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Chapter 4

But That’s the Way We’ve Always Done It

Henry Ford once said, “Obstacles are those frightful things you see when you take your eyes off the goal.” Everyone faces obstacles at different times in their lives, but it is how they are dealt with that makes the difference between success and failure—both in our personal lives and in business.

Thomas Carlyle says, similarly, “Nothing stops the person who desires to achieve. Every obstacle is simply a course to develop their achievement muscle. It’s a strengthening of their power of accomplishment.” How you handle a crisis or significant setback defines your character and resolve.

In business, we face challenges every day. Our characters develop in how we react and face them. You know that in your lifetime, you will experience difficult times, and most are not predictable. Think through how you might handle the loss of a loved one, or some other possible personal or work-related obstacle. Maybe you lose your job, or a parent or loved one dies. These things happen. We cannot control everything. It is only you who can decide to be strong, accept the current circumstance, and rationally think through what can be changed. No matter how hard we strive to separate our personal and business lives, each has an effect on the other.

The new venture was growing, and growing fast. We were always on the go and busy. The business was expanding, requiring more equipment and employees. With an additional location in Alaska and another in Washington, our store count was up to four, with more in planning. A mere two years into this business, our growth was still far exceeding our plans or expectations. Both John and I had had more work than we knew what to do with. Twelve-hour days were short days then. Leaving the house by 5:30 AM, returning home after 8:00 PM was normal.

The manufacturing plant was running smoothly thanks to John, who now had a crew of full-time employees helping him. More service trucks had been purchased, and the drivers were hired and trained to manage customer needs. Commercial tire salespeople had been hired to grow that side of the business, and additional office staff was hired to handle the paperwork, billing, HR, and accounting.

Everything seemed to be running successfully.

One of the key success drivers and part of the original vision shared by both John and I was that our competition was simply selling tires. We were focused on educating our customers on the total cost of their operations and how we could reduce that cost with them. We taught our sales and service personnel to understand the customers’ business well and act as their consultant, or even an inside employee.

Though it was true that every customer needed tires in their business, that was not all they needed or wanted. In an effort to save money across the board, our customers (much like any customers of any business) wanted to make sure they were getting the best price. We all love a good deal, don’t we? So, what if you could educate the customer that proper management of their tires—managing the retreading and inventories better—would save them thousands of dollars a year? We wanted to show the customer how to reduce the needs for different sized tires by standardizing the size used, reduced inventory, spares, and space. We also wanted to show the customer that they did not need to have a tire employee on staff with all the associated wages, insurance, taxes, and liabilities because we could do it for far less overall cost. What if we could educate them about the whole process regarding how a company buys tires and retreading and also save them a huge amount of money every year?

There are a couple of humorous stories that relate to how decision-makers view salespeople, especially when those salespeople can save the company money. Saving money does not involve just buying a product for less. There is much more to be saved through improving efficiency, productivity, and long-term change improvements. It is the salesperson’s job to help buyers understand that.

One comic that comes to mind is an infantry field General fighting the enemy with swords and arrows shown above. A salesperson stands before the general with the clear solution to his problem, but the general cannot be bothered with “solutions,” as he has a battle to win (he is super busy). The salesperson clearly has not demonstrated his ability to solve the general’s problem and create efficiency through improvements!

The other anecdote relates to quality, and goes like this: when a customer buys a low-grade product, they feel pleased when they pay for it because they believe they have saved money. However, they are then displeased every time they use it because it is of a low-grade. But when a customer buys a well-made article, they feel extravagant when they pay for it but well-pleased every time they use it because of its quality.

In the business of selling commercial tires, it is the same. In fact, it is the same in almost any business today, including high tech. Think about this: in past years, companies continually added and upgraded their data and computer servers in order to maintain their systems, accounting software, data storage, and manage growth in their business. Today, it’s as easy as opening a cloud drive that exists across platforms, which can be used as needed without the massive investments in space, equipment, and maintenance. “The cloud” represents a way to outsource data storage at significant savings, as well as adding flexibility for growth and needed changes in operations. When we started our company, trucking firms had been employing people to take care of the tires on their trucks. If managed properly, we could reduce their daily needs, and the customer could eliminate the position and its related expenses.

The “old way” of doing business is constantly changing in every industry. In the case of our new venture partnership, at the time we started, many of the tires were about the same and price was the main selling point. Every company sold essentially the same product; the only difference was who made it. Many buying decisions, as today, were based on personal relationships with the salesperson. People deal with people. Often, purchasing decisions were based more on personalities than what made better sense for the customer.

But what if you could shift this paradigm?

We see today that everyone, to some degree, operates in the paradigm they know and understand. If you can introduce a new knowledge base that changes this perception—granted, you are dealing with a reasonable individual or company owner—an opportunity emerges. Put another way, if you can show a company owner or manager a better way to do what they want done, the customer can save money, increasing your sales and customer base.

Many large companies have staff operating in an old paradigm, as change might negatively affect their job stability, such as in IT departments. They are reluctant to support a change. Change is often not easy for most people, and unless you can clearly present a better way to do what needs to be done, it tends to be a very slow process.

As mentioned with Boeing and elaborated on later in this book, they spent $500,000 a year on tires for their fleet of vehicles (not airplane tires). In addition to that expense, they had a warehouse and several staff members managing it. They also had drivers delivering the tires from their warehouse to the various plants around the Seattle area. This is how they “always did it.” Boeing really did not need a warehouse. Our company had a warehouse full of tires already. We could supply them as needed, and we could just as easily deliver to their various locations at about the same cost as delivering to their warehouse. So, by eliminating their warehouse and all the related rent and labor expenses, they could save $600,000 in additional costs annually!

Understanding this, in order for our new venture to succeed, we would need well-trained service people and sales professionals who were not afraid to do things differently, having the ability to consult, educate, and be a true partner to a customer, not just a salesperson.

As you may or may not be aware, salespeople generally do not garner a lot of respect, and for good reasons. I remember a paper I read when first starting in this industry that stated 95% of salespeople do not know their product well enough to defend or properly respond to a complaint or criticism. The paper also went on to say that it takes an average of five to seven calls to win over a new customer, and the average salesperson makes an average of two calls or less on a lead for a new account. There were several other less-than-flattering statistics in that paper on why salespeople fail. Statistics like those contribute to the less-than-stellar reputation salespeople have earned. Of course, there are great salespeople in every industry, but they are the exception. When a company finds a good one, they do everything they can to keep them.

In our situation, our service people—the truck drivers—were the most critical part of the vision. When properly trained on the management of the customer’s fleet, that person could be an extension of the customer’s company and act as an employee of that customer. Besides, who does the customer see more often anyway, the salesperson or the service person?

Companies with these larger fleets had hired their own tire people for many years, dating back to a time when tires did not last long, failed often, had dangerous, multiple-piece tube-type rims, and required almost full-time work to keep the fleet rolling. At the time our new business was starting, fleets had the option to change to tubeless rims, just like regular cars. They could also run radial tires that would last twice as long and rarely failed.

Most tire failures are a result of flat tires, and radials reduce the number of flats by 90%! If they were wise enough to understand and make the switch, the fleets could outsource the tire work to a vendor such as our company, who could do all the work for them in a fraction of the time, saving the customer thousands every year. The opportunity here was that most of these customers did not realize this huge step in tire technology and the resulting opportunity to decrease costs. It turns out that the competition did not see this opportunity either. They wanted to keep selling what they were selling and were resistant to change. Unfortunately for them (and fortunately for us), this meant that they were missing out on an opportunity the customer didn’t recognize they needed yet.

Customer by customer, big and small, we started gaining market share. The ball was in our court, and the shot was wide open. But we still needed to execute and make the shot.

The same education and training were needed for the sales team as the company expanded. Much like our competitors’ way of thinking, most salespeople in the industry were also neglecting to see what the customer actually needed. They were simply trying to sell the customer what they currently had, and price was their only sales tool. The customers also were primarily buying on price because that was all they knew! If we could show the customer a better way to reduce all the costs, not just the price paid, we represented far greater value to that customer, but it required change and a different way to look at the opportunity.

We had come up with a different plan in order to succeed. Though it might seem like a foolish decision, we actually found it best to hire salespeople from outside the industry—the less experience in both sales and tires, the better! I know you might be questioning this strategy but think about this: it is easier to teach a brand-new habit and knowledge base than to change the old. You know the saying, “You can’t teach an old dog new tricks.” Same example here.

We endeavored to apply the same wisdom to hiring service people. Most of our hires had no experience changing and handling large commercial tires, driving a large service vehicle, or making service calls on customers. It was a slow process to do this training correctly, but it paid off. The company was growing, and more importantly, garnering an exceptional reputation while gaining market share. This caught the attention of some international firms, and the results almost crushed our little enterprise.

We had started with zero market share. Now, after two full years, we had maybe 5% market share. We were competing with big companies like Goodyear, as well as large independent operators—some who had been in business for a few generations.

Though I had experience in my earlier job with many of the world’s largest transportation companies such as UPS—who was operating many thousands of trucks—and other large commercial operators, our new company was too small to properly service these larger companies in the beginning. A commercial tire operation had to have 24-hour service, which meant they were able to respond quickly at any time in order to keep the customer moving or repair vehicles on the road, handling truck breakdowns or tire failures. The good news was that we kept in good standing with our contacts at these larger companies. I knew they greatly respected both John and me after having built relationships with us over the years. Someday, we knew our company could grow large enough to be able to handle these customers and markets.

One morning, everything changed for us. The world surrounding our new venture was turned upside down. We had been served a U.S. Federal Court summons. A large international corporation, called Bandag, was suing us for patent infringements and was asking for an immediate injunction to shut down our operations. We were still a small, fledgling operation at the time. We had maybe 40 employees, but the competition was starting to see us as a threat. Bandag was a large Fortune 500 firm, while we were a very small company.

Immediately, our energy and focus shifted to surviving this lawsuit and impending manufacturing shutdown. As you may recall, we started this company with the purchase of a retread manufacturing facility in a bankruptcy auction. We had bid on the equipment, bought said equipment, and shipped it all to Seattle to set up our first manufacturing facility. The equipment had been manufactured by the world’s largest retread rubber and equipment supplier, Bandag, from Muscatine, Iowa. Our new venture was not a Bandag franchise, however. We did not use any Bandag rubber, and we had not once said that we were a Bandag dealer. We had no idea how things had escalated to the point of a lawsuit.

Bandag was not only asking for an immediate injunction to shut down our operation, but there was also a monetary component that would follow. If this lawsuit were won, we would lose everything we had put into the company thus far. Our success would be ripped right out from underneath us. We only had a short time before we had to appear in front of a federal judge who could shut us down in a matter of minutes, so we knew we needed to act fast.

The original attorney who helped us set up the new corporation, Pete, agreed to work with us again. He set up a meeting with us to strategize. After our meeting, he agreed that we were not violating Bandag’s international patents as the equipment was sold in a public auction, meaning there was no copyright or patent infringement at the time of purchase. Bandag had allowed the equipment to be sold on the open market.

As if the impending court date wasn’t threatening enough on its own, it didn’t take long for our competition to hear about the ordeal and use it to their advantage. Since the local Bandag dealers were a part of the suit, word traveled fast around the area. One customer called that very morning, catching us off guard, to say the least. This negative information could seriously cut into sales and customer confidence if they feared we were going to be shut down.

“I heard your company has been shut down? What’s the deal?”

We knew that we needed to do some damage control—and fast. Luckily, we had a top-notch attorney on our side. We had no idea how crucial that would be in the long run.

As we sat in a large federal courthouse with our attorney by our side, I couldn’t help but think of everything that could possibly go wrong. I can’t say either of us had spent much time in a courtroom before this, especially federal court! I hadn’t got much sleep the few nights before, and the stress of it all was wearing heavily as I thought about our employees and how this wasn’t just putting our livelihood on the line—it was theirs, too. I had to remind myself to breathe as I listened intently while a well-polished, New York City attorney pleaded the case of how this little start-up company was causing irreparable harm to an international firm. The attorney went on to share how Bandag had visited many of our biggest customers looking for evidence, fishing for any incriminating information that could be used against us. This was also eroding customer confidence in our firm, as those customers were being interrogated by someone from a highfalutin, New York City attorney’s firm.

Unfortunately, we had a few customers that expressed concerns regarding the viability of our new business, and one of our larger accounts had already stopped doing business with us as a result of this lawsuit. We also learned that the judge knew of Bandag’s founder, who had passed away a few years earlier. Things looked very bleak indeed.

Our attorney made the case for our fledgling company, laying out all the reasons he did not believe Bandag had any right to bring suit for patent infringement. The situation seemed like a re-enactment of David and Goliath as we both sat there, completely helpless. Our whole future, our whole lives, hung there in suspense for what seemed like an eternity that day.

Though the judge ruled against the injunction, it wasn’t the end of the road for us. Bandag was not able to shut down our operations yet, but they weren’t going to give up without a fight. Even though we were still able to run our business, we had the constant threat of financial ruin looming over our heads. Bandag would file other injunctions, interview other customers, and make our lives very miserable for a long time to come. It was an obstacle we had never expected. Our employees were wondering if we could still pay them and keep them employed. Customers were questioning if we would still be in business.

The following year, Bandag filed an injunction appeal but failed again. Even though we were successful in defending the lawsuit, the financial burden of attorney fees looked like it could be our demise. It was hard to see if there was a light at the end of this tunnel, and if there was, it might be a locomotive ready to crush us.

While all this lawsuit business was going on, at 3:00 AM on a cool, wet, Seattle-type, gray October day, my wife and I welcomed our third child into the world. Feeling both euphoric and exhausted, I remembered I hadn’t checked my messages all day since we had been at the hospital. Still, no cell phones or text messages then. I picked up the phone and dialed my voicemail.

“Hey, Kim! It’s John. I know you’ve probably had a long day, but Pete needs us at the office at 8:00 AM sharp tomorrow. It’s gotta be important. See you there.” Tomorrow was now today, this morning, just a few hours after Jill gave birth to our third boy (Jill needed a girl, but that was never meant to be).

I maybe slept about an hour before it was time to head over to Pete’s to see what all the fuss was about. Imagine my surprise when I walked in to see the Bandag attorneys! They made the trip to Seattle as Bandag management had decided they wanted to settle the case that morning, out of court. John and I knew that our key witness had totally refuted what the Bandag attorneys thought was their best opportunity to win. Still, it seemed a bit odd that all of a sudden, they wanted to settle the case. We both knew the basis for the suit was weak by this time, and Bandag had poor odds, but we would not know the real reason for the fast settlement until a few years later.

Regardless of what was to come, the real victory was this: that morning, the attorneys for Bandag dropped the suit for a very small sum, which was to be paid over the next year. Suddenly, it was as if the anvils we were carrying on our shoulders were gone. We were finally free to grow and build our business further while shedding the awful burden of a federal lawsuit and possible demise. Though we are now thankful for the opportunity to learn and grow through that painstaking process, it was certainly an expensive lesson to learn! We were grateful for the hard-working employees who stayed with us through the whole ordeal, as well as many customers.

On the other hand, we had run up over $100,000 in attorney’s fees, and Pete knew we did not have the resources to pay him at that time. He had held most all his fees over that whole year, never billing us. He generously offered that we could have the next couple of years to pay him in installments, with no interest. I still get a little choked up by his generosity. Not only did Pete save our business, but he was a true friend to us. I can’t say I know many attorneys who would be so kind.

Thankfully, we eventually gained back the customers we had lost and continued to take larger percentages of the market. We were back in full-charge mode and growing again, gaining back what we lost and more.

During the lawsuit process, the world had seemingly stopped around us. It felt as if there were an eerie, dark cloud that rendered any thought or focus on the future an impossible task. Every day we woke up thinking, “This could be the day we get shut down for good.” But the light at the end of the tunnel finally came, and it was not the train! The sun instantly pierced through the clouds, exposing hope for the future once again. Just think, I had gotten the gift of a brand-new baby and a settled lawsuit on the same day! The future was certainly looking bright.

The company that was suing us, Bandag, called ten years later, asking that we start doing business with them. There were some interesting negotiations regarding that step in our business. We eventually became one of their largest dealers in North America, operating four large Bandag manufacturing plants! How that all happened is an example of why it’s important to be open-minded, professional, and able to look at mutually beneficial opportunities all the time. This book will focus on decisions and choices, self-discipline, and how we deal with the 35,000 or so choices we are confronted with every day. Some of them carry long-lasting consequences that can affect the rest of our lives, so we always want to choose wisely. In our case, becoming a Franchise Dealer for Bandag was a great decision for both companies.