When Peers Prompt a Turnaround
As part of our Small Business Comebacks series, a Cincinnati-based IT company reaches out for guidance to stage a comeback.
Erin Arnold had been at NextStep Networking, a Cincinnati-based IT consulting firm for 17 years when she stepped into the role of president in late 2008. She knew the business inside out, but what she didn't know was that only a month after taking the helm, the economy would tank and so would her company's sales. The firm's founder had retired, maintaining majority ownership, but placing Arnold in the role of president and giving her partial ownership of the business.
While the business still maintained contracts with long-term clients -- many had been paying monthly service fees for over a decade -- the project work that made up 30% of the company's $2 million in annual revenue was grinding to a halt. This included hardware and software updates for clients, who were penny-pinching in the recession and choosing to stick to old technology that required more of her staff's manpower to maintain. At the end of 2009, annual revenues were down $450,000 to just over $1.4 million.
Arnold, 36, who started at NextStep Networking as a front-desk receptionist in college, had never seen such a staggering slowdown in sales. Since many clients were not updating their servers -- a service that was the company's bread-and-butter -- technical snarls abounded, keeping her staff working on repairs but not bringing in money. She threw more company resources into sales, hoping to boost revenue.
"It took me getting to a really bad place to rethink how I could change my approach," she says.
Her short-term memory began to lapse under the strain. At times, Arnold says she couldn't remember what she'd done the day before. She drove the hour commute home in silence those days, caught up in solitary brain-storming. The tension was so palpable, even her three dogs stopped greeting her at the front door. "My husband would look at me and say, 'You need to get in the car and drive some more and clear your head,'" she says.
Turning the Tables
During this dark period, Arnold was preparing a presentation for the Heartland Technology Group, an industry group she belongs to, whose members meet quarterly to share best practices. She froze with the realization she'd have to speak about her company's recent decline, when she couldn't explain it or fix it. "As a business owner, you're the one who is supposed to know everything," she says. "The hardest thing was getting up there and saying, 'I'm screwing up here and I need help.'"
She asked her peers for advice – and they delivered. With their guidance, Arnold took a hard look at the company's spending, productivity, and relationships with customers and vendors. Instead of "getting whoever has a heartbeat to try and sell stuff" as she did when sales slowed, Arnold built an efficient sales department. She replaced a salesperson and made her accounting clerk responsible for inside sales support, which helped streamline and standardize the sales process. Arnold then tracked sales activities and found that increasing offsite sales visits and bringing prospective clients to the office helped close more deals.
Also at her peers' suggestion, in early 2009, Arnold began working with larger vendors who helped defray marketing costs, spent time with her staff on training, and helped her launch a monthly newsletter and quarterly marketing events. As a result, she secured 19 new clients last year, a 15% increase over 2009.
Arnold then renewed her courtship of loyal customers. For example, she delivered pizza to one client's office and factory to show appreciation for their workers. Small gestures helped improve client relations.
The culmination of changes turned the company around. Revenue in 2010 was $1.6 million, a 5% increase over the previous year. And with Arnold's cost-cutting and sales restructuring efforts, NextStep Networking saw a $160,000 increase in net income from 2009 to 2010. Arnold projects revenue will top $2 million this year.
She says turning to her peers helped put the company back on track. "Having those people there to support me when I hit tough times," says says, "that's been so life changing for me and my growth and development."
Turning to outside help gave Arnold the push she needed to see the business from a new perspective. With that guidance, she placed a laser-like focus on expenses, while taking a more strategic approach to improving sales.
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