February 19, 2013

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A Crisis to Remember

Nonexistent Cash Flow Nearly Shut the Doors on Simply Mac

Candace Little

February 19, 2013

Simply Mac is an Apple Specialist retailer (one of the top three of its kind in North America) that in six and a half years has grown from a 1,500-square-foot store and four employees to 10 stores with 102 employees. Steve Bain, Simply Mac president and CEO, says behind every successful business is a trail of obstacles that were overcome. And his company is no exception.

One obstacle Simply Mac faced early on was cash flow.

Simply Mac was selling about a half a million dollars of inventory a month and working off of a $20,000 credit line and four credit cards. On top of its little-to-no cash flow, Apple called to inform the company that the deadline to order holiday inventory—a $1.5 million expense—was fast approaching.

It took no Mac Genius to figure out that the numbers weren’t going to add up.  But that didn’t stop the fledgling company. Bain and his small team of four employees found investors to lend them money for 90 days, purchased the inventory, worked their tails off (about 80 – 100 hours a week) to sell the product, and paid back their investors—earlier than promised.

Here are the lessons Bain and his team learned from that early crisis.

Vision and Values

Simply Mac’s earliest employees decided that its vision was to “be the premier provider of Apple technology solutions in North America, providing world-class service.” When the small company was faced with the holiday inventory crisis in 2006, the team embraced the challenge because they had their company vision in mind.

“We felt that every month counted. And if we’re going to aspire to be a [top company], what do we have to do today? We have to act like a company much larger than ours, we have to assume we are going to get there,” says Bain.

Along with a vision, the company also set up values as a guide to reach its vision and create a strong company culture. While luck was a small contributor to Simply Mac’s success, Bain says a lesson he learned is just how important it is to have a vision and values before a challenge hits. “You have to work extremely hard. You have to be committed,” he says. “You have to overcome obstacles, and passionately persevere through challenges. We weren’t willing to give up.”

The company shares and lives these values six years later.

Bain says the company values and vision not only helped them through the holiday inventory crisis, but the vision and values were strengthened by the crisis, too.

Strong Relationships

A huge lesson learned quickly, says Bain, is the value of great relationships. After this crisis, Bain says the company developed much stronger relationships with banks. But Simply Mac had many good relationships that helped it meet the challenge.

First off, its relationship with the people at Apple enabled it to know about the deadline to order holiday inventory. If the company had not ordered in time, Apple’s product likely would have been sold out, leaving Simply Mac nothing to sell for the holiday season.

Second, prior relationships with board members and high-net-worth individuals allowed the company to secure the $1.5 million in less than a week. “We divvied up phone lists and just started calling. It was stressful—very stressful,” Bain says. But in the end, he says investors committed because they trusted the people who were asking them for money.

Other relationships proved their importance, like hiring people who can work passionately and contribute to the group, building a strong network and partnering with real estate landlords, product suppliers, vendors and alarm companies.

Details, Details

Paying attention to detail pays off, says Bain. When the cash-flow challenge arose, “Operationally, organizationally, we had to get really focused on the minute details of our business,” he says.

One example is inventory control. Inventory was meticulously counted, reported and even gathered to one spot at the end of every single business day. The next morning, it was evaluated during a sales call and delivered to Simply Mac stores. These tight inventory controls gave investors the confidence to invest.

As the holiday shopping season set in, the daily inventory checks became very important as they determined what products the company would be hoping to sell. It was crazy, Bain says, and unpredictable—for example, one day they needed to sell seven iPods, the next 14, and the next they hoped not to sell any iPods and would push accessories more. Sales margins on iPods were not very large, so accessories with higher sales margins helped control cash flow.

Bain says they were confident they could sell the inventory, but it was still a risk. “We sweat bullets every day through Christmas hoping that they’d sell,” he says. This meticulous control helped the company sell its entire inventory and even pay back its investors early. 

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