From the March 1999 issue of Entrepreneur

Looking for a way to grow your business? If you sell products through traditional retail or wholesale channels, consider adding mail order to your operation--it's a low-overhead, relatively safe way to expand.

Ouidad in New York City is one example of a company that did just that. The hair salon was doing well in the mid-1980s, but growth was limited by a finite facility and market. At the same time, owner/stylist Ouidad and her husband and business partner, Peter Wise, noticed a trend among clients who were moving out of the area to want to keep buying the products Ouidad had developed for the salon.

"[With only a retail location,] you start hitting the ceiling as to how many dollars you can make without raising prices," Wise says. The solution was Ouidad Products Division, which ships products to consumers who order by phone, fax, mail, or over the Internet.

Wise says retailers expanding into mail order have an advantage over new businesses starting catalogs. "You know your customers; you know what they want. What you're doing is offering them another way to do business with you," Wise says. "Customers aren't in your store, but when they call on the phone, they have to get the feeling they're still dealing with the company they know."

Here are two lessons Wise learned along the way:

  • Make it easy for customers to do business with you. Offer 24-hour ordering; contract with an independent order-taking service if 24-hour staffing isn't practical for you. Use toll-free numbers on your order lines.
  • Listen to your customers. Wise was running monthly product specials until customer feedback made him realize people don't typically buy hair-care products every month, so he shifted his promotions to match the buying patterns of his customers.

Down & Out

When an employee files bankruptcy.

As the rate of consumer bankruptcies continues to rise, chances are, at some point you'll have an employee who seeks protection from creditors through the courts. It's important that you understand your responsibilities and obligations as an employer under the federal bankruptcy code, says Louis A. LeLaurin III, an attorney with LeLaurin & Kessler LLP in San Antonio, Texas.

There are two basic types of consumer bankruptcy: Chapter 7, which is a straight liquidation, and Chapter 13, under which the debtor agrees to a court-supervised repayment plan. It's possible that an employee could file a Chapter 7 and you'd never know about it. Under a Chapter 13 filing, however, you'll probably receive a document called a pay order, LeLaurin says. This will direct you to pay a certain portion of the debtor's wages to a trustee, who will then disburse the funds to creditors.

If the employee owes you money, you become another creditor and will be treated as such in court. "In a Chapter 7 case, you'll get money only if there are assets available to distribute to all of the debtor's unsecured creditors, and that's rare," LeLaurin says. "In a Chapter 13 case, you'd have to file a proof of claim and you'd receive the same percentage other unsecured creditors would receive over the course of the [repayment]." In either case, you can't use future wages to secure payment outside the court on a debt that has been designated part of a bankruptcy action.

Beyond the actual financial details, keep in mind that an employee who has filed bankruptcy is likely experiencing a high level of stress and perhaps shame. If you have an employee-assistance program, or if your health insurance covers counseling, discretely remind the employee that such resources are available. If the employee's job performance suffers, address that as a performance issue unrelated to the bankruptcy. Keep in mind that it's a violation of federal law to discriminate against any employee for filing bankruptcy.

Full Esteem Ahead

Is your recognition program working--or backfiring?

Business experts all agree: Workers need recognition and rewards to be successful. But how do you know whether what you're doing is helping or hurting?

Tom Pace says the easiest way to find out is to be sensitive to the general atmosphere of your workplace and pay attention to individual reactions to your efforts. Pace, 41, is president of Pace/Butler Corp. in Oklahoma City, which buys and sells midrange IBM computer equipment. Through trial and error, he's developed a recognition and rewards program that works.

Each morning, the company's 50 employees gather in the conference room for a unique but powerful 15-minute motivation session. They begin by reading the company's "atmosphere statement," which was written by employees and describes the environment they want to work in. Then they review the company's mission statement, values and goals. Next, seated in groups of six to eight, employees compliment each other for recent behaviors, both minor and major. Finally, each person shares something they've done well. "These meetings raise individual self-esteem and set the tone for the rest of the day," says Pace.

But the daily meetings are just one of the components of Pace's program. He does a variety of intrinsic and extrinsic things designed to express his appreciation and make his company a better place to work. For example, he periodically gets $300 to $400 worth of $2 bills and gives them to managers with instructions to pass them out to anyone who is seen doing something positive. He also often provides meals, pays for trips, gives out books and flowers, and awards performance bonuses. Recently, he arranged for a helicopter to land on the company parking lot and take employees for rides just for fun.

Pace refuses to implement programs that create competition between workers, such as naming employees of the month. "That's about the worst thing a company can do because it singles out one winner--and the rest lose," he maintains. In fact, he says, any time he's tried to motivate employees by pitting one against another, it's failed miserably. "Make sure your program can reward everyone, that everyone can win, and that you don't have winners and losers," he advises.

One clear indicator of the success of Pace's efforts is that several employees who have left Pace/Butler and gone on to form their own companies have emulated the morning meetings and other components of Pace's recognition and rewards programs. "Other companies come in and see what we're doing and copy it," Pace says. "Even a federal prison has emulated some of the things we've done."

Knock It Off

Dealing with foreign forgeries.

As a U.S. manufacturer, what can you do when a foreign company copies your products and erodes your profits with cheaply made knockoffs? You could go to court, but international litigation is expensive and lengthy. Paul Lyon, CEO and founder of The Lyon Company, a Salt Lake City designer, manufacturer and distributor of gifts, took a different approach.

Ten years ago, Lyon realized his line of liquid-motion key chains and desk toys were being knocked off by a Taiwanese manufacturer. "The designs I was manufacturing here were being copied, exactly, with my name on them, and my competitors were distributing them," Lyon says. So he went to Taiwan, met with the manufacturer and rather than fight with him, convinced him that they should work together.

Lyon provided the designs and held all the rights to the U.S. market; the manufacturer paid for all the tooling charges and took the rest of the world market. Both companies saw profits increase as a result of their alliance.

Of course, Lyon's solution may not be practical in every situation. Usually, by the time knockoffs hit the U.S. market, it's too late. If you're planning to reduce prices, Lyon says, you can make your products unattractive to copycats by reducing them earlier, before fakes can hit the market. "Early on, know when you're going to drop your price," Lyon says. "If foreign manufacturers don't see enough margin to be made, they won't copy you."

Another technique Lyon recommends is to knock yourself off. If you do it first, you'll remove the profit potential for others. Lyon suggests creating different sizes of the same product or coming up with slightly different versions. By the time foreign manufacturers have duplicated your original product, you've already introduced the latest version. "Then," says Lyon, "[distributors] will be more apt to buy from you because you have the whole package."

Contact Sources

LeLaurin & Kessler LLP, (888)839-2889, txatty@flash.net

Ouidad, (800)677-4247, www.ouidad.com

Pace/Butler Corp., (405)755-3131, www.pace-butler.com