Sales Comp

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Greg And V
This husband and wife
team personifies the
give and take, the yin
and yang, the equal
partnership mentality
that has taken a two-man,
fax-and-filing-cabinet
operation and turned
it into the industry’s
seventh-largest distributor
conglomerate.
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d Vera Muzzillo –
Perfect
Partners
by Patrice A. Kelly
D
an McCarthy has been a Proforma franchise owner
since July 2003. Newly introduced to promotional
products, he discovered Proforma while investigating other business models. “[At first] we really
didn’t see any advantage to joining, because even though we were
only two years old, we had become pretty successful,” he says.
“The one thing that kept gnawing at me was that I would read
about Proforma, and companies that were doing $1 million to $3
million to $5 million [in sales] were joining! It intrigued me; if
companies at that level were doing it, there must be something
to Proforma to make them join.”
There is. The thing at Proforma is that, from top to bottom, it’s
all about making individual owners successful. To do that, it looks
for people with whom it can build relationships, people who impress
them – not just as professionals, but also as human beings.
“We have wonderful franchise owners,” says Greg Muzzillo
who, along with his wife Vera is co-CEO of the Cleveland, OHbased firm. “At the end of the day it’s people. Programs can
make sense, systems can make sense, but it’s people that drive
the day-to-day success.”
At first glance, the way Proforma empowers distributors is
simple. Franchisees are able to offer a full range of services that
include promotional products, commercial printing, business
forms, documents and e-business solutions. Whether a client
wants a single, creative premium item or a comprehensive incentive program, Proforma owners of any size can fulfill the customer’s needs. That’s because the Proforma franchise model
takes care of all the intrinsic details so owners can go about the
business of selling and servicing clients. They provide support
in all aspects of the business, from lead generation to accounts
receivable.
“Proforma has increased our profitability in a lot of ways,”
McCarthy continues. He is especially impressed with vendor
relations. His franchise access has led to suppliers he didn’t know
existed and given his firm instant credibility. “The marketing
assistance, we couldn’t buy,” he says. “We’re in the midst of a
direct-mail campaign right now, and we never would have been
able to come up with anything close to it. And if we had gone
someone outside to come up with this marketing program, we
couldn’t have afforded it.”
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Proforma’s corporate headquarters in Cleveland.
In fact, the model is so compelling that
a former president of Norelco purchased
a franchise. Upon retiring, this former corporate officer was looking for “something
he felt comfortable with but also something he and his son could do together,”
says Proforma president Alan Chippindale.
“He was looking for something with a low
start-up cost and looked at all types of different businesses. He liked the industry
because you could literally go up one side
of the street and down the other and everybody uses [promotional products]. He also
liked the fact that the profit margins were
strong and the overhead was low.”
The Proforma model has proven successful. Of its 650 franchisees, 77 (12%)
have posted $1 million or more in promotional products sales in their best year.
(Industry-wide, the percentage of distributors generating that much is only 1%.)
Twenty franchises do over $4 million and
two over $10 million. The average franchisee with the firm for at least a year posts
$500,000 in combined promotional products and printing sales.
Big Company, Small Perspective
“We not only help people grow their
sales, grow their profits, etc., but we help
them be better business owners,” says Vera
Muzzillo. “And I just think that’s huge,
because in this industry you have such a
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multitude of small mom-and-pop distributors, many of whom have never had any
type of financial modeling, consulting or
support. For us, we are invested in the success and dreams of our owners, not just
the dollar amount of sales but the dollar
amount of cash and profits they can put
in their pockets.”
It’s this partnership and team concept that
has drawn the attention of the media and
the business community. Proforma has
received a plethora of recognition and
awards. For example, it was named U.S.
Small Business of the Year by President
Reagan in 1985, Distributor of the Year by
Trade West Magazine in 1996, and
Distributor of the Year by BFL&S Magazine
in 2002. It made the Entrepreneur
Magazine’s list as number one in the business services category for five consecutive
years. It’s listed in the top 100 Home-Based
Businesses, and it ranks eighth in last year’s
Counselor Top 40 with $131.2 million in
promotional products sales if you add the
revenues of all its franchises.
What makes Proforma a different animal?
First, it’s a business-to-business franchise.
Unlike companies like McDonald’s and
Burger King, the model isn’t geared to
direct-to-consumer sales. And although it
may sound trite, Proforma franchisees sell
relationships as much as products to their
clients. Unlike a lot of other franchises, success at Proforma isn’t based on volume sales
but on repeat business – just like the rest of
the promotional products industry. That’s
why it works so well as a concept; a marriage of idea and industry.
A Bit Of History
Proforma’s rise in the industry is interesting, given its humble beginnings. In
1978, Muzzillo founded Proforma with
a college friend and a $200 investment
in an answering machine and a file cab-
‘We not only help people grow their sales, grow
their profits, etc., but we help them be better
business owners, and I just think that’s huge.’
– Vera Muzillo,
Proforma Co-CEO
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Members of the Proforma executive team (from right) Terry Tibbits, chief vendor development officer; Brian Smith, chief operating officer; John Campbell, chief owner
development officer and Todd Carpenter, chief technology officer.
inet. At the time, he was with the auditing firm of Haskins and Sells (predecessor to Deloitte & Touche), but wasn’t
happy. The same went for his friend’s
job with a print distributor, so together
they decided to strike off on their own.
“We knocked on a lot of doors in 1978,”
Greg recalls. “By 1980 we had our first
million-dollar year, by the mid-1980s we
had a multi-million-dollar company and
were recognized three years in a row by
Inc. magazine as one their 500 Fastest
Growing Companies.” In fact, it’s the
only company in the business forms
industry to make the list more than twice.
In 1985, the company won the Small
Business Administration National “Business of the Year” award. Muzzillo developed the Proforma franchise model in
1986 and took the company national.
“Candidly,” he says, “even for a multimillion dollar company, I didn’t believe
we were making the kind of money or
profits we should be making. I felt there
had to be a better way.”
Muzzillo took a long, hard look at the
promotional products industry and saw
a market with tens of thousands of distributors, lots of duplicated overhead and
what he felt was an inefficient business
paradigm: “I thought, if there was only
a way for all of us to get together and
share a lot of overhead, have some real
marketing programs, to have some real
buying clout with the suppliers so we
could all make more money by sharing
overhead and have more resources for
‘Candidly, even for
a multi-million dollar
company, I didn’t
believe we were
making the kind of
money or profits we
should be making. I
felt there had to be a
better way.’
– Greg Muzillo
Proforma Co-CEO
the advancement of dollars. And when
you think about it, that’s franchising.”
In 1987, Proforma made Venture magazine’s list of top 50 businesses, and in
1988 formed an advisory council and
held it first annual convention. Three
years later, it expanded into Canada,
receiving recognition from Case Western
Reserve University’s Weatherhead
School of Business as an Outstanding
Growth Company for that year, and the
next two.
But Muzzillo and company were just getting started. In 1994, Proforma expanded
its products and services to include promotional items, introducing its ProSource
online catalog the following year and moving to its present facility.
Another major milestone was achieved
in 1996, when Fred DeLuca, founder/CEO
of Subway, invested in Proforma. “When
we first decided to start franchising, I
became involved in the International
Franchise Association,” says Muzzillo. “I
wanted us to be the best franchising company we could be, and I wanted to hang
out with the best. I had an opportunity to
serve on the [IFA] board of directors, and
that’s where I met Fred DeLuca.”
The two became friends, and after a
board meeting, started talking about each
other’s businesses. “Fred knew that businesses in North America spend way more
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on the products we sell – printing and
promotions – than all people in North
America spend on fast food, including
burgers and pizza and chicken and submarine sandwiches,” Muzzillo says.
“That impressed me.”
The timing was right for an investor to
come along, as Greg had recently bought
out his original partner. “Even though we’re
not Subway and not retail and not restaurants, it gave us a certain amount of credibility – not just capital – to get things to
the next level,” says Muzzillo.
The year 2000 brought another change
for Greg, albeit one of a more personal
nature. It was that year he met his future
wife, Vera. She joined Proforma in 2001,
coming on board to help maximize strategic development opportunities and provide comprehensive oversight to the
banking, cash management, credit, financial, operations and technology aspects
of the firm. She previously held a senior
position with Comerica Bank and was a
strategic business consultant for a few
years. All told, she brought 10 years of
commercial lending/credit experience
and comprehensive strategic planning
and financial consulting experience to
the table.
“One of the things we’re the most
committed to as an organization is high
quality, clean, active systems,” she says,
“because everyone benefits when your
system has quality owners. We’re very
committed to that [principle]; we are not
committed to growth for growth’s sake.
But we are committed to growth in the
right way because, for us, protecting and
empowering our owners is everything.
We can’t take any chances or risks that
would detract from that goal.”
Everyone Benefits
Alan Chippindale has been with
Proforma 17 years, starting as vice president of franchise success. Now, as president, his job is to concentrate on new
owners and encourage their businesses
to grow. “My focus today is primarily
the early stages of working with people
who are looking to affiliate with
Proforma,” he says, “and going through
that process of understanding who they
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are, their background and where they
want to go.” Currently, Proforma has 650
franchisees, and plans to expand that by
another 200 in 2004.
And while personality and sales experience help, they aren’t everything at
Proforma. The company puts potential
owners through a rigorous background
check, “We’re a very profitable company; we’re in no hurry to do anything that
would be detrimental to the wonderful
people we already have,” says Greg. “So
we’re in no hurry to add people that might
add a bad name to Proforma or do bad
‘We craft and implement
programs that help all
of our franchise owners
market themselves and
support their selling
efforts.’
– Michael Paulus, Proforma
chief marketing officer
things. We look for good quality people
that have strong credit. We look for people who are going to add to the energy and
add to the overall success.”
Once into the process, new Proforma
business owners participate in a weeklong Owner Training School where
they’re introduced to proven marketing
and sales techniques, product training and
business development tools. There are also
annual regional educational seminars to
cover the latest industry trends, as well as
company support tools and updates.
Then there’s the annual convention that
provides training sessions for owners of
all types – from start-up to mature – and
includes a preferred vendor trade show, a
recognition ceremony and numerous networking activities. There’s also an opportunity to participate in the annual Owner
Advisory Council Meeting and vote on
important network issues.
In addition, franchisees have access to
experienced staff members in the support
center who answer questions and provide
assistance by telephone. And for a more
hands-on approach, Proforma provides
access to area development coaches to
take assistance to the next level. These
coaches provide help on anything from
brainstorming a presentation to pitching
a story to the local paper to planning a
trade show.
Fighting Failure
Most Proforma owners are small businesses as defined by the SBA (Small
Business Administration), which also
notes that one of the chief reasons why
most small businesses fail (aside from
lack of capitalization) is lack of sustaining revenues within that critical, first five
year period. The problem is so common
because most start-ups don’t have the
resources to conceive, implement and sustain an effective long-term marketing
strategy. To combat this, Proforma provides its owners with a comprehensive
marketing and support program that rivals
those found at some of the largest corporations in the world.
Chief marketing officer Michael Paulus
is familiar with integrated marketing applications, utilizing a wide array of tools to
enhance sales promotion and marketing
for Proforma business owners. “We craft
and implement programs that help all of
our franchise owners market themselves
and support their selling efforts,” he
explains. “It’s kind of a dual focus. One
is to create materials and programs that
are system-wide to support the breadth of
our organization. We also try and create
flexibility in order to recognize the individual differences of our franchises. One
of the challenges in our business model
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is that while all of our owners can go out
and market, sell all of the things we have
to market, there are clear differences
among them.”
One of the persistent rumors about
Proforma is that it locks its franchisees
into 10-year contracts. Ironically, the
reverse is true. “We actually lock ourselves in,” says Greg. “The franchise
agreement has an out-clause. Franchise
owners can leave whenever they want
during that 10 years. We believe if an
owner decides to become part of the
Proforma family, he or she deserves to
know what he can count on from us.
They can count on us being there for 10
years at least.”
He also notes that, unlike some similar industry set-ups, Proforma operates
in true franchise fashion: It does not
assume the credit risks for its owners.
“Each owner is a completely independently-owned and operated business,” he
explains. “As such, they’re free to use
whatever financial and credit system, and
control their own cash-flow. What we do
is enable them to grow by offering them
a buying cooperative that can make them
a better company overall.”
“We provide them with a high level of
business consulting, modeling and support,”
says Vera. “We have a team that supports
people in mergers and acquisitions and supports people in understanding the business
model, cashflow, etc. The truth is, a lot of
salespeople may be very good at sales, but
they’re not good on the operational and
financial side of the business. They may not
know how to collect, how to make wise
credit decisions. And that’s another service
we provide that I think has helped our owners tremendously.”
Proforma’s Preferred Limited Partner
(PLP) vendor program has forged strategic relationships with hundreds of the
premier manufacturers in the graphic
communications and promotional products industries. One such vendor is
Broder Bros. Co. Inc. David Grobison,
vice president of sales, was formerly vice
president of sales for the company’s
Alpha division. He had been with Alpha
for eight years when it merged with
Broder in 2003. One of the first things
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he did in his new position was initiate a
relationship with Proforma.
“When I first approached them eight
years ago,” Grobison says, “their total
sales with our organization was about
$5,000. Now they’ve done, over the last
eight years, several million dollars. I
think that the combination of [Greg and
Vera] makes for a very forward-thinking organization which enables them to
leverage the scale that I bring, so that
I’m able to give them the resources that
enables them to drive their business.”
Grobison notes that the Muzzillos are
upfront in terms of their communication,
their goals, their expectations and their
vision for Proforma. For him, that’s what
makes the working relationship so productive. “My relationship with them has
made us a better company operationally, from a marketing perspective, from
a sales perspective, from a deliverables
perspective,” he says.
Apparently, Broder isn’t alone in
its thinking. Based on ASI’s Credit Direct
database, suppliers have extended
higher credit levels to Proforma, with
the highest reported line at $52,000.
The average highest credit line for the
industry is $9,000.
the best way to do that is to hire a lot of
salespeople. “But those models don’t
work,” he adds emphatically. “The model
of the power distributors – everybody
continuing to own their own businesses
but partnering together and working
together to create a brand, create a system and create the clout that gives us
today, to reach throughout North
America and someday reach throughout
the world and create a multi-billion dollar powerhouse – that’s what I see working.”
For her part, Vera Muzzillo offers a
slightly more sensitive (but no less competitive) version of Greg’s goal: “I think
for me,” she says, “the goal is that we’re
always viewed as the best. I know growth
is obviously a goal of ours, growth in
the right way, but I want us to be viewed
as the best in the industry; who have
the best owners, the best tools, the best
business model. If we accomplish that
then I’ll be very pleased, because these
people come to us with dreams, and
it’s important that we value those dreams
and we do everything in our power
to ensure they have the ability to make
them happen.”
■
Patrice Kelly is a freelance writer based in Cleveland, OH.
On The Horizon
Not one to rest on his laurels, Greg
Muzzillo has very definite ideas about
the future of the industry. “Our goal
is to continue to grow,” he says. “To be
the largest, most dominant brand
throughout North America and someday the world. You know, today
this industry is a highly fragmented,
relatively mom-and-pop business, but
it doesn’t make sense it should remain
that way forever.
“Given the size of our business, there
ought to emerge a few leaders – a few
leaders with a national brand, a North
American brand, a worldwide brand, and
a team that is able to handle North
American accounts, national accounts,
large corporate accounts and be the most
efficient distributor, the most effective
distributor and the most powerful distributor in our industry.”
Muzzillo says that a lot of people think
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