Editor’s Note: Now, don’t get us wrong-we love Jeff Harbaugh. We think his column adds a certain perspective to our magazine. But when he was hired as the new COO for Sims , we secretly smiled to ourselves.

You see, Jeff had some pretty good theories about running a snowboard company-he certainly thought they were good-but could he actually pull them off? After all, talk is cheap.

So, two months into the job, we talked to our devil’s advocate to see just how closely he’s following his own advice.

I’ve had the luxury, over the last couple of years, to be able to dispense advice and commentary from the relative safety of an observer’s perch. Suddenly-and amazingly of my own choosing-I’ve given up a perfectly comfortable lifestyle to reenter the snowboard management fray. I must be out of my mind.

I’ve done this at a time when the snowboard industry consolidation, if measured by the number of companies, is probably entering its final year. But we’ve become part of the winter-sports industry. That industry is going through some hard times, and the continued scurry to embrace snowboarding as its savior is perpetuating some tough and irrational competitive conditions that aren’t going away quickly.

When I last sat in the management chair-in the early 90s-industry conditions were just a bit different. Remember when we could sell everything we could make, there weren’t enough factories to go around, and raising prices ten percent each season was a no-brainer? Ah, those were the days.

Since that move from management to consulting, I’ve dispensed a bunch of advice in this space. I trust it was at least worth what you paid for it. Four ideas have stuck with me: protect your brand name, know your numbers, find a niche, and don’t kid yourself.

So, am I taking my own advice? Let’s see.

Protect Your Brand Name-It’s All You’ve Got

Grade: A

I’m there. Maximizing sales isn’t the goal. Increasing sales at a respectable rate, selling out every year, and earning a profit is. Growing too quickly and in the wrong places can mean lower margins, working capital requirements that are tough to support, and potential damage to your brand. Who needs that?

The best advertising and promotion that can be done is the kind where the retailer says, “Hey, I sold it all at full margin, and when I called to order more, they were all out!”

Next ordering season the poor sales rep, with any luck at all, will find himself faced with having to control the increases requested by the shops to make sure they sell out again. And you didn’t spend a single marketing dollar to get that.

Then there’s the issue of gray-market sales as it relates to protecting your brand. Avoid them, I’ve said. It’s not that simple. Your distribution can get better year by year, but it will never be pristine. The impact on sales, if you arbitrarily cut off all the sales that might be gray market, could be too severe.

Four or five years ago, brand name hardly seemed to be an issue. If it was a snowboard, it sold. With hindsight, it looks obvious that the brands that succeeded grew while controlling their distribution. They didn’t sell every last board. As a result, when crunch time came, people still wanted their product and they could still hope to have a business.It was a fine line to walk. On the one hand, you had to get out of the awkward “tweens,” that level of sales between, say, five- and fifteen-million dollars where you needed to act like a larger company, but couldn’t afford to.

On the other hand, if you tried to push sales too hard, your credibility as a brand suffered. To put it succinctly, you had to perform and grow according to the market’s expectations, but no faster. Too slow or too fast and you were toast.

So, building your brand was just as important, and difficult, as it is now. It just didn’t seem quite so urgent.

Know Your Numbers-Cash Flow is Everything

Grade: B-

So far, I only gea B- on this one. I’ve got the numbers, thanks to some good systems and people. In fact, even as I write this those number are sitting on the desk next to me waiting to be studied, analyzed, and dissected.

But I’m finding that management issues during the first two months have left me with precious little time to spend the consecutive hours required to really get into them. They are also not “my” numbers yet. They’re somebody else’s. Cash flow, I’ve said, is a living, breathing thing. By creating your own model, working with it, and thereby internalizing it, you develop certain instincts for how the money moves through a business.

In a highly seasonal business like snowboarding, there’s probably nothing more important than the cash-flow dance. I’m learning the steps at this company by signing all the checks, watching the changes in the ballance sheet accounts, and planning for a new budgeting prowess.

At a time when everybody’s struggling to make a profit, and so few are succeeding, knowing your numbers and managing according to them should be everybody’s management priority. It always should have been.

Five years ago, however, flush with high margins, soaring sales, Japanese prepayments, and COD terms to retailers, knowing and working with your numbers didn’t seem quite so compelling.

In truth, it wasn’t. You didn’t have to invest as much money, and you got it back sooner. Boy, I miss the good old days, where various management miscues could be hidden behind ravenous product demand.

Find a Niche-Know Your Customers

Grade: Incomplete

I can console myself on this one by remembering that when I gave the advice, I acknowledged that it was not a trivial thing to do. In fact, I said it was time-consuming, detail-oriented, hard work to really figure out who your customers are.

I know the market niche and the basis of the company’s competitive advantage. But I’m not spending enough time in shops. Neither are we collecting enough demographic information on our customers to know who is really buying the product. Give me an incomplete.

And let’s acknowledge that it will always be an incomplete. The process is never ending-unless the market stops changing.

A niche, it turns out, is a necessary survival mechanism. The hundreds of companies that didn’t have one-or the basis for creating one-aren’t with us any more.

Creating a niche is a long-term process, and it was five or more years ago-when it didn’t seem to matter-that you had to have begun the process if you wanted a niche you could defend in current business conditions.

Some companies found theirs, then lost it in the struggle between growth and credibility I described above. Some stumbled onto it, and kept it in spite of themselves.

Don’t Kid Yourself-Make The Hard Decisions

Grade: A

The rumors are always worse than the truth. Ignoring them won’t make them go away. Change is easier when you make it before you have no choice. Bullshit is inevitably dysfunctional to an organization. Etcetera.

We kidded ourselves as an industry for a long time. Sure there was going to be a consolidation, but it would be somebody else who would be the consolidatee. We were brainwashed by the wonder years. No hard decisions required. We couldn’t bring ourselves to believe that snowboarding was just another industry, as susceptible to competitive trends as any other.

In my first snowboard management incarnation I was a believer, even though I knew better from my experience in other industries. The excitement was contagious, the opportunity apparently endless. The bullshit smelled great.

Never again. I’ll have fun, but I won’t lose my perspective and objectivity. I’m trying to keep everybody at the company informed-about both good and bad news. I’m thinking about sharing the financial statements with all the employees each month. There’s very little inventory on order that isn’t committed to an account. I’m interested in spending money on product development and marketing-not on general and administrative expenses. I don’t expect to grow 50 percent next year (but I hope to increase our gross margin), and I’m trying really hard to only sell to accounts who will pay us. What a concept.

Report Card Time

Let’s see: two A’s, one C+, and an incomplete. Well, it’s a start.

More importantly, I guess these four ideas have held up pretty well. They weren’t any more or less valid five or seven years ago then they are now. The irony is that in the past they were easier to ignore, but paying attention to them then might have made consolidation a little more manageable for some companies.

Like compounding interest, little changes can have a big impact given the advantage of time.

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Jeff Harbaugh is hard at work improving his GPA at Sims, but he also works with other companies in transition. Reach him at: (206) 232-3138.

spending money on product development and marketing-not on general and administrative expenses. I don’t expect to grow 50 percent next year (but I hope to increase our gross margin), and I’m trying really hard to only sell to accounts who will pay us. What a concept.

Report Card Time

Let’s see: two A’s, one C+, and an incomplete. Well, it’s a start.

More importantly, I guess these four ideas have held up pretty well. They weren’t any more or less valid five or seven years ago then they are now. The irony is that in the past they were easier to ignore, but paying attention to them then might have made consolidation a little more manageable for some companies.

Like compounding interest, little changes can have a big impact given the advantage of time.

——————————————————————————————————————–

Jeff Harbaugh is hard at work improving his GPA at Sims, but he also works with other companies in transition. Reach him at: (206) 232-3138.