Safely Ahead of the Game
Unique prospecting methods, employee empowerment and a key acquisition have fueled Northern Safety's speedy growth
In just a year, safety and industrial supplies cataloger Northern Safety has acquired a competitor, added an outside sales force, nearly doubled its staff and opened the doors of a new distribution center. In the process, the company has increased its annual sales by more than 70 percent.
Sal Longo, president of the Frankfort, N.Y.-based business-to-business (B-to-B) catalog, says this growth is the result of aggressive prospecting, strategic partnerships and empowering employees to get the job done on their own terms.
Not that growth is new to Northern Safety. In its nearly 23 years in business, the cataloger never has had a negative growth year; in the past 10 years, sales have grown by 20 percent annually, on average.
But to get to the point where he could grow Northern Safety his way, Longo had to gain control of the entire company. Following a management deadlock with his co-founder, Longo and the company went to court in 2004 to dissolve the 50-50 partnership. Northern Safety went to auction and Longo acquired a 100 percent stake in the company using capital raised through senior lending, mezzanine lending and a small piece of equity, he says.
Longo reflects that raising capital for the buyout was challenging, especially doing so in a way that wouldn't over-leverage the business. Ultimately, however, the buyout positioned Northern Safety to grow at a much greater pace than it previously had.
Aftermath of a Buyout
Immediately following the re-acquisition of the company, Longo made changes to Northern Safety's management structure.
He eliminated the hierarchical management system that had been in place. He then established a self-directed paradigm, which allows employees the freedom to make decisions that affect the company — and their jobs.
While the new structure still requires employees to report back to managers, Longo favors this management style because it allows employees to get things done quickly, without being hampered by an overseer.
"It was designed to be a quick strike force team, so we could prioritize work and execute it in the most efficient manner," Longo says.
The restructuring also led to additional jobs. Northern Safety's ranks swelled from 170 in June 2005 to 215 this past May.
Neil Sexton, president of Sexton's Market, the Trinidad, Colo.-based consultancy that Northern Safety has employed for several years, says the self-driven employee structure works well for the company. In particular, the management structure allows for rapid implementation of new ideas. "I've never met a company that can go from concept to strategy to execution like Northern Safety can," Sexton says.
Reach Out and Prospect
Part of what has allowed Northern Safety to grow so much in the past 10 years has been what Longo calls an "aggressive prospecting strategy." Indeed, Longo has increased circulation since the buyout of the company last year, and he plans to increase circulation of the company's 532-page big book by about 30 percent in the next 12 months.
Although the company won't identify the specific lists that have been producing positive results, Robin Fostini, executive vice president for strategic planning, says Northern Safety's best lists feature companies from the top 10 SIC codes, including agriculture, construction, manufacturing and mining.
MeritDirect's B-to-B cooperative database has been another significant source of names, Fostini says. Names modeled from this database regularly perform as well as, if not better than, some segments of the company's housefile.
Some the most unique sources of names for Northern Safety come from a name appending service offered by the sister company to Sexton's Market, TeleGreet.
TeleGreet's representatives call the companies in Northern Safety's housefile to effectively perform the dual function of cleaning the housefile and adding relevant names. The reps log directly into Northern Safety's database via a virtual private network and make changes based on calls to Northern Safety's customers. They confirm whether or not a given buyer in the housefile is still with a customer company. If not, the reps delete the name from the housefile and ask if someone else from the company should receive the catalog instead.
Referring to the process as "database non-marketing," Sexton says, "We're trying to prevent the mailing of 532-page catalogs to people who don't need them." At the same time, TeleGreet ensures that every person authorized to purchase safety products under that customer's rooftop is receiving a catalog.
Longo and Fostini won't reveal how many names TeleGreet adds to the Northern Safety housefile. But Sexton notes that his company makes at least 9,000 calls per month on Northern Safety's behalf. Recently, TeleGreet has started adding e-mails to the information its reps collect as part of Northern Safety's burgeoning e-mail marketing program. With 20 percent of Northern Safety's sales coming in via the Web, Longo's team plans on growing that segment of the business with more e-mail marketing and a retooling of the catalog's Web site.
To Acquire Is to Grow
Shortly after his buyout of the company in June 2005, Longo says he intended to make acquisitions and acquire a new distribution center. Then this past May, he followed through. Northern Safety acquired Safeco, an occupational safety products supplier based in Kingsport, Tenn. Immediately following the close of the acquisition, the company purchased a 160,000-square-foot warehouse in nearby Church Hill, Tenn., and started refurbishing the building to house both a distribution center and office space for customer service and sales. At press time, the facility was partially open and was expected to be fully operational by mid-August.
Longo says Northern Safety went after Safeco for its first acquisition following his buyout because of its similar product line and customer base. What's more, Safeco also has a direct sales force and offices throughout the southeastern United States. Northern Safety gained an additional marketing channel through the outside sales force, and Safeco is able to leverage Northern Safety's catalogs as an additional sales vehicle.
Sexton suggests that the complementary sales channels are the most important component to the acquisition. The most common objection to ordering via catalog is that customers deal with their local vendors, Sexton says. Safeco's outside sales force gives Northern Safety a leg up on its catalog competitors by enabling the company to be both a catalog vendor and a local vendor.
And while Longo and Sexton see Safeco's sales force as a strong complement to Northern Safety's own efforts, Victor Hunter, president of Hunter Business Group, a Milwaukee-based B-to-B consultancy, points out that "the similar customer set and product synergies really will drive any success they have."
As the acquisition cleared the way for Northern Safety to acquire the new fulfillment center, the facility enabled the cataloger to ship more quickly. "Essentially, we can now ship to two-thirds of the country in two days or less," Longo says.
Hunter notes that this is particularly important for a business like Northern Safety. Pointing to his firm's own research, Hunter says, "Fast, efficient delivery is far more important for consumables under $200 than for durables more than $500."
And since Northern Safety's average order size is $250 and the company's most popular products are such items as disposable gloves, hearing protection and eye wear, most of the company's customers should appreciate the speedy delivery afforded by the new distribution center.
With the acquisition, Longo and his team face several challenges. Safeco has been rebranded as Northern Safeco and while nearly all of the Kingsport employees remain in place, Longo implemented the same sort of managerial restructuring he used in Frankfort nearly a year prior. Safeco needed the restructuring, he said, because the company wasn't operating with the efficiency and productivity that Northern Safety does.
So, within two weeks of showing interest in purchasing the company, to engage Safeco employees in the deal, Longo visited each of Safeco's seven regional offices, learning all employees' names in the process. Starting a month before the deal and continuing for a month afterward, he flew Safeco employees up to Northern Safety's headquarters to see how the company was run. He also held strategic planning sessions in Fort Lauderdale, Fla., for management on both sides. In short, "We really rolled out the red carpet for them," Longo says.
The result? "The buy-in has been unbelievable, just tremendous," Longo says. "We never expected to buy a company and turn a culture around as quickly as we did."
Northern Safety Corporate Time Line
1983: Sal Longo and his brother Ronald found a home-based business selling first-aid kits and safety gear out of a van to local factories and municipalities in Frankfort, N.Y.
1985: The company adopts the name Northern Safety and enters the direct mail industry with an 8.5-inch-by-11-inch mailer with two gloves on one side. Armed with 1,000 names from the McCray's Industrial Directory, Northern Safety sends the mailer in a No. 10 envelope and sees a 2.5 percent response rate. Later that year, the mailer turns into a 24-page catalog. Sales increase threefold over the previous year, and the company moves into a small office and warehouse in Utica, N.Y.
1999: The company moves into a new building in Frankfort, N.Y., a 94,000-square-foot, custom-built facility.
2001: Northern Safety completes the expansion of its warehouse, doubling its size from 60,000 square feet to 120,000 square feet.
2002: The NS® family of products is introduced. The first products are N-Specs® Safety Eyewear and NS® Hand Protection.
2005: Sal Longo completes the buyout of his brother and co-founder in June and restructures the company. This begins a period of rapid expansion for Northern Safety. In one year, the company grows from 170 employees to 310.
2006: In May, Northern Safety completes the acquisition of Kingsport, Tenn.-based Safeco, an occupational health and safety products supplier with an outside sales force. Immediately after closing the sale, Northern Safety buys a warehouse in nearby Church Hill, Tenn., and begins construction on office space on that site. At press time, the project is scheduled for completion in mid-August.&000;&000;
About Northern Safety
Headquarters: Frankfort, N.Y.
Year founded: 1983
Merchandise: safety and industrial supplies
Price point range: $3 to $3,000
Average order size: $250
Annual circulation: About $7 million
Mailings per year: 32
# of SKUs: 20,000
# of employees: 310
Customer demographics: top 10 SIC codes, e.g., agriculture, construction, manufacturing, utility and mining
Sales per channel: 20 percent Web; 30 percent outside sales; 50 percent catalog/telesales
Annual sales: $120 million (est.)
Printer: Press of Ohio, Transcontinental of Canada and Quebecor
List manager: MeritDirect
12-month housefile: 225,000&000;&000;
Tracking Northern Safety's Sales
2002 - $39.5 million
2003 - $45.4 million
2004 - $53.1 million
2005 - $64.8 million
2006 - $120 million (est.)
Sal Longo's Catalog Startup Tips
Since he co-founded Northern Safety when he was just 20 years old, President Sal Longo says he had to learn everything the hard way, finding everything out for himself. Here's some advice he wishes he'd known then:
→ Go to conferences and meet as many people as you can. First, you'll meet some of the best consultants at industry events, and second, you'll meet seasoned catalog veterans who can share their expertise. Learn as much as you can.
→ Find a mentor. Longo says he often forms advising relationships with companies new to the direct marketing game. He recommends looking for mentors outside your product vertical just to eliminate any potential conflicts with your business.
→ Put your own spin on outside advice. While Longo does advise that you listen to what experts say, he suggests giving it a good wring through. "Try to understand what's legitimate advice, and what just won't work for the way you do business," he says.
→ Rein in your emotions. Longo admits that he's a passionate guy, so he's had to put in place systems that remove any emotion from the decision-making process. He says that establishing metrics for every part of the business and allowing others to challenge his decisions have helped keep his emotional nature in check.&000;&000; &000;&000;