It's Not Luck (29 page)

“How much is it?” Bob asks him.

“About thirty-four million, three hundred thousand dollars.” He hurries to add, “Based on the number Susan gave me, that the average time from our shipping until the shops sell is forty-five days.”

“Wahoo!” Bob is impressed. “Alex, are you sure that you can get us so much money?”

“Check your assumption,” I say. When he doesn’t get it, I turn to Morris. “Assuming that this reduction in receivables does not affect sales, will you please tell Bob who is giving this money to whom?”

“Isn’t it obvious?” he innocently asks. “Right now, we have fifty-seven million, ninety thousand dollars in receivables. This is roughly one hundred and sixteen days. According to Susan, it will drop to only forty-five days. As I said, if she’s right, we’ll be able to give back to UniCo about thirty-four million, three-hundred thousand dollars.”

I burst out laughing. One by one, they join in.

25

At dinner I’m telling my family about the marketing solution for I Cosmetics. Julie and Sharon are naturally interested. What is surprising is to what extent Dave is involved.

“Why don’t you buy more companies that sell other merchandise to the same drugstores?” Dave asks. “If it’s so good for I Cosmetics, it will be good for them as well.”

He has a point. With this type of offer—asking for shelf space rather than hard cash and promising daily replenishment—it’s bound to be good business.

“You can use the same distribution network,” he echoes my thoughts. “You said that the regional warehouses are almost empty today.”

“Dave,” I say, “it’s a good idea, but I’m afraid that UniCo doesn’t have the cash to invest in it.”

“That shouldn’t be a problem,” he continues to develop his idea. “You said that Bob’s offer will reduce the receivables from over one hundred days to about forty-five. This is a cash machine. Borrow money, buy the companies, convert their receivables into cash and pay back the loan. What’s the problem?”

“It’s not so simple. But Dave, carry on this way and you’ll become a very successful businessman.” I’m very pleased with my son. He’s sharp.

“Dave is already a successful businessman. He has an antique Cadillac,” Sharon brags. “A real collector’s item.”

“Yeah, sure,” I laugh. And to Dave I say, “So, you decided to restore the old car? Good luck.”

“Didn’t I tell you? I guess not,” he is a little embarrassed. “Thanks, Dad, I used what you taught me and that’s the result. Herbie and I are going to restore a car. But Sharon’s right. It’s not going to be the fifty-six Olds. It is a nineteen-forty-six Caddie. We’ve already started to work on it. Can you imagine me in a big, shiny Cadillac?”

“How cool,” Sharon squeals. “Remember, you promised to give Debbie and me a ride. All the girls will die. Yahoo!”

“Cool down, Sharon.” What a lively imagination. “They first have to fix it. Right now I doubt if it even has an engine.”

“Yes, it has,” Dave assures me. “The original, and it’s just been rebuilt. It runs like a dream. But of course, there’s lots of work to do before we can put it on the road. Lots and lots.”

“How did a fifty-six Olds become a nineteen-forty-six Cadillac?” I wonder what’s going on. “Where did you get the money? A forty-six Caddie with a good engine is not something that you can get for fifteen hundred dollars. Not even fifteen thousand.”

“It’s all thanks to you, Dad.”

“To me?”

“In a way. I took your work, you know, Jimmy and the boat, and . . .”

“What boat?” Sharon is all ears.

“Keep quiet, shrimp. I’ll tell you later,” Dave promises her. “Anyhow, I wrote my negative branches. Actually they boiled down to only two . . .”

“Dave, don’t try to sidetrack me by talking about the Thinking Processes. Where did you get the fortune to buy the car?”

“I’m telling you,” Dave sounds irritated.

“Let him tell the story,” Julie says. “It’s fascinating.”

“So I wrote two negative branches.” Dave is still a little put out. “One dealing with all the problems of sharing and maintaining the car between Herbie and me. You know, like what you had with Jimmy. The other was about Herbie’s problem getting the money.”

I barely listen. The kids had a hard time scraping up fifteen hundred dollars. Where the hell did they get the money for such an expensive car? How much was it? Thirty grand? Forty? Maybe even fifty?

“I started with the easy one,” Dave continues. “The one about the problems of sharing. I went over the logic with Herbie. I forced him to read every word. If I spent so much time writing it, he could spend the time to read it. He trimmed it in five seconds.”

“Tell your father how.” Julie makes sure that I get to hear all the details.

“Oh, it was simple. We both have to leave for college in September, so we decided that at the end of August we’ll sell it. That’s not much time, until then we’ll manage.”

“When will you finish the car?” I ask.

“Early July, we hope. I’m telling you, there really won’t be time to fight about it.”

“So the first negative branch was trimmed. Great. What about the second one?”

“The second branch was more sensitive. As I told you, I was concerned about where he was going to get the money. Well, it turned out he was planning to sell some grass.”

“What! You didn’t tell me this part.”

“Mom, cool down. You know that I would never agree to such a thing. Herbie knew it too. That’s why he didn’t tell me about it before.”

“So that was the end of that idea,” Julie states.

“Yes, but it wasn’t the end of our idea to restore a car. Herbie used our first injection to develop the second one. He said that since we were going to sell the car anyway, why not borrow from the future buyer. We knew approximately how much the car and the parts would cost us; about fifteen hundred dollars. Remember, at that stage we were still thinking about the Olds, we didn’t know about the Cadillac. On top of the cost to us, we estimated that we were each going to put about three months’ work into it. So we thought that offering it for twenty-five hundred would be a good bargain.”

“Whom are you going to sell it to?” I ask.

“To you,” he smiles at me.

“You are still talking about the Olds? Why do you think I would be interested in an Oldsmobile?” Really!

“That’s exactly what gave us the real idea,” Dave beams at me. “You see, I remembered what you told me about the difference between the perception of value of a supplier, and the perception of value of the market.”

“What does that have to do with it?” I ask, baffled.

“The way we figured the value of the car—you know, what it cost us and the labor—is the way a supplier would derive the value,” Dave explains. “But when we started thinking about persuading you, we decided to look from your eyes, and the only good argument we could come up with was that I would promise that if you bought the Olds, I would never touch your BMW.”

“I see.” My sneaky son.

“But then we decided that if that’s the type of argument we were going to use, we would be much better off approaching Herbie’s father. You know that sometimes Herbie succeeds in convincing his father to let him borrow his cherished antiques, and you also know that sometimes it takes a small fortune to repair the damages.”

“So you concluded that Herbie’s father’s need for such a promise is much greater than mine,” I say, relieved. “Did you ask him? What happened?”

“Herbie’s father had a much better idea. He’d already purchased this Cadillac, and the major parts. So he offered us the job of restoring it. Of course, he first forced Herbie to sign that he will never ask to borrow one of his other cars again.”

“And what are you going to get out of it?” I ask.

“Oh, until I go to college I can use it on an equal basis with Herbie. And if we get it running and it goes twenty-five hundred miles with no problems, Herbie’s father promised me a thousand dollars. This way I don’t have to spend my money, I can save grandma’s gift, and I will have even more money to spend at college. How do you like it?”

“I like it.” I like it a lot.

“So you see, Dad, you helped me twice.” Dave summarizes. “Once with the negative branches, steering Herbie smoothly into a real solution rather than a real fiasco. And the second was explaining to me the differences between perceptions of value.”

“Good job, Dave. You really put it to use nicely. You even pushed the concepts further. When I was talking about the suppliers’ and markets’ perception of value I was talking about companies producing products on an ongoing basis. You applied it to one-shot deals. And you’re right. It works there as well. Come to think about it, it should work for any sale.”

“Including the sales of your companies?” Julie jumps in. “They are each a one-shot deal.”

“No,” I reply. “Here the rules are rigid.”

“What rules?” Dave is interested. “How do they determine the value of a company?”

“It’s quite involved, but basically, you look at the net profit of the company and multiply it by the profit/earnings ratio for that type of industry and you have a good starting point. It also depends on the assets the company has. That might modify the picture.”

“But that’s purely based on the perception of value of the supplier,” Dave insists. “You are only looking at the company. It’s like looking at the product, rather than the needs of the buyer, Dad.”

“You have a point. But that’s how it is done.”

“Not necessarily,” Julie interjects. “Not according to what you’ve told me about Stacey’s company.”

I think about it. She’s right. If you look at Pressure-Steam in isolation, the value is very low. But when you look at a particular buyer—a very particular buyer, Stacey’s competitor—in regard to his needs you get a totally different number. Four times higher.

I raise my eyes and look at her. “Julie, you are right. Maybe we are going about it in the wrong way. Maybe we can get much more for Pete and Bob’s companies if we look at the needs of the potential buyers. But what do I know about their needs? Nothing.”

“Well, who are the potential buyers?”

“For Pete it is large companies in the printing industry. For I Cosmetics, we are approaching a much wider spectrum. The real experts on it are Brandon and Jim. I’ll have to talk to them.”

“Alex,” Julie continues, “you must know something about the printing industry. Last year you spent a considerable amount of time at Pete’s company.”

“Yes, I did, but . . .”

She waits a minute, watching me. “Well?” she pushes.

“When I got Pete’s company it was a good representative of the industry,” I admit.

“Which means what?”

“Everything was run in order to save costs. Not real operating expense, but cost-accounting costs. You can imagine the results, I’ve told you about it a thousand times. It’s hard to believe, but that’s how most of this industry operates. That’s the reason I’m afraid to sell it to someone who will interfere with the way Pete is running it.”

I love to talk about Pete’s company. When I start, it’s hard to stop me. “This company is now a beauty, in every aspect. In quality, in delivery, in quick response to whatever the clients want. And most importantly, with their innovative approach to the market, it’s bound to become very profitable, even this year.

“Profitable. The word does not describe it. It’s going to be much above anything that anybody in the printing industry has ever seen. Let me tell you Julie, from every imaginable aspect, it’s a model. A model of how this business should be run. I’m really proud of it.”

“You deserve to be.” Julie smiles at me.

“Doesn’t somebody need such a model?” Dave asks.

“You mean,” I slowly say, “selling it not based on the financials but rather on the fact that it can be used as a model for its industry? Interesting thought.”

“Alex,” Julie chips in, “I think that Dave might be right. You said that companies spend a lot of money on benchmarking. What is better for them than to have the best performer in their own backyard.”

“Yes.” My mind is racing; I develop it further, “And they spend a fortune on consultants. In their business, Pete and his people are better than any consultant out there. They not only understand what to do, they have done it.”

“So they will be the teachers,” Sharon concludes.

They all look at me. “Let me understand what we are talking about,” I try to recoup my thoughts. “For a big printing company, and I’m talking about really big, Pete’s company can be the source of a paradigm shift in performance. It’s a perfect model of how to schedule and control a printing operation, not based on the paradigm of artificial cost but on what really makes sense, short and long-term bottom-line impact.

“They are an outstanding example of how to handle the prep room. A job that might take another company weeks, Pete is turning around in four days, no sweat. But most importantly they know how to develop unique marketing approaches. They can be the benchmark, the school and the consultants at the same time.”

“But Pete and his people don’t want their company to be sold,” Julie reminds me.