David Long. Photo Credit: Alyssa Noon
Alyssa NoonMore than thirty years ago, growing up in Wilmington, NC, David Long was taught a trade in high school. Little did he know that this trade would lead him to grow an industry-changing firm with a business model that even high-tech entrepreneurs would envy.
In 1989, David started MyEmployees out of his parents garage, leveraging the mechanical engraving skills he learned in shop class. With constant experimentation and a thirst for understanding the art of business, he would grow that little garage start-up into a $10.5 million business with a Fortune 500 client list and drool-worthy gross margins of 87.5%. (If you aren’t sure what gross margins like that mean, it’s on par with the high-flying dot-com, Facebook.)
With business humming along (David managed to take off more than half the year at his beach house and on vacation last year) expanding the business’ offerings took some risk—and a radical shift in direction.
MyEmployees is dedicated to helping businesses become more productive through increased employee engagement and reduced turnover. One of its core offerings has always been employee recognition plaques. But recently, the company began exploring an entirely different way to support their customers employees through an innovative engagement survey software called Star Culture. The software platform allows leaders to gather anonymous feedback from employees on how they’re doing. It’s sold based on the number of employees being recognized and the number of managers using the system.
“It’s fixing a gap that hasn’t been taken care of,” Long says. “You’ve got the Gallups of the world that come in and take surveys and make their money from multimillion dollar consulting projects. The smaller to midsize companies are really not being served. I want to be able to really help the companies that are having the highest turnover.”
The software also provides leaders with a clear dashboard showing which areas they’re excelling in and where they’re falling short. Over the course of a year, they receive engagement coaching until every metric on the dashboard is in the green.
“We can give them a number showing them exactly how they’ve improved as a leader in the relationships they’ve built with their people,” Long says. “We had [an] Applebee’s recently that was #67 in [its] region, and in the space of one year, [it] went to #2. That’s massive.”
Teething Problems: Supporting Staff Selling Radically New Product
Long is hopeful that Star Culture will attract a larger corporate client base and help his business continue to grow. But after investing $300,000 in its development, its introduction was not as smooth as the founder and CEO would have liked. Long quickly realized that his sales staff and engagement coaches were struggling to switch gears.
“We’ve spent the last year training them on almost a weekly basis [...] about all the nuances,” he says. “They’re having a bit of a problem making that transition. In their mind, they’re muddying the water. Even after all the training and getting to know what’s what, they just weren’t comfortable with it.”
Retraining staff was not the only problem. Star Culture’s new target audience was very different than MyEmployees’, and that was hurting sales.
“In the beginning, we were going after HR, but that was definitely a mistake,” Long reflects. “We weren’t really getting any traction. This particular solution is more of a corporate decision; it’s much deeper into the DNA of the company. So [...] we’re splitting [MyEmployees]. It’s a different product and a different mindset.”
Breaking Up: Strategic Risks Of Creating A Sister Company
Long made the decision to split his company in two--with the old company products staying with the old corporate entity and a new company being stood up around Star Culture--after talking to a branding expert about the challenges he was facing. He had heard the same advice from other entrepreneurs, and knew it was time to take that risk.
“He said [it’s] not so much a sales problem as it is a mindset issue,” Long recalls. “We’re trying to go from a physical product to a software solution, and the change in mindset has been the most frustrating thing. We wanted to combine them because, in our minds, they are the exact same thing and they are to a degree. But they are done differently. They are sold differently. It’s like oil and water.”
Long’s original goal of keeping everything under one roof was not unrealistic. Companies like Microsoft have successfully made the switch from physical offerings to software subscriptions—but not without acquiring a few scars along the way.
Ultimately, Long made the decision for the benefit of both his business and his people. His sales team were unhappy with the new direction, finding it difficult to move between the two distinct offerings, which inevitably affected sales.
“It was starting to cause a little bit of conflict, because our people were uncomfortable,” he admits. “They were frustrated. That’s one of the reasons we’re splitting it. That’s not to say we [won’t] cross pollinate between the two companies. When someone becomes a client for Star Culture, then we can go back to them later and say, “What are you guys doing for recognition?’”
While it’s still too early to tell how Long’s most recent strategic risk will affect his company, the entrepreneur says it looks good so far.
“Right now we are doing proof of concept. This is a new thing for us. We’ve already topped $100,000 in sales,” he revealed. “We’re getting serious traction.”
We’ll be checking back with Long as his strategy develops to find out how his sister companies are faring, and what challenges and surprises this move will reveal.
To listen to the full interview between Lewis Schiff and David Long click here.
