Turning the Red Ink Into Black

Insult was added to injury when Slocum Printing Co., already in the midst of a long sales decline, lost a big customer to an out-of-state move two years ago.

Although the customer had given advance notice, the small Canoga Park printer has been unable to replace the business or halt the decade-long slide in sales.

Last year, revenue at the six-person printing company came in about half its peak of $400,000 in 1989.

“We did really good in the past. . . . It seems lately I don’t get anywhere,” said Homa B. Larijani. He and his wife, Margaret, a graphic designer who works at the company, bought the business from the founders in 1985. The couple looked at several businesses before settling on Slocum, which was founded in 1946.

Larijani, a former contract administrator at a San Fernando Valley aerospace company, blames the brutal California recession and real estate crash of the early 1990s for putting the squeeze on the business and the couple, who had invested in local property. In 1991, for example, they purchased a 5,000-square-foot building and moved the business there from its smaller site nearby.

As the recession lingered, sales and property values slumped. In 1993, the couple, doing business as Slocum Printing, briefly entered Chapter 11 bankruptcy protection in order to reorganize financially. The company recovered enough to take over a nearby newsstand, Canoga News & Books, adding about $170,000 in revenue.

Sales at the printing company, though, continued to be a problem.

“It’s a good business, but the money won’t stay,” said Larijani. The cash “comes and goes but none sticks to me.”

Although he has enjoyed the freedom to be his own boss and make deals, Larijani hasn’t been happy with his paycheck, which was less than $4,000 last year. At one point, the couple even considered selling the business, as Larijani wrote in his letter to The Times asking for a consultant to review his operation for a Business Make-Over.

After a meeting at the Owensmouth Avenue plant, consultant Michael Russo said he found a situation typical of former cubicle-dwellers who have bought a business. When the environment changes, in this case the recession’s onslaught, the business owners often lack the entrepreneurial skills needed to keep up.

“They are still hoping for $400,000 of work to come in the door, and they have been hoping for 10 years,” said Russo, a certified public accountant and principal of Michael Russo & Co. in Los Angeles.

As he talked to Larijani, he realized the owner needed to rethink his belief that the business was suffering because of forces beyond its control and that more equipment, even the recently hired part-time salesperson, could reverse the decline.

“They don’t accept the reality that what they are doing is causing the result they are getting today,” said Russo, “and it’s never going to change unless they change.”

In his first meeting with Larijani, the consultant encouraged him to rekindle his excitement and passion about the business, then network in the local business community. Larijani, who said he was somewhat disappointed with the “self-improvement and motivation” focus of the talk, wasn’t overly receptive, Russo said.

“He said, ‘I’ll be excited when business comes in the door,’ and I said, ‘Business will come in the door when you get excited about your business,’ ” said Russo. The veteran consultant has learned that some business owners need to hear a difficult message more than once, and from several angles, before they get it.

In his second attempt to convince the company to change its strategy, Russo prepared a comparison of Slocum Printing’s operating costs and revenue to those of another printing company, a quick printer that is a client of Russo’s.

What he found falls into the “good news, bad news” category.

First, the bad news. As Slocum Printing’s sales have fallen, its operating costs, which are fairly stable, have gradually taken a bigger percentage out of profit.

“What’s destroying him is he’s losing sales, and 75% of that is going to the bottom line because so much of his costs are fixed costs,” said Russo.

His analysis showed that his client, also run by a wife-and-husband team, produced $419,000 in annual revenue, or $93,000 per employee. The company has one part-time and four full-time workers, including the owners. The company generated $13.54 of revenue for each dollar spent on wages.

By comparison, Slocum Printing has annualized revenue of $163,000 this year, or roughly $30,000 per employee. With one part-time and five full-time workers, including the Larijanis, Slocum generated just $2.23 for every dollar spent on wages, Russo said.

The good news: Russo figured Slocum Printing’s break-even point--a critical calculation for any business--and discovered that a huge chunk of any dollar generated by sales above that point, about $182,000, would flow straight to the bottom line as profit.

“When they go above [break-even], they are going to make 75 cents on the dollar,” said Russo. The company could literally pick up a job at half-price and still make money, he said.

Running similar analyses on a company’s sales and costs can uncover important information, said Russo. For example, does a business owner, as Larijani did, think the company is enjoying lots of referrals and repeat business? Run the numbers and find out, said Russo.

“What he thinks is going on and what the numbers show are different,” said Russo. “Successful entrepreneurs have a fabulous relationship with reality.” Most business owners don’t, he said. No one wants to face a potentially painful truth about the state of his or her business. Until that’s done, though, an owner won’t be ready to accept the need for real change, he said.

As a start, he advised the Larijanis to keep track of their time, much like a lawyer would do, in 15-minute increments to get an idea of whether they are spending it on activities that will directly increase sales.

Next, Homa Larijani needs to leave the comfort of his desk and knock on customer doors, said Russo. He suggested the business owner spend a minimum amount of time in the office, perhaps an hour each morning and an hour at the end of the day. Most of his time should be spent out selling and networking, building the personal and business relationships that will boost sales.

To help hone the sales message, Russo brought in sales training consultant Ian “Ike” Krieger, founder of Krieger Training in Van Nuys, to meet with the Larijanis and their part-time salesperson.

His first recommendation: Figure out how many new customers are needed to meet sales goals, based on what the average client brings into the business on a yearly basis. For Slocum Printing, the number is 1.75 per month.

“It was, ‘Hey, we can do that,’ ” said Krieger. “It shifted their paradigm.”

Most small-business owners drag their feet when it comes to selling, he said, because they don’t want people to think of them as salesmen and they don’t really know how to go about it.

His second recommendation: Focus sales efforts on finding and solving customer problems. Try not to compete on price or tout the company’s equipment, and don’t hound a prospect.

“People love to buy things, they just hate to be sold,” said Krieger.

He advised Slocum Printing to dump the sales scripts it had created. Instead, the company should be having “authentic conversations” about solving customers’ communication problems.

“That’s a much different conversation than the traditional approach, where you try to create a need and overcome their objections,” said Krieger.

The two consultants also encouraged Larijani to stop thinking of the company as just a printer and start thinking of it as part of the communication process. They recommended it team up with others in the field, such as advertising agencies, public relations firms, graphic design houses, even complementary printers such as Kinko’s, to approach customers with a whole menu of communication solutions. Separately, the company should try to expand the wholesale printing business it currently does for a local Kinko’s to other quick printers, the consultants said.

The important thing is to realize that the business owners themselves are responsible for the company’s success, not outside forces, said Russo.

“I’m not a shy person, but I’d rather do the administration than go out” and sell, said Larijani. “But I know that’s probably not right, according to Mike Russo, if I want to be an entrepreneur.”

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This Week’s Company Make-Over

* Company name: Slocum Printing Co.

* Headquarters: Canoga Park

* Type of business: Commercial printer

* Status: Private corporation

* Owners: Margaret and Homa Larijani

* Financing: $50,000 start-up capital from sales of overseas property.

* 1998 sales: $200,000

* Employees: 4

* Founded: 1946. Current owners bought the company in 1985.

* Customers: Businesses that need 20,000 to 50,000 four-color pieces printed.

Main Problem

Declining sales. Biggest customer moved out of state two years ago.

Goal

Relieve cash-flow pressure by increasing sales.

Main Recommendations

* Function like an entrepreneur, not an employee.

* Get out from behind the desk to lead sales efforts.

* Figure out how many new customers are needed to meet sales goals.

* Emphasize problem solving, not price, in marketing.

* Team up with other communication companies.

* Boost wholesale printing business.

Meet the Consultants

Michael Russo, a certified public accountant and a business consultant, is creator of the Extraordinary Results business transformation program. He founded Michael Russo & Co. in Los Angeles in 1984.

Ian “Ike” Krieger is the founder of Krieger Training in Van Nuys.