Ed Butler, chairman of The Butler Group, Inc., joined Family Business Radio host Meredith Moore on Thursday, May 31, 2012, to talk about the growth of his family-owned enterprise and the steps he and wife Betty took to welcome their three children into the business.
The Butler Group is a sales organization representing wholesale manufacturers and importers of home decorative accents, personal accessories and general gifts in a nine-state Southeastern region. The organization operates an 11,000-square-foot showroom in the Atlanta Gift Mart. The Butlers also are partners in Maison Chic, a manufacturer of baby gift items, and owners of Kaleidoscope, a distributor of jewelry and accessories.
Creating a Job That Won’t be Eliminated
Ed got his start as a janitor in a retail store. He says he gave extra in all he did and was eventually accepted to the manager training program. He then spent 21 years working in management for Montgomery Ward, a now-defunct department store with locations primarily in Texas and the Midwest. While Ed had planned to spend his entire career with the organization, his job was eliminated in 1982. He then worked for Federated Department Stores and managed Rich’s stores in Atlanta.
In 1988, Ed decided to create a job that wouldn’t be eliminated. He visited a business brokerage, where he first looked at retail businesses selling products such as paint, building materials and hardware. Every time he looked more closely at the businesses for sale, he could see their weaknesses. He then came across a manufacturer representative business for sale. Using money earned through investment in rental properties, he and Betty purchased it. Their main cost was for the lease of a showroom, which was located in the Merchandise Mart in downtown Atlanta. (Since then, a Gift Mart has been added to the Merchandise and Apparel Marts, and the three are connected into America’s Mart, the number one market in the nation.) Manufacturers provided free or low-cost samples for displays. Salaries were also a large cost, though he and Betty took no salary in the first two years of the business.
The Butler Group, Inc. got its start selling baskets, a popular item at the time. One of their largest accounts was Cracker Barrel, which offered a room of baskets in each of their stores. The Butler Group had 3,000 accounts managed through the showroom and five sales people who went onto the road to call on stores. About 90 percent of the sales were in baskets, with the remainder comprised of other gift items.
As the popularity of baskets dwindled, The Butler Group had to diversify offerings quickly. They analyzed the 3,000 stores in their customer base to determine the types of products they might use. Because their territory was the Southeastern U.S., they focused on lines that would be attractive to people in the South. In conducting their research, they found that their organization had developed a reputation as being one of the “must-see” showrooms at the America’s Mart. As they started to look for other manufacturers to represent, they found they were already well-known in the industry and their services were in demand.
Welcoming the Family to the Business
When they founded The Butler Group, Ed and Betty had one daughter who had finished college, a second daughter in college, and a son in high school. Ed says that none of the kids wanted to join the business because they thought their parents worked too hard.
Ed and Betty encouraged their children to pursue their interests in college. The oldest of the three, Christy, was working as a director for Mary Kay and home schooling her two children. The second daughter, Paula, earned a degree in theatre. While she landed a couple of bit parts and commercials, she also worked for a jewelry company. Greg worked in the warehouse of a wicker basket/furniture importer during high school. In college, he took every art class he could, exploring many different types of art.
Paula was the first to join the company in 2003. Her job was to drive a mobile showroom to florists. In 2004, Greg came on as showroom manager, using his artistic talents to design displays. Christy asked to come on board after her older child left for college. Ed wanted to use her sales experience, but there was no open sales territory. He gave her the clients that were a low priority for the other sales representatives, and she spent time with them to turn them into solid clients.
Family Meetings and Each Finding a Place
As Ed and Betty started to consider retiring and exiting the business, they realized their children might not have jobs if the business sold. They began working with Joe Astrachan and Kristi McMillan at the Cox Family Enterprise Center at Kennesaw State University. The Cox team interviewed each of the children and talked to the family as a group. They had some family council meetings so the children could become part of their retirement and exit planning.
As part of this process, Ed says he was concerned with having each of his children in the right position to match his/her abilities and interests. He interviewed each privately, asking them questions about their goals and things they enjoy doing. He also asked each what he/she thought the others should do in the company. Ed says they all agreed. Greg wanted to work with the displays and not have dealings with the manufacturers. He thought Paula should handle sales, which was exactly what Paula wanted to do. Christy also thought Paula was best suited to run the group, and she took on the role of cheerleader and supporter. Ed and Betty agreed with the assignments. As a family, they refined their respective roles and agreed to hire others to perform the additional functions.
Other family council meetings included one in which Ed says he and Betty revealed to the children how much money they make. While he says it was awkward for him and Betty, the kids’ response was neutral. The parents tried to express the time it takes to accumulate wealth. The family also talked about profit margins in a business where they work on a commission, which is limited and shared with sales representatives. They agreed to look toward finding a product they could develop on their own so they could enjoy the manufacturer’s margin. They would avoid situations they had encountered in the past where they had helped a manufacturer grow by teaching them good distribution practices, only to have the manufacturer leave them with no interest in the company. By having their own products to distribute, the family business could take advantage of revenue streams at different stages of the manufacturing and distribution process.
Opportunity Knocks With Maison Chic
In July 2008, the owner of Maison Chic offered the Butlers the opportunity to manage her business. The manufacturer of high-end baby gift items, the business had tried unsuccessfully to handle distribution from the factory, and the business had failed. The Butlers responded that they were not interested in managing the business, but they would be interested in purchasing it. Ed says they were mentally prepared when the unexpected opportunity came along because of the discussions that had taken place in their family council meetings.
The Butlers joined the current owner and her husband in a 50-50 joint venture partnership in January 2009. The Butlers handle distribution in North and South America, and the other owners handle the manufacturing and sell from the factory. She also has the final say in the proprietary designs of the textile-related products. Daughter Christy took on a new role and is the Executive Vice President of Sales and Product Development for Maison Chic.
The new line’s brand philosophy is to provide nicer textiles with hand-worked details. These details allow them to increase the price point. The venture has been successful for a number of reasons. First, the Butlers found that the customer base was already there. Store owners had liked the product, they just didn’t like that it was hard to get into their stores. With a policy in place to guarantee delivery, the customers returned.
Also, because the higher end product is primarily used for gifts, it attracts repeat customers. Finally, Maison Chic had the advantage of displaying products in The Butler Group’s nationally known showroom, where sales representatives come in looking for lines to represent. The company now has 150 people selling the line.
New Jewelry Focus With Kaleidoscope
In the original family meeting where new ventures had been discussed, jewelry had been the first idea. It’s small and easy to ship, women love it, Paula had experience, and Betty had a natural interest. In March 2009, Ed and Betty started Kaleidoscope, which offers 2,000 items including fashion jewelry, handbags, scarves and accessories. Their customers are the same kinds of gift stores that carry other items they have represented. Like Maison Chic, Kaleidoscope rents space in The Butler Group’s showroom in America’s Mart.
Kaleidoscope’s product line is also a sign of the times. Ed explained that many gift stores relied on home accents as a large portion of their sales in the past. With the housing bust and fewer people buying new homes, those sales have slowed considerably. His observation is that Americans still want to buy something personal in a down economy, they just buy less. The result is that 11 percent of sales in gift stores now come from fashion jewelry, greater than the amount sold in clothing stores. Accessories such as scarves and purses comprise another 6 percent of sales.
Responding to Changes in Consumer Buying Habits
Ed says it is important in his industry to be able to listen to and react to the customers. He has to be aware and have the flexibility to switch products. Except for the Kaleidoscope and Maison Chic lines, the Butlers do not have to acquire products, but the products The Butler Group represents need to reflect the economic environment. The sales representatives at The Butler Group also serve their customers—store owners—by helping them keep up with trends they may not see while they are tied to their shops.
What are some of the trends Ed is seeing? Right now he says that fashion jewelry, scarves and accessories make up about 17 percent of sales in gift stores. These categories are followed by Christmas items, baby items, candles and related accessories, and picture frames. Picture frames used to be a major category for retailers, but thanks to digital photos and the many new ways of sharing them, they have fallen to only about 1 percent of sales.
He says that this is the year of the scarf. Sales took off in January, and they will be big in the fall. He says belts were popular for a while, but interest has waned. Interest in gold fashion jewelry has increased this year, though silver is still 90 percent of the business.
In the Southern market, Ed says we see more bright colors and more monogramming and personalization than in other areas of the country. One advantage of the specialty stores they service is that they can base their product selection on the clients in their own neighborhoods.
Mixing Family and Business
The Butler family does not schedule regular family meetings, but calls them when an opportunity or need arises. Most recently, they’ve talked about goal setting. Ed has revisited his questions to each of them about what they enjoy doing and how their preferences may have changed in the past several years as their situations have changed.
While he wants to guide them to jobs they find fulfilling and interesting, he has to balance that role with also holding them accountable. They are currently looking at what the market value is for the jobs each of the children holds. Each will then be paid a salary according to his or her contribution to the company and receive separate funds for their ownership in the form of dividends.
The family is also looking at ways to involve the next generation; Christy’s daughter is in college and already helps a little. She is planning her studies so she’ll be prepared to work in the family business.
Outside of business, the Butler family enjoys many family gatherings where they don’t discuss work unless something unexpected comes up and they schedule a brief meeting. Initially, they had planned to have a special family council meeting as part of their annual family-centered Thanksgiving retreat so they could share with the third generation. The grandchildren were not interested, and the family has discontinued the practice.
Ed Butler’s Three Tips for Family Business
- Allow each child to do what they enjoy and hire others to do the rest.
- Separate ownership from job responsibilities. Pay a salary and bonus for the job and dividends for ownership.
- Communicate with each child individually and with all as a family. Listen to the spouses in the family; they know what’s going on.
Contact our Guest:
The Butler Group, Inc.
230 Spring Street NW, Suite 1212
Atlanta, GA 30303
Phone: 404.577.6941 or 800.241.9533