Matterform Part 1

 

How to Survive a Sunset Industry

One of my first clients was Matterform Media. I met the owner, Michael Herrick, while I was a local commercial broker leasing office space at the Sunshine building in Downtown Albuquerque. Herrick and I, along with other fans of the urban lifestyle, have stayed in touch while volunteering together to improve our downtown.

When Herrick started Mariposa coaching with me, he was typical of many of the small business I knew around town. He had managed to survive the Great Recession, but his company was pared down to just the basics. He no longer had a staff of five employees. He remarked he actually liked the situation better, not having to worry about payroll. He was clearing the same profit as when he was fully staffed.

Immediately I began to wonder about the pricing of his services. Growing a company ideally involves creating greater profits for the owner than working solo would. If not, something is wrong.

There are two types of small business owners--people who grow a company and people who give themselves a job. It was curious to me that Herrick had the ability to run a full-fledged company but had chosen to go, in my opinion backwards, to working a self-employed job. Why had running a company with employees lost its appeal? Why wasn't he making enough money to want to have employees?

Like many small business owners Herrick had hunkered down to survive the recession. After discussing his "value per hour," I knew he had to be doing some jobs himself that he should be farming out to a lower paid employee or contract worker. It also concerned me that most of his cash flow was based on a single primary customer. So far, everything had worked out okay. But what happened if his best customer fired him or went out of business? He was too reliant on one source of income.

Herrick also mentioned another issue. Streamlining his business down to no employees had caused him to become isolated. His primary customer was on the west coast. Furthermore, as other companies pared back and went out of business, he had lost the companionship of the other tenants that used to be located on the same floor in his office building.

Herrick was starting to avoid time at his office. His two rooms were crowded, some of which had become expensive storage of family boxes that needed to be shifted to his house. Junk was starting to accumulate in the space that once would have held employees.

Herrick’s desk was a computer hutch shoved against the wall, with his back to the door and the two sunny windows with great views. He couldn’t see who approached the office. During our discussions he mentioned that disorder caused him anxiety.

 

Background

Herrick had started his company back in the days when customers paid a ridiculous amount of money for software and internet services like websites. Years ago it was a very specialized field.  However, technology has continued to evolve until now a high school student can build websites and databases. Herrick had moved into expanded services and more sophisticated technologies, but still talked about being a software company.

 

Crisis

Matterform Media had entered the sunset phase of its original industry. What used to be a high demand skill of building internet and business gadgets had become a commodity. Without being able to differentiate himself and the services he provided, Herrick had entered the race to the bottom competing on price.

Herrick pitched his services to a mutual acquaintance of ours and was disappointed that she chose an inexpensive website developer instead of hiring Matterform to integrate all of her business and website needs. She didn’t understand the value he offered.

We realized that while Herrick was talented at making small companies run efficiently, he wasn’t good at explaining his value proposition or making sales. He tended to assume that his really cool gadgets would speak for themselves. He also tended to underestimate his value at helping companies problem-solve. No high school student has a couple decades of business experience in showing a small enterprise owner how to run their entire operation more efficiently and increase cash flow with his tools.

 

Read Part 2: Transformation Begins