PPP: And Then There was Seneca Ceramics
“My goal is to make money any way I can,” Sheckler said. “Whatever takes the least amount of work to make the sale, that’s where we’re putting our effort. People have to be able to make a decent living working for me, so I want to build the company to have those higher standards.”
That goal has led the company to focus on its marketing efforts—as well as on new areas of business into which it could grow. The past two years have been both a learning experience and a success story, as this new company has tried to find its market niche.
Establishing a New CompanyIn early 1999, Sheckler decided he wanted to run a ceramics business. The trouble was that his background was in technical ceramics. He had spent 12 years as director of research and development for a technical ceramics company, and now wanted to strike out on his own. But it was a risky proposition.
“I figured out that it would probably cost me $1 million just to try to start a business, and with an average four-year development time for a new technical product, it would be awhile before one of my products was ready to be sold commercially. Without a project being shipped out the door all the time to cover the cost of operations, there was probably a 50% chance I would fail. That’s a pretty high risk to take,” said Sheckler.
Instead, he began looking at other ways he could enter the business. That’s when he stumbled upon Heart Land Studios, based in Arkansas. At one time, the company had been quite profitable, selling nearly $1 million worth of porcelain giftware at its peak in 1994. But over the past several years, the company had stopped actively marketing its products. By the time Sheckler found the company in June 1999, its sales had dropped to below $100,000, and the owners were eager to retire. For Sheckler, it was the perfect opportunity.
“The company was very well organized and was definitely a viable business from a manufacturing standpoint. I decided it would be a good vehicle for me to get into business,” Sheckler said. He promptly decided to buy the assets of the business, including the Heart Land Studios name and all of the related manufacturing equipment.
Two months and five tractor-trailer loads later, the new company established itself as Seneca Ceramics Corp. in Geneva, N.Y., with four full-time employees (including Sheckler, his wife, who handles the bookkeeping, and his brother, who handles the marketing) and a solid product line. But that was just the beginning. “For our first year in operation, we were entirely focused on manufacturing and on trying to understand what the market was all about. Once we had that figured out, then we could begin to grow,” Sheckler said.
Marketing Pitfalls and SuccessesIn order to grow, Seneca Ceramics needed to focus on its marketing efforts. “Our average customer in the giftware industry probably does $200 per order and will order two or three times per year, so we had to figure out how to get in contact with all the people in the giftware business to increase our sales,” Sheckler said.
It was the age of the Internet, so one of the first marketing tools the company invested in was an elaborate website, which included a wealth of product information and online shopping capabilities. But the market wasn’t interested.
“Most of our customers are small mom-and-pop shops that don’t really use the Internet,” Sheckler said. “I don’t think that we’ve done more than $1000 in giftware sales through our website. It’s really been a big disappointment.”
While the company is trying to reach out to some of the larger companies, it now sees its website as more of a reference tool than a sales tool. “When a company calls us up to talk about our products but doesn’t have our literature in front of them, we’ll send them to our website and they can look at that while they talk to us,” Sheckler said.
The company also hasn’t had much luck with outside representatives. “The rep houses take 15% off a sale for representing a product, and they’ll carry anywhere from 40-60 different product lines in the house. Our sales end up being relatively small to their customers because the rep houses just can’t present them well enough,” Sheckler said. “We’ve done door-to-door sales to the gift shops just in our area, between the Rochester and Syracuse in the Finger Lakes region, and have probably done three times better than our best rep house, which covers the whole Mid-Atlantic region of the U.S.” While the company still uses some outside representatives for its products, it is contemplating dropping these relationships in the future.
So far, Seneca Ceramics’ best sales tool for giftware has been bulk mailings. “Our biggest problem is getting in the door of the gift shops for the first time. Once we’re in, a good percentage of gift shops sell the products very well, and they keep coming back and reordering,” Sheckler said.
For its customized giftware products, the company has developed a successful variation on the bulk mailing theme—cold calling with a follow-up sample. “After finding a list of potential customers, by searching on the Internet, for instance, we give them a call to introduce ourselves and let them know that we’re sending out a sample. We don’t waste any of their time—we get back off the phone and immediately send out the sample,” Sheckler said. The sample is generally a custom piece done for another customer who has given permission to send it out to other companies. “We typically get a 20-30% return with this approach,” Sheckler said. “Our product is a much more tactile than visual product, so potential customers are more likely to buy the product if they have a sample in their hand.”
Focusing on the ProcessSheckler’s financial goal is to build Seneca Ceramics into a million-dollar enterprise by 2004. So far, the company is well on its way, virtually doubling its sales every year since it’s been in operation. The company estimates that it will be pulling in around a third of a million dollars at the end of its fiscal year in March 2002. But making a profit and paying employees a decent wage can be a constant challenge for a small company. An engineer at heart, Sheckler was determined to find a way to minimize the labor involved in the manufacturing process so that Seneca Ceramics’ products could be produced with a minimal number of employees.
“My philosophy is not to hire minimum wage labor. I really want the company to work for the employees as much as the employees work for the company,” Sheckler said. “A lot of the potteries around the country are stuck paying minimum wage because of the number of people they employ. For instance, two such operations that I’m aware of have 20-25 employees for $1 million worth of business. That’s only $40,000-50,000 worth of sales per employee. That’s not what I want to see happen in my company. My original plan was to hit $1 million in sales with eight people.”
To do that, Sheckler would have to continuously streamline the company’s operations. He had a good head start—when he bought the assets of Heart Land Studios from the previous owners, he also purchased a proprietary process for taking the products, which are all RAM™-pressed, from concept to completion relatively inexpensively. Developing a new product in a typical RAM pressing operation might take several months and cost several thousands of dollars; Heart Land Studios could do it in four to six weeks with about 10-15 man hours and $150 in materials.
Sheckler was impressed with the process but was eager to refine it even further. He spent his first year in operation doing just that. Today, Seneca Ceramics can take a new product from concept to production in four man hours and around $50 in materials.
“I’m always looking at streamlining and what can we do differently to get this product out faster,” Sheckler said.
And there is a side benefit to improving the manufacturing process—besides cutting down on the amount of labor required, Seneca Ceramics’ process enables it to manufacture new products almost as quickly and inexpensively as the standard, off-the-shelf products. This has enabled the company to branch out into new areas of custom manufacturing, including what it calls “regional giftware.”
“We’ve found that if you put the name of a town or landmark on a piece, you’ve pretty much guaranteed the sale to that region,” said Sheckler. “We’re still learning the techniques of this business—we’ve only been doing it for about three months right now—but I would say the regionals are outselling the other giftware wherever we put a regional product line in place. Having a manufacturing process that enables us to come in with new designs as easily as we can run our standard product has enabled us to be successful in this area.”
Of course, there have been some challenges along the way. Where artwork is concerned, the company has had difficulty working with professional designers due to the inherent challenges of working with ceramics compared to other types of media. After trying to work with five different artists, Sheckler decided that for now, at least, he and his brother would have to handle the artwork themselves. They have each designed several giftware lines, and they split up the custom lines based on whose design style is better able to meet the customers’ needs.
Additionally, not all parts of the business can be modified for efficiency. All Heart Land Studios products are sold as “handcrafted” items, and Seneca Ceramic must retain a certain amount of handwork in its process to keep its handcrafted label. For this reason, the cleaning and finishing of each product—adding glaze to the grooves, standing off the surface and finishing the piece—is done by hand. According to Sheckler, that process alone accounts for 60-70% of the entire manufacturing cost of each product. “It’s very frustrating, but we have to keep that handcrafted label. That the products are ‘handcrafted’ and ‘made in the U.S.A.’ is critical to their value,” Sheckler said.
Even with these challenges, Sheckler has managed to keep the price of his products relatively low—providing yet another selling point for prospective customers. “Many times companies can buy bread warmers, coasters or trivets with their own unique artwork in a relief pattern for less than it would cost them to get literature printed,” said Sheckler. “That’s another reason we’re able to get those high returns on the samples we send out.”
Branching into New AreasWhile the Heart Land Studios line of products has been successful, Sheckler has been eager to grow into other areas of business, especially with regard to RAM pressing.
According to Sheckler, RAM pressing provides the flexibility to fill smaller orders and make special shapes at a much lower cost than other technologies. With injection molding, for instance, a set of molds can cost up to $25,000, and hundreds of thousands of pieces must be produced from that mold to make it economical. Sheckler can break even selling 125 RAM pressed pieces for $6 each. But the molds used with RAM pressing make many companies shy away from using the technology.
“As a technical ceramics person with a lot of background in porous ceramics, I have been approached a number of times by people having problems with RAM pressing molds,” Sheckler said. “In fact, the reason that RAM pressing has a limited use right now is mostly associated with maintaining and controlling the quality of the molds. When I bought this company and its RAM pressing operation, I decided that one of my goals was to get the RAM pressing manufacturing process to a level where it becomes a viable alternative to injection molding for a number of applications.”
Sheckler has spent the last couple of years learning as much as he can about the RAM pressing process and using his background in porous ceramics to refine the technology. “When I bought Heart Land Studios, the owners told me that I should expect to get 300-500 cycles off a plaster mold before I had to replace it, and that I couldn’t go above a certain resolution on the relief patterns that were put into the mold. I’m now looking at a very fine pattern that is three times the resolution of what they were able to get, and I can typically get 1000 cycles on my plaster molds. In fact, I have some molds that I can go up to 6000 cycles.” The company eventually hopes to develop a mold that can run for 100,000 cycles.
For Sheckler, this side of the business is as important—if not more so—as the products he is manufacturing. He would eventually like to share the technology with other companies through licensing agreements.
Sheckler has been able to fill yet another market niche by designing technical ceramics and related manufacturing processes for other companies. Over the past two years, this segment has grown to comprise 20% of Seneca Ceramics’ business, and Sheckler believes it has a great deal of potential.
Ultimately, though, Sheckler will pursue whatever road will make his company successful. “Our goal is to make money at whatever we have to do. If the company does not survive from a financial standpoint, then everything else goes away along with it. We will never give up the giftware/porcelain product line because it is something that’s profitable. But we’re also looking toward other product lines as well,” Sheckler said.
And as for his $1 million sales target? “I think we’re on track for meeting that goal, and I think we’ll be able to do it with six or seven people instead of eight because we’ve been able to implement so many improvements in the manufacturing process,” he said.