Desk-Top Phone Firm Finds Niche : American Businessphones Courts Small Companies
The way some telecommunications analysts figure it, anyone with a garage, a line of credit, a good story and a prayer can get off to a fast start selling telephone systems to businesses.
Sure, it’s hyperbole, but there are enough real life fairy tales in the business to support such notions.
Consider, for instance, Frank Feitz’s story. Just 3 1/2 years ago, Feitz started selling simple desk-top telephones to small businesses in Orange County. These days, Feitz still is selling desk-top phones to small businesses, but his company, American Businessphones Inc. of Irvine, now has 233 employees, branches throughout California, plans for additional offices nationwide and sales running at a rate of $30 million this year.
The sales pace, about 85% faster than last year’s, is enough to put American Businessphones among the second tier of the estimated 6,000 so-called interconnect companies--firms that sell and maintain internal business phone systems that tie into the external system operated by a local Bell company or other telephone firm.
What’s remarkable about American Businessphones’ growth rate, analysts say, is that it has come during one of the telephone industry’s worst downturns. The slide is considered a natural reaction to the frenzy that followed the move to opening phone service to competition, including the divestiture of American Telephone & Telegraph.
“The market is beyond saturation,” said David Keeler, manager of market research for the North American Telecommunications Assn. in Washington. “There are too many manufacturers, too much product and too many vendors.” Dozens of the trade group’s 700-plus members have gone bankrupt this year, Keller added, and business telephone sales, which hit $5 billion last year, are expected to stay flat in 1985.
So how has American Businessphones, whose profits doubled last year to $950,000 as sales hit $16.3 million, managed to buck the trend?
Feitz, an upbeat “supersalesman,” attributes it to the company’s adherence to its original business concept: selling only three models of telephone systems from a single manufacturer, TIE Communications Inc., to businesses requiring only between 10 and 100 phones in a single office. No more and no less.
“The key is the service,” Feitz claims. “You can buy the equipment from 25 other companies. But we’re the ones who will install it properly, train the company’s workers on how to use it and then fix any problems.”
American Businessphones announced Monday that it had won a $500,000-plus contract to install phone systems in 23 California branch offices of stockbroker Bateman Eichler, Hill Richards, one of the largest contracts received by the company.
Feitz, who started his company five years ago as a sales training organization, believes that his competitors are bogging themselves down by offering too much to too many.
He claims, for example, that technicians from competing companies can’t possibly develop an expertise in any single system, as his employees can. Or, as Feitz adds: “In order to put spares in the service truck, those guys would need North American Van Lines.”
No Shortchanging on Service
Furthermore, Feitz claims that, because he concentrates exclusively on small businesses, he’s not tempted to shortchange his customers in favor of big accounts when it comes to making service calls.
Finding a niche in a crowded and competitive market is one of the best ways of riding out market turbulence, and analysts say American Businessphones appears to have found a safe port--at least for the present.
However, the small-business market has in no way been ignored by Feitz’s competitors.
AT&T;, perhaps the most formidable player in the big-business market segment, has mounted an aggressive media campaign to lure merchants to the services of its “small-business connection.” Still other companies, many of them far larger than American Businessphones, go after small businesses as well as larger corporations.
Yet, by specializing in small businesses, American Businessphones is courting a market with an estimated 4.5 million potential customers, about 10 times the size of the big-business market segment. Furthermore, analysts say that small-business customers are the most likely to respond to a sales pitch stressing service, training and maintenance support.
According to Sylvanye Sharpe of Telco Research in Nashville, Tenn., a telecommunications market analysis group, businesses--especially concerns too small to have a telecommunications expert on staff--have been confused by the array of phone features and services that have been spawned by technological breakthroughs and competition-spurring court rulings.
“Small businesses often don’t know where to turn for help and are a great market if you can give them what they want, and that’s lots of service,” says Michael Kennedy, an analyst with Gartner Group in Stamford, Conn. “Simply selling the equipment isn’t enough.”
Although American Businessphones’ original business plan appears to be serving the company well, three months ago Feitz took the first steps toward expanding his customer base. Retail stores for the “really small businesses” and “upscale residences” have opened in Costa Mesa and Anaheim and others are planned for Riverside and downtown Los Angeles.
Feitz claims the move is not a violation of his business creed but rather a logical extension. “We’re still sticking with the small businesses,” he said about the venture into the crowded and discount-dominated self-serve market. “And we’re still going to be selling our service.”
American Businessphones fiscal year ending June 30 1981* 1982 1983 1984 1985 Net Revenue $43,385 $726,664 $2.9 $9.1 $16.3 million million million Net Earnings -$1,170 $59,841 $73,725 $471,731 $949,000
*from Nov. 14, 1980