Young Company Focus: Scentsy
All 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
Sometimes the next big success is nothing more than an entrepreneur looking for a great product and a product looking for a great entrepreneur. This magical combination is exactly what occurred at a trade show in Salt Lake City a few years ago. Stay-at-home mothers Kara Egan and Colette Gunnell had designed and packaged no-flame candles—aromatic and decorative—and since October 2003 had been selling them here and there. Orville Thompson was an entrepreneur who, since 9/11, had been struggling, and he and his wife, Heidi, were considering giving up their business of selling goods at fairs, kiosks, etc. When Thompson first saw the candles made by this tiny company called Scentsy, he immediately sensed they had huge potential.
“Initially, I wanted to sell their product through my normal distribution channels—fairs, kiosks, and shows—but there was something about it,” Thompson says. “I brought the product testers home to my wife, mother-in-law and sister-in-law. An hour later, I came back, and they were still smelling the testers, laughing and sharing memories.”
The first thing he did was call the wife of a friend who was a consultant for a struggling direct selling business and was ready for a change. Thompson asked her if she wanted to help him launch a company, and together they went to New Orleans for the Direct Selling Association’s (DSA) annual meeting. That’s where ideas really started to generate, and Thompson says he received help from all sides. “I was immediately impressed with the collaboration of the DSA,” he says. Thompson returned home with excitement, and he, Egan and Gunnell brainstormed ways to take the wickless candle concept to the next level. On May 1, 2004, Thompson and his wife bought Scentsy, keeping the two founders on as both consultants and members of the board of directors.
Humble Beginnings
Scentsy’s first home was literally no more than a metal box: Thompson had a 40-foot ocean container on his small sheep farm (no kidding about the sheep). “We were building a team while deciding on compensation plans, making the candles ourselves and working 20 hours a day to get this thing off the ground,” he says.
What the company lacked in accommodations and capital, it made up for in determination. “We started off with a sense of purpose and a sense of destiny,” Thompson says. “Everybody told us the sacred rules of margins and cost of goods and the importance of making sure you’re fully capitalized ahead of time. We weren’t able to meet even one of those rules.”
For Thompson, bucking conventional wisdom about the “right” way to do business paid off. “We were a little company with an aspiration to be a big company,” he says. “And we had 322 percent growth in the first year.”
A year and a half after the company launched, Scentsy moved into a 2,000-square-foot facility. And yet people were still looking at the business plan and telling Thompson, “The candle industry is dying. You don’t have enough capital to get where you need to go.” Despite the naysayers, Thompson forged ahead, and in Scentsy’s second year he was able to invest in the company’s growth. “We paid others instead of ourselves,” he says. “We changed the price of the kit and sold it under cost. We bought software. We had about 100 consultants and revenue of about $5,000 a month and we hired a consultant trainer.” Scentsy grew 410 percent in its second year.
The company continued to grow, and after a one-year stay in 5,000 square feet, Scentsy had grown so much that it was sorely in need of space. So Thompson found a 42,000 square-foot building and approached the property owner who quickly said Scentsy’s projections were unreasonable and denied him tenancy. Not ready to give up, Thompson cut the growth predictions in half, to 200 percent. The property owner agreed to rent the building and Thompson obtained financing. “We used that line of credit for three weeks,” he says. “About $60,000 is all the company has ever needed. Everything else has been completely bootstrapped.” And by the way, the growth during that period was more than 750 percent.
And Scentsy’s growth shows no signs of slowing. “We ended 2007 at 594 percent sales growth—$13.5 million,” Thompson says. “Our recruiting growth was 556 percent and that translates into a 7 percent increase in sales per consultant while we grew.”
Scentsy’s market is still concentrated in a small area, and 70 percent of the company’s growth has been in the Utah, Idaho and Texas areas. “We’re untapped in California, we’ve barely touched the Northeast, and the Midwest and South have room to grow,” Thompson says.
Value, Authenticity, Simplicity
The basis for Scentsy’s business philosophy is a quote by Albert Einstein—a quote that so inspired Thompson as a young man that when he saw it on a poster he bought it and hung it on his bedroom wall: “Try not to become a man of success. Rather, become a man of value. A successful man takes out of life more than he puts in. A man of value will give more than he receives.”
This philosophy serves as the starting point for Thompson’s three-point business strategy of Value, Authenticity and Simplicity. “Good things flow to value,” Thompson says. “The concept of the value of contributing more than you take has allowed us to become stronger and stronger. Having the right values helps the business through its generations. Be true to yourself, contribute more than you take, be simple and good at one thing. ”
Thompson says every Scentsy consultant is important to the success of the company. “I value every consultant,” he says. “I don’t say, ‘You’re not recruiting anybody so I don’t value you.’ One woman is saving her money to take her kids to Disneyland. I’m not going to say, ‘That dream is stupid. You could be driving a new car.’ If the consultants are only giving a little bit, but only taking a little bit, they still have value. This simple principle fosters incredible positivity in the company.”
Both for consultants and customers, authenticity is the second key tenet of the company’s success. Thompson holds a Director’s Counsel every week for those who have $10,000 in team wholesale volume and explains where sales are compared to the previous year. Nothing is a secret. “They use this call as their thermostat,” Thompson says. “My job is removing the impediments to growth. I tell them, ‘You guys are the drivers of the dream.’ They’re driving it; we’re serving them.”
Authenticity is the concept that sets Scentsy apart for its customers as well. “Boomers have a tendency to try to mask who they really are,” Thompson says. “Gen X is completely different. Authenticity speaks very clearly to them. Heidi is shy, I’m bald, and I don’t shave every day. We’re authentic.”
Thompson says the buzzword authenticity resonates with the Gen Xers and Gen Yers because they want to know what they are getting, how much, when and why they should want it. With the value of authenticity behind every product and every consultant in Scentsy, a new demographic is discovering a company they can trust. “Gen X and Gen Y are now our primary consumers,” Thompson says. “The boomers are moving into the consumption of experience—college educations, trips, hospital bills. It’s the Gen Xers who are buying homes and decorating them, and who are buying diapers and food and all the things that are needed to keep a family running.”
Scentsy’s third business strategy is a focus on simplicity. “In the loud world we live in now, the message has to be crystal clear for us to hear it,” Thompson says. “Instead of having a large product offering, we have parties with one idea that people have to understand. It cuts right through the clutter.”
One way Scentsy keeps things simple is by listening to its consultants. For example, when the field asked for smaller samples, Scentsy made them small enough to fit in a basket. Consultants can put the samples in a basket, find a location to place that basket, and leave it alone. Customers then use the samples to place orders. “We have one consultant with 17 basket ‘parties’ going on at one time,” Thompson says. “Now we’ve just taken away the problem of finding hostesses for doing home parties.”
Scentsy’s Future
Thompson believes his salesforce shares his vision of the positive future in store for Scentsy. “To self-perpetuate, we have to perpetuate the values—the vision,” he says. “It’s not enough to have a convention and share my vision and have consultants go home and work on my vision. They have to have complete buy-in if they want to instill in other people that same vision. In addition, the Scentsy product simply offers a better value proposition.”
Thompson hopes the winning combination of great products, a passionate sales force and a sound business strategy will make Scentsy a company others want to emulate. “In five years, I want to be an industry leader,” he says. “I want Scentsy to be known as one of the great companies that have inspired us.”
Author: by Deanne Lachner Source: www.directsellingnews.com
Tags: Scentsy company profile