From the August 2001 issue of Entrepreneur

In a way, it began with a bet. Or a dare. Certainly it was a promise. Whatever you call it, it happened at the annual meeting in 1994, a half-social, half-serious function celebrating the past year. Larry Gaynor, founder, president and CEO of The Nailco Group, was proud of his beauty salon product distribution company. And why not? He had a strong company, largely constructed by a formidable sales team.

Today, it is a selling tsunami.

Back then, it had made $18 million for the year, and The Nailco Group--TNG for short--was moving into a 100,000-square-foot, state-of-the-art complex. But Gaynor was bracing for a possible quitting epidemic--the new office in Farmington Hills, Michigan, was 20 minutes further from most employees' homes. And so Gaynor, who is something of a showman, boldly announced to his 65 employees: "When we reach $50 million, I'm going to buy each of you a car."

He enjoyed the looks he got from his slack-jawed employees. Then he promptly forgot his pledge.

Until 1999, when 24 employees reminded him.

As the only ones left of the 1994 crew--and knowing sales would hit $50 million within a year--they expected their cars. "I was in shock," says Gaynor, now 45. "I remembered saying it, but then I didn't remember saying it."

At TNG's annual meeting, held in the waning days of 2000, those 24 employees were rewarded with a choice: $25,000 in cold, hard cash or a free car worth 70 percent of their salary.

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Employees wept. They shouted for joy--especially when Gaynor promised similar incentives for reaching $100 million. They promised Gaynor they'd reach that new goal within a year or two.

It could happen. After all, Gaynor's company is already something of an empire. There are several divisions underneath the TNG banner: The Industry Source, a mail order and retail store division; Hairco, a full-service hair-care products division; Beauty Direct, a master distributor for dealers, distributors and over-the-counter stores; and NailSmart, a discount nail product supplier.

Dizzying, Isn't It?

Gaynor is an entrepreneur determined to rise to the top of his industry. And it's hard to argue that he won't. TNG, which now has more than 230 loyal and enthusiastic employees, is growing by 30 percent each year in an industry that usually sees 2 percent growth.

"We don't call customers," brags corporate trainer Frank Knight. "They call us--with huge orders. It's like they can't spend enough. They apologize when they have small orders--they feel they aren't living up to [our] expectations."

So how can you achieve all that? In a way, it begins with a bet. But most of all, it begins inside the sales machine.

The Sales Machine

It's a big machine. Gaynor's warehouse holds 10,000 items, from nail polish to tanning beds. On a typical day, TNG ships out up to 15,000 items worldwide. Roughly 50 sales staffers sway minds on telephones, telling incoming callers that if they just buy a little more, they'll save a little more. They offer more good deals than Monty Hall. Meanwhile, about 25 salespeople make deals out in the field, persuading salon owners nationwide to carry nothing (or almost nothing) but Nailco.

One of those salespeople is indoor tanning director Dave Folsom. With his crew cut and tall frame, he looks like a cross between a military instructor and a gym coach. He's one of TNG's elite. "I like [TNG's] leadership, the management. We've got good commanders," says Folsom, who likens TNG's sales instruction to basic training (and he should know: He's also a military policeman in the reserves). "We attack, and we attack in full force."

But for all the people running the sales machine, something's got to fuel it. And that formula is Gaynor-designed:
* A sales-enthusiastic culture.
* A learning-friendly environment.
* Incredible customer service.

"We don't call customers. They call us--with huge orders. It's like they can't spend enough."

The recipe is deceptively simple, but the cooking process is anything but. Almost as soon as new employees arrive, they're introduced to the TNG culture. Explains Maureen Mann, vice president of sales for the Industry Source division, "You have to want to play on the team, and you have to want to win."

Gaynor has wanted to win ever since he was 10 years old, working in his dad's hardware store in Detroit. Even in high school, Gaynor worked weekends and evenings, missing the chance to play in sports. An armchair psychologist might suggest that's why Gaynor acts more like the fired-up, beloved coach of a high school football team than a CEO.

TNG has "school colors"--purple and white. Especially purple. It colors the walls, carpet, cubicles, chairs, tables, pens, files and folders. The building's exterior features a prominent purple stripe. Numerous pennants, emblazoned with "TNG Rebels," decorate the place. And how many businesses do you know with their own fight song? At quarterly meetings, you'll find TNG cheerleaders and a Rebel mascot (played by Folsom), and at annual meetings, a real high school marching band. Working at TNG is one big pep rally.

That's the idea. It's hard to be excited about selling for your company if you hate your job. And how could you not like working here? Gaynor and his wife, Teresa, TNG's vice president, host two barbecues per year for the staff, and Gaynor routinely passes out $100 bills at quarterly meetings. TNG occasionally caters lavish lunches for employees, and there's always free soda in the lunch rooms.

Says Anne Schultz, one of TNG's top sellers, "Every day I come to work in a good mood."

Learn and Earn

A business has both internal and external customers (employees and clients), says Gaynor. It's basic math: Please both groups, and sales go up. And his employees often need a pat on the back: "Salespeople, in general, ride emotional roller coasters. They frequently run into rejection," says Tony Alessandra, author of The Sales Manager's Idea-a-Day Guide: 250 Ways to Manage and Motivate a Winning Sales Team--Every Selling Day of the Year (Dartnell).

But it's hard to enjoy your job-and thrive in it--if your brain matter is hardening. Hence Learning to Learn, a five-week, three-hour-a-week required course for all employees. They learn how to retain information, and everybody is assigned to read newspapers, magazines and two books: Tuesdays With Morrie (Doubleday) and Harry Potter and the Sorcerer's Stone (Scholastic Trade).

"The average person forgets 50 percent of what they listen to [within] the next day," Gaynor says. "They forget 90 percent of what they listened to within a week. And within a month, it's virtually forgotten altogether." Scary stuff, when your sales meetings are packed with information. But Gaynor remains enthusiastic that TNG can overcome the stubborn memory by giving reading a critical role in the learning process. In fact, it was a book--Timothy Gallwey's The Inner Game of Work (Random House)--that inspired Gaynor to make his company "a learning-based organization."

The book has since become the company bible. The main theme in Inner Game is this, says Gallwey: "The potential of human beings to learn from their work experience is not fully taken advantage of. To do this requires acknowledging the way in which individuals, teams and corporate culture can interfere with the worker's learning and potential expression of excellence."

"Salespeople, in general, ride emotional roller coasters. They frequently run into rejection."

That is a philosophy Gaynor takes to heart. New employees attend an intense three-week seminar, where they study the workplace culture, the complicated computer system and specific sales tactics. Common stuff, of course. Most successful companies offer training.

But then Gaynor's employees take Learning to Learn, and some time later, they move into Learning to Learn: Level Two. Mann, an instructor, explains: "We go into a more in-depth understanding of the principles of The Inner Game of Work, such as mobility, focus, redefining work, thinking like a CEO and coaching for managers."

When employees reach Level Three, they study personal and professional development. And Level Three, Mann says, "will never end."

Impressive? Or a waste of time and money? "It is an investment," argues Alessandra. "For instance, IBM has found that for every dollar they invest in training, they get $25 in return. Of course, if you're looking to save money, training is one of the first things an entrepreneur will cut."

Indeed, several months after implementing TNG's learning programs, Gaynor saw customer satisfaction rise to 90 percent. Turnover virtually stopped. And Knight talks of one training success story regarding a woman who had never touched a computer before coming to TNG. "For two weeks, she cried every day," he says. But he stuck with her and had her spend an extra week in training.

Says Gaynor, "She ended up being the first to do $1 million in sales. She's still the sales leader on the floor."

Salesman is a Dirty Word

In the early 1980s, when Gaynor opened an upscale discount beauty products and drug store, he put comment cards in each aisle so he could follow his customers' lead. Later, in 1985, he opened TNG strictly as a nail products business. But he listened again to customers--and as they demanded more, Gaynor happily obliged.

Customer service and selling may not seem simpatico, but they are to TNG's salespeople. Knight bristles at the term "salespeople." He knows all too well that used-car-salesman stereotype. Says Knight: "We call our people 'business development specialists.'"

The BDS title isn't BS. TNG's salespeople--sorry, old habits die hard--are trained to help budding entrepreneurs open salons and spas. Clearly, they want the salons and spas stocked with TNG products, but in getting that done, they'll also offer free advice and education on how to organize the layout for a salon, manage it, motivate staff and set goals.

"If you grow, then I grow," explains Knight. "If I give good customer service, then your bottom line goes up, and so does mine. I'm not viewed as a salesman, I'm [seen as] your partner. And then, while everyone else is trying to sell you something, you won't even talk to them, because you're waiting to talk to your partner. That's the strategy."

Inside The Lair

THIS COMPANY TAKES CULTURE TO A POSSIBLY ZANY, BUT NO DOUBT PROFITABLE, LEVEL.

For all of its friendliness and community goodwill (the company donates $100,000 to charity annually), there's a military-style seriousness to The Nailco Group. To get into the first-floor offices, for instance, you need a special code key. And sales soldiers get pumped up by watching a video that shows the TNG Rebel mascot in an airplane dropping animated bombs on competitors.

But the real military games are just that. Drop by founder Larry Gaynor's office, and on those dark mahogany shelves you'll find special board games his crack marketing team designed especially for him. There's Nailco-opoly, Nailco Pursuit and TNG Payday, complete with play money featuring Gaynor's face splashed across the $10,000 bills.

Nailco-opoly lets you purchase Asia and Europe instead of Park Place and Boardwalk. Instead of the "Go to Jail" space, you might land on "Go to Larry Gaynor's Office."

But nothing compares to Kill the Competition: Collectors Edition, modeled after Risk. Inside the box is a stiff cardboard map of the world, complete with game pieces and cards. The premise? Rival beauty product distributors have taken over nations. The object according to the directions? To win, Nailco must "conquer whole industries, watch enemies and fortify borders adjacent to enemy territories."


Geoff Williams is happy to say that he's already read Tuesdays With Morrie, and he wrote Entrepreneur's February cover story on lessons from Harry Potter.

Contact Sources

  • Tony Alessandra
    (800) 222-4383