Managing Momentum Channeling Rapid Growth
October 31st, 2008All articles are free to use as long as you keep the author bio intact and provide a live link to the Thriving Candle Business website
If you’ve ever wondered what it’s like to ride a rocket, just ask executives of the fastest-growing direct selling companies. They all agree. It’s excitement like nothing else.
Though sales in the entire direct selling industry weakened a bit over the last year, the companies who spoke with Direct Selling News flew far above the slumping economy. Each characterized its remarkable growth in a different way.
Scentsy’s wickless scented candles and products have created a business so hot that it has grown by a factor of six for the last 18 months.
“Our sales and consultant numbers have had equal average growth,” says Scentsy President and CEO Orville Thompson. “For four or five months, our sales numbers grew faster than the consultant count. Then it flip-flopped. But year to date it’s all up about 600 percent. Sales per raw consultant are up slightly over last year.” The company’s upward growth trend has expanded each year since it was established four years ago.
At greeting-card company SendOutCards (SOC), growth is measured numerous ways. No two cards the company produces are alike, and each is printed, addressed, stamped and mailed by the company after the customer custom-creates it online.
“When we first started business in my garage, we could print 10 cards in five minutes,” says President Erik Laver. “Now we can print 1,000 cards in five minutes on printers that are 40 feet long. Since we sent that first card on July 1, 2001, we have mailed about 15 million cards. We’re currently growing at 210 percent a year.”
State-by-state energy deregulation allowed Ignite to begin offering electricity in Texas in 2005 and in late April the company expanded into newly deregulated Georgia to offer natural gas. In those two states alone, it has more than 100,000 independent associates and has already acknowledged three million-dollar income earners in its first three years of operation. The young company’s revenue shot to more than $600 million in 2007, from $400 million in 2006 and $67 million in 2005. Keep in mind, the company was doing business in one state.
“Electricity is the perfect product or service,” says Doug Witt, Ignite’s Senior Director of Marketing Operations. “We kept things simple. You don’t have to explain anything to anyone or change their buying habits.”
E-Growth
Agel President and Co-Founder Craig Bradley says it’s hard to comprehend how fast the company has grown, but, “We realized that we had a billion-dollar idea, and we knew that we wanted to have a footprint around the world.”
The company uses a major e-commerce focus to market its gel-based nutritionals and opportunity. Since almost 100 percent of its orders are placed online, it credits the Internet for much of its incredible growth. The founders’ intent was for the company to be immediately international, so it developed a revolutionary, proprietary method to make it happen. Agel launched in 10 countries simultaneously in May 2005 and now has expanded into almost 50.
“We’ve been able to set up the company in such a way that we’ve self-funded virtually all the growth.”
—Darren Jensen, President of Agel International
“We were up over a million dollars this month over last,” Bradley said in early July. “We just launched in Kazakhstan six days ago, and we broke even on our investment in just 48 hours.”
Agel created strategic alliances and partners around the world to help it distribute products while leveraging technology to allow it to expand rapidly. Both have let the company expand without heavy investment in bricks and mortar, and its robust Web site overcomes language barriers. The Utah-based company also tapped the international student body at nearby Brigham Young University to staff its customer-service center, speaking to customers and team members—its name for distributors—in 35 languages.
Its initial challenge was to figure out cash flow, accounting and a way to meet regulatory requirements around the world for its product line. It made its way through all three mazes.
“It’s not inexpensive to operate,” Bradley says. “But we have a very sophisticated system now. From the beginning, we had a strong financial partner who understood the billion-dollar idea. We were held accountable, but our partner is very good. We paid back our initial investor a year ago, and we’ve been debt free since.”
Agel President of International Darren Jensen adds, “We’ve been able to set up the company in such a way that we’ve self-funded virtually all the growth. We still have our partner, but we’ve been able to build internally through the revenue we take in. We also formulate our products for global use to begin with. In almost 50 countries, there are very few variations. Some go everywhere with no variation at all.”
Its basic business model and being e-commerce-based has allowed SendOutCards to grow with relative ease.
“Two things are hard on business—accounts receivable and inventory,” Laver says. “We have neither. Each card is already paid for when it goes out the door, and because of our product we run zero inventory. We have paper as a raw good, but we have virtually no waste. And we have a great management team who are good decision-makers. So it hasn’t been as difficult as you’d think because of the great team that surrounds us.” His only complaint is offered in jest: “Holidays age me by about 10 years!” he says with a laugh.
Laver acknowledges that distributors always face the perennial direct selling showstopper: being told no. But he adds that his products’ convenience, the variety of 12,000 greeting cards and their inexpensive price—starting at 62 cents, when the average cost of a greeting card purchased in a store is well over $2—readily overcomes most objections.
Real Estate Restrictions
Perhaps the e-commerce focus has helped Agel and SendOutCards avoid one of the key challenges that most companies face: real estate.
But fast, powerful growth has created space demands for both Ignite and Scentsy.
“For us, the challenges have been mostly personnel- and space-related,” Ignite’s Witt says. “For instance, in three years I’ve been in four different offices because of our expansion requirements. It’s always in the same building, but we have to reconfigure every time you turn around. And there are times when you can’t seem to get people on the payroll fast enough.”
He says that for an energy company, the primary danger to fast growth is service-related.
“If you lose credibility and confidence with either your field or your customers, your momentum will extinguish,” Witt says. “It’s not something you can turn on and off. We’ve had to deal with that. We’ve had some challenges and stumbles, but for the most part we’ve overcome problems and reached our goals.”
Ignite’s energy provider is Stream Energy. Stream has successfully tapped technology to provide stellar service. In April, a panel of 25 global industry analysts selected Stream Energy as one of the two most innovative companies in North America in customer service. They gave the company a four-star ranking, the highest honor in the awards program, because of the technological transformation and streamlining of the company’s customer contact center.
Witt adds that Ignite’s growth is restricted by the slow pace of energy deregulation in each state in the United States.
Scentsy’s Thompson says that having enough operational space has always been a challenge.
“The problem is that when we’re growing this fast, we have to explain to the landlord that we have to have 25,000 square feet, but the lease on it is 35 percent of last year’s revenue,” he says. “They say, ‘Show me.’ It’s difficult to get a landlord to understand that your projections are accurate. When we went to our landlord to show him our projections so we could lease the building we’re currently in, he turned us down. He thought our projections were irrational. We had used a factor of 400 percent, even though we thought it would be 600. Then we had to lower the projection to 200 percent just so he wouldn’t think we were crazy.”
Scentsy had to obtain a line of credit with its bank before the landlord would lease to it. The bank cooperated because Scentsy had good revenue and good deposits. Three months later, when the company’s growth proved the projections accurate, the landlord was impressed and expanded the space he would allow Scentsy to lease.
“We only did what we said we would do,” Thompson says. “But in a year, the landlord extended the amount of space we had by another 25,000 square feet of warehouse and 13,000 square feet of office space. Now that we have a track record, we’ll simply expand more into the same building we’re in.”
Subletting is one of the company’s growth secrets.
“For our first building, we specifically looked for something we could sublet,” he says. “We negotiated the shortest lease times possible so we would have the flexibility to move. Now we’re in 75,000 square feet.”
Recruiting the Right People
No matter how much or how little space an expanding company has, the people in the space—and the people they support in the field—have to have the right stuff. Ignite looks for experience, attitude and stamina to work the long hours needed to get the job done. International Agel values language skills and experience with other cultures. And the staff at SendOutCards tends to be young—average age 28—and, of course, have cutting-edge Internet skills.
But at Scentsy, President & CEO Thompson has a unique requirement for his executive staff: no direct selling experience.
“Anytime a company is growing at this kind of rate, it isn’t doing so because of a marketing or advertising campaign,” he says. “It’s because of the person-to-person viral marketing that’s going on. The primary job of a CEO, as I view it, is to define the virus and perfect it. My job is not to allow somebody to introduce the inoculation. So many companies borrow what their virus is from other companies, and if I were to bring someone in from another company, they’re bringing that company’s virus—it’s a unique offering to the world that was ingrained in them for as long as they worked there.”
To be certain that the Scentsy virus doesn’t mutate, all executives come from other industries, such as technology, automobiles and apparel. And Thompson has another requirement, too.
“Everybody has to be a generalist,” he says. “You can’t hire for a specific task when you’re young because everyone has to put on so many hats. You have to roll up your sleeves, go to work, but be experienced and smart enough to run a department. The skill set and personality type I’m looking for is unique; some people can manage, some can build. At Scentsy, you must have both.”
As in every direct selling company, Scentsy’s viral growth starts with its distributors, who are concentrated in the Intermountain West of the United States. Its primary distributor demographic is somewhat younger than most direct sellers, but it also has some unexpected representatives.
“Our typical distributor is a 31-year-old stay-at-home mom from Boise, but we also have an 83-year-old guy in an assisted-living facility,” Thompson says. “He does $300 to $400 a month in sales, and he’s enjoying the experience. They have very little in common outside of Scentsy. Our Hispanic market has started to heat up. We haven’t gone after it, but it’s coming to us. And we have a lot of deaf consultants. We have three or four directors who are deaf. They communicate through e-mail and are very well interconnected. It’s a wonderful demographic for direct selling. We would never have thought to go after the hearing-impaired demographic, but our numbers have grown organically, and we’ve happily facilitated and accommodated them as best we can.”
SOC’s Laver says that his typical distributor is a younger-than-industry-average male with the Internet skills that are common today.
“For recruiting, it’s beneficial to have some business background,” he says. “It particularly helps you talk with other businesspeople about the products. Anyone with a small business loves our products. One of the customer groups we’re attracting is distributors from other direct selling companies. With our product, they can market more efficiently and communicate well with their downlines and prospects. They can create cards about what their company is doing or about events that are coming up.”
“If you lose credibility and confidence with either your field or your customers, your momentum will extinguish.”
— Doug Witt, Senior Director of Marketing Operations, Ignite
Ignite’s Witt credits the company’s field leadership with being key to the company’s skyrocketing numbers.
“Very few of our people had any MLM experience, and we didn’t move whole organizations into Ignite when we started the company,” he says. “More than anything, it was the inherent integrity and leadership skills of our founding group that has quickly helped us grow organically and with few problems. You can’t teach ethics and integrity, but if you’re fortunate enough to start with a group like that, they attract people like them. It makes a huge impact.”
Once Ignite attracts its ethical distributors, it builds their knowledge base through both online and off-line systems, including Ignite Academy, its traveling training school. The combination of integrity and information is powerful and helps fuel growth, Witt says, “Fast growth generates enthusiasm, and enthusiasm is contagious.”
Agel executives also point to their field leaders as one of the company’s keys to success. The company cultivates close relationships so its leaders feel buy-in.
“We want to do everything possible to get rid of the wall between the corporate office and the field,” Jensen says. “Whether people are employees or distributors, we refer to them as team members. We’ve found field leadership with the skills we wanted. We didn’t necessarily develop their skills, but we set the proper expectation. Then that culture is replicated throughout their organization.”
As executives of the fast-growing companies—none more than 7 years old—reflected on the rewards of building such high-powered growth engines, all expressed pride at the impact their opportunity has made in the lives of their distributors. And none expect the pace to slow down.
“It’s been very satisfying seeing something start from scratch,” Ignite’s Witt says. “In 2005 we were just six guys sitting at card tables in a one-room office. Now we have more than 300 employees and in excess of 100,000 associates. But best of all is the impact that the business has had on people in the field—not just the millionaires it has created, but the single mom who’s making an extra $1,000 a month that’s changing her life.”
Author: By Barbara Seale Source: www.directsellingnews.com
