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Pondemonium by Greg Wittstock
December 18, 2007
What Got Us Here Won't Get Us There
Posted at 10:50 PM
For four years running, from 1999 through 2002, Aquascape landed on the Inc. 500 list of the fastest growing privately held companies in America. Yet on December 31, the core business that achieved that feat with will be dead. Why would we kill what was a successful and prosperous business in favor of another model that is completely untested, you ask? Simple. We decided to stop trying to be all things to all people and figure out for the first time what we truly want to be when we grow up.
In order to achieve this new vision, we have been working tirelessly to remake Acquascape from the leading direct-to-contractor business to the superior distribution and market development company we want to be. From now on, instead of selling directly to contractors, we will sell our professional line only to distributors who will take responsibility for selling to contractors. Beginning January 1, we will see how our gamble pays off as we refer all callers interested in our professional product line to our extensive distribution network. To even contemplate turning over our customers, the lifeblood of any business, to our network -- a network that didn't even exist one year ago -- seemed preposterous when we first began considering this.
And yet, today, after one year of a full-scale assault, we have increased our distribution access points from 71 to right around 500. What this means is simple. We're putting our customer base in the hands of a distribution network that until now we had supported with a wink-wink. Now, for the first time, we've put our money and our customers where our mouth is. Before we made this strategic decision, I couldn't have said that because I was hedging my bet. On one hand I would claim that I supported distribution because I realized the importance of local access points for our products. On the other hand we would ship products directly to any contractor in any market anywhere -- regardless of the contractor’s proximity to one of our distributors. Needless to say, this didn't exactly build goodwill with our distributors. By playing both sides, we came to realize over time that we were doing neither our contractor customers nor our distribution partners any good. Hence the decision to pick a horse and ride it. And the distribution model looked a lot more promising to all of us than the direct-to-contractor model we'd built this business on in the past.
Here's the crux of my argument: By trying to be all things to all people, it's easy to end up being nothing to nobody. So we've made our choice, and a superior distribution and market development company it is. With that, another age-old business dilemma is decided. We have chosen to exchange high margin direct sales for lower margin, higher volume distribution sales. That's the game plan to get us to our goal of $100 million in sales by 2010. The market's there. Water features are still hot with consumers. During the transitional year of 2007, we sold more products -- albeit at a lower margin -- than any previous year. And now we have a network of fully vested distributors to partner with. Needless to say, if this transition fails, so do we. The question is, did we make the right choice? We'll find out soon enough. In the meantime, it's been anything but boring around here, which is the way I like it!
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Well said, now go in peace and sin no more. [or at least less]
We have struggled with the same issue. I am the VP of Herkules Equipment and we sell collision repair equipment through Warehouse Distributors (WD's) and I find that the increase in volume benefits the company as a whole. Additionally, it creates a barrier of entry for competition that is not willing to sacrifice the margins.
It's all about getting to 100 million isn't it?
Did you sacrifice your dreams and visions to get to that point?
Direct to contractor sales coming from a hyper growth company like Aquascape could not withstand a long term commitment to rightfully service U.S. and International consumers. That philosophy was considered short term, and without a major vehicle change in their distribution strategy, Aquascape would continue being just another supplier.
When this was originally discussed I was NOT in favor of making any further changes at the distributor level and thought the idea of moving the comfort zone of direct sales would be detrimental to what we have already achieved.
Not anymore; one of the biggest challenges for the network of contractor's installing Aquascapes products were the availability, and in many cases the nearest distributor was hundreds of miles away. Access points are very critical in this industry as they are with any other business model.Supply and demand will always be a factor when it comes to contractor purchasing practices.
This is a VERY big gamble for Aquascape and I know Greg wants to talk about $100mil in sales goal for 2010 ? well if Aquascape will focus on being a superior distribution and market development company, than it will be easily atainable.
Thanks for keeping to the topic and not getting caught up in all the drama that sometimes comes with Blogging.
That sounds great! Now are you going to release your buyers and distributors from their blood oath and be a true competitor in the market?! You talk the game about being the best and if that is true than your customers should be willing to buy your product even when a cheaper option is sitting next to it... but that's not going to happen... so you have opened up your model to include people who have no understanding of your product and will, if history holds true (can we say Pikes), give them all your attention, ignoring the companies who have struggled and remained loyal to fend for themselves since they can not get a TSM or anyone else to return an email or call them back thus pissing them off when they are the ones who are truly selling your product to contractors who already see you as hard to deal with while they deal with other vendors who are bending over backwards to make them happy - what was my point? Oh yeah! Competitive quality products and pricing with good customer service will get you where you need to go - but you have to learn to play nice in the sandbox first!
One of the most important things one of our mentors/client, who was a high profile player on Wall Street, taught us 20 years ago was, Bulls and Bears make money and Pigs get slaughtered.
We have installed nothing but ADI products for 9 years and love their technology and constant attendance to improvement (KANI). We had always purchased direct with great customer service and tech support. Yes, this took a little pre-planning to make sure we were not short any parts.
Now we have a great supplier and yet we got another notice last week that another one of our vendors in also now a distributor and is only 30 minutes away instead of 2 hours. We will be sticking with our previous supplier due to their great service.
I do not have inside knowledge as to how the distribution works, but it does not appear as if there are master area distributors who then set up and support local distributors and if ADI does set them all up directly, that is simply a smack in the face to those loyal early distributors who built the golden road for ADI.
America was built on working hard and smart. So yes, employees will come and go as does the economy. Smart businesses understand to build slow and with lots of cash, which allows you to weather the storms. The turtle always wins in the end but also never advances without sticking his/her head out.
We have been fortunate to have key mentors and another one of ours is a Horatio Alger story who ended up answering directly to Jack Welch of GE as he was CEO of one of Jack’s companies. He taught us many important lessons two of which are 1) You should not be in business unless you are #1 at what you do or on your way and 2) do it as humbly as possible. (which is why he left Corporate America and started his own $50 Million business which takes care of both customers and employees)
This same mentor also taught us the importance of being altruistic. We all see politicians and businesses touting their support of scholarships and helping the challenged in press releases and news stories. This has more to do with self promotion than being altruistic. If you believe in Karma, your good will karma is used up in the self promotion.
Another key factor in success in congruency. You remember from math and congruent triangles in parallel lines...OK maybe not :) Congruency is action matching beliefs. I was surprised when ADI bought a company that sold everything that goes against everything ADI had preached to that point. It reminds me when I was a Ski School Director and we used to teach beginners one way and then change the teaching style when they became advanced confusing the hell out of them......that is how I saw this expansion.
In our landscape industry I chuckle going to trade shows and the first question people ask is So, how many crews do you have? I told this to my mentors and they just laughed and laughed. The questions you should ask is 1) What is your break even point 2) at what average gross profit margin 3) how many months...yes months of vacation do you have (not counting winter months for contractors and 4) did you make it to your kids ball game last week.
Because of our mentors we thought we had pretty balanced lifestyle the last 20 years, great income, lots of time off, worked out regularly and then......my 56 year old sister called to tell me hospice had come in to take care of her and she was dead one week later. I had the greatest gift ever sitting next to her bed that last week and talking to her about life.
ADI builds great products, they need to figure out their cash flow, their focus (ever try to hold two books in your hands and read them at the same time much less be able to retell the story)? And do it as humbly as possible. We will continue to purchase their products and only hope they have lots of cash to weather this storm. As my father taught me, we only have one true asset and that is our integrity, care for it daily.
Congratulations on having the insight to deal with this issue. Most people don't.
My only suggestion - ask yourself what this change means in terms of your own behavior.
As I say in my latest book, "What got YOU here won't get you there!"
Chris & I just learned about your blog. We enjoyed going back and reading through them. We are exsited about this blog. We was just talking today again about change as you know we are in the middle of huge changes for our company. We are holding our breath to see what you are doing!
Chris & I just learned about your blog. We enjoyed going back and reading through them. We are exsited about this blog. We was just talking today again about change as you know we are in the middle of huge changes for our company. We are holding our breath to see what you are doing!
Chris & I just learned about your blog. We enjoyed going back and reading through them. We are exsited about this blog. We was just talking today again about change as you know we are in the middle of huge changes for our company. We are holding our breath to see what you are doing!
Chris & I just learned about your blog. We enjoyed going back and reading through them. We are exsited about this blog. We was just talking today again about change as you know we are in the middle of huge changes for our company. We are holding our breath to see what you are doing!
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