Entrepreneurs have a tendency to see what they want to see.
Entrepreneurs have a tendency to see what they want to see.
Over the years, I've noticed a pattern among the people who come to me seeking advice. In most cases, the problem they think they have is not their real problem, and so the solution they have come up with is not the right one. That happens partly because they get so close to the problem that they lose perspective. They see something wrong in one area and fail to connect it to what's happening in others, and so they miss a solution lying elsewhere. Beyond that, I think we all have a tendency to look for the type of solution we feel most comfortable with, given our personality and our skills. Thus, engineers tend to look for technical solutions. Accountants tend to look for financial solutions. And salespeople go for the sales solution--even when the problem has nothing to do with sales.
I'll give you the example of Mike Baicher, whom I've written about before (see 'The Best-Laid Plans,' January 1997, and 'Your Money or Your Life,' August 2003). When I met him, his family-owned trucking business was doing about $1.7 million a year in sales. Today, it's a trucking and warehouse business with annual sales of $11 million. His drivers, some of whom are independent contractors, pick up giant shipping containers from the New Jersey ports and deliver them to warehouses in the area, where they are unpacked. Four of the warehouses belong to Mike, whose company provides storage services for some of its customers. Other customers have storage facilities of their own. The latter were on his mind when he came to see me about a year ago.
He said he was thinking about hiring a salesperson. When I asked why, he said it had to do with the hassles of dealing with customers who used him only for pickup and delivery, not warehousing. For one thing, they often didn't unpack the containers in time to avoid the late fees charged by the shipping companies--which own the containers--when an empty one is returned to the port after more than five days. Those fees ranged from $65 to $125 a day, depending on the shipper. The problem didn't arise when the container came to one of Mike's warehouses, because his people would unload it right away. But customers with their own warehouses waited until the last minute. By the time Mike's drivers brought the empty container back to the port, the shipping company's office would be closed, and Mike would get charged for an extra day.
'Can't you pass that along to the customer?' I asked.
'I try to, but it's tough,' he said. 'They say, ‘What are you talking about? We emptied it in five days like we're supposed to. If you didn't get it back in time, that's not our problem.' If I insisted they cover the late fee, we'd lose the account.'
'What about calling them in advance and reminding them to unload the container before it becomes a problem?'
'Yeah, I suppose,' he said, 'but there's another issue. I can't bill the customer until I receive the paperwork from the driver, and the drivers don't turn it in on time. I'm constantly chasing after them to get it. I just have to keep nagging. I hate it.'
I knew what he was talking about. I've had that problem with my drivers as well. 'So what does this have to do with hiring a salesperson?' I asked.
'I want to sell more of our warehousing,' Mike said. 'Not just the storage, but also the value-added services.' He explained that some customers would pay him to deal with the contents of the containers. Suppose that a clothing chain was receiving a shipment of shirts and dresses from China. The customer might hire Mike's company to upgrade the hangers, add price tags, put the clothes in poly bags, and then ship different types and sizes to different stores. That's what he meant by 'value-added services.' He figured that if he could build up that side of the business, he could phase out the part that was giving him all the headaches.
Under his new plan, he would emphasize the value-added services over storage. Accordingly, he'd be looking for a different type of customer. 'How have you been getting your warehouse customers up to now?' I asked.
'I get them from picking up their containers at the port,' he said. 'Maybe they don't have room in their own warehouse. Or maybe they don't want one. I become their warehousing department.'
'Well, if that's been your source of new business, why do you want to stop doing it? Why give up on a proven method of getting customers and making sales? Are you the biggest guy doing this?'
'Oh, no,' he said. 'I'm one of the smallest.'
'So why would you stop when you still have a lot of potential customers you've never even spoken to?' He didn't have an answer. 'Tell me,' I said. 'Who does the selling now?'
'I do,' Mike said, 'but I hardly have time for it because of all these other problems I'm dealing with.'
'What do you like to do best?' I asked.
'I like to sell!' he answered without hesitation. 'I love to sell. I wish I could do more of it.'
So here was a guy who loved to sell, but instead he was going to hire a salesperson. Understand, in most businesses there's a significant lag time between the hiring of a salesperson and the production of sales--especially when you're selling a service. First, you have to train the person. Then you have to wait while the salesperson tries to persuade potential customers to leave their current vendors and go with your company.
On top of that, Mike would be using a sales approach he'd never tried before. Selling value-added services is different from selling warehouse space to customers whose containers you're hauling. It's almost like going into a new business, which is fine under the right circumstances. I would have reacted differently if Mike had said, 'I want to open up a new line of business because the old one is getting tougher to sell. I'll keep selling as much as I can, but I think it's time to try something new.' I also would have reacted differently if he'd told me that his customers were asking for this new service, that it had good gross margins, and that he could provide it without investing too much time and money. What didn't make sense to me was to go into a new line of business because of hassles in an old line of business that he'd had success with and that still offered plenty of opportunities to grow.
'Listen, Mike,' I said. 'I think there's another approach you're not considering. I'm a salesman like you, and I hate dealing with those kinds of problems as well. So I surround myself with detail-oriented people. I'd call them anal people, but my wife says I can only use that term three times a year, and I've already gone through my allotment. Anyway, they're people who enjoy taking care of things like reminding customers to empty their containers and getting drivers to turn in their paperwork. They're good at it. They also start out with a lower salary base than salespeople, and they can get up to speed in a matter of days, not the three or four months that a salesperson needs.'
The truth is, Mike probably didn't even need a full-time person. He could have found a college student who would do the work after school. Instead of paying someone $700 or $800 a week, he would be able to reduce, if not eliminate, the major aggravations in his life for $300 or $400 a week. Meanwhile, he'd be freed up to sell.
It was a simple solution, and yet Mike hadn't seen it, which wasn't surprising to me. Like most entrepreneurs, he was a salesperson, and when salespeople run into a business problem, they instinctively look for ways to get more sales--because 'good sales wash away most problems,' as the saying goes. They also tend to regard administrators, accountants, and clerks as 'nonproductive' employees. But what those people do is almost as important as getting the sale in the first place. They make it possible for you to keep the customers you already have. Customers aren't happy when you bill them late because you can't get the paperwork done in time. They aren't happy when they receive a bill for a fine that they may or may not have been responsible for incurring and that you never warned them about. And we all know what happens to unhappy customers. No doubt the time will come when Mike will need to hire a salesperson, but the impetus will come from opportunities that he wants to go after, not from the normal aggravations of running a business.
Norm Brodsky is a veteran entrepreneur who also writes The Morning Norm at Inc.com. His co-author is editor-at-large Bo Burlingham.