Turning Vendors Into Partners
It's one of the most enduring myths in American business: the lone entrepreneur, struggling against the odds to transform vision into reality. But is it really accurate? There's no question that small companies are almost always driven, at least at the outset, by the passion of a single risk-taking individual. But the myth of the solo flier, however romantic, obscures something crucial: Business success depends on collaboration.
That's especially the case today. Business is more collaborative than ever. New developments in technology—file-sharing, social networking services, open-source development schemes, weblogs—are bringing a new collective spirit to the way almost all companies operate. So is the ability to outsource nearly any noncore function. Increasingly, a successful company is less a standalone entity than a seamless network of alliances and partnerships—with customers, vendors, even competitors.
This also applies to the purchasing of business services. Entrepreneurial companies are long on energy and ideas but are often short on infrastructure. They need contractors—for financial services, tech support, marketing expertise, real estate savvy, and the like—that can function as true partners.
Inc. recently interviewed dozens of entrepreneurs, seeking examples of vendors who had become partners by providing outstanding, grand-slam service. While some praise went to the big players of corporate America, the most enthusiastic anecdotes were about companies run by other entrepreneurs. It makes sense. After all, who is best positioned to serve the needs of business owners? Other business owners. They can be more flexible, dedicated, and creative. They understand what you're going through because they're going through it too. They're smaller, which makes it easier to form partnerships. And, best of all, they actually need your business.
The best service providers, we learned, pull it off by consistently having the correct answers to the questions that every business owner needs to ask before even thinking of signing a service contract. Those questions are below, along with the stories of five happy business owners who got terrific service—and built stronger companies—by putting their faith in companies that understand what it means to be entrepreneurial.
Can large companies pull off the same thing? Sure they can. But most big providers can learn from the service fanatics described below. Perhaps you can too.
1. How focused will your company be on my company?
Sepaton, a data protection company based in Marlborough, Mass., was about to take off, and COO and CFO Bob Iacono needed a new headquarters. The new space had to be about three times larger than his current one, furnished, and move-in ready, with all of the special electrical and air-conditioning facilities that high-tech firms require. And he wanted his rent to remain more or less the same. Who would help him find it?
He began meeting with brokers from some large corporate real estate firms. But in meeting after meeting, Iacono came away feeling as if they were reading from a script, one in which his role—the scrappy little fellow thrilled that the big-shot real estate execs could remember his name—had been plotted out ahead of time. Every office they showed him was wrong. "I was looking for 20,000 square feet, and they were used to renting in 100,000-square-foot increments,” Iacono says. After two months and eight brokers, Iacono began to wonder if he'd ever find what he was looking for.
Then, his banker and lawyer recommended he talk to an outfit called T3 Realty Advisors. Iacono had never heard of T3. But he liked what he saw. For one thing, T3 worked only as a buyer's broker—so it had no built-in incentives to fill its own buildings and no need to scratch the back of financing and construction partners. What's more, it sent at least two brokers to meetings, ensuring that more than one person was on the case.
Assigning multiple brokers to each client is part self-defense, says Roy Hirshland, T3's CEO and co-founder. "Early-stage clients tend to be very frenetic and require a ton of handholding,” he says. Having more than one person assigned to each account means more hands to do the holding. Entrepreneurs also need more support than larger companies
because they often have no one working on facilities management and may not even have an office manager.
In fact, Hirshland created T3 to function like a real estate department for technology start-ups. It handles interior and exterior architectural issues, finds and manages contractors, advises on lease negotiations, and even manages the leases for clients—it purchased a document-management system specifically for that purpose. "If we can't make the smallest three-person company happy about T3, we've failed,” Hirshland says. The logic, he adds, is simple: Successful small companies don't stay small for long.
In Sepaton's case, T3's brokers found six spaces that met Iacono's criteria. He picked the top two and told Hirshland to get a deal done. Days later, Sepaton signed a three-year lease on a new 21,000-square-foot home. Hirshland also managed to get some new office furniture thrown in free of charge. Following the frustration of dealing with the large corporate brokers, Iacono found the experience satisfying—as well as comfortably familiar. "It was the kind of service we hope we give our customers,” he says.
2. Who will be working for me?
Project managers with stricken looks aren't a happy sight, especially when they run your most important account. But when Scott Fischer found out why his project manager seemed so anxious one Thursday last March, he saw a huge opportunity to take his business to a new level.
Fischer is president of the Center for Systems Management, a Vienna, Va., company that offers consulting and training for government entities and corporations. One of its key clients is NASA, which had hired CSM to develop course work for the agency's newly created Independent Technical Authority, mandated by Congress in the wake of the Challenger shuttle disaster. NASA wanted CSM to create an internal marketing campaign, including a slick video. And that's what accounted for the project manager's anxiety. "It was well beyond what our marketing department could do,” Fischer says. If CSM botched the job, it would damage its relationship with NASA. But if CSM succeeded, the firm would prove itself capable of handling a whole new category of work.
NASA needed the video and internal campaign in 45 days, and Fischer immediately set his business development team to work on finding a firm that CSM could partner with. The very next day, a Friday, the team contacted three marketing firms and asked for proposals to be submitted by Monday morning. All three delivered. CSM picked Technovative Marketing, a seven-person shop in Peapack, N.J. By Monday afternoon, Harriet Donnelly, the firm's president, and her project manager were in CSM's offices, ready to get started.
Fischer had plenty of experience dealing with marketing firms, both large and small. With the large outfits, it was always the same—the senior executives closed the deals, then handed the actual work off to less experienced junior employees. Technovative was different. "When Harriet looked me in the eye and said she was personally going to stay involved with this,” Fischer says, "she was very believable.”
In fact, Donnelly became CSM's chief marketing officer in all but title, commuting between New Jersey and Virginia. She personally worked on the video and attended all meetings with NASA, though she never talked about herself as being from an outside firm. "We represented the project as if we were part of CSM's team, which is what we were,” she says. That means behaving as much like a salaried employee as a contractor. She's also careful not to nickel-and-dime clients for extra charges. The higher costs may cut into her margins slightly, but long-term client relationships won't flourish if you charge for every little thing, she says.
It didn't hurt that she thought the NASA project was a particularly cool one. But even on less exciting projects, she says it helps that her firm isn't so large that she can't stay involved with all of them, and that she always has a senior staff person involved as well to make sure clients have at least two points of contact. It also helps that she's both a bit obsessive about her work and has no problem working nights in her home office.
Technovative's work was a huge hit. Because of it, CSM has already pulled in more work from NASA and is in the process of selling similar internal marketing campaigns to other clients. Donnelly has been enlisted to help. The whole process has reinforced what Fischer suspected—that by working with another entrepreneur, he wouldn't just get a contractor. He'd get a virtual employee.
3. What happens in an emergency?
January is a bad time for an accountant to find a mistake. That's when tax season begins, and all the forms businesses need to send out have to be processed. So it was a dark Friday last January when Charles M. Ross, a CPA in McKinney, Texas, realized he'd set up one of his client's payroll systems with the wrong wage figures and then run it that way for six months. It was a problem Ross couldn't fix on his own, and the W2s needed to go out the following Monday.
Ross uses PayCycle, a payroll services company in Palo Alto, Calif., to process payrolls for his own firm and about a dozen of his clients. He likes the service for its flexibility—most of his clients are able to give it their own twist so it better suits their companies' needs. Still, he was nervous when he called PayCycle about his problem. There wasn't much time left before the weekend, and he wasn't sure anyone would be available to help him.
Ross doesn't have a designated customer support representative. PayCycle expects any employee who answers the phone to be able to solve any customer problem—and all of its 70 employees, including its CEO, spend at least 10% of their time taking customer calls. Ross's rep understood the problem and its urgency. She said the company would take care of it. PayCycle's staff recalculated an entire year of Ross's client's payroll—a job that required almost a day of nonstop work. On Monday, there was a voice mail waiting for Ross when he arrived at work: "Problem solved.”
This kind of responsiveness comes because PayCycle was founded to focus on its customers' needs, says Rene Lacerte, the firm's co-founder and CFO. Lacerte believes that the basis of successful business is having customers feel like they're being listened to. He also sensed that his customers could become both his best salespeople and his best source of new product ideas. That's why every employee interacts with customers. The payoff? Nine in 10 customers refer new customers to PayCycle.
For Ross, the best part about his experience is that it didn't cost him anything. Helping customers with their mistakes, even on weekends, is part of the job for PayCycle. Fixing the W2s himself, Ross says, "would have taken me an entire day.” And better yet, he didn't have to make an embarrassing phone call to his customer.
4. How do I know you'll be there when I need you?
When Michael Joseph has a technology problem, he calls his accountant. When he needs advice on benefits packages, he calls his accountant. HR issues? Ring the accountant.
"I bring up things that are giving me pain, and I see what he has to say about it,” says Joseph, CEO of ASI Inc., a medical instruments distributor in Cleveland. Joseph didn't start out thinking that way. In the beginning, he simply needed someone to help him with his books. Business was growing fast and Joseph lacked the time to stay on top of his finances and the resources to hire someone to work in-house.
He didn't realize he'd be getting much more than an accountant when he hired Skoda Minotti, a 120-person accounting and consulting firm. Joseph picked Ken Haffey—one of Skoda's 10 partners—because he sensed in Haffey the same hustle he himself had. What he quickly found was that Haffey was good at two things: seeing the entire financial picture of his business and staying in touch.
Haffey has plenty of big clients and spends long stretches on the road working on mergers and acquisitions. Still, he lavishes attention on ASI, which has just 15 employees. "I got an e-mail from him once at 3:50 a.m,” Joseph says. That kind of responsiveness means Joseph now feels comfortable turning to Haffey for advice on strategic planning, benefits programs, even on keeping his PCs running smoothly. If Haffey can't fix it himself, he usually knows someone who can. "For all intents and purposes, Ken's my CFO,” Joseph says. "I rely on him that much.”
According to Haffey, being available to all clients—at all times and on all issues—is part of the Skoda Minotti culture. "Customers are our second most valuable asset,” Haffey says. Employees are the first, and they must meet high standards. The firm does situation training for its CPAs, dealing with such questions as what to do if a client calls and you're supposed to have a meeting with a partner (ditch the partner; call the client); what to do if a client calls at 4 p.m. on a Friday (call back before you go home); and how many times a CPA should meet face-to-face with each client for something that isn't strictly business (at least once a quarter). The firm requires that CPAs respond to clients within half a day, insists they go over tax returns and financial statements in person (unless the client asks otherwise), and even asks them to sit down and write a note to clients once a year. "Ken Haffey is a wonderful guy,” says Joseph. "But if Skoda Minotti didn't have the culture to let him do what he does, it wouldn't matter.”
5. How hungry are you?
Steven Mullins was fed up. The CFO and COO of Secure Elements, a 40-person network security software developer in Herndon, Va., needed to get his company's 401(k) program up and running—and he needed to do it fast. Secure Elements was on a major talent hunt, and it's tougher to attract worthwhile people without a solid retirement plan in place. When it was founded in early 2003, Secure Elements had outsourced all of its HR functions to a $1 billion HR outsourcer in Houston. The idea was that it would get better service cheaper than hiring someone in-house.
But the provider seemed incapable of dealing with the unique financial needs of a start-up. In fact, before it could complete the 401(k), the provider demanded that Mullins produce documents showing that the retirement program wasn't being set up for the benefit of the company's venture capitalists and their investors—that is, people not on Secure Elements' payroll. Doing so, an auditor told him, would cost $25,000. And that wasn't the only problem. Secure Elements staffers also found themselves doing things the company expected its HR provider to do, like getting accurate information on available vacation time.
Customer service representatives at the large company were responsive, Mullins says, "but the same problems continued to occur.” He didn't think he should have to work so hard to get them fixed. As he began researching other providers, he received a timely cold call from someone at a company called TriNet, a 215-person HR outsourcer based in San Leandro, Calif., that works primarily for high-tech companies. TriNet quickly became the leading contender for Secure Elements' business. The company seemed particularly on the ball, with the right answers to all of his questions. But so did plenty of other providers. What clinched it for Mullins was the fact that TriNet seemed hungry to make his company a customer. "Everyone will tell you that their customer service is better than the others',” Mullins says. "But TriNet was very aggressive about wanting our business.”
It didn't hurt that TriNet seemed attuned to the needs of his employees. It was also a plus that TriNet didn't want payroll funds as far in advance as its competitors did. After about six months of due diligence and learning about TriNet's benefits plans, Mullins felt comfortable making the switch.
"We have intimate knowledge of what our customers have to deal with. That's our secret weapon.” Martin Babinec, founder and CEO, TriNet
Once it got the account, TriNet didn't lose its hunger. Martin Babinec, the company's founder and CEO, works hard to get out in front of clients' issues before they become problems. "We have intimate knowledge of what our customers have to deal with at a particular stage in their life cycle,” he says. "That's our secret weapon. People are moving at a fast pace. All they know is we're responsible.” TriNet was able to take care of the 401(k) plan. The cost to Secure Elements: $1,000. TriNet also took over negotiating health care benefits, and secured better rates by lumping its small clients' employees together into one large pool.
All of that was to be expected. But Mullins was stunned when TriNet jumped in to help with some problems a new employee was having. The employee had an outstanding claim on the insurer at his former employer; it came back denied after he had started at Secure Elements. Even though the case occurred at another company, TriNet handled the issue and ultimately resolved it in the employee's favor. "They took care of it,” says Mullins. "The large companies we deal with don't go the extra mile for us. TriNet clearly has.”
Michael Fitzgerald is a freelance writer in Millis, Mass. Staff reporter Darren Dahl contributed to this story.