Small Business Comebacks

Benjamin Sayers had just doubled his staff to more than 70 at VoIP Supply LLC in 2008, when he found out sales dropped by $1 million in one month. Since founding the company, he’d watched sales grow tenfold in four years. But when the recession hit, he suddenly had the rug pulled from under him and double the staff to pay.

Before the economic crisis hit, Sayers had hired 36 new people in six months in a rush to grow the Buffalo, N.Y.-based business, which sells equipment for Internet phone service to small and medium companies looking to replace traditional phone systems. Desperate to get his payroll down after the blow to sales, he gave himself two days to cut the number of employees in half. "We didn't wait at all," he says. "The general consensus was, 'Let's just assume it's going to get worse and not better.'"

A Low Point
In addition to the layoffs -- a savings of $1.5 million a year -- Sayers, 38, also eliminated expensive overlooked company perks, which included a luxury box at the Buffalo Sabers hockey arena and a BMW X5 sport utility truck that the employee of the week was entitled to drive around.

"We got rid of some of the toys we had accumulated over the years when people weren't paying attention," says Sayers, who founded the company in 2002 after successfully creating and selling another company -- an interactive voice response service bureau -- for $4 million. As a result, Sayers cut operational expenses in half, saving an additional $100,000 a month.

But sales continued to drop -- and by November 2008, they dipped to a monthly low of $1 million, down from $2.4 million in July. Not wanting to resort to more layoffs, Sayers cut his salary by 90%, his chief operating officer Brett Crandall -- who owns 10% of the company-- took a 50% cut, and Sayers established a 20% pay cut for employees.

The Turnaround
The tight economy meant Sayers, a college drop-out who says he’s learned everything he knows about small business from experience, had to keep his expansion tendencies in check, resisting the urge to write prototypes for new applications like he'd been doing in the past. For example, when the recession hit, he put a prototype for a telephone-sales training program in which he'd invested $150,000 on hold. Instead, Sayers began looking at how to streamline operations. "Collectively as a company we went back to where we were in 2006 just selling voice-over IP hardware," he says. "We retracted to what made us successful to begin with."

Reality Check
Sayers was forced to take a hard look at his business and ask himself what was and wasn't working. Here are three key questions he asked that might help your small business make a turnaround:

  • How are you being strategic with hiring efforts?
  • Are your new initiatives taking your business too far from its core focus?
  • In what ways can you improve efficiency in day-to-day processes?

Sayers had gotten wrapped up in so many expansion projects that he didn't realize the catalogue of products his customers used was outdated or in some cases, missing items entirely.

"Our focus [became] delivering exactly what our customers wanted and insuring our catalogue had the most current information," he says "The customer is what got us here and it was really going back and taking care of the customers who were remaining."

Sayers also worked to improve efficiency and make sale transactions faster. For example, in May, VoIP began using an in-house sales software platform that cut the time it takes to place an order from 20 minutes to five minutes.
Last year VoIP cut its debt in half and bought a new building, saving the company about $70,000 a year over its previous lease. While annual revenue in 2009 fell to $17.8 million with a net income of just over $12,000, last year annual revenue rose to $18 million, with a positive net income of $110,000. In May, VoIP is expected to have earned $2 million in monthly sales for the first time since early 2008.

Lesson Learned 
Straying from the company's core focus and hiring too many people too quickly were big mistakes Sayers realized only once the recession hit.

"In hindsight, the forced retraction of the business was a huge win for the company," he says "It was unfortunate for the people we had to lay off, but as far as the future stability of the business, it was a blessing in disguise."