Firm’s growth is boxed in
The back wall at the Melrose Avenue shop Fancifull Gift Baskets is dominated by a giant organizational chart detailing who does what in dozens of jobs across seven divisions and 21 departments.
The diagram, created by owners Wally and Terry August, steers employees to the right person for help as they create and deliver as many as 18,000 gifts and gift baskets each year. That includes the $4,000 gift-filled trunks ordered every Christmas by the sultan of Brunei for President Bush, Nancy Reagan, Bill Clinton and others.
The board is a symbol of the well-oiled systems -- including a custom computer program designed by Wally August -- that the husband-and-wife team has fashioned for the 21-year-old company, which expects sales of $1 million this year, down from a peak of $1.3 million in 2005.
The problem: Wally, who serves as president, shows up in more than a dozen boxes on the chart, mostly back-office duties. Marketing, which he loves, has gotten far less attention.
“He’s a whiz at it, so why is he doing bookkeeping?” says Terry August, company founder, chief executive and overseer of purchasing and production.
The Augusts say Wally’s operational focus has ensured that their small staff can whip out orders within a day while minimizing errors. One day this month, Terry says, they had two hours to create half a dozen $400 Halloween-themed gift-filled funeral urns and Gothic trunks ordered by Michael Jackson’s office for family and friends, including Elizabeth Taylor.
And as the pace picks up around the holidays, when two dozen or more temporary employees are brought in to handle what accounts for half the Los Angeles firm’s annual sales, the infrastructure ensures a smoother operation during a crucial time.
The Augusts acknowledge that they’ve probably spent more effort on systems, at the expense of marketing, in part because they’ve been unsure how to pitch their company to potential clients. They’re not even sure what to call the business.
“I’ll be very honest, I hate the words ‘gift baskets,’ ” Terry says. “I’m always trying to find another way to say it because I feel like people have a preconceived notion of gift baskets as a bunch of stuff that matches in color but isn’t particularly great -- the cookies pretty much taste like the cheese biscuits that really taste like the crackers.”
The business sells most of its items online and also offers single bottles of wine, flowers, baby gifts and individual boxes of chocolate. Most of the company’s products range from $50 to $125.
This year, they decided to refocus on their venture, adding popular green-themed gifts and solidifying their emphasis on fine foods.
The owners also are sprucing up their 3,600-square-foot storefront near Paramount Studios. Faded banners have been taken down, the exterior got a paint job, and new signs touting “Fine Foods, Chocolates, Wines and Gift Baskets” have been painted in the windows.
“It seems like such a simple business and yet it’s so complicated,” Terry says.
One major complication is a $310,000 loan guaranteed by the Small Business Administration for an acquisition that didn’t work out. The 10-year debt, which costs $3,900 a month and will be paid off in 2010, has damped spirits along with cash flow, she says.
Consultant Daniel A. Nathanson, a veteran entrepreneur and visiting associate professor at UCLA’s Anderson School of Management, says marketing is the key to boosting sales, profit and spirits.
“Why can’t they just double their sales? It should be easy,” he says. “They should be able to consistently build sales if they had more of a marketing effort.”
Nathanson met with the Augusts and found them hard-pressed to decide between wanting a lifestyle business or a multimillion-dollar enterprise.
“So the vision has sunk, not that that is bad -- I think they have had a decent time with it, and they want to get reinvigorated and feel they can grow,” he says.
A rundown of his recommendations:
Change job duties. He suggests Wally move immediately into marketing.
“I’ve seen this time after time: Once a No. 2 person comes in to take over operations, then finally the organization is allowed to take off,” Nathanson says. “Most founders of companies are the rainmakers; they are the people who go out and get sales and do the marketing.”
Nathanson, who is also managing director of Signature Creative, a Los Angeles-based digital media and marketing company, and principal of Smart Management Inc., also would like to see Terry delegate more authority to enable her to focus on strategic planning.
Market research. Talk to clients. Find out why 15-year clients have been buying from them. Is it because of Fancifull’s willingness to customize and its speedy turnaround time, or is it the baskets themselves?
To find out for sure, Wally should create a questionnaire and set up individual meetings with 10 customers. Ask what the company has done right, why the customers buy from him and what Fancifull can do to improve.
The answers will help the owners take the next marketing step: “They need to develop more of a specific, differentiating statement on what makes them different,” Nathanson says.
Wally should continue to meet with customers to build the company’s market research database and to test and refine new marketing efforts.
Create a new marketing message. As the market research comes in, the owners should settle on a marketing message and get it out consistently, something the couple acknowledge they haven’t been good at in the past.
Unless the market research indicates otherwise, Nathanson suggests that the message emphasize the company’s customer service. That includes stressing its reliability, custom work and maintaining a history of customer purchases.
For example, last week they were putting together $150 Halloween baskets for a physical therapist that included pedometers with her logo on them.
Broaden the product line. He’d like to see the Augusts add more high-end corporate gifts, but would expect them to check with their customers first.
“I think they are limiting themselves by saying they are a gift basket company,” he says.
That’s a thought Terry says she has had. But to stay high in the search engine rankings, they’ve found they need to use www.fancifullgiftbaskets.com as their main domain name. They own several others, including www.fancifull.com.
The consultant notes that the business already carries some gifts and could easily leverage its vendor contacts to carry more with little extra effort.
He also applauds their move into green gifts and would like to seem them promote their organic baby gifts, a popular gift area.
Boost the website. Nathanson recommends the company find a search engine optimization expert to help boost their rankings. He also says they should retool their website.
“There was no ‘Wow! This place must have good gift baskets,’ ” he says. He’d like to see more pictures of the products. And the articles highlighting the food artisans whom the Augusts travel to see worldwide should send a focused message of “We are looking for the best stuff for you, the best deals for you, and we are going to work with you, and this is not a standard basket type of company,” he says.
Create an advisory board. The Augusts, like most business owners, want and need someone “to hold their feet to the fire,” Nathanson says. “As husband and wife, it’s easy, especially after 20 years, to get complacent.”
Whether it’s a professional management consultant, a board they assemble themselves of small-business owners and professional service providers, or one of the many business coaching organizations that offer individual and group counseling, outside advice can be crucial.
The Augusts have built “a very nice platform for growth where they can do fast turnarounds and satisfy customer needs, and they know they can double sales with it,” he says. “Now it’s time to hit the marketing front.”
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(BEGIN TEXT OF INFOBOX)
Fancifull Gift Baskets
COMPANY SNAPSHOT
Business: The Los Angeles-based company creates, sells and delivers high-end gifts as well as gift baskets and operates a food and gift store.
Owners: Terry and Wally August
Employees: Seven full-time; up to 30 during the holiday season
Revenue: $1 million projected for 2008
Founded: October 1987
Start-up funds: $2,000 from credit cards
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CHALLENGE
How can the company reinvigorate sales while paying down heavy debt load?
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GOAL
The owners want to double customer base and make Fancifull a household name for fine foods and gifts.
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Meet the expert
DANIEL A. NATHANSON
Nathanson, a veteran entrepreneur, angel investor and consultant to small businesses, is a visiting associate professor at UCLA’s Anderson School of Management. He is also managing director of Signature Creative, a Los Angeles-based digital media and marketing company, and principal of Smart Management Inc. in Los Angeles. Nathanson previously taught entrepreneurship at the Leonard N. Stern School of Business at New York University.
