It takes a shrewd entrepreneur to find big-league software at minor-league prices.
It takes a shrewd entrepreneur to find big-league software at minor-league prices.
Rug seller Bob Shallenberger found software that lets his small business act like an industry giant without spending giant fees.
The year: 1995. The setting: a classic loft building in lower Manhattan occupied by retailer ABC Carpet & Home. Bob Shallenberger, a rug retailer from St. Louis, stood on the ABC showroom floor and watched as a customer approached a salesclerk. "I like the style of this red rug," the customer said, "but do you have it in a four-by-six, in blue?" The clerk disappeared for a couple of minutes, then returned with a thumbs-up. The clerk had used ABC's computer not only to confirm that the store carried the rug but also to pinpoint the rug's exact location. Shallenberger could hardly believe his eyes.
Back then, Shallenberger, general manager of Rug World Oriental Rugs, in St. Louis, could only dream of such efficiency. His oriental-carpet retail business, with 1995 sales of just $350,000, could never match the resources of ABC, then a $100-million company. "If you're a rug guy, they're mecca," Shallenberger says of ABC. But today Shallenberger, 31, enjoys a computer system with ABC-like efficiency, and then some. What's more, he didn't spend a fortune to get it. Instead, he mined his contacts in the rug business until he struck gold: a custom program with an industry pedigree, for just a few thousand dollars. Now, instead of staggering back in awe, Shallenberger is sitting pretty. "It's wholly empowering," he says. "We're in the game now. Before we were in the minors. We're not in the minors anymore."
Like Shallenberger, many CEOs at growing businesses dream of someday harnessing the power of big-company computer systems. Often those dreams are never realized, because the CEOs assume -- correctly -- that they can't afford the big, third-party software packages their industry's giants run. But some tech-savvy CEOs tailor off-the-shelf applications like Lotus Notes to create their own, semicustom software.
MAGIC CARPET RIDE: "I can do in eight hours what used to take me three days," says Bob Shallenberger.
But Shallenberger is no techie, and he doesn't write his own code. He likes to discuss tech decisions with his CEO buddies. Their advice is free, he points out, and "probably more accurate than some guy trying to sell us things." So when he wanted to match ABC's software, he talked to rug-industry people. Shahab Etessami, a former rug wholesaler who wrote the software Shallenberger now uses, says that "probably 90%" of the people in the rug industry start a software purchase by simply asking other people in the business which software they use and where they got it.
Shallenberger is a rug-industry veteran, having started with Rug World back in his college days in 1991 as a part-time salesperson and delivery man. He quickly advanced to become Rug World's store manager, head of retail operations, showroom manager, and finally general manager. When, in 1993, Rug World's owner, Cy Tavazo, moved to New York City to source rugs, Shallenberger was left in day-to-day control of the St. Louis shop. Two years later Shallenberger took an ownership stake in it as well.
Shallenberger's interest in becoming Rug World's computer expert was strictly sales driven. Back in his rug-schlepping days, the company had no computers and kept its books in giant ledgers. Rugs lay stacked 100 deep in the store, organized only by size without regard to color or pattern. Salespeople kept information about their customers on index cards. Shallenberger spent hours upon hours figuring out which suppliers needed to be paid, which customers needed to pay up, and which rugs were where. Without computers, Shallenberger figured, there was a limit to how big Rug World could grow. "We weren't going to get over a million, maybe a million two," he says.
Then, in 1994, Shallenberger was literally jolted into making a change when he was hurt in a serious car crash. "I broke my hip, a bunch of ribs, part of my head, and my collarbone," he says. "I wasn't able to do anything for a while." Bedridden, Shallenberger bought himself a Macintosh Centris 610 and began loading data -- rug size, color, supplier name, country of origin, and price -- into a spreadsheet. Not everyone's idea of rest and recuperation, perhaps, but "there's only so much Oprah and Donahue you can watch," says Shallenberger.
The spreadsheet was a useful first step but not much more. It couldn't share data with other programs, so Shallenberger would still need to write Rug World's invoices by hand. "It was a complete nightmare," he remembers.
The next step came the following year, in 1995, when Shallenberger made his pivotal visit to New York City. There he witnessed ABC Carpet's rug locator in action, an event that shoved him to the next level. Upon returning to St. Louis, he telephoned software programmers large and small, hoping to find someone who could build him an ABC-like program at an affordable price. With each call, he explained the byzantine workings of his business: Rug World either accepts rugs on consignment or purchases them outright. Each rug is unique, but some appear similar. Sometimes the company orders rugs over and over in different sizes; other times, rugs are special-ordered. Often, the company sends five rugs to an interior designer, but the designer sells only one and returns the others. Customers frequently take a rug home to try it out with their furnishings, only to return it later. During phone call after phone call Shallenberger explained that he needed software to handle all those options.
Several vendors offered Shallenberger subsets of their large, multifunction programs. But using their software would have required Rug World to adapt its business to the vendors' technology, instead of vice versa. Others, who in Shallenberger's words "semiunderstood" what he wanted, offered to charge "ungodly outrageous" sums -- again, his words -- of $50,000, $100,000, and even $350,000 to create a custom program. "I was totally bummed and completely frustrated," he says.
In that frame of mind, Shallenberger began to think that with his small-company resources, he would never be able to match the likes of ABC. But that idea quickly led him to another possibility. Maybe, just maybe, a solution could be found among the small rug companies, the hundreds of wholesalers with whom Rug World owner Cy Tavazo dealt in New York City. After all, Shallenberger reasoned, who understands the technology needs of one small rug business better than another small rug business?
An inspired Shallenberger riffled through the three-ring binder in which Rug World kept its wholesalers' invoices. He found 10 that seemed generated by computer. He asked Tavazo to visit the showrooms of those 10 wholesalers, observe their operations, and ask questions. "He [Tavazo] didn't know anything about computers," Shallenberger says. "He didn't know what he was asking, but people respected him enough to listen." To avoid the technical discussion he wouldn't have understood, Tavazo simply told the wholesalers, "If you think you have some answers for us, call Bob in St. Louis."
Three people did. The first suggested a solution that essentially duplicated what Shallenberger had already done with his Mac spreadsheet. The second offered to share a system then being developed but added that the software would not be ready for another two years. The third caller was Etessami, who was with Computerized Office Corp. His background was perfect for Shallenberger's needs. Etessami and his family owned a rug wholesaler, Moussa Etessami & Sons. Etessami, who had studied computer programming, had already written a program to manage his family business's inventory. In 1984 he had started Computerized Office Corp. to license his software to other rug companies.
Shallenberger spent hours upon hours figuring out which suppliers needed to be paid, which customers needed to pay up, and which rugs were where. Without the help of computers, there was a limit to how big his company could grow. "We weren't going to get over a million, maybe a million two," he says.
Etessami offered to license his software to Shallenberger for $3,500 -- pocket change compared with the fees charged by the St. Louis programmers. "At first I thought there was something wrong," Shallenberger says. "It wasn't going to work, or he would go out of business. But I talked to him for a while, and I felt comfortable." Etessami had grown up in the rug business, and he understood how Rug World operated. "He wasn't going to require me to change everything," Shallenberger says.
Etessami defends his low-fee business model. He deals almost exclusively with rug companies, he explains, starting with the same basic program and modifying it for each customer. To enter a new vertical market, he says, would take him a year, "and the charge is not going to be a few thousand, but 10 times more."
At first Shallenberger, whose only computer experience was with Macs, was nervous about working with Etessami's program, which was originally written to run on DOS-based PCs. Over a period of three months, Etessami customized his program for Rug World, overnighting diskettes to Shallenberger. Shallenberger then tested them on his computer and made sure he could get invoice forms, checks, and ledger reports to line up with his printer. Etessami fiddled and tweaked until everything matched. Then Shallenberger spent two more months gingerly entering data on all his rugs, customers, and suppliers. Finally, in October 1996, he flipped the switch.
Success: Shallenberger's computer showed him an inventory of the rugs he had on hand, those he'd ordered, and those being tested in customers' homes. The software recorded Rug World's monthly sales. It flagged those rugs that came in on consignment and generated a check for the consignor when the rugs were sold. "I was relieved and enlightened," Shallenberger says. "It was like, 'My savior is here." Still, he kept the paper ledgers current for another year and a half.
In the years since, Etessami and Shallenberger have collaborated at least 100 times on what they now call the Rug Program. They've improved transaction histories for customers and suppliers, added a mailing-list function, customized reports for inventory losses and extras, and more. And they've done all the work over the telephone. Though the two have met at rug shows, Etessami has never visited Rug World.
Rather than charging Shallenberger separately for each new improvement, Etessami charges Rug World a low monthly support fee. What's more, when one of Etessami's clients requests a software change, he'll often share that change with his other clients. That way, the costs -- and benefits -- of keeping the Rug Program up-to-date are spread out over nearly 100 rug companies. "This program is the feedback of many, many people," Etessami says.
Recently, Shallenberger asked Etessami to add a feature for calculating the percentage of sales coming from repeat customers. "In a slowing economy, I want to market smarter, more efficiently, before sales go down," Shallenberger says. Etessami pounded out a few more lines of code, and a day later Shallenberger had his answer: repeat business from interior designers represented nearly 40% of his revenues. Shallenberger subsequently beefed up his marketing to the interior designers.
The Rug Program's main drawback is that it still uses the DOS interface, while the rest of the PC industry has long since moved on to Windows point-and-click. "I would like to be able to use a mouse," Shallenberger says. "Everything has to be Windows eventually."
Still, Shallenberger says he's satisfied with the program. For one, Rug World's annual revenues have passed that million-dollar milestone, the point at which Shallenberger feared manual systems would leave his company stalled. But more than that, the system has streamlined his operations and saved him time. "I can do in eight hours what used to take me three days," Shallenberger says. "If I want to know how many rugs I have from supplier X, and what I owe them, I can do it in 30 seconds -- unless the printer hasn't warmed up." And time, as Shallenberger likes to remind himself, is the only commodity you can't make more of.
Jill Hecht Maxwell is a reporter at Inc.
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