Where Do They Go From Here?
When sisters Jill Hotvet and Celeste Nameth were growing up, their father used to tell them that if they ever wanted to head a company, it would probably have to be their own.
“We grew up with the idea always in the backs of our minds that we would own our own business. It was something we always wanted to do,” said Nameth, whose father started his company after retiring from the aerospace industry.
The sisters were in their 30s, each pursuing successful careers in marketing, when their dream came true. In 1989, the self-described “artsy-craftsy” duo designed a watch for a friend. It was inscribed, “You’re One in a Million.”
Friends liked it so much they started asking where they could get one. When Hotvet and Nameth began getting orders from friends and then from department stores, they decided to launch their own firm, One in a Million Productions, from an office in Hotvet’s backyard in Pasadena.
Each sister put up $600 to get the ball rolling. Eight years later, they’re projecting $1 million in annual sales for the company, which specializes in designing, licensing and distributing watches and clocks to retail stores and catalogs. Now based in Glendale, the firm has a national sales manager and 180 contract sales representatives.
When Hotvet and Nameth approached The Times with a request for a make-over, it was not because their business was in trouble. Rather, they recognized--wisely, according to small-business consultant Kent J. Burnes--that with rapid growth come many decisions and planning issues that require professional help.
The timing of their realization couldn’t be better, said Burnes, who evaluated One in a Million’s financial status, product line, employee relations and past operations.
“The overall health of their company now is good,” he said. “Most small businesses would like to be in the position these two women are in.”
However, he added, many businesses get into trouble when they hit the $1-million milestone.
“Most small businesses see the first $1 million as the plateau they really want to crack. Going from $1 million to $2 [million] or $3 million is not that difficult if they can deal with the increasing complexity that goes along with growth,” Burnes said. “They can take this company anywhere they want it to go, so long as they don’t get so bogged down in daily operations that they become unable to nurture a long-term vision.”
His prescription for avoiding that--and to facilitate growth--is for the sisters to sit down and write up a working management plan. They are working with an out-of-date plan that will not accommodate future growth, he said.
“I would like to see their plan focus on employee and financial expansion and on new markets,” Burnes said. “The plan should definitely be updated every six months to a year, because they are moving into arenas that will change very quickly, and they need to constantly monitor their company’s health.”
Burnes said he was impressed with the company’s fiscal management. “At the risk of offending, I have to say I find that a lot of women-owned companies handle their finances better than those owned by men,” he said. “These owners are spending where they need to spend, but there is not a lot of fat in this company.”
Because managing inventory has been one of the most troublesome aspects of the company’s operations, Burnes recommended that it purchase inventory forecasting software. The OTB Book system by OTB Retail Systems, for example, would help Hotvet and Nameth forecast their inventory needs so they don’t hold inventory longer than needed and thus improve their cash flow, he said.
To smooth the way for internal growth, Burnes recommended that the company purchase policy manual software to help develop employee procedure manuals, something One in a Million currently lacks. And he said it should retain a consultant to interview employees and evaluate its internal structure.
“It is typical in a company like this, even though they are really well-organized, to find that when you look at it under a microscope, they could be eking out 1% to 2% more productivity. That can have a significant impact in a small company,” Burnes said.
He said the sisters will eventually need to bring on another management-level employee with experience not only in numbers, but in research and marketing. As the company grows, he said, handling all of the top-level functions themselves will become overwhelming.
Adding a management layer may be tough, Burnes acknowledged, noting that the sisters work exceptionally well together and will have to make adjustments to accommodate a third person.
“Family and partnership is hard to do, because many of us would treat our family partners with less patience than we would a non-family partner,” he said.
The fact that there is a clear separation of responsibilities between Hotvet, who handles the company’s finances, accounts and computer needs, and Nameth, who concentrates on inventory, overseeing employees and licenses, helps, said Burnes.
The consultant, who also looked at how the company could target new markets, quickly spotted a gap in its product line. One in a Million currently has products that appeal to children, adults and retirees, but nothing for young adults.
Fifteen- to 22-year-old, college-oriented females are potential customers, he said, as they tend to have both part-time jobs and financial support in the form of family credit cards. Their spending reflects that double income.
“I think this company could round out its product line with watches that have strong logo identification and a kind of ‘now-wow’ look featuring rock groups and sports figures,” he said.
Hotvet and Nameth said that choosing licenses is one of the trickiest aspects of their business, but they have had good instincts in the past.
Burnes advised the sisters to be ready to discontinue lines that lose their appeal. “You have to make the decision to drop a dog when it becomes a dog,” he said. And as they boost the size of their company, they should consider supplementing their gut instincts with research and test-marketing, he said.
“I would love to see them get out and start talking to their customers face-to-face. They can stop people in the stores and ask them why they bought one of their watches, what made it stand up to the competition,” Burnes said.
Would they need to hire a research firm?
“Not at all. During a slow period, they could take in-house personnel, develop a questionnaire, do 1,000 interviews and get some darn good information. All they need is a mentor who could help them get started,” Burnes said.
Another way to increase sales is to add value to their watches by packaging them with a second product, such as a belt, fanny pack, T-shirt or mug imprinted with the same design, Burnes said. “That will help them keep their prices up. The last thing I would recommend is that they start discounting their products,” he said.
Burnes was told that the company did experiment with a price decrease in the past and that it resulted in a noticeable dip in profit.
“They realized themselves that they were not able to increase sales volume to the rate of discount they had taken,” he said. “They fixed the situation by re-pricing the line in conjunction with a redesign and repackaging and have found they did not meet with a lot of resistance.”
“The lesson is that if they had a 35% profit margin and they discounted their prices by 15%, they would have to increase sales by 67% just to keep up. But if they increased their prices by only 6%, even if their sales declined by 15% they would still maintain their profitability,” Burnes said.
That’s not to say that One in a Million shouldn’t explore a low-end product line to build some sales volume in the national discount arena, he said. In fact, he recommended that their new management plan explore just such an idea.
“They could take on more of an impulse-purchase, low-end line that they would probably go offshore to buy in volume and sell in volume,” he said. “It could even be sold under a different name.”
Hotvet and Nameth said Burnes’ recommendations confirmed many of their own plans and gave them an inkling of how things could really start happening for their business. “It’s exciting,” Hotvet said.
If she and Nameth stay the course, plan for the future and are careful not to let their product line go stale, Burnes sees continued success for them.
“These are smart people. They are going to be players in this industry provided they can move with the trends, go into what’s hot and exploit the old standbys as long as they are working.
“Who knows what the cards hold? In five years, somebody may make them a terrific offer and they may decide to sell. Or maybe not. The future is pretty much whatever they want it to be.”
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This Week’s Company Make-Over:
* Company Name: One In A Million Productions, Inc.
* Headquarters: Glendale
* Type of business: Designs, licenses and distributes watches and clocks.
* Status: Private
* Owners: Celeste Nameth and Jill Hotvet
* Annual revenue: $680,00 to $850,000 last three years; $1.5 million projected 1997
* Financing: Line of credit
* Employees: Five full-time, two part-time
* Founded: 1989
* Product brand names: Mary Engelbreit, Curious George, Dr. Seuss (distributorship agreement), several other licensing agreements.
Main Business Problem
Preparing for growth through streamlining internal operations and goal-setting.
Goal
Selectively expand product line by defining niche markets and nurturing positive, goal-oriented workforce.
Recommendations
* Write working management plan that will focus on employee and financial growth and targeting new markets. Resource: Pacific Bell Directory’s “Smart Steps to Business Success,” a business plan workbook, available for $49.95 from Pacific Bell’s Smart Resource Center, (800) 848-8000.
* Purchase and use inventory forecasting software to help boost cash flow. Recommended: “OTB Book,” available for $699 through OTB Retail Systems, (800) 444-4682.
* Purchase and use software to develop employee policy manuals.
* Hire a certified professional management consultant to evaluate the company’s internal structure. Price range: $5,000 to $25,000 depending on depth of evaluation and consultant chosen.
* Hire additional management-level employee with background in finances, research and marketing.
* Expand product line to target 15- to 22-year-old, college-oriented females.
* Use in-house personnel to do market research and focus groups.
* Add value to product by packaging with additional item, such as mug or T-shirt.
* Explore adding a low-end product line, possibly under a different company name, to expand into national discount arena.
Meet the Consultant
Kent J. Burnes, a small business consultant for the past 15 years and the author of five books aimed at small business owners, is the founder of Burnes Consulting in Grass Valley, Calif. More than 45,000 business owners and managers have attended the training seminars that he holds throughout the country each year.
