Michael Patton, president and CEO of Corporate Strategic Services Inc., says he blundered when he founded his purchasing-consulting company in October 1996: He did it without a sales and marketing expert to develop new business. Now, he’s pedaling fast to catch up.
By Joan Slattery Wall
There was never much question that Michael Patton would be an entrepreneur. It began with a paper route and sales of produce from his family farm, where he learned good work ethics. Then came his college days, when he peddled dictionaries door to door. So it was a natural step when—after building experience and contacts through purchasing positions at six big corporations, including Shell Oil Co., Baxter Healthcare Corp. and The Huntington National Bank—he decided to start his own company.
“I always had an inherent self-belief that I could do it better,” says the president and CEO of Corporate Strategic Services Inc. in Dublin, which provides consulting, outsourcing and software products for the purchasing industry.
During his final year as vice president of purchasing and administrative services at Huntington, he contacted associates he’d met during his career to seek potential partners. His business plan, which he wrote with input from suppliers and peers as well as with industry research, included such details as quotes for furniture and office space, a complete staffing plan and cash-flow projections for the first five years of business.
As his business grew, however, he realized he’d omitted a crucial point—one that probably cost him business and prevented him from being able to follow the plan to the letter.
“We should have hired a sales and marketing manager the first day we were open,” Patton says. “In retrospect, it was our biggest technical error.”
Nearly two years later, he’s making moves to catch up on business development.
False hopes
Corporate Strategic Services got off to a booming start.
The timing was right for Patton because his wife, Sandra, had just sold her own business, Sunset Cemetery, giving the couple working capital. Sandra is treasurer of Patton’s company.
Patton recruited three industry peers—all from Huntington’s purchasing department. Daniel Henderson, Phyllis Massie and Mark Triguba worked with Patton for 12 months researching and revising his business-plan draft and deciding whether the business could succeed. Triguba has since left the company because of its extensive travel demands, and Patton this spring recruited another industry peer, Phil Haury, who was sourcing manager at Raytheon Co., based in Lexington, Mass.
Although his management team had high expectations that their combined 100 years of purchasing experience would make them successful, the principals knew the road could be rough.
“Purchasing is always the low end of the totem pole,” Patton says. “You never make money in purchasing. You’re not a profit center [for a business]. So we always had to demonstrate the value we brought to the table.”
High expectations, however, proved correct when, just three weeks after incorporating in October 1996, the foursome landed a huge client. The Bank of Scotland hired them to assess the bank’s business and implement plans for improvement. It was an account that grossed approximately $350,000 over six months. Weeks later came the second client: Bank of America [now Nations Bank], a $30,000 lump-sum contract job during which CSS analyzed and reorganized the accounts-payable department in two months or so.
Another sign of success: two trade shows, the National Association of Purchasing Management international conference and the Bank Administration Institute purchasing management conference, where they met hundreds of contacts—most of whom expressed interest in their services or products.
“We sat here and said, ‘Gee, if we knew this was going to be this easy, we would have done this earlier,’” Patton remembers.
It turned out to be beginner’s luck.
The two conferences, after a year’s time, netted only five clients.
“A lot of the people we talked to weren’t in [a position of] power to execute,” Patton says.
Then came another glitch. With all the firm’s principals in Scotland or flying to San Francisco for the Bank of America project, business development at home halted.
“We had planned to do business development ourselves,” Patton says. “We didn’t plan on being out of the country for six months.”
They also didn’t plan on delays in developing their software product, AESOP, which was generating positive response before its release. AESOP—which allows all employees at a company to control the purchasing process by ordering products and electronically sending the order to suppliers, other employees within the business or CSS—has been the company’s biggest start-up investment. It absorbed $450,000 of the initial $600,000 put up by the Pattons from the sale of the cemetery business and other funds, such as stocks and capital investments.
Because the software took longer than expected to release and the partners still were struggling with the lack of time for business development, the firm’s client list stalled at two until July 1997, when American Pacific State Bank, of Sherman Oaks, Calif., hired CSS.
That dry spell prompted Patton and his partners to spend the past year figuring out ways to jump-start their business development efforts.
Backtracking
Based on past success, one of the first moves the firm made toward improving its marketing was to form strategic alliances.
One was already in the works and had, in fact, led CSS to its first two clients.
Representatives of Walker International, a software developer in San Francisco, knew about Patton from his speaking engagements and professional documents. When they got wind that Patton was starting his own business, they contacted him to help with two of their clients, Bank of Scotland and Bank of America.
Since then, CSS has worked with other Walker clients, such as ConAgra Inc., a food processing company in Omaha, Neb., and Princeton, N.J.’s Summit Bank. In return, CSS looks for opportunities for Walker to become involved with some its clients, which now number more than a dozen.
A second strategic alliance was formed when the CSS partners sought advice on their marketing-and-business development predicament.
In October and November 1997, the principals sat down for a status check, asking each other, “Where are we going wrong?”
They brought in Huntington Bank’s Mike Paton, vice president of private banking and Patton’s own banker, and Richard Simonton, vice president of investments and private banking. The two validated the partners’ own suspicions. They needed to halt the cycle of bringing on big clients, then being too busy to look for more.
That, of course, would require money, and CSS wasn’t a good loan prospect for Huntington because the consulting business had no assets. So Huntington recommended another strategic alliance—this time with Coopers & Lybrand.
Don Bush, a senior partner at Coopers & Lybrand’s Cincinnati office, stepped in to help CSS develop a new business plan, which Patton now is using to share information about his company with potential investors. He hopes to bring in $1.3 million to hire additional staff to handle business development and marketing for the consulting business and AESOP product as well as a new product, the Electronic Mall, an online catalog that allows members to obtain prenegotiated volume discounts.
The relationship with Coopers & Lybrand didn’t stop there.
Coopers & Lybrand representatives introduced CSS to some of its own clients.
“It’s an added service they can provide through us,” Patton says of the consulting he provides. In turn, Patton teams up with Co
opers & Lybrand experts to provide additional benefits for some of his clients.
This spring, CSS started a third strategic alliance by consulting for clients of Solutions With Technologies, a New York company that specializes in telecommunications.
Another step the partners took was to hire Neil Brown, former regional marketing director with Huntington, as the start-up’s marketing manager this spring. Brown will focus on sending out direct mail or seeking prospective clients through trade shows or Internet news groups and then filling the gap long overlooked by CSS—follow-up contact.
“There’s no real magic,” Brown says of business development. “It comes down to doing it and doing it every day, every week, every month.”
These changes have brought in about 75 percent of CSS’s new clients, Patton says, six of which came in a two-month time period, including John Deere’s Augusta, Ga., facility and Northwestern University.
Naturally, that has helped the company’s financial situation, too.
In the red until May of this year, CSS made a profit of $40,000 that month and in the one that followed. The company also billed just short of $250,000 in the first half of the year—more than all of last year.
Now, Patton and his principals await word from investors, realizing they could soon reach a crucial decision: How much will they have to give up to get the funding they need? Their goal: minimum loss of ownership.
That won’t come without a struggle, he knows. In fact, Walker and Solutions With Technologies already have offered to buy the company.
“We thought about it, but there was really never a question,” Patton says. “That’s not what we got in business ourselves for.”
