With a growth factor of almost 1,000 percent over the last five years and sales approaching $5 million this year, it's easy to see why Bay Home & Window made the cut to take its place among other notable Inc. 500 alumni as Dominos Pizza, Timberland and Microsoft. Falcon credits the company's rapid growth and success to Cathy Falcon, its chief financial officer; a talented sales and installation staff; and a formula for success he developed before starting the company.
It was Falcon's planning that gave the company's senior staff the ability to know what was expected to happen, analyze what actually happened and discover the difference if one existed. "The importance of a business plan can't be understated," Falcon says. "The old maxim about it being impossible to hit a target you can't see is an accurate one. I spent four months writing the business plan for Bay Home & Window back in 1993, and the numbers and the execution plan were the gauge for the first three years of the operation by which we measured our success."
IT'S THE NUMBERS
Falcon didn't necessarily intend to start a shutter company when he first went into business. After leaving AMRE Inc., where he performed sales and marketing functions for the home improvement division of Sears Roebuck and Co., Falcon was restricted by a non-compete clause. His plan, then, was to find a product to launch and bring other interior products aboard as the company grew. Shutters, he explains, fit the criteria he was looking for.
"We had three things we were looking for as a vehicle. We wanted to find a product that had some sex appeal to it—that had some salability to it. The next thing we needed was to find a product that was able to sustain a profit margin. We also wanted to find something that was relatively high-ticket because my experience has taught me it's just as difficult to sell an inexpensive, low-ticket item as it is to sell a higher-ticket product. That's why we picked shutters," Falcon says.
"In my opinion, I think we could have launched this same formula in any of a dozen cities in the western United States: Seattle, Phoenix, Las Vegas, Los Angeles. But I happen to love the San Francisco Bay area, I grew up here," he adds.
Falcon launched his sales and marketing program in 1994. "We approached the market with a pretty well thought-out marketing program that involved a comprehensive campaign," he says. "We set up audit trails and we got the results we had expected, our sales ratio came in at what we expected it to be and basically moved forward from there."
Most of Bay Home & Window's marketing involves print media including display advertising in newspapers, direct mail and a large coupon effort. "All of our marketing is set up so we track everything. The thing we are most concerned about with any of our marketing vehicles is the ad ratio, so we track very heavily both the cost per lead and cost per sale. The results are showing pretty much even throughout when it comes to percentages and dollars spent versus leads that came in," Falcon says. "The reason we do that is so we can weed out programs that don't work. We have a criteria that we're looking for and if an advertisement falls outside that criteria on either a cost per lead or a cost per sale, then we 86 it and move our dollars into another area," he explains.
"Most of the expansion and growth we've experienced and enjoyed here have been through our extensive marketing. We're fastidious about marketing here," Falcon says. "Sales, sales organizations and marketing is what I grew up with, what I studied in school and what I've basically done all my life."
IT'S THE PEOPLE
Key to Bay Home & Window's success is the people who make the company what it is. "That's one of the things I'm proudest of," says Falcon. "Our staff of less than 20 people is making a noise in this industry that I think companies with five times the population would be proud of."
That group begins with Cathy Falcon, Bay Home & Window's chief financial officer. "She has played a very important role in the growth and the success of this company. She deserves a lot of the credit," Falcon says. He adds that Bob VanLandingham, vice president of installation, also is key. "Good management often is the ability to recognize the ability in others," Falcon admits.
As CEO, Falcon maintains a fair amount of energy in all parts of the company, although he sees his primary responsibility as being over sales and marketing and especially building a sales organization. "Our sales and installation staff is better trained than anything I've ever come across, but that also was by design as well," he says.
"We've set up a training program here for our salespeople that is pretty much a full-immersion scenario. When they get out they are experts in shutters. Since we don't cover thousands of different products, we can really focus and hone them in and help them learn about the product. We have implemented this training process from the beginning. It emphasizes the need to educate our customer base. The result is a closing ratio that is relatively phenomenal in this industry. We're talking about a 50 to 60 percent closing ratio, and we're talking about every customers that calls and sets up an in-home appointment."
"Our presentation—absolutely, totally—is geared toward the establishment of value. Most of our competitors are in a home for no more than 15 or 20 minutes. Before we even ask if the customer would like to buy the product we're in there for at least a couple of hours. It's not a high-pressure sales scenario in any shape or form, we couldn't get away with that with the sophistication of our market base. We're learning about what the customer is dealing with, what the customers' needs are, we're explaining to them what the differences in construction levels are, and then we show them our different lines. So by the time we get around to asking a customer, 'Would you like to buy the product now that we've talked about it?' we've clearly established the value, otherwise we couldn't maintain that closing ratio."
Bay Home & Window's customers most likely are professionals living in the greater San Francisco Bay area, one the country's highest real estate markets. Falcon says customers fall in the upper half to the upper third of a bell-shaped curve, although they cover a wide demographic in terms of age: from the upper 20s to the upper 60s.
During the company's first three years in business, Falcon says virtually all new customers found Bay Home & Window through its marketing efforts. "Since that point an ever-growing portion of our customer base is coming in through referrals," he says. "At this point, I'd say for our senior sales staff almost 40 percent of new sales is from referrals."
IT'S THE PRODUCT
Of course, Bay Home & Window wouldn't exist without a product to sell, and that especially distinguishes the company from competitors. "We set out at the very beginning to develop a shutter line with the manufacturer we had chosen to work with that really is head and shoulders above the rest of the marketplace," Falcon says.
Bay Home & Window carries a full line of interior shutters from synthetics and resins to full wood in a range of construction qualities. While many retailers see growth in the synthetic and composite market, Falcon estimates that 85 percent of his company's business is in the high-end wood lines. "We really specialize in upper-end lines and some of the lines that are not otherwise available on the retail market," he says. "We've never attempted to compete in the market solely on a price basis. It has always been my opinion that the market will bear the cost of what it perceives as a value."
Bay Home & Window's custom shutters are fabricated on site in its Pleasanton facility through what has been a growing and evolutionary process, according to Falcon. The actual manufacturing is done by any of a number of sources Falcon has obtained through the years. The company maintains a proprietary list of suppliers for both branded and unbranded products. What they have in common is what Falcon looks for from any supplier: a strategic partnership with emphasis on dependability and consistency.
A single-product focus, such as seen in Bay Home & Window, allows a business owner to concentrate on buying power and key markets—it's a trend toward micro-specialization that Falcon says might be developing throughout the industry. "Diversification is important," he notes, "but perhaps it lies outside strictly window coverings." In fact, that seems to be the next step for Bay Home & Window now that Falcon has it established as a platform for expansion.
"I once heard that there will be two types of companies going into the next millennium: the quick and the dead. I have pretty much founded every aspect of our organization on that principle," Falcon says. "The aptitude a company has to adapt in a constantly changing environment is its only true foundation. The only real stability a company has is its ability to adapt."
Now that Bay Home & Window has grown beyond the point Falcon first foresaw, it is ready to move into its next phase. Falcon's intention is to add on other home interior design products, not necessarily window coverings, that can be piggybacked onto its marketing program.
If it all goes according to plan, that opportunity should come soon.