How to Succeed in Business Without Really Trying.

[JohnT]

This is a sort of continuation of the story that I went on about in 3 previous threads:

God, I quit my job... left the family biz... and I'm so happy I could just scream!

Ten Days that Shook My World

and

All The Lies That Are My Life, or, JohnT vs. his Parents

You don't have to read the above to understand the following, but it provides some interesting and (maybe) entertaining background.

(names will not be provided to protect the innocent and not-so-innocent).

OK, the first thing you need to understand is this: my parents company was really, really screwed up managerially-wise. The number of people who left the company to form competitors total 7, and include:

M, part owner (hell, he owned 40% of my parents company and just walked away) who left around 1990 to form his own company (and they are doing very well, with a couple of lucrative Sprint and Yellow Book contracts).

J, T, and H whom left together in 1998 to form their company, CRG.

R, who left in 2000 and is doing very well volume-wise, though his biggest client is one of those that expects you to cut your margins to the bone.

Yours truly was going to start a distribution company, but because of events described in the last thread listed above, had to change corporate focus to providing distribution support services, rather than actual distribution itself. But the non-compete is over, and, in retrospect, the law of unintended consequences reared its head and actually put me in a better position than I was a year ago.

[industry info]

What we all do is simple: we deliver telephone directories. There are 500,000,000 printed in the US every year (up from 420,000,000 in 1996), and every single one of those has to be delivered somehow. It is an industry dominated by two large players, one or two mid-sized companies, and a number of smaller mom-n-pop operations. The two big guys go after each other in the large public utility market (your BellSouths, your SBC's) while most of the other players go after the smaller utilities and independent publishers (whom account for ~200 million of the 500 million books printed).

[/industry info]

So much for the industry rundown, here's what's happened:

CRG, the second company that was formed from defecting employees, was founded by two gentlemen who are not, to put it kindly, either entreprenuerial or leadership driven. It was an ill-managed company that suffered from a number of things, including corporate focus, attention to detail, and a proper work ethic among the top management. Essentially, what happened was this: they had one client that was 80% of their business and supplied them with very nice operating margins. Unfortunately, this client got bought out by another company whom has some bad relations with the President of CRG, J. As soon as 80% client could, they got out of the contract, leaving CRG gasping for air and $$$. 'Twas a classic textbook case of a corporation that put too many of its eggs in one basket.

You'd think that losing 80% of your revenue would light a torch under somebody's ass... but it didn't. J and T literally just sat on their butts, waiting for the phone to ring. They made no calls. They went on no presentations (except for 1 that I was instrumental in setting up - I believe the phrase used was "If you didn't have JohnT on your team, we wouldn't be talking to you right now, but we have such a comfort level with him and his ability to get the job done that we are glad to talk to you.") They did nothing for over a year, while their corporation was slowly dying. Hell, T even loaned the corporation $70,000 just for the ability to sit on their asses another 8 months.

[aside]

I have a database of all the publishers and their directories, including distribution counts, publishing dates, etc. that I extracted from a PDF document last January. This information is unique and, to the best of my knowledge, nobody has it outside the trade organization where I lifted it from. I do know my parents company never had this info, and none of the other distribution companies do either. I offered this info to CRG last February... and they weren't interested. Not because it was too high a price... they just weren't interested. They didn't even bother to ask how much I wanted to sell the data.

[/aside]

Anyway, in spite of (or because of) the events that have transpired over the past year, I wanted to get back into distribution as soon as I was legally able. While a non-compete prevents one from working in an industry for a specific period of time, it cannot be used to prevent a person from planning their actions for when the agreement is over. I could arrange financing, meet and talk to like-minded, interested people, select a corporate name, fill out a bunch of paperwork, etc., just as long as nothing officially happens until after the end of the agreement (August 30th, 2003 in my case).

(To be Continued - I don't want this post to be too long. )

[chequita guevara]

I was in that musical!

[chequita guevara]

More! More!

[Oerdin]

Sounds like JohnT has big plans.

[JohnT]

I first started out with the more-traditional idea of just forming my own company with appx. $50,000 in seed capital, and slowly nurturing the thing along until it was profitable. This idea had its merits and drawbacks, but to me, the drawbacks actually outweighed the merits especially in regards to financing - you might not think so but phone book distribution actually requires very strong financial controls, with a hawkish eye towards your cash flows at all time. The number of small operators whom have crashed and burned because of their inability to make just one payroll (or achieve proper financing to handle these cash crunches) is legion. Even my parents company has had a number of times in the past where the even the short-term future of the company was bleak due to cash issues.

In short, the financial difficulties that were going to happen down the road was my biggest problem in doing a start up. Knowing my strengths and weaknesses, I knew that I wasn't capable of doing the finances myself (though I've been boning up on this stuff for the past year) and wanted, needed a partner/employee/whatever who had a strong financial background. And you know how many of those like to join thinly capitalized start-ups. ( ) Plus, there's always the issue of banks and other financial services companies - you think they're going to open a line of credit to a brand new service company, one with no history or assets?

So I decided that it would be better to buy into an already existing corporation, one that had good financial management, or at least a proven record of success and profitability.

Enter CRG, and partner #3, H. H was unlike T and J - he worked long, hard hours, knew what had to be done and constantly urged his partners to do what had to be done... and they never did it. H finally became disgusted with them and, while still maintaining ownership of his 500 shares (1/3 of all the outstanding stock in the company), resigned from CRG effective November 2002.

Knowing H from my parents company, he and I got together and found that we get (and work) together well - we share the same ethic, vision, and understanding of what is necessary to reinvigorate CRG to become a fully viable corporation again.

So we engineered a takeover.

CRG was experiencing another cash crunch. J, the President, is undergoing a nasty, NASTY divorce and is in no position to loan the company money, buy more stock, etc. T is already $70,000 in the hole, is burned out, and has no more desire to sink any more money into this corporation so that J can continue to sit at his desk, downloading internet porn.

Knowing this, I made the following proposal to CRG earlier this summer: Issue another 500 shares to me at a purchase price of $50/share, or $25,000. The $25,000 will cover the cash flow situation until mid-February, by which time the new contract from the people whom we gave the presentation mentioned earlier will kick in. Looking at the hole in their books, they took a vote (H, as mentioned, is still a shareholder and is still on the Board) and agreed to these terms.

So we wait 3 months until my non-compete is up. During all this time neither T or J bother to lift a finger trying to find new work other than a presentation to Sprint which CRG received only because J used to work for the current CEO of Rueben H. Donnelly. During this time, the company I founded is doing pretty well, earning an average of $8k a month in revenue - but considering that I am the only employee, and my fixed monthly costs total a whopping $500, that's not too bad and is enough for Laura and I to live on (as long as the SOB's pay their invoices that is ).

So September comes. I write a check for $25,000, with the agreement contingent upon my being elected to the Board and a few other things, with the combined Shareholders and Board meeting scheduled for 10:00am, September 9th, 2003.

(To be Continued...)

[Garth Vader]

I can't wait for the part where JohnT's robotic legions goose step over the shattered remains of his competitors

[Nubclear]

More!!!!

[chequita guevara]

JohnT should consider writing a book.

[Oerdin]

The plot always seems to thicken with JohnT's work stories.

[Tuberski]

Originally posted by Garth Vader
I can't wait for the part where JohnT's robotic legions goose step over the shattered remains of his competitors

I bet that "J" guy has a clone army waiting in the wings........

ACK!

[JohnT]

Now, the bizarre thing is, all that followed was known to all three partners before the meeting. I'm not going to go into details, but I essentially asked T for his support (hell, I asked him for his Proxy but he didn't go for that, though he knew what had to be done). I had a long discussion with J about CRG's future needs, his situation, etc., and flat out told him that I was going for the Presidency in the board meeting tomorrow (this meeting occured on Sept. 8th.).

H open the meeting by first passing along the stock certificate to T (Secretary) and J (President) so they can sign it. Knowing that I was going to go after his job, J still signed the certificate*. I had structured the purchase agreement so that if they decided NOT to have me on board in the time between the payment of funds and the issuance of the stock, then the payment would revert to a loan, repayable immediately.

H then opened the Shareholders meeting with but one thing on the agenda - to elect me to the Board of Directors. The motion was seconded and passed by unanimous (sp?) assent. The Shareholders meeting was declared finished and my election to the Board was duly noted and yadda, yadda, yadda.

I then opened the Board meeting and gave the floor to H, who explained the current cash position of the company and how it is that CRG is going to survive the next 6 months (essentially on my $25 grand). J jumped right in, and made a foolish, stupid blunder:

J: "What I want to do is resign the Presidency, ..."

JohnT: "Seconded and noted. Vote?"

H: "I agree. The Presidency is now vacated."

JohnT: "The board has accepted the resignation of the Presidency by J by majority vote, as stipulated in the Bylaws of the Corporation, and declares the position open. J, you may continue."

He was like or like , but to me he was at the switch - did he not even know the bylaws to his very own company?

J: "Well, what I was saying is I want to resign the Presidency as long as T will take over the position."

JohnT: "T? Are you interested in the Presidency of CRG, Incorporated?"

T: "No. As I pointed out a number of times previous to this meeting, I am sending out resumes** and will resign from CRG once I land a job. I do not want the position, nor will I hold it if it is given to me."

J was pretty much bug-****ed at this point. His bid to save his butt by giving his job to his best friend had failed, and now the best he could do is argue his way back into the position he resigned from just 5 minutes before. J and T (and the Board) went back and forth on J's proposal, with T adamantly and repeatedly refusing to accept even the idea of being President (as I knew he would before the meeting). During this time, T couldn't, wouldn't look J in the eye as he knew changes had to be made but didn't want to be the agent effecting those changes (T is very passive, not inclined for the battle.)

JohnT: "The Board has heard enough discussion on the motion proposed by J, and it is time for a vote." A round the table vote occurred with 3 voting against the proposal, 1 voting for. "The vote is 3-1 against the proposal and the Board considers the motion to have failed. The proposal and vote is duly noted, etc.."

H then motioned that the Board elect JohnT as President and Treasurer of CRG. After putting it up for discussion, the following happened:

J started arguing for his job back. His entire reasoning came down to this: it would look bad in the industry, and to current CRG clients, if it became known that J has lost his position. He also went on about how he didn't think I had the experience, etc. needed to run a company.

JohnT: "J, you talk about your 26 years of experience, but I want to ask the following question of you: what has your 26 years of experience brought to CRG? You've had 5 years as the President and revenues are down 75% from 3 years ago, profits are non-existent, and neither you nor T have the means or the stated desire (referring to something said earlier in the meeting) to continue running this business - and nothing in your history suggest that things are going to change. My God, man! you're best friend is now in the hole personally for $70,000 and you have done nothing to increase revenues or cut costs with the time bought by his loan."

I then went on to make my case to the board, as to why I should be President of CRG.

More discussion followed, but it was little more of a rehash of J's points - it would look bad, the clients might not like it, I might upset the corporate culture (duh! The corporate culture is lazy), he has a reputation to protect. Eventually, I intervened with the following:

JohnT: "The Board has two candidates for Presidency to select from. If the Board agrees by majority acclamation, I propose that we close discussions and then vote on the two candidates."

The Board assented.

JohnT: "Please vote by voice if you agree to the proposal of having J re-assume the Presidency."

J: "Aye"
H: "Nay"
J: "Nay"
T: (after a long pause, and not looking at J once) "Nay"

JohnT: "By a vote of 3-1, the nays have it. Duly noted, etc."

JohnT: "Please vote by voice of you agree to to H's proposal to elect JohnT President."

H: "Aye"
JohnT: "Aye"
T: silent... just wouldn't say a word.
J: "Well, if I can't be President and if T doesn't want it, then I guess it's you by default. So 'Aye'."

JohnT: "By a vote of 3-0, with T declining to vote, the "Ayes" have it. JohnT is now the duly elected President... etc, etc.

I accept the position and thank the Board for its confidence. That concludes the special Board meeting of September 9th, 2003 and this meeting is hereby adjourned."



*Denial is such a beyatch, isn't it?
**

[Immortal Wombat]

hooray!

[JohnT]

A couple of notes:

1. H is a financial guy, being the company's controller, accountant, etc before his resignation. He has agreed to come back on board once changes were made, and he and I had a meeting in regards to future financial needs just today (also about cost-cutting, etc. These people are paying for 8! DSL lines, though there are only 2 people who have a computer in the office. )
2. Before I left, CRG was Public Enemy #1 at my parents company. Now I've taken them over. I'd love to see the look on my stepmothers face when she hears the news.

[Wittlich]

Now turn the company around John!

[korn469]

can i have a job next year when i graduate college? lol

[Oerdin]

Congradulations on getting yourself into the leadership position. Now, how do you propose to cut costs, increase sales, and broaden the number of clients?

[Nubclear]

Glory!

[DRoseDARs]

[Skanky Burns]

Congratulations John!
Keep us informed with how things go.

[JohnT]

Originally posted by Oerdin
Congradulations on getting yourself into the leadership position. Now, how do you propose to cut costs, increase sales, and broaden the number of clients?

1. Cost cutting. There are a number of things that can be done immediately to cut costs by at least 10%, including:

a. Making sure your field managers are not paying people $.23/book to deliver in the Dallas suburbs (the usual rate is appx. $.17/book). Savings: $.06/book (and that is HUGE).
b. Cell Phone use is currently charged directly to the Corporation, with the Corporation supposedly charging back to the individual the personal calls made. Problem: this wasn't done under management. Solution: Reverse the bills so that the cell phones are billed to the user in question and make them line item expense those calls made for corporate use. Savings a minimum of $500/month.
c. As I mentioned earlier, a two man office is paying $500+ for eight DSL lines. Savings: $400/month.
d. Getting rid of the country club memberships so that the users pay for them out of their own pockets. Savings: $350/month.

And tons of stuff like this. TONS. Yeah, this stuff is kinda small, but it's a small company: $2,000, $3,000 a month added to the bottom line adds up.

2. Increased sales. I've actually already started this with my participation in the XXX bid, which will increase CRG's distribution levels by 1.5 million books, resulting in an additional ~$600,000 in revenue. I have a meeting next week in Louisville KY with a potential client who themselves publish 22,000,000+ directories - my history with these people is VERY good, and even though they aren't the best paying people in the world, my big issue right now is increasing volume as to keep the company going on a short term basis.

3. Broaden the client base. Well, I won't stand still when the XXX bid comes in. As I said, I have leads on every single publisher of telephone directories, and personal contacts with a good number of them. I also put the bug in somebody's ear to conduct a survey of phone book publishers in re: to distribution issues (something nobody has done before in this industry). He has done so, (set up a website, sent out emails, and can track the "anonymous" entries through IP settings and whatnots), and we are currently in talks in regards to selling the data to CRG and not my parents company. This data will be nice to have when I go give a presentation: walking in the door I will know that Company Y has big concerns over issue A and is not too concerned with issue B, thereby allowing me to angle my presentation to what they want to hear.

[JohnT]

Originally posted by korn469
can i have a job next year when i graduate college? lol

Do you like to travel?

[Oerdin]

Aslong as you make sure your data is correct then this plan sounds good. Question: If you sell your data then what is to prevent competetors from using your own data to do the exact same thing you are doing right now? Is the short term cash inflow worth risking a long term unique sales position? Then again the data becomes less valuable the longer it has been sitting around so maybe sell the old data but keep the latest stuff for your personal use?

Also how do you get perspective clients to fill out the online survey form? Are you going to direct mail them a flier asking them to fill out your form?

[Oerdin]

Originally posted by JohnT
Do you like to travel?

Hehe, he's got a job for you which pays $0.17 per book.

[JohnT]

Originally posted by Oerdin
Aslong as you make sure your data is correct then this plan sounds good. Question: If you sell your data then what is to prevent competetors from using your own data to do the exact same thing you are doing right now? Is the short term cash inflow worth risking a long term unique sales position? Then again the data becomes less valuable the longer it has been sitting around so maybe sell the old data but keep the latest stuff for your personal use?

Also how do you get perspective clients to fill out the online survey form? Are you going to direct mail them a flier asking them to fill out your form?

No, I'm not selling the data now, of course. I proposed it to CRG back in February, before I had plans to do what I did.

D, who did the survey and website design, sent out emails to the distribution managers (or their bosses) to all 200+ publishers of telephone books. So far, appx. 30 separate companies have replied. In two weeks he is planning on sending follow-up emails with some sort of incentive if they fill out the form (I don't know what the incentive is going to be).

[monolith94]

"Before I left, CRG was Public Enemy #1 at my parents company. Now I've taken them over. I'd love to see the look on my stepmothers face when she hears the news."

Revenge is a dish that people of taste prefer served cold.

You MUST rent Kind Hearts and Coronets TONIGHT JohnT - it's absolutely PERFECT for your situation! It's a great movie and I know you'll love it given your situation...

[JohnT]

Originally posted by Oerdin


Hehe, he's got a job for you which pays $0.17 per book.

Believe it or not, there are people who make over 6 figures delivering telephone directories. Generally they have 2 helpers and push out appx. 2,000 books a day (dependant upon the size of the directory). We usually pay these people more than $.17/book, but $.20 is usually the max that you pay anybody unless they have to drive up a mountain or something.

[JohnT]

Originally posted by Oerdin


Hehe, he's got a job for you which pays $0.17 per book.

Actually the job would be to manage the people who deliver the books, or a "field manager." You travel from place to place, opening up a delivery station, operating it, and then shutting it down before you leave to the next job. A typical field manager works about 3 weeks in a given city, travels for a day or so, and then stays 3 weeks at the next city, etc. So Korn could go from Arlington, TX to Shreveport, LA to Fort Smith, AR, etc. We try to keep them in the same geographical area so we're not paying people to travel 1,500 miles between jobs. We also try to keep them around their home - we wouldn't hire Korn to manage deliveries out in California, for example.

[Oerdin]

Originally posted by JohnT
Believe it or not, there are people who make over 6 figures delivering telephone directories. Generally they have 2 helpers and push out appx. 2,000 books a day (dependant upon the size of the directory). We usually pay these people more than $.17/book, but $.20 is usually the max that you pay anybody unless they have to drive up a mountain or something.

6 figures sounds good but I'm thinking it would be very difficult to keep up a 2000 books per day basis for very long. I mean in an eight hour day that would be something like 4.15 books per minute including travel time.

[JohnT]

Which isn't too hard if you stay within the inner core of cities and have a large number of businesses on your route. If you're driving out in the rural areas, no, you're not going to do 2,000 books a day - 1,000 would be more like it.

[Oerdin]

Hmmm, so 2k per day equals about $42 per hour out of which you'll need to pay something like $10 per hour to each of your helpers so $22 per hour gross rate. Remember you'll have to pay taxes on the whole $42 per hour I think and not just the $22. Still he'll gross around $40k per year. Good for a young fresh out of college guy but he'll spend 3/4 of his time traveling.

How how is turn over amoung your field managers? I'm guessing they burn out quickly.