From: TomCrouser@aol.com
Date: Fri, 21 Jun 1996 14:58:40 -0400
Subject: Letters: First Sales Person and Other Stuff
Content-Length: 20741
X-UIDL: 835386424.002

Crouser Report OnLine Copyright 1996 Thomas P. Crouser, June 21, 1996 -
Material may not be reproduced in whole or in part without prior written
consent of the copyright holder.
***** ***** ***** ***** ***** ***** *****
Our Next FREE Power Pricing Seminar will be in Ft. Lauderdale on June 29th.
Call (304) 342-5100 if you want to attend this session. Hope to see you
there. 
***** ***** ***** ***** ***** ***** *****
Letters: First Sales Person and Other Stuff
Transmitted from Folkston, Georgia

In This Issue: Hiring the first SALES person; comments on Sales COMMISSIONS;
questions a sales RECRUIT wants answered; COPIER advice on an upgrade for
X ed@copied.com; one CPA S response to accounting fees; more on VALUING a
business; and a letter on UNFAIR competition which suggests we save Earl the
Printer! (We have organized our letters columns into topics. To zip to a
topic, use your word processing FIND command to go to the work in CAPITAL
letters above.) 
*****
Hiring the first SALES person, Sales Commissions and Other Issues

Received two letters on the subject of hiring the first salesperson. Here
they are.

Subj:	New Sales Force
From:	Hungry For Bucks
To:	TomCrouser

Tom . . . I need some help in hiring my first sales person. Can you suggest
some books or guidelines for the first timer. I ve read you info on Sales
compensation. But need some guidelines on training, service and other areas.
Can you help? Thanks. Hungry For Sales.
*****
Well, yes and no, Hungry. My first question is, have you ever went out on the
street to sell your own printing service? My experience is that people who
have not done so are rarely successful in hiring someone else to do work they
wouldn t do. That s the first step. Train yourself first (or obtain needed
training), then hire someone to assist you in doing something you need done.
Same thing you did when you hired your first press operator.

By the way, I published an audio cassette program entitled 

Outbound Sales

 a
few years ago and it is still available from our office (email
Crouser@aol.com or telephone (304) 342-5100). It s $125 for subscribers to
our estimating guides (or software) and $175 for others through July 31st,
1996. It covers probably 90% of the answers you need to train yourself in
sales. Then you can help and supervise the person you hire. Hope this helps.
Tom.
*****
Sales COMMISSIONS

From:	Been There
To:	TomCrouser

Hi Tom - Boy!  Reading your Sales Compensation Letter and 

Sleepless s


letter, brought back old memories and nightmares.

I was Executive Vice President of a $14,000,000 a year commercial printer in
NYC that closed in 1991 (Another story!).  I spent a large percentage of my
time trying to 

tweak

 an over generous and very complicated sales
compensation plan (Formally called; 

The Variable Pricing and Commission
Schedule

 created by a predecessor.) to both motivate sales and generate more
profit.  I also spent a great deal of time trying to improve production s
performance and accountability.  Regrettably, I didn t have the time to
divorce sales compensation from the cost sheet and production s performance
before the #1 salesman jumped ship taking over 30% of the business with him.

Now I own and operate Minuteman Press (four years this July.).  I m not a
good salesperson so I ve hired a marketing person.  I thought you would be
interested in how I compensate him and what I have learned from your Sales
Compensation piece.

Present Compensation (Part time Marketing Rep): Hourly Rate: $5.00 for 30
hours
Commissions: 10% on in-house sales
                        5% on out-house (no pun intended) sales
Bonus (On quotes): 1% on all new quotes up to $2500 in quotes         
                              per week.  $50.00 if they exceed $2500.

Here s what I m thinking of doing:

Marketing - I like your section on the GUARANTEED DRAW (SALARY) AGAINST
COMMISSION but will add the 

QUOTE BONUS

 to the formula.  I will make the
marketing person a full-time employee and add a modest year-end bonus on
sales exceeding the last year s sales (Adjusted for our annual price
increase).

Production - I will implement a monthly production bonus based on average
daily billing volume adjusted for overtime and redos due to production error.
 This is a plan worked out by the home office and seems to work well. I d be
interested in your further input.  Thanks for the continuing flow of good
advice.  I enjoy reading each and every piece.
*****
Hey,  Been There. Thanks for your kind words and detailed response. Here s
some thoughts regarding your plan.

You wrote:  I like your section on the GUARANTEED DRAW (SALARY) AGAINST
COMMISSION but will add the 

QUOTE BONUS

 to the formula.

Would the bonus paid on 

quotes

 or a bonus paid on 

new quotes which turn
into sales.

 I follow a 

new quotes which turn into sales

 but would have
grave concerns about paying a commission on new 

quotes

 which may or may not
turn into sales. My fear would be that you would be inundated with useless
estimating chores. I will assume it is 

quotes which turn into sales

 unless
you advise otherwise.
 
I will make the marketing person a full-time employee and add a modest
year-end bonus on sales exceeding the last year s sales (Adjusted for our
annual price increase).

I answered an almost identical question this morning which has applicability
here, I think. 

Have you (yourself) ever gone out and sold your printing to
others?  My first question is, have you ever went out on the street to sell
your own printing service? My experience is that people who have not done so
are never successful in hiring someone else to do work they wouldn t do.
That s the first step. Train yourself first (or obtain needed training - see
above), then hire someone to assist you in doing something you need done.
Same thing you did when you hired your first press operator.



As to your situation, I question the need for a marketing director. No one
can do marketing without having toe to toe sales first. Is anyone actually
selling anything?

Production - I will implement a monthly production bonus based on average
daily billing volume adjusted for overtime and redos due to production error.
 This is a plan worked out by the home office and seems to work well. 

Although this is completely a different issue - make sure you have a
supervisor first. If you know how sales compensation plans can go hay wire,
then you only have a nodding acquaintance with what can happen with a
production bonus system gone amuck. An incentive plan is NO substitute for a
supervisor. Who is the one person you would fire if production doesn t get
done. If you do not have one person, then you have an organizational issue
(problem). Good luck and again, thanks for your kind comments. Tom
*****
Questions a sales RECRUIT wants answered.
*****
Subj:	Sales per employee
From:	Pursued In Peoria
To:	TomCrouser@aol.com

Dear Tom, I have been a reader of your 

Crouser Reports

 for a number of
years. Recently I have been interviewing with a local printing company for a
high level position in the Sales/Marketing Area.  For obvious reasons the
name of the company must remain anonymous.

Anyhow, I have some very reliable data that indicates the company is doing
$8,000,000 in sales with a total of 8 sales people.  Not bad, however, they
have 100 employees total which translates to an annual total of $80,000 per
employee per year.  Talk about labor intensive!  According to NAPL figures,
this is a rate of about 60% of the most profitable printers they surveyed and
55% of all other printers surveyed.

I remember that you usually included a sales per employee figure among your
reports.  Could you please e-mail me your current survey figure for sales per
employee so I have a second point of reference.  It may help you to know that
the customer screen prints binders, custom index tabs, presentation folders
and general commercial printing (usually that associated with binders & tabs)
on a DocuTech and offset presses. Thank you for your assistance. Sincerely,
Pursued In Peoria
*****
Dear Pursued. . . .Thanks for being such a loyal reader over the years. I
really appreciate the kind words.

Regarding sales per employee, I find up to $100,000 per employee achievable
in the type of business you describe (high speed copy/duplicating, DocuTeks,
etc.). More normally, we see the $75-$80,000 being achieved in the small
press shops. 

The main difference between these shops and average NAPL-types is the
equipment intensity of NAPL types. Usually larger presses, higher degrees of
automation, etc. than your typical small press shop. Therefore, that would
normally translate into a higher sales per employee in my opinion.

So, I m not so concerned about the $80,000 sales number as it relates to
profitability. That doesn t mean absolutely the company is or is not
profitable- - - - ->it does mean it could be either and I have reviewed many
companies within this sales per employee range which are very profitable. A
lot would depend upon other overhead expenses. Good luck and keep in touch.
Tom
*****
And Pursued did. Here s his follow-on message.

From:	Pursued In Peoria
To:	TomCrouser@aol.com

Dear Tom. . .Thanks for the info.  I wasn t so much worried about
profitability since the company has existed for nearly 40 years.  However, I
was concerned about the fact that the recruiter said the VP needed to be an
advocate for the sales force with production, implying that some problems
exist getting the work out.  It would seem, though, that the salespeople are
performing well and that he is hitting the average for the industry.  That s
not to say they can t do better, but it is more reassuring! Sincerely,
Pursued
*****
Hey, Pursued. . .Thanks for your clarification.

I too would be worried here. The production manager should have production
well under control and sales should not have to be an 

advocate

 in order to
get jobs out. Sounds like a production management concern on their part.
Probably scheduling and the lack of a single person in 

charge

 of
production. Not unusual, but still not the way it should be. Good luck. Tom
***** ***** *****
COPIER advice on an upgrade for X ed@copied.com
*****
In our last letters issue, X ed@copied.com wrote: Need info - I know you can
direct me to the right source. Have 2 1090 s leases up in 6 months.  Need
Docutech, can t afford!  What machines (does not need to be the big X) should
I look at?  Screen quality very important!  Do lots of computer manuals.
 Presently running 1/2 mil per month between both machines.  They are not up
to the quality that I need.  Now on the all you can eat plan and I know Xerox
is going to get me as soon as the lease is up.  They are breathing down my
neck now!!!   Help!
*****
Here s your responses:

From:	PrintgPlus
To:	TomCrouser

Tom;   Here s my suggestion for X ed@copied.com re a Non-Docutech upgrade for
his 2 1090 s.  Look at the Kodak IS-70.  We do a lot of computer manuals,
too, and use this machine for excellent results.  We encourage our customers
to give us computer files, rather than hard copy, so all our printed pages
are  originals .  If X ed is not in to digital and file transfer, etc., he
(or she) will have a pretty steep learning curve, but the Kodak box is a lot
less expensive than any version of the DocuTech, and prints spot color, too.
Regards,  Mickey

From:	Curmudjohn
To:	TomCrouser

I have two Kodak 2110s and like them a lot. We have climbed up to 1.3MM with
them on occasion, although my volume is not drastically higher than yours on
average. I think Kodak would agree that one is sufficient to handle .5MM per
month. The copy quality is, in my opinion, absolutely the best (non-digital)
out there. And the spot color is OK, but we didn t get it for that reason.
Our service is very good, averaging about 1 and 1/2 hours, too. We get about
100m b/t calls. Good luck, and if you don t already do it, subscribe to Larry
Hunt s newsletters.  --John Baicy

From:	EdieSG
To:	TomCrouser

To the person who has Xerox breathing down my neck, I would recommend
speaking to some 3rd party brokers who sell used equipment, Kodak, Oce, Xerox
at downright inexepensive prices in comparison to a new, out of the box
product.  You can get a Xerox 5090 for well under $50,000 and then get a
proposal from Kodak or Xero\x to service the product.  You can get them to
fight over you and your service.  As I look to upgrade my high speed copying
equipment, I want to explore this option more aggressively for 2 reasons. 1)
I resent the direct Xerox competition and this is one way not to give them
the $$$ directly (2) It can be cheaper to buy used, third party equipment
EdieSg

From:	RonJon@Computek.net (Ronald E. Jones)
To:	TomCrouser@aol.com

If you are just running a half million copies per month, that is, total
output on both 1090 s, you cannot afford to move to a Doc. If you are NOT
producing 1,000,000 per month, stay away from a Doc, you cannot pay for it
(unless you have the contract of the century!). The 1,000,000 is the minimum
output to even order one in my opinion.

We moved from a 1090 to the 5090 and then to the Doc. We got ours about 6
months after their debut. It s been a struggle but we are there, finally.

Also, don t buy a Doc to sell just copying. There are lots of places where
high volume copying is being bid at 1.5 cents (Yes, that s 1.5 cents). We have done it
here when there was no shipping involved and things were slow. FEMA is
located just down the street! This is a great 

keep people busy

 concept, but
there s no profit in it and if you have any trouble, it s often a loss.
Better no work than work with a loss!

Broker your manual work to us, we ll be happy to look at it and maybe we can
both make some money (we do software manuals too). I have no idea how many
manuals we output last year (we don t count them because you cannot compare a
25 page manual with a 700 page manual). However, based on all the
projections, we will output approximately 3.2 million pages during the month
of August-our peak month (August 1995 output was 2.6 million). These are
output on a single Doc without networking.

Xerox wants way too much money to add networking to the Doc-another reason to
be careful of their pricing. Their latest network price to us was $1,575 per
month for 48 months in addition to the $7,500 per month we pay as a base rate
on the Doc (yes, the click charges are added to this also). We will be forced
into this shortly. We just have too much volume to rescan everything again
and again and we have virtually exhausted any other options. I am certainly
open to suggestions!

We have been wined and dined by Kodak but their finest machine (the 92???
something [latest type Lionheart]) just has 2 paper drawers. Not good enough
for us. We need three most of the time. Their price was OK but did not have
their act together when we were there for the private demo. Seemed a bit
strange and disorganized at the time.

Oce also tried to win us over (but not recently). They had what appeared to
be a pretty good piece of equipment (I don t remember the model but it was
their largest and fastest) but we didn t do it. I just do not remember why.
 Finally, I have looked at many of the others (It s my favorite trade show
activity!) but none seem to do the job. The Doc has the market. It s the best
and the most expensive and you must have to the ability to pass those costs
on to your customers-they pay the bills. Remember, you cannot pass on much at
1.5 cents!

Please contact me directly if anyone wants to talk about the Doc. I can be
reached at 817-383-3060 or directly via e-mail at ronjon@computek.net.

Thanks, Tom, for providing the forum to offer our opinions, questions, and
answers.
*****
And thank you Ron and John and Mickey for your responses to X ed. Good luck.
***** *****
Here s one CPA S response to accounting fees. Texas Jack, CPA weighs in with
his comments regarding the accountant charging one printer a flat rate to get
a tax reprieve.

From:	JackCKern
To:	TomCrouser

Tom: I am a CPA and the CFO, Treasurer & Secretary of Ginny s Printing &
Copying in Austin, Texas. 

If the tax consultants who handled the IRS reversal of penalty assessments on
payroll taxes are CPAs practicing in Texas, a complaint should be filed with
the Texas State Board of Accountancy.  CPA s in Texas who hold themselves out
for public practice may charge on a fee basis only.  This is absolutely
necessary to maintain the appearance and reality of independence and
objectivity within the profession.

A reprimand and satisfaction of the printer who has been wronged should be
the end result of a lengthy investigation process that will not be pleasant
for the CPA.  This should also be true in most states.  While I personally
believe fee basis revenue is the only legitimate billing basis for audit,
review, compilation and tax services rendered by CPAs, I believe CPAs should
be able to offer financial analysis, consulting and services on any basis
they choose.  This would bring market competition to CPA s and improve their
services.  For the reason you mentioned regarding tax services and for the
reasons I mention above for audit and attest services, certain services
should be offered only on a fee basis by CPAs.

Jack C. Kern, CPA, Ginny s Printing & Copying
CFO, Treasurer & Secretary

PS: HOOK  EM AND GIG EM

Thanks for the expert opinion, Jack. I assume you are sending this with the
appropriate attest letter and disclaimers.
***** *****
VALUING a business. A reader recently wrote: 

Your newsletter early this year outlined a method of business valuation:
3.5 times
owner s cash flow. In this instance does owner s cash flow INCLUDE
depreciation? WONDERING.
*****
Dear Wondering. Generally, the cash flow could be figured as follows:

Sales - Direct Materials - Labor - Overhead (including depreciation) = Income
Before Owner s Compensation - Owner s Salary (Draw) = Net Income +
Depreciation (from Overhead, above)
- Payments on Notes (principle) = Cash Flow Positive or Negative

There are other ways to get to the same thing, but the average cash flow for
typically the last three years (some cases five years) would probably be
calculated. The quoted article states that many businesses are being sold in
the 3.5x cash flow range which doesn t necessarily mean they are priced using
this same method. Hope this helps. Tom
*****
UNFAIR Competition. Let s hear it for poor Earl the Printer.
*****
From:	HPLACE
To:	TomCrouser

Tom. . . .Since your most recent Crouser Report contains more examples of
competition by our vendors, I thought you might like to share this with your
readers: The June, 1996 issue of PC Computing contains an ad in the very
front from Canon. Here s how the copy reads:



Earl the printer sure is going to miss you.





Your days of running to Earl at all hours are over. Thanks to the Canon
Convertible (TM) Color Printer, the MultiPASS (TM) C2500. It s the only way
to bring home brilliant color Bubble Jet (TM) printing, plain paper faxing,
copying and scanning. All in one solid machine, backed by our 24-hour
InstantExchange warranty program. It even has exclusive Canon (TM) Creative
software. So you and the kids can do lots of imaginative things. Want to know
more? See our web site, http://www.ccsi.canon.com or call 1-800-848-4123,
Ext. 904. Hey, you can still keep in touch with old Earl. Just send him a
fax.



The accompanying picture shows a wooden structure out in the middle of
nowhere with neon signs announcing 

Earl s

 and 

color printing

. The ad is a
slap at printers because it portrays us as rinky-dink 

mom-and-pop


businesses and because it suggests that what we do for our customers can be
replaced by a desktop bubble jet printer.

Do you think we could start a 

Save Earl

 program online? Or sign our checks
to Canon 

Earl the Printer?

 --Nancy D.
*****
Thanks, Nancy. As usual, you are on top of it. Maybe we should canonize Earl?
Whatcha think?
***** *****
Well, that s all for now. Keep on keeping on and Happy Trails to all.

Tom and Pamela in Folkston, Georgia where the trees are a little more
meaningful today and the normal antics of the kids are a lot easier to
accept.
***** ***** ***** ***** ***** ***** *****