Consultant to High-Tech Industry Puts His Money Where His Mouth Is
Al Rose insists that, by getting answers to 10 simple questions, he can pinpoint what’s wrong with any sales-starved, small high-tech company and--almost on the spot--accurately tell its management how much of an increase in profit he can help generate.
Consultants to the high-tech industry routinely make similar claims, but Rose--a longtime computer industry executive--is putting his money where his mouth is, basing his fee on results.
The president and only employee of month-old International Procurement and Sales Company--TIPSCO for short--said he will analyze a client company’s weaknesses, draw up and implement a plan to cure its problems, and will take as his fee 10% of the increased revenue or cost savings that occurs.
In essence, Rose says, “TIPSCO is a part-time chief operating officer, focusing on cost reduction and increased sales for the COO (chief operating officer) and his staff. It’s more than a consultant, more like a part-time employee.”
With the high-tech industry still in the doldrums, suffering from the slowdown in the U.S economy and from an increase in the number of products and competitors, many smaller companies are struggling to stay profitable.
And Rose, who spent more than 20 years at IBM and was chief operating officer of two Orange County-based computer companies as well, is one of a growing number of consultants who sell their experience to ailing companies, promising to bring the company back from the brink.
Hopes to Parlay Experience
He said he hopes to parlay his experience in trading with companies in the Far East, Europe and Australia into a successful business linking suppliers and producers to distributors and dealers. Rose said he believes that the ability to link up with new markets and cheaper sources of production is the key to survival for high-tech companies, particularly the smaller ones.
But business isn’t always easy for a consultant.
Dennis Jay Cagan, a distribution and sales consultant to high-tech companies for two years, says that Rose, like most consultants, will have difficulty drumming up clients, and once he’s found them will have trouble convincing them to do what he proposes.
Rose, who has no clients yet, said he established his company in Orange County because of the concentration of small- to medium-sized high-tech firms with sales under $50 million a year, and because he believes such companies often remain parochial and need help in broadening their horizons.
And that’s essentially what Rose claims to offer for his 10%: helping clients, through his experience, to “skillfully manage worldwide resources.”
While that isn’t a revolutionary concept, it’s one that many high-tech companies have been either slow to grasp or simply too snarled in daily business problems to explore, Rose said.
In formulating a business plan, Rose said he would first discern a number of things about the company’s finances and method of doing business, including where its products are procured, how much inventory is on hand and whether the products are sold directly or through dealers, distributors or retailers.
What Plan Might Entail
His plan might call for adding more sales channels, new product lines, or for obtaining materials from foreign sources or even moving production overseas.
If Rose’s client is a company that manufactures and sells its own products, the company’s profits theoretically would increase by adopting Rose’s plan to use a cheaper overseas supplier.
Mike Beason, president of MGB Cultural Learning Systems--which supplies management and training programs designed to foster new attitudes and assumptions in a company’s employees--worked with Rose at ABLE Computer in Costa Mesa and is currently loaning Rose office space.
Rose served as ABLE’s chief operating officer from 1982 through mid-1985. Beason said that during Rose’s first 18 months at the company, ABLE more than tripled annual sales. Rose said the company had $10 million in sales when he joined and $20 million in sales when he left. Officials at ABLE, a privately held company, would not comment on Rose’s tenure there or divulge sales and revenue figures.
Beason said one of the biggest problems for companies the size of ABLE--one that a consultant with an impressive industry background would be most helpful in solving--is lack of expertise.
“In a lot of the small companies,” he said, “you get people who are very technical and lack the skills for international marketing. There are a lot of technical companies that have been in the computer market for 15 years but still don’t have any overseas manufacturing and aren’t getting the best possible price they can get.”
Beason said he is impressed with TIPSCO’s willingness to come into a client’s firm and physically implement whatever business plan Rose develops. “If you just plunk down a plan,” he said, “I don’t think that’s helpful because (a small company) doesn’t have the ability to implement it.”
Consultants who will work directly with a company’s management “are very sought after, very highly paid, and (there are) just a few of them who are good,” Beason said. “They get paid for what they know. (Rose) has got the track record.”
But Thomas Bliska, an industry analyst with Robertson, Coleman & Stephens in San Francisco, said he thinks companies might be “somewhat skeptical” about paying Rose’s fee because of the difficulty in determining “how much of the improvement is directly attributable” to Rose.
Several industry analysts and consultants also said Rose may have a tough time persuading companies to use his services.
Cagan, the consultant, says Rose’s service is useful but that he might have a difficult time overcoming the prejudices of a long-entrenched management.
‘Substantial Ego Invested’
“When you’re starting to talk about marketing plans and sales plans, a lot of times companies have a substantial ego invested in how they’ve been doing things before.”
Also, Cagan said, taking the sort of active role in a company that Rose proposes can be time-consuming for a consultant, limiting the number of clients he can assist at one time. And from a monetary standpoint, Cagan said, “people in small companies tend to be more frugal in willing to compensate people.”
Rose agrees that the number of clients he can help at one time is limited--no more than three or four before he would have to hire staff to assist him.
Despite his lack of clients, Rose says he is optimistic about a number of “prospects,” which range from product companies to suppliers to venture capitalist firms.
He will need at least a few paying customers to realize his ambitious plan for his own business.
Within four years, he says, he hopes to open TIPSCO offices in 20 major cities throughout the world. He said he also wants to acquire a number of marginally profitable companies and turn them into profitable examples of his company’s abilities.
