control, purchase orders, accounts payable and receivable, and general ledger. A year later, thrilled by the amount of time and money I'd saved, I spent $10,000 more on a Power Macintosh and the other equipment I needed to produce all my print ads and catalogs in-house. And right before Christmas, I launched the EZRider Web site, which I'm now hyperlinking to vendor sites in hopes of sending business our way.
I know that each time I make a new technology purchase and suggest that perhaps you should follow suit, it's like another bag of bricks on your back. The very idea of automating is overwhelming, intimidating, and cost prohibitive. You've done just fine handwriting everything--your sales receipts, your payroll, your purchase orders, your work tags for ski tune-ups--and processing sales through a traditional cash register before posting them, manually, to a general ledger. And doing a physical inventory twice a year has become as habitual as brushing your teeth. Why change now?
Well, so you can get out from under the daily details--the myriad numbers and processes you carry around in your head (what a feat!)--and have more time to plan the direction of your company. So you can see how you're doing at any moment and make decisions based on that information. So you can grow faster. Whereas my revenues have climbed to more than $1 million in just five years, yours have remained steady at about half that. I don't mean to sound disrespectful, but at times I think that what we say in the snowboard business about the ski trade also holds true for you and me: Sometimes it takes a young-buck sport to give a shot in the arm to a standard.
Please don't take any of this the wrong way. Every day I stand in awe not just of your sales acumen but also of your generosity--specifically, your ability to support me when I felt I had to go my own way even after you'd invested untold hours training me to work alongside you. It's just that when I see you juggling so many particulars with your hands and in your head, I want to give back to you what I've learned, just as you have given so much of what you know to me.
Consider these facts: While it takes you hours every pay period to go through your handwritten receipts to calculate your salespeople's commissions, it takes me about 30 seconds to do mine--because all the information is keyed in by the salesperson at the POS. While you have to look at your wall and count up your inventory (a grueling task), I can monitor mine at any time by merely plugging in item descriptions and pulling up a grid of brands, styles, sizes, and colors in stock. That gives me more control. I can tell vendors to release products early if I'm short or to hold a shipment if I'm overloaded, which means I end the season with minimal carryover inventory--you know, the kind that eats up profits. At buying season I can call up history reports showing what items in which categories I've sold (right down to sizes) and when I've sold them. Now, I know you can do some of that, too--but at what cost? And I can't imagine how you'd determine when you sold what--a crucial variable, I've found, if you want to spot trends in order to pace your purchases.
The system also saves me a bundle on payroll, one of my--and your--biggest overhead expenses. Because the POS module breaks down sales by time, I can see when my busiest and lightest times are and schedule workers accordingly. That means no more paying staff to sit around when business is slow. But perhaps what excites me the most is what I can do with the financial statements the system generates. True, you can use the Peachtree package you bought in July to help with accounts payable and profit-and-loss statements for taxes. But I can use my financials as a managerial tool. At EZRider, everything--accounts payable, marketing expenses, sales, discounts, overhead--automatically goes into the computer, and net profits come out the other side. So I can compare current numbers whenever I want--even every month--against my forecasts and be proactive if I'm not where I want to be.
Now, if anyone has a good reason to be gun-shy about technology, it's you. It was only seven years ago, after all, that you bit the bullet and leased an inventory-control system--only to see the hard drive crash after Mom had spent weeks inputting data. And when I think of the money you spent on lawyers to battle the computer company to pay for the disaster--well, I can understand your attraction to pencils and paper. But you stand to lose a lot more than just data these days by not getting wired--namely, not being able to take the Ski and Sport Shack to the heights to which you and I know it could go.
Of course, no computer system is foolproof, but those on the market today are light-years ahead of the ones you were considering in 1990. They are much more powerful, have loads more safety and security features, and are incredibly user-friendly. There are even systems that automatically back up your data on magnetic tape every night (we use Hewlett-Packard's HP Colorado Backup). What's crucial is that you choose a system that comes with strong technical support--folks who will be there to service the equipment and guide you whenever glitches arise.
Let's face it: last summer we got to a point where mixing a technology-dependent business like mine with a technology-distant one like yours was like mixing electricity and water--it just led to sparks. I hope we never go there again. There's probably no one whose work ethic I admire more than yours, Dad, no one who can command a sales floor with your agility and finesse. I just want you to have the same advantages that I do when it comes to mastering your own business fate.
Love, your son,
Anthony Scaturro is CEO of EZRider, which recently relocated to Burlington, Mass.