John Jantsch at Duct Tape Marketing introduced me to Jott, and I decided to give it a try. There are several ways to use Jott, but the way I use it is to call the Jott phone number on my iPhone, dictate a short “to do” message, and hang up. Since I am still using the free service, I do not get an email with my Jott note, but I do get an email with a link to my Jott note. When I click on the link, there in black and white is a written version of what I “jotted” on the phone.

You might be surprised at Jott’s accuracy. For example, yesterday I called Jott while I was in San Antonio and said: “Medical record to Texas Tech.” Here is how Jott interpreted that spoken message:

This is a really useful tool for me because I tend to have some of my best ideas when I am driving down the freeway. Instead of trying to drive and write, I can just Jott myself a note from my mobile phone and be confident that when I get to my laptop, I will have the information available. While I agree that using a cell phone while driving has its own perils, I am confident it is safer for me than trying to write myself a note while steering with my knees.

For me the usefulness of Jott covers business, personal, and writing issues. I may Jott to remind myself to send a circuit board sample to a customer, to remind myself to get the oil changed, or to capture my ideas about blog article topics so they don’t vanish from my mind.

I have not tried a long message on Jott, and I do find that the more slowly and deliberately I speak, the more accurate the transcription seems to be. I encourage you to sign up for a free account with Jott and give it a try. You might just find it to be a helpful tool to you as well.

UPDATE: I just downloaded the free Jott application for the iPhone. I am in the process of exploring it and will write an update after I have put it through its paces.

The technical program was very good with informative presentations by local professionals on a variety of topics. The first presentation I attended was on “X-Ray Inspection for Electronics Quality and Reliability” by Glenn Robertson of Process Sciences. Glenn discussed various X-Ray technologies and visual inspection. He also answered some common concerns expressed by clients about the effectiveness of X-Ray inspection in RoHS-compliant assemblies.

The second presentation I attended by presented by Daivd Carey, the “Chief Wrench” at Portelligent. David and I first met in about 2000 when I was at the Flextronics Austin Design Center and he was just starting Portelligent. He has a fascinating job. He and his colleagues at Portelligent tear down products and study them from a Bill of Materials standpoint and to understand the packaging and assembly of the devices. This kind of information has a variety of uses. His topic was High-Density Packaging Trends in Portable Electronics. He discussed the state of the art of packaging for mobile devices like cell phone, iPhones, etc. The discussion included a comparison of System in a Package (SiP) and Package on Package (PoP) approaches to high density packaging. It is amazing to see under the hood of the devices that we know and love and to see that engineers and designers continue to push the envelope to give us more connectivity at our fingertips. I love the fact that you can also get to their website by going to www.teardown.com. That is fairly descriptive of what they do at Portelligent.

Unfortunately I was not able to attend the final two presentations of the day, but I want to list them in case readers want to look into the information that was presented. Presentation #3 was by Cheryl Tulkoff and Jim Lance of National Instruments on Electronics Reliability Prediction Using the Product Bill of Materials. Presentation #4 was given by Bert Haskell of HelioVolt on Thin Film Photovoltaic Technology and Solar Cell Module Design.

I enjoyed the event and next year Baselodge Group hopes to participate as an exhibitor in the vendor show. Thanks to all those in the CTEA who made this program happen.

While the thrill of sales is one of the reasons I enjoy my job, that is not the reason I enjoy my particular job. There are three main reasons I enjoy my particular job, which is selling manufacturing services.

1. Engineers.

My customers have something to manufacture. In turn, that implies that they design products. The designers are typically engineers. There is something very invigorating about being around the product design process. Engineers impress me as people who, for the most part, really find enjoyment and fulfillment in their profession. This is true of electrical engineers, mechanical engineers, test engineers, RF engineers, and every other type of engineer I interact with.

I consider it a privilege to be able to see the products that designers are bringing to market. I always treat my customers’ product designs as confidential, even when there is not a formal Non-Disclosure Agreement between us. However, there is always a thrill to seeing the products for the first time. It is even more thrilling when one or more of my manufacturers are selected to manufacture some or all of the the product. I really enjoy the interaction I have with designers.

2. Procurement Professionals.

I also admire the work done by procurement professionals. Sometimes this role is filled by a program manager. They play a key role in determining the supply chain players for their firms. They have a big responsibility to balance not only getting the best price possible, but also making sure that the suppliers they choose are up to the task and quality requirements. Some people consider the relationship between salespeople and procurement people to be adversarial by definition. I do not agree. I understand the role they play, and I enjoy the interaction with them.

3. Suppliers.

I also work closely with the companies that I represent. With each of the suppliers that we represent there has been a courting process where they have investigated Baselodge Group to determine if we are the kind of firm they want representing them in the marketplace. In turn we have done our due diligence to make sure the firms are quality suppliers who fulfill their promises. In the process of working on a regular basis with the sales and technical people at the firms we represent, I have developed not only close working relationships with these people, but also genuine friendships. It is this team aspect of my job that reminds me of my “glory days” in athletics and that provides a lot of joy in my daily work.

Conclusion

So, the bottom line for me is that I really enjoy my job because of the excitement of the product development cycle and the opportunity to work with professional engineers, procurement pros, and ethical suppliers who are bright and who enjoy what they do. Together we each play a role in bringing high quality products into the marketplace. In some cases these products make the world a better place. In other cases these products make life easier or more convenient. In yet other cases these products may just be fun. Regardless, it all adds up to an enjoyable role for me.

May 1, 2008 marks the two year anniversary of Baselodge Group as a company. It seems like a good time to reflect back on the challenges we have faced, the triumphs, the disappointments, and the future outlook.

Not Our First Rodeo

Baselodge Group is not the first company my wife and I have started together. In 1988 we created a frozen yogurt shop and cafe in Santa Fe, New Mexico. We named it Margot’s Frozen Yogurt and located it one block from the historical plaza in Santa Fe. We sold the business in 1991, but I am happy to report that the current owners are still in the same space and doing similar things. They made the smart move of capitalizing on America’s thirst for coffee and have expanded into the space next door, something we had in our original business plan. If you visit Santa Fe, please check out the offerings at the Piccolo Cafe on the corner of Lincoln and Marcy.

Starting, operating, and selling Margot’s Frozen Yogurt was a great experience for us as entrepreneurs. We learned a lot about quality, customer service, and employees. We would not trade the knowledge gained by that experience. We had some great employees, too, that we still think of fondly.

Our Second Rodeo

So, Baselodge Group is our second rodeo. While Margot’s Frozen Yogurt and Baselodge Group could not be more different in mission, there are lessons we learned with the frozen yogurt shop that really helped us in launching Baselodge Group.

1. It Takes Patience. The first lesson we brought with us from Margot’s Frozen Yogurt is it takes patience. When entrepreneurs write business plans, they are often wildly optimistic. Any really useful business plan should realistically consider a future that is more challenging than the most optimistic forecast conceivable. We learned that it will probably take longer to reach profitability than we hope. It will take staying power and patience to get the business out of the euphoric mode of the start-up and into the long-term viability of a going concern. We went into Baselodge Group for the long run, believing that we can begin experiencing success in the short-term, but probably profitability only in a longer horizon of time.
2. Always Be Selling (ABS). The second lesson we learned from the yogurt shop is Always Be Selling (ABS). Just because we brought Baselodge Group into this world doesn’t mean that anyone knows anything about us or what we do. We have to not only create our corporate identity through marketing collateral (brochures, website, promotional items, etc.), we have to be constantly telling and retelling our story. In our case we are mainly talking to prospects and customers about the companies we represent, but they have to come to view Baselodge Group as a valuable source for one or more concerns they have. Our job is to help people think of “manufacturing outsourcing” when they think of Baselodge Group. This point is always driven home when I speak for the second time with someone about what we do. A first meeting covered all of the firms that we represent and what their capabilities are. The second meeting often leaves me wondering if I communicated anything at all in the first meeting. We have to hear something multiple times before we really get it. Your customers have to hear what you do enough times that they permanently associate your name with your game. That is why we have to Always Be Selling.
3. Keep Your Promises. This sounds easy and fundamental, but it is harder than it sounds. Trust is still at the core of why customers continue to come back and transact with us. When we recurrently fulfill our promises, we engender trust and confidence. In our company we strive to recognize each time we have made a promise, even if “small,” and to do what we said we would do.
4. Be Open to New Opportunities. Our business plan for Baselodge Group designs in an openness to new business opportunities. This does not take away from our central focus as a manufacturers’ representative, but it allows us to think creatively about how to diversify and move with the market. This allowed us to seize the opportunity to grow our business by adding pharmaceutical manufacturing to our offering of outsourced manufacturing. We call this pharmasourcing, and it is part of our mission now because we were open to thinking openly when the opportunity presented itself.
5. The Customer is Usually Right. One day in the yogurt shop a customer came in with the belief that she could treat the counter help (me) anyway she chose. She was rude, condescending, and totally undesirable as a customer. The old maxim is that the customer is always right. I believe that we should run our business on the basis that the customer is usually right. I always try to give the customer the benefit of the doubt and try to see his or her viewpoint. I usually side with the customer in keeping with a longer term outlook. However, there are those customers that you do not want now or long-term. Some people are not worth the few dollars they will bring you in exchange for the heartache that will come as strings attached to the money. I declined to accept her order for the yogurt and lost a customer. You have to take your stand at times. Plus, there is always the philosophical perspective that in any transaction between two parties, there are actually two “customers.” If we remove money as a medium of exchange and envision a bartering situation, it is easier to see that there are actually two customers, not one. Both parties have to be satisfied with the transaction. In summary, I usually side with my customer and give them the benefit of the doubt. I do have conditions of satisfaction, though, on how I should be treated by my customers. A long-term business relationship depends on both parties finding satisfaction in the transactions.
6. Find & Use Mentors. In our frozen yogurt business we did not really have any mentors. We were in our later 20s and thought we knew it all. There was one serious mistake we made that could have been prevented by having an experienced mentor. I am very fortunate that before we even started Baselodge Group, I had a couple of experienced individuals who were willing to mentor me. It is helpful to have mentors in your specific industry and mentors for business in general.
7. Continually Learn. How do we grow and adapt in a changing business world? We have to be committed to continual learning. As with mentors, our learning has to be both general business learning and domain-specific learning. Never before has so much information been so accessible to so many people. If I am unsure of a specific acronym or specialized term, a quick search of Google or some other search engine yields an amazing amount of information. The Artful Sourcing blog is dedicated to sharing information on how to source products and services. As our backlog of articles grows and as we add more writers, this blog grows as a source of useful information. There are plenty of sources available to us, but it takes discipline and commitment to really take advantage of it.

Conclusion

As we celebrate the second anniversary of Baselodge Group, we are excited about our excellent start and optimistic about the future. We continue to practice the lessons above and have confidence that we will continue to grow as a valuable resource for our customers and suppliers. I honestly believe that if you will implement these practices as you start your new venture, you will also be pleased with the results. Owning and growing a business is not easy, but the potential rewards will continue to draw people who are ready for the challenge.

Circuits Assembly magazine has awarded its 2008 Service Excellence Awards to South Bay for:

• Dependability/Timely Delivery
• Responsiveness
• Technology

We offer our congratulations to South Bay for this well-deserved recognition. It is a privilege to represent South Bay and to work with their outstanding staff of people like Tim Martinez, Randy Langston, Amy Kryzak, John Lundin, and many others. A link to the press release can be found here.

So, you are an entrepreneur with a great idea, a great design, a surefire business plan, but a limited budget. Surely contract manufacturers will be beating a path to your door to line up to manufacture your product, right?

The cruel reality is that seldom is this the case. Contract manufacturers draw on past experiences with entrepreneurs that were just as excited about their products as you are about yours. Some of those projects turned into winners and the entrepreneur and the CM made good money. Many (most?) of them, however, fell short of expectations. In fact, in some cases, the CM lost a lot of money when the glowing forecasts for 1 million units the first year fizzled. More than one CM has ceased to exist by not exercising caution regarding a customer.

In addition to past experiences, CMs have CFOs and controllers on staff whose job it is to ensure that their firms are not taking inordinate risks. This means that if you hope to secure a quality manufacturer to build your product, you are going to have to be willing to “open the kimono” and reveal the details about your credit and financial situation. The cardinal rule for strong CMs is that they will not assume their customers’ market risk, especially as it relates to inventory. If your business fails, they have to make sure it doesn’t cause theirs to fail.

Example

Your new firm (owned by you and your buddy Fred), Intergalactic Widgets, has just invented a new widget that your market research has indicated every gamer with a game console will just have to buy. You have paid $15,000 to have an engineer complete the drawings and deliver a manufacturing data package from which CMs can quote. A patent attorney has prepared and filed your patent application. You have written a business plan that describes the product, the market, and the non-existent competition. It is a slam dunk, and it is going to make you and the CM a lot of money. You are an evangelist for your widget.

The Bill of Materials (BOM) for the product includes plastic components, electronic components, a cable, and a keypad. The average cost of the BOM, according to the three CMs that quoted the package, is $7.50 at your conservative forecast of 1,000 units a month for the first six months. You figure you can sell your widget, that has no competition, to your distribution network for $20 per unit. They will mark it up and wholesale it to retail outlets.

To prime the pump of the distribution chain, you need your CM to produce 10,000 units right out of the gate. Not considering the upfront costs of tooling and fixturing, the initial inventory alone is going to cost the CM $75,000 ($7.50 X 10,000). Even though Intergalactic Widgets is going to issue a purchase order to the CM for the production of 10,000 units, the CM has no assurance you are going to pay your bill. What happens if you go broke? What happens to the $75,000 worth of inventory? The CM gets stuck with it and usually ends up scrapping the custom parts and selling the standard parts for pennies on the dollar. For these reasons, CMs are very cautious about who they engage with. If the customer is a multi-billion dollar public company that everyone knows, the CM is not going to be that concerned - their PO is going to be fine. This explains why CMs are hardly ever as enthusiastic about your project as you are. They can’t afford to buy the hype. They have to ensure that safeguards are in place.

How can you convince CMs that you are a worthy customer?

The first step to success with a CM is to understand the concerns they are bringing to the potential relationship, as described above. Your interaction with them at every level should indicate an understanding that their financial concerns are legitimate. With that in mind, here are some suggestions to increase your odds of finding a true manufacturing partner:

1. Maintain your optimistic tone about your product, but temper your “irrational exuberance” when interacting with the CM. Be sure they know that you are level-headed and realistic about the challenges of moving into manufacturing. Wild-eyed optimism will be interpreted by many CMs as inexperience and lack of preparation. If your exuberance is ultimately proven by the results to have been justified, everyone will be happy.
2. Similar to the first suggestion, be realistic with your forecasts. If you tell the CM that you are going to sell a million widgets the first month, they are not going to take you seriously. Do a little homework and talk to some entrepreneurs that have taken a product from idea stage to launch. Ask them how their initial forecasts panned out. Were they too optimistic, too pessimistic, or did they get it “just right”? You might prepare your forecasts with three potential outcomes: Conservative, Moderate, and Aggressive. The CM will like to see that you understand the complexities of product launches and that you are level-headed. They can probably offer their experience with other product launches and help you sharpen your forecast.
3. Be flexible with regard to credit terms and inventory risk issues. Again, the CM’s biggest concern is that your business may fail and they may be hurt with inventory that cannot be used and whose value can never be recovered. How can their concerns be addressed? Well, you could always pay cash in advance with your order. That will satisfy most any CM because it eliminates their inventory risk. That is clearly not an arrangement you would want to maintain very long. Your wholesale customers are not going to pay you cash in advance when they order your product, so if you are paying cash for the production and granting 30 or 45 day terms to your customers, you are going to feel the pain. However, it may be possible to negotiate a plan that over some period of time can get you to terms with your CM. This may involve paying cash for a set period of time or for a certain number of units. This should prime the pump of revenues and allow you to start demonstrating a track record for the product. Like a credit card company that slowly raises your credit limit as you pay our bill on time, the CM will have a better idea of where your product and company is headed after a while. When the conversation with your CM turns to credit, tell them you want to work out a plan to grow into credit terms.
4. Be sure you are talking to the right CM. Contract manufacturers come in many different sizes and have many different capabilities. Small entrepreneurs will find it very difficult to get the attention of a large, Tier One CM. These CMs have huge facilities and concentrate on the largest OEM customers. Most of them do have New Product Introduction (NPI) centers, but this is not the best place for entrepreneurs to start. Do a little research on the industry and focus your efforts on CMs whose business model includes a genuine interest in new products and small businesses. See post Finding CMs with the proper capabilities for more on this topic.