Dory Hyan quit his job as a marble installation contractor three years ago to become a supplier in the same industry in an attempt to shed some stress.
"I used to employ 50 people doing marble projects in hotels," Hyan said from his North Hollywood shop, B.H. Stone Supplies. "But a lot of workers means a lot of headaches with paperwork and payroll. And then you also sometimes have problems with customers, so I changed to this job."
Hyan is quickly learning that he unloaded one set of problems as a contractor only to inherit a new set as a supplier.
Frequently, he feels trapped between a rock and a slab of marble when his contractor customers are slow to settle their bills even as manufacturers expect prompt payment from him.
In addition, competition to supply glues, sealants, polishes and blades to marble contractors is fierce. Hyan knows of six other shops that sell the same products in North Hollywood, the center of Los Angeles' marble industry.
"The L.A. market is saturated," he said. "This is an extremely competitive business."
Hyan has managed to steadily increase his sales to a level of $500,000 last year, up from $430,000 in 1998. But margins are extremely thin, and he frequently runs into cash flow problems.
Several important steps could improve Hyan's fortunes, said consultant Ken Keller, who analyzed B.H. Stone Supplies. These include implementing tougher credit policies, drafting a formal business plan and creating a Web site to attract new customers.
"He's got some serious issues to deal with," Keller said. "He needs to find better clients, become more savvy and remember that the people he is dealing with are customers, not friends. He's got to realize that this needs to be run like a business, not a hobby."
But Hyan questioned Keller's remedies. He noted that the marble industry is a close-knit community dominated by immigrants from Israel, Armenia, Greece and Mexico. Hyan, who emigrated from Israel a dozen years ago, feared that creating tougher credit policies and making other changes would backfire.
"If I start sending people to collections, I'll lose customers and it will hurt my reputation," he said. "I don't want to lose the business that I have."
There was little consensus between Keller and Hyan on several issues because the two perceived the business in different ways. While Keller encouraged a more professional and sometimes tougher approach, Hyan preached the importance of nurturing his customers, even if they were sometimes difficult to deal with.
The contrasting perspectives showed up in several of the recommendations Keller made to Hyan, including:
Creating a Web Site: Keller suggested that an Internet presence would raise B.H. Stone Supplies' profile and boost sales.
Rather than creating a Web site himself, Hyan should use a vendor to build and maintain the location for him. "For less than $1,000, you can have a site that will do what you need," Keller told Hyan. He suggested using a vendor such as Wonder Web USA (http://www.wonderwebusa.com) to perform the service.
Keller called a Web site crucial for any business that sells to the public or other businesses. "I hear from some people who don't even bother to look at a phone book anymore," he said. "They go straight to the Web."
But Hyan questioned the Internet's value in a gritty industry built on relationships. "The people ordering my products are not the type of people sitting in front of a computer checking the Internet," Hyan said.
Setting Goals: "I sense that your business is without a rudder, lacking a sense of direction," Keller told Hyan. "You need to set goals for your business, yourself and your staff." These goals--which should include sales and profit targets--should be part of a formal business plan, he said.
"You need written goals that you can keep in front of you and monitor how you're doing," said Keller, who suggested that the very practice of drafting these goals could provide focus.
Hyan, however, dismissed the process of writing goals as a time waster. "I have in my mind how I want to grow my business," he said. "I'm always setting goals in my head. There's no point writing them down if I have them in my mind."
Formalizing Collection Procedures: "Cash flow is critical to your success and you need to improve it," Keller told Hyan. He suggested requiring up-front deposits, having a written credit policy that customers agree to and turning over accounts older than 90 days to a collection agency.
Although Hyan has a 30-day payment policy, it is not unusual for some contractors to take five or six months to pay their bills. "He has his own bills to pay so he can't operate on a handshake basis," Keller said of Hyan. "What good is a client if he doesn't pay?"
But Hyan feared a "get-tough" payment policy would kill his business. "Everyone knows everyone in this business," he said. "If I do these things, my customers will go somewhere else and I will get a bad name." Besides, he notes that he usually gets paid, even if it comes very late. Last year, he had to write off only $2,000 from his $500,000 in sales.
Finding More and Better Customers: Keller suggested a more aggressive outreach program. He encouraged Hyan to hire a person to make calls to potential customers. Calls should be followed up with written materials and personal visits.
Hyan agrees that he needs to boost his sales effort. With that in mind, he recently added a second salesperson and equipped him with a truck full of supply samples. His two-person sales staff canvasses the Los Angeles area as well as outlying areas from San Diego to Fresno.
Getting Education and Peer Support: Keller suggested that Hyan join a business education organization, such as the Valley Economic Development Center. The program would allow him to take advantage of free classes in areas such as finance and business planning.
He also suggested that Hyan join an entrepreneur support group. This would allow him to share ideas and concerns with other business owners, network and gather suggestions that have helped other businesses succeed.
Hyan was noncommittal on the education and peer support group. A past experience with a business group had not proved fruitful, he said.
Keller made several other suggestions, including contacting past and current customers in an effort to increase their orders. He also urged Hyan to work more closely with manufacturers to seek discounts or more liberal payment terms.
Hyan replied that he has already pushed his suppliers as hard as he can and that as a small business operator he often has little leverage with his multimillion-dollar suppliers. "I already try to squeeze them as much as possible," he said.
Unlikely to embrace much of Keller's advice, Hyan vowed to increase sales through his recently expanded sales force. He also said he intends to attend national industry shows where he hoped to add some accounts. "I'm still optimistic about the future," he said. "I think it's just a matter of time to get more customers."
Keller was less sanguine. "I think he's trying to be too much of a nice guy," Keller said. "He's got to realize that this is a business, not a hobby. Right now, he's lucky to be alive in business."
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This Week's Company Makeover
* Name: B.H. Stone Supplies
* Location: North Hollywood
* Type of business: Sells supplies and tools to marble contractors
* Status: S Corporation
* Owner: Dory Hyan
* Founded: 1996
* Start-up financing: $85,000 ($65,000 from savings, $20,000 from credit card)
* 2000 sales: $500,000
* Employees: 3
Main Business Problem
* Late payments from customers, limited success growing sales
* Create a Web site
* Implement tougher credit policies
* Get more business education
* Join a peer group
* Seek better terms from suppliers
Meet the Consultant
Ken Keller is a small-business consultant and principal of Keller & Associates in Valencia.