Entrepreneurial success: Masters of one

DISCIPLINE 1

BUILDING A SUPER SALES CULTURE

MASTER: THE HERJAVEC GROUP
KEY INDICATOR: FIVE-YEAR REVENUE GROWTH OF 3,785%

If you’ve ever dreamed of reinventing your business but never quite figured out how to make it happen, Robert Herjavec has a message for you: to fuel fast growth, focus on creating a company culture that puts sales at its very heart.

Herjavec says this focus has been the determining factor in the exponential expansion of The Herjavec Group (THG), his Toronto-based computer network security provider. And he says that’s where you should concentrate, too: “Unless 90% of your sales are recurring, service-contract revenue, everything you do has to be driven by sales—from answering the phone, to having professional salespeople, to forecasting, to training.”

Art Wilson, a Boerne, Tex.-based sales consultant, says SMEs that make sales their central thrust can compete on a level playing field these days against bigger companies, thanks to the availability of customer relationship management software and vast information online about effective sales practices. If your firm lives and breathes sales, you can gain the upper hand on rivals of any size that don’t make it their overarching priority.

Harvey Copeman, president of the Canadian Professional Sales Association, says building a strong sales culture requires investing strongly in sales training—not just money, but senior managers’ time and energy. He says salespeople at companies that have made this investment tend to earn more and feel better recognized for their contribution to the firm’s success, so they’re likelier to stick around. They also develop a closer connection to the marketplace, says Copeman, bringing back insights that can help improve every aspect of operations, from R&D to marketing.

There’s no missing the intense focus on sales at THG, which Herjavec says is ruled by the motto “Sales and margin start the minute you walk in the door.” He insists on professionalism among his reps. Suits and ties are de rigueur five days a week, “because our customers also buy on Fridays.” And no report or proposal leaves the premises without being properly bound and branded.

Reps who excel are asked to help the team by coaching weaker or less-experienced colleagues. But Herjavec—who’s also one of the multimillionaire investors on CBC’s hit Dragons’ Den—is under no illusions that his sales staff arrive at work every day strictly for the good of the firm.

“People respect and admire the corporation, and understand why it’s good for the team to succeed,” he says. “But in sales, the needs of the individual have to come first. If people aren’t self-driven or motivated by money in sales, they’re not going to be great salespeople.” That’s why THG asks job candidates to name the top three things they look for in a job; if money isn’t one of them, then THG doesn’t invite them to a second interview.

The company keeps sales targets realistic and achievable so its reps can reach their goals and stay motivated, and it celebrates strong performance. But the minute the last glass of champagne has been drunk dry, it sets the metaphorical bar higher.

Herjavec says the key to building a strong sales culture starts with the boss: “The first thing you need to do is look in the mirror and ask yourself, ‘Do I inspire a great sales culture or a culture of success in my company that other people are going to want to follow?’” If not, he says, you need to hire a sales executive who does.

The payoff from THG’s sales-first approach has been impressive. Despite the slump, revenue is set to reach $45 million this year, up from almost $30 million in 2008—and just $434,000 in 2002. “There are many people that do what we do, but none has grown at the rate that we have,” says Herjavec. “It’s not that they necessarily do a worse job [at sales] than at engineering or R&D. But they don’t have a sales-driven culture.”

DISCIPLINE 2

FIRING UP YOUR EMPLOYEES

MASTER: I LOVE REWARDS
KEY INDICATOR: TRIPLED SALES; 90% RETENTION RATE

It takes a lot for a founder to consider walking away from his own company. But that’s where Razor Suleman, CEO of I Love Rewards, found himself in 2005. Despite healthy sales of $5.4 million, morale was low and attrition rates through the roof at his expanding—but largely visionless—incentive marketing firm. The Toronto-based company had lost six of its 18 staff in just three months. Employees, though working hard, were largely detached from their jobs. And the CEO felt the same.

“One day,” Suleman recalls, “I walked into my second-in-command’s office, partly for effect and partly out of frustration, and said, ‘I’m done. I’m out of here. You run it.’” With some convincing from his right-hand man, Suleman reconsidered. He opted instead to galvanize his firm with a mission to recruit, inspire and retain the best employees. His goal: to turn the company into one people would truly love working for.

Todd Mathers, a Toronto-based principal at Hewitt Associates, a global human-resources consultancy, says becoming an employer of choice can boost morale, kick-start productivity and improve your bottom line. He cites data from Hewitt’s 2007 Best Employers in Canada study, which ranks firms by the share of their workers who reported high engagement in their jobs. Those companies in the top 20—81% of whose staff, on average, were highly engaged—had an annualized cash flow return averaging 14.7% over five years. But those in the bottom 20—with just 41% of their employees highly engaged—scored only 6.5% on the same cash-flow measure.

The study also showed that top employers have an easier time attracting and retaining talent. The top 20 received 53 applications per job opening, versus 24 for the bottom 20. And turnover rates for high- and low-engagement firms averaged 7.5% and 13.4%, respectively.

“Companies that invest in creating a quality work experience that aligns well to the needs of their workforce have a clear advantage over organizations that don’t do that,” says Mathers. “That translates into higher employee engagement, which translates into some very real differences in performance metrics.”

I Love Rewards now offers a range of workforce-pleasing perks such as an annual employee retreat, flex-time and four weeks of vacation for new hires. But it’s not just about being nice to your people. The firm also requires employees to participate actively in setting and achieving company objectives. It runs a nine-minute daily meeting at which employees and management review goals, discuss challenges and acknowledge exceptional performance. To boost engagement, Suleman also introduced an employee share ownership program and open-book management, the latter giving staff full access to the company’s financial details. On a quarterly basis, employees can grill management on everything from cellphone expenses to growth strategies at what Suleman calls “brutal facts sessions.”

This approach has made recruitment easier: I Love Rewards, which twice ranked as one of Canada’s Top 100 Employers, now receives more than 200 resumés per job posting, and its retention rate hovers around 90%.

Suleman credits his fired-up workforce with driving 200% growth in the year ending January 2009. “In the worst economic quarter in years, we tripled sales,” he says. “I attribute it to our culture, our business model and our focus on people and rewards and recognition.”

And the payback has been more than monetary: “Now, I love coming to work. It’s amazing to see 27 people so engaged, so aligned and wanting to change the world in our little way.”

DISCIPLINE 3

BECOMING AN IDEA FACTORY

MASTER: NURSE NEXT DOOR
KEY INDICATOR: ON TRACK TO DOUBLE ITS FRANCHISEE BASE IN ONE YEAR

If you think the famously innovative cultures of corporate giants such as 3M and Google are beyond your firm’s reach, you might want to reconsider. An innovative approach might provide the competitive advantage you’ve long been seeking—and a big boost to your growth rate, too.

A 2008 Georgia Tech study of manufacturers in that state found that firms that competed mainly by innovating or using new technologies posted a three-year average return on revenue of 14.5%, compared to 7.6% for ones competing on price alone. Those that employed process innovations to, say, boost efficiency, achieved 15% faster productivity growth than non-innovators.

“When you focus on innovation, it’s easier to get distribution, easier to develop product awareness, easier to hold your price, easier to get repeat purchases and easier to get appointments with customers, because they’re excited about your business,” says Doug Hall, founder and CEO of The Eureka! Ranch, a Newtown, Ohio-based innovation think tank. To build a culture of innovation, he says, you need to communicate to your staff that your firm is always on the hunt for better ways to do things. You also need to weave processes for brainstorming and implementing good ideas into your operations.

Ken Sim and John DeHart took this approach when they launched Nurse Next Door (NND) in 2001. The Vancouver-based firm is a franchisor of home health-care services for seniors, which might not seem like fertile ground for innovation. But the co-founders have made NND exactly that by scouring the world for best practices they can learn from, and institutionalizing a culture based on a ceaseless quest to streamline operations. Sim says this innovation streak has been fundamental to NND’s rapid growth as it builds a national network and lays plans to go global.

NND starts by hiring people who are keen on the “Find a better way” ethos that animates the firm. During job interviews, it outlines how NND manages a given aspect of its operations, then asks applicants to suggest a better way to do so. It isn’t seeking the “right” answer, but an applicant who shows an aptitude for such challenges and eagerness to address them.

Once on board, these hires join NND’s Kaizen Club (“kaizen” is Japanese for “continuous improvement”), which works to relieve bottlenecks. Staff meet weekly to analyze feedback forms from colleagues outlining an operational issue, its cause and effect, and its costs. In 2008, the club successfully implemented one new idea a week, from simplifying invoices to improving scheduling systems.

Sim and DeHart have also copied or been informed by ideas gleaned from visiting successful firms in countries such as the U.S., Japan and India. One widespread best practice they noted was to be ruthless in simplifying your business processes. When they applied a technique called value stream mapping to their workflow, they were stunned to find it took 37 steps from a client’s first call to completing the care for the client. NND has now culled the non-essential steps from this process.

The firm’s never-ending questioning of its own practices also revealed that its paper-intense internal procedures—what Sim calls “people running around to fill out data, which is put in a file cabinet where no one can see it”—was wasting $1.6 million per year. NND did away entirely with file cabinets so there’d be no room to store paper documents, leaving itself no choice but to make its massive switch to digital-based processes work.

This yielded huge efficiency gains. Combined with those from the rest of NND’s steady stream of ideas, it has allowed the firm to reduce its staff count by 50% over three years through attrition. This is even though system-wide revenue has jumped by 50% in the past year, and the number of franchises is on track to double from 19 last year to 40 by the end of 2009.

Sim says NND’s constant tinkering with its processes allows its franchisees to deliver a more reliable and personalized service to seniors, maximizing their revenue. This, in turn, allows NND to attract a top calibre of franchisee. “We don’t compete on price anymore,” he says. “Our competitors are no longer a choice (for customers and franchisees) because we offer something no one else does.”

DISCIPLINE 4

RUNNING AS LEAN AS A GREYHOUND

MASTER: SEQUEL HOTELS & RESORTS
KEY INDICATOR: PRICED 30% LOWER THAN ITS RIVALS

If there were ever a time to run as lean as possible, this is it. But, as Barry Cross, an operations management and technology professor at the Queen’s School of Business, points out, becoming lean is about more than just cutting costs—it needs to pervade every aspect of your business: “Running lean eliminates waste and complexity in your system, and that tends to really generate other opportunities.”

Anne Larcade, president and COO of Sequel Lifestyle Hotels & Resorts, has applied that lesson since launching her hotel-management firm in 2005. She decided, for instance, to have no office space at all by having all her managers and back-office staff work from home. That yielded not only $50,000 to $100,000 per year in savings for her Huntsville, Ont.-based firm, she says, but better work-life balance. The latter is a focal point for Sequel, which Larcade says helps keep turnover to just 17%, vs. an industry average of almost 30%.

“Most of our people think like entrepreneurs,” she says. “They’re constantly bringing ideas to me—ways we can do business for less cost, or processes we can improve to save time or labour.” Sequel teaches all 250 staff to read financial statements so they better grasp cost management. “The key to being lean is to allow your employees to come forward with ideas,” says Larcade. “You’re the enabler, the maestro.”

Sequel has embraced technology to run leaner. For instance, Larcade uses the Web-based application Easy Time Logs to estimate more accurately how much time her staff will spend on each service for a given client. This accuracy permits her to leave out the cushion usually built in to quotes prepared using rough estimates. Larcade can drop her price, undercutting rivals, yet know she’ll still make a profit.

Larcade also finds lower-cost ways to deliver in areas where her clients don’t require gold-plated service. Whereas competitors have call centres, Sequel doesn’t—saving up to $150,000 as a result. Instead, it encourages customers to make their own bookings online using TravelCLICK, or directly e-mail the employee they’re dealing with, who the firm promises will respond in near real time.

Lean overheads allow Sequel to charge 30% lower property-management fees than its competitors do, says Larcade. This advantage helped the firm finish a tough 2008 with revenue of $9 million, up 8% over 2007. And Sequel is on track for 15% growth in the first quarter of 2009.

Scott Morris, a partner at Results.com, a Calgary-based business growth consultancy, says lean companies are well positioned now. At a time when banks are scrutinizing balance sheets like never before, firms with cash on hand, low overheads and little debt are the most likely to be entrusted with bank loans. Morris says these companies have an opportunity to acquire new products, new business lines and even competitors at cut-rate prices.

DISCIPLINE 5

GUARANTEEING 'WOW' SERVICE EVERY TIME

MASTER: PRINT AUDIT
KEY INDICATOR: CLIENT-RETENTION RATE OF MORE THAN 80%

John MacInnes was so tired of dealing with software-support centres that were anything but supportive that he imagined how nice it would be to do business with a firm utterly committed to customer service. Then he set out to build one.

When he founded Calgary-based Print Audit, which develops software to track and reduce printing costs, he adopted a simple policy that would become the foundation of his customer-service model. “At every other software company in the business,” says MacInnes, “you’re not going to get someone live on the phone.” At Print Audit, callers always do.

MacInnes, while not stinting on R&D, sales and marketing, saw his true opportunity for a competitive advantage in offering a level of customer service foreign to the software sector. To that end, visitors to Print Audit’s offices may notice a stack of thank-you cards at each employee’s desk bearing that person’s photo. MacInnes encourages staff to send them to clients when they buy software—or simply pay their bills on time.

All 58 employees also have access to a flower and gift account to send thank-yous to customers, as well as gifts to mark key events in a client’s life, such as a birth or death. The firm’s flower bill is $10,000 per year, but that brings in “millions in business,” says MacInnes, who puts Print Audit’s revenue in “the high seven figures.”

His customer-service strategy is about more than sending beautiful bouquets. MacInnes realized early on that speedy troubleshooting could give his firm a big edge, so employees meet every day to report on software glitches that need fixing. And the customer-service staff try to nip problems in the bud by collecting, and then passing on to the company’s software developers, clients’ suggestions for improving everything from functionality to the help files.

MacInnes’ staff are not merely empowered, but also required, to do their utmost to solve product problems—even if that means putting the issue on his desk. If the customer is still unsatisfied, they get a refund, no questions asked. To avoid this, the firm surveys clients within 15 days of buying software and again within the next 15 days, to ensure they’re using their purchase effectively. And it follows up every year after to ask how to modify the software to meet clients’ evolving needs.

MacInnes says this customer-first approach has been decisive in achieving annual growth of 45% over the past five years and a customer-retention rate that tops 80%.

Joe Wheeler, executive director of the Service Profit Chain Institute, a Hingham, Mass.-based business-performance consultancy, says strong customer service offers multiple rewards. “There’s example after example of companies that have spent less on sales and marketing, and more on service. And it’s a three-for-one,” he says. “The customers can’t stop talking to other customers about [the service], so the firm grows organically through referrals. No. 2, the cost of sales is a lot less. And No. 3, in terms of customer retention, if there’s any kind of lifetime value before a customer turns profitable, you have to deliver a service experience that retains them as long as possible.”

A 2007 study by Toronto-based research firm Ipsos Reid shows how easy it is to miss out on the chance for repeat business: 84% of Canadians said they’ll stop buying from a company after just one negative customer-service experience.

It takes hard work to avert this danger. At Print Audit, this starts with recruitment. The firm does multiple interviews, at least one of them devoted to thoroughly assessing a candidate’s fit with its service-oriented culture. Print Audit’s skill at this is one reason its staff-retention rate typically hovers around 100%.

“The biggest hurdle is making sure that the people working here share the same values,” MacInnes says. “If they have that, then [good customer service] is ingrained. Unless it’s already in them, you can’t convince people to want to make people feel good about themselves.”