Bidding, Beijing, Banks, and Backorders

What in the world do Bidding, Beijing, Banks, and Backorders have in
common? More than you would think. This is complicated and will take
quite a few words. Be aware, however, that if you are a fundraising
project sponsor in a school or sports league and are selling something
other than food items, you will probably have backorders. This is
true no matter what salesperson you deal with or what company you will
pay for your product. The problem is industry-wide and is significant.

Before we get to that, we need to describe the nature of the product
fundraising industry. The salesperson that visits your school or
league is likely either an independent businessperson using the
services of a pack/ship facility or an employee of a salesforce
company. (The third option is that he/she owns a pack/ship facility
and also works with client groups, but this is becoming increasingly
rare.) The pack/ship or salesforce company buys product from mid-
level or source-level suppliers. Mid-level suppliers purchase
product, arrange it into catalogs, publish catalogs, and sell the
products and catalogs to pack/ship or salesforce companies. Larger
pack/ship or salesforce companies my develop their own catalogs and go
directly to manufacturers or high-level suppliers. Finally there are
manufacturing facilities that make "house brand" goods upon demand, as
designed by their own creative staff, or on designs supplied by the
companies that buy from them. All of these companies are
interdependent, and also depend on banks for their financing for their
inventory, payroll, buildings, and equipment.

Now back to Bidding. What has this got to do with fundraising?

First of all, a LOT of fundraising "hard goods" such as wrapping
paper, tags, ribbons, bows, candles, giftware, and home decor items
come from China. Over the past fifteen years it has been cost
effective to design this type of goods in the US and then go to China
to find a factory to make the goods, because of the relationship
between US and Chinese currencies. Even with the cost of ocean
shipping, it was very cost effective. The push for lower cost on
goods came as more and more salespersons attended what in the industry
is known as "cattle calls" where PTA's and Sports Leagues had a
meeting where companies were invited to come and pitch their wares.
Salespersons, encouraged by their companies, started bidding up the
profit percentage in order to win the business, and to continue to be
profitable without raising retails to the "choke point" had to look
for lower cost of goods, and China was there willing and able to
provide he goods. That was about fifteen years ago when the balance
of trade and exchange rate between US and Chinese currency was
favorable to US companies buying product from China. Even WalMart
changed from domestic to imported goods about that time.

After the competition in the industry had maxed out the possible
profit margin for schools and leagues, the fundraising industry
"created its own monster" by increasing the number and variety of free
services, such as kickoff assemblies, pack per seller, complete
fulfillment of orders with no backordered items, increasingly
comprehensive prize programs, and ever-larger catalogs. The schools
and leagues came to see these services as the norm, so any company not
offering them lost business. To pay for these "free" services, just
about every company increased prices a little each year. In 1986,
there were $2 and $3 items on most brochures. Now the lowest price is
$5 or higher. All of this depended on cheap goods from China.

Things went smoothly until inflation increased and the dollar fell.
This did not have a great impact at first, but as the dollar grew even
weaker and the Chinese economy grew in strength, suddenly the retail
pricing of goods went past the "choke point" and schools/leagues
changed from post-pay to pre-pay sales because of increasing numbers
of uncollected sales. These events combined to create a level of
frustration on the part of parents that reduced their willingness to
participate in the sales. Where in 1985 70% to 80% of parents were
participating in sales, which were mostly post-pay, by 2005 the
typical participation rate was down to 35% to 40%. Gradually, over
time, sales were cut in half.

So much for the damage caused by bidding. The casualties included
five major suppliers, a number of minor suppliers, about half the
national sales force and half of the distribution companies. Schools
and leagues expected "business as usual" and the casualties mounted.

In 1985 there were as many as eight major suppliers, a dozen national
"sales force" companies, and over 500 small independent companies. By
2007 there were about four major national "sales force" companies,
about 200 small independent companies, and only two major suppliers--
Scott's and Giftco.

Now to Banks. Giftco's bank looked at their uncollected accounts
caused by the bankruptcies of several major pack/ship and sales force
fundraising companies and changed the company's terms for their credit
line at the bank. The ripple went industry-wide. This caused a change
in terms for pack/ship and sales force fundraising companies. Now
companies had to order 70% of anticipated needs in February for the
following fall, guessing on how many of each item to order, with the
assurance of 50% "backup" for a reorder in September. (That's why
product is priced high--so up to half the inventory of any item that
doesn't sell can be sold off to Big Lots or put into the landfill.)
Scott's followed suit as credit tightened in 2008. Where pack/ship
and salesforce companies had relied on supplier financing, with terms
as generous as "buy in February, take delivery in August, pay in
December", now the terms are quite a bit tighter, with payment
required in October or early November. The pack/ship and salesforce
companies had to get their own bank financing, and if that were not
possible, were forced out of business. This means that the pack/ship
companies now have to collect from the independent sales
representatives within 15 days rather than 30 or 45 days, and the
independent sales persons have to collect from schools and leagues
before shipment, or upon delivery. Any "late pay" school or league
has a domino effect all the way up the supply chain. The tightening of
terms is a direct result of the changing ratio of value between the US
and Chinese economies. Generous terms were initially financed by what
was called a "ten time mark" on products from China. In reality the
"mark" was even higher in some instances. The "out the door" price in
China for a $10 retail item may have been from 40 cents to 80 cents
back in the late 1980's. This allowed room for the cost of shipping,
allowed suppliers to sell the $10 product to pack/ship or salesforce
companies for $1.25, which allowed costs of buildings, warehouse
staff, packing, brochures, prizes, and shipping to the school or
league. This allowed the $10 product to be sold to schools/leagues
for $5, allowing a 50% profit (or 100% mark-up) by the school or
league. When the economic balance was changed, this scenario collapsed.

Companies cannot produce goods without cash. Companies cannot buy
goods without cash. If accounts receivable cannot be collected in a
timely manner, companies have to borrow money. If banks won't lend,
everything grinds to a halt. That has happened to some extent.

Enter Beijing and the Olympics. There are many factories around the
Beijing area and they are terrible polluters. To get the Olympics,
China had to agree to improve air quality in the areas where outdoor
events would be held. To make these improvements, they had to close a
number of factories temporarily during the late Spring and early
Summer, the exact time when many fundraising products are manufactured
in these factories. When the Olympics were over, it took some time to
get factories back up to speed. They were behind and stayed behind.
Because it takes weeks to months to get products from factories, to
port, across the ocean, unloaded at the port, and trucked to
suppliers' warehouses, the entire supply chain was interrupted for
certain types of products. Right now things like gift tags, ribbons,
and other paper products, along with some gift items are being
affected. Product that was ordered in February by pack/ship and
salesforce companies has not been delivered to their warehouses by
suppliers. It should have arrived in August. but did not. As time
passed and other matters were pressing, warehouse staffs didn't notice
the problem until it was too late. This was universal throughout the
industry. Everyone was blindsided by this.

We hear a lot about "just in time inventory" these days in business
circles. This works well as long as every company in the supply chain
performs as expected. We have had instances where port backups
delayed product, and this is something that is easy to see because
there are many ships on the ocean off the coast at Long Beach or
Galveston. But when the factories just don't produce the product on
schedule and do not inform their customers, and the word doesn't get
passed downline, we hit a crisis point in October when product hasn't
arrived when school and league orders are ready for packing. The
entire industry, in the non-food portion of product, is in that
situation right now.

It is not possible to delay packing until product comes in. Product
fundraising warehouses are seasonal businesses and hire workers to do
data entry and pack product during a fixed season in the fall and
again in the spring. Some of these workers also do seasonal work in
other industries, so their schedules are not all that flexible.
Product deliveries also are constrained by sports seasons or school
holidays. Replacing workers requires training time. There isn't any
time left. Warehouses have limited floor space for packed product on
skids waiting on trucklines to pick up, so the flow has to continue.

Thanks to Bidding, Banks, and Beijing, this creates backorders, and
they will be extensive across the country throughout all fundraising
companies where non-food products are involved.

So what is a fundraising chairperson in a school or league to do?
First, do not panic. (We have heard that quite a bit of late about
the financial situation, but it is true there and also is true in
fundraising.) Communicate to your parents the real reasons for this
unfortunate situation. Rest assured that the product will be shipped
to you when it becomes available. It will be inconvenient for
everyone involved--parents, end consumers, salespersons, company
owners, and bankers. You will get yelled at. It isn't personal, so
just hang in there and wait until the dust settles and the Christmas
Holiday arrives.

Yes there will be casualties. Some parents will become disgusted and
opt out of your next fundraiser. Some companies will go out of
business. Quite a few people working in the industry will be out of
work. It will become more difficult for you to find someone to fill
your fundraising needs in the future.

After the dust settles, you would be wise to switch to an all-food
project. Pizza, cheesecakes, cookie dough, cheese, chocolate bars,
boxed chcocolates, soup mixes, and microwaveable sandwiches are all
domestically-produced, and most are available from regional
manufacturers and suppliers. People buy food products sold in
fundraising from their grocery budgets and will support your sale.

If you have a sales rep or company that has served you well in the
past, stick with them. They are having as much trouble as you are,
and if they survive, will be stronger for it and will be glad to
switch you to an all-food program in the future. If your problem is
very severe, consider switching to $1 chocolate bars for your next
sale and then introducing other food items as time goes on.

Sorry for the bad news, but you deserve to know the truth.

A dose of reality for project sponsors.

Times have changed. Everyone is paying too much for gas. Quite a few
families are "upside down" on their mortgages--owing more than their
home is worth in today's market. Many people have way too much credit
card debt. To expect to raise as much money on a single project as
you did in the past is not realistic. To expect fundraising companies
to continue doing business "as usual" is not at all realistic either.
As the economy tightens, more and more groups are chasing fewer and
fewer discretionary dollars in the community. The cost of doing
business for fundraising companies is going up rapidly. It has gotten
to the point that certain client groups are not cost effective for a
company to keep servicing. A large number of fundraising companies
have gone out of business and more are sure to follow as the cost of
doing business eats up the bottom line and company owners can no
longer make a decent living. Those that will survive are those who
made sensible business decisions, such as grouping deliveries,
eliminating non-productive services, and limiting on-site visits to
client schools. This also includes pruning the client list of those
groups that do not make a concerted effort to succeed with their
project. This comes back to the sponsor and the members of the group
being committed to the project's success and taking the steps, no
matter how much effort is involved, to ensure success.

Here's what to expect:
• Fewer families will participate in your fundraiser. They will have
decided not to participate long before you start your sale.

• People will favor the lower priced items in your offering.

• Limitations on replacement of missing and damaged items, with
deadlines.

• More "hands on" work for your volunteers--unloading the truck,
organizing the delivery, handing out products

• Deadlines on turning in your orders beyond which no late orders
will be accepted

• Delivery dates based on economical transportation, including
grouped deliveries on a "route."

• Declining effectiveness of prizes, parties, and other "extrinsic"
motivation in promoting your project

• Increasing importance of getting your members, parents, or
constituents to "buy in" to the reason you are raising money.

• A call from your community for greater accountability in spending
the funds raised.

Here's what to look for:
• A product source (fundraising warehouse point) no more than one
day's delivery time from your location.

• Food products manufactured in your part of the country. Product
value does not come from higher transportation costs.

• A company able to produce a "cover letter" explaining why it is
important to each person reading to support your cause.

• Someone to "teach you how to fish" rather than someone who will
"hand you a fish." The difference is in the details.

• Products with more reasonable retail prices and lower profit
margins for your group. This is what will sell.

Remember--
• The only dollars you are working with are those dollars the person
"at the door" is willing to surrender to buy your products.

• People will only buy if they want to help your group more than they
want to keep their money. Desire for the product is inconsequential.

• The fundraising product does not "give" you profit. You earn it.

• All companies are in business to make a profit for the company and
a living for its employees. If this fails the company closes and
everyone loses.

Decisions, Decisions, Decisions!

Just about everyone in the fundraising industry says the same thing. Most organizations are slow in making decisions about fundraising projects this year. Some organizations are finding it difficult to find volunteers to staff their projects, while others are taking a "wait and see" stance toward the economy. It is likely that gas prices and rising food prices will have an impact on people's attitudes about spending, but we have not seen any real impact on fundraising sales yet. We do see a trend toward frozen foods and $1 chocolate bars. Adding World's Finest Chocolate to our local mix of products has been a very good thing. Most people will have a dollar to spend and will enjoy the quality and taste of the chocolate, especially as it is a larger bar for the money than most retail brands. Our frozen food sales have been increasing also. Our brochure prices were locked in back in November of 2007, and our costs from suppliers were based on futures prices at that time, so now as grocery store prices rise, our frozen food prices are becoming ever more attractive to consumers, and our fundraising client groups are reaping the benefits.

If your organization is thinking about a giftwrap catalog, jewelry, flower bulbs, or any other nonfood take-order program, the time to act is now, as brochures will soon be sold out. Many of the gift and wrap items are imported from the orient and there is a finite supply in warehouses in this country and not enough lead time to bring in more. If you wait past September first, you should probably opt for our frozen food program, domestically produced cheese/sausage/chocolate, or chocolate bars. That way you will be assured of receiving your product in a timely fashion. There were many horror stories in the fall of 2007 about other companies not delivering on time. Fortunately we did not have that problem because we stopped accepting reservations when we saw that available inventories were close to committed.

Decisions, decisions, decisions. The time to decide is right now.

Frozen Food Sales are UP!

Just this month we had two of our "regular" clients show increases in
sales, even in light of high gas prices and increasing food prices.
Our frozen food suppliers have already locked in prices of ingredients
based on commodity futures, so we know we have a stable price
structure, and as prices of other items go up, our prices remain low.
Frozen foods for fundraising become ever more attractive to the end
consumer as prices at the pump and the supermarket go up. In
addition, we communicated the NEED for funds to the community on both
of these MAY sales. Both groups were school groups, and running
school sales in May is generally considered an exercise in futility,
but both of these sales were overwhelming successes. We can't
generalize from just two examples, but feel that we just may have
found the path to success for all our client groups in this difficult
economy.

NEW: Educational Game Show

Testing and time on task have taken their toll on creative teaching, time for the arts, and even fund raising projects.

What if we could pull them all together and improve test scores, foster creativity and raise a little money along the way?  What if we could do that without selling any products? 

Simply put, if you take the popular "game show" format, add questions based on your curriculum and the expectations of your testing program, and add pledges, you have "Learn and Earn."   We use  an exclusive high-tech game system set, like the ones on TV,  that we bring to your school along with a professional actor to run the one-day event.

  

How does raising $5,000 to $15,000 in a one week project with a one-day event sound to you? This program has been doing just that in Florida for some time and it is now time to bring it to your area.

  

The best way to see this in action is in the video link on our web site. 

Just click here to go to our Educational Game Show web page and then click on the quicktime video link.

There's an email link on the web page.   Your students deserve this quality program!

Up to 60% profit? You've got to be kidding!

60% profit?  You've got to be kidding.  What's the catch?  Why?  How can you do this?

No, I'm not kidding.  But it's UP TO 60% profit.

Yes, there's a catch, sort of, but in a good way.  The catch is that you have to WORK to earn the 60%.

Here's the Why and the How:

Why:  In the past two years we have seen the economy take its toll.   Schools need more money, but many schoolwide fundraising projects have been falling short.  The same is true of youth sports leagues.  As professional fundraising companies keep detailed records of sales, we have been able to see patterns that our client groups do not see, as we have the advantage of seeing emerging patterns over a large number of organizations.

What we are seeing is that those individuals that DO sell are selling just as much, or even more as in the past.  The problem is that far fewer individuals in each organization are actually selling anything. Ten years ago it was commonplace for 80% of an organization to sell with an average of about 55%.  Now we are seeing participation levels as low as 9% with an average of about 38%.  The decline in average participation almost exactly parallels the dollar amount decline in sales by the organization.

We attribute this decline in participation to several factors which are mostly "unintended consequences" of decisions unrelated to the fundraising product:

1. Schools are intimidated by "No Child Left Behind" and are eliminating kickoff assemblies to avoid sacrificing classroom time.

2. Because of the time pressure to teach to the test and achieve certain benchmarks, teachers do not promote the fundraising campaign in their classrooms. The project has lost the voice that is heard by the children daily and gets repeated at home daily.

3. Youth sports have developed from an activity to a competitive situation, making coaches feel pressure to win.  Their efforts go to their priority. Absence of vocal support by the coach implies that the project is not important, and that impression gets passed on by the players to the parents.

4. Past fundraising successes in youth sports leagues create a sense of entitlement among coaches, players and parents.  When the league gets large, a we-they viewpoint can develop with the expectation that the "board will provide."

5. The rise of government entitlement programs has created a "the government should" attitude that spills over to self-supporting volunteer groups. This has also influenced teacher support in the classroom.

6. Volunteer help in schools and leagues has declined because more families are two-job, three-job, or four-job families.   The type of family depicted on "Leave It To Beaver" or "Father Knows Best" is in short supply, so there are not as many stay-at-home moms to volunteer for PTA/PTO or as team moms.

7. Selling by parents in the workplace has changed because work schedules have changed.  The old pattern of 9-5 jobs on a regular schedule has been replaced by flex time, telecommuting, rolling shifts, and other creative approaches.  This means that a parent may not see the same people at order-taking time as they see at delivery time.

8. The increasing mobility of populations and the increasing debt load of families has caused a shift from postpay to prepay sales to avoid uncollected amounts.

9. Fundraising project sponsors and school administrators  without private-sector business experience will not accept uncollected amounts as part of "the cost of doing business" even though the end result of a postpay  sale with some uncollected amounts will be more than twice the amount of a prepay sale.

10. The requirement of collecting with the order deters students and parents because they are embarrassed to ask friends and family for money with the order, feeling that it implies lack of trust.  Emotional trumps practical every time. 

11. Some parents, teachers, and administrators insist that all children be treated equally even though they did not contribute equally to the success of the project.  In this case, rewarding "nonbehavior" has created a preference in the population toward "nonbehavior" rather than toward "behavior" we want to promote.  Parents and students quickly learn that they will be rewarded whether or not they do their fair share, so "why bother." This is often referred to as "shooting yourself in the foot." 

12. Most of all, teachers, coaches, parents and students have lost sight of WHY the fundraiser is being held and HOW the money earned will benefit them.   

***There are probably more reasons, but this list is long enough to illustrate WHY.

Now to the HOW we counter all these negative external pressures:

The simple answer is to apply good parenting skills to the fundraising project.  Just like we praise our children for doing something right to reinforce that behavior, we apply good behavioral management to the fundraising program.  We reward that which we want to promote, and remove rewards for behaviors that we want to "extinguish".  In this case we are rewarding the organization and the organization is rewarding the students and the parents.  Some of this reward is praise.  Other aspects of this reward are building a sense of  need and urgency... yes it is rewarding to accomplish a goal!   Other rewards may be more tangible such as money, free goods, prizes, certificates, placques, and special events.

For the organization, that means our company rewarding the organization's effort to increase the participation in the fundraiser by more of the students or team members.  We are doing that by tying the percentage of profit on certain product lines to the percentage of participation.  We thought about making this optional, but then decided to make it part of our regular program.  If you are one of our established customers and want to be "grandfathered" so you can continue doing it the "old way" that is just fine.  Doing it the old way will produce similar results to the past. We hope you want better for your children

The product lines for which we are offering this new approach include wrapping paper, cards, wrap accessories, and other "hard goods" (meaning non-edibles) in our major shopper catalogs. Because there are certain fixed costs in providing a program for your organization, and to protect your group from achieving a result worse than before, we have settled on a minimum and a maximum profit level.   We have chosen these items because we have a better margin on them and have room to give a higher profit percentage if we can recover our   fixed costs through higher participation from our client groups.    (Profit levels on food items are unaffected by this project option.   Also "tag along" brochures are unaffected by this option.)

Did we raise prices or cut quality?  No.  We are using the excellent quality

items from The Wisconsin Cheeseman... the same quality of items that they

use in their national mail-order catalog. Along with Harry & David, Swiss Colony, and Figi's, they are a premier mail-order food and gift company.  What we did cut out are items of marginal quality and value. 

Under this program we guarantee you a minimum of 40% profit on these specific product lines, even though you may have a participation level lower than 40%.  Percent of participation is simply the number of sellers divided by the number of brochures distributed, based on the enrollment figure that you give us when you register the project with us.

As your participation level increases, your profit percentage on these items also increases. If 41% of your students or team members sell, you make 41% profit. If 50% of your students or team members sell, you make 50% profit. If 55% sell it's 55% profit.  If 60% sell, it's 60% profit.  We cap it at 60% because of our fixed costs for your product and the services we provide. So if you get 70% participation, you make 60% profit, BUT you benefit from the extra sales, which will be considerable.  If you double your participation you will more than double your profit. 

We are hoping that you will "step up" and promote the sale within your school or league to the point that 60% or more of your students or team members sell.  If our past experience and the statistics on past sales continues to hold true, you will get an increase in sales almost equal to the increase in participation.  We say almost equal because as your sale reaches community saturation, the items per participant will decrease ever so slightly.  The increase in your profit percentage will much more than offset this slight decline in per participant sales, so all in all you should see an increase in profits equal to or greater than the increase in participation.

What do you need to do?  First, accept our offer.  Then, do the program the way we say to do it.  Yes, we welcome your good, innovative ideas, if they are well thought out.  Not only will we help you include them but will share them with our other clients, who can add their own twist to the process.  As you work with us in succeeding years, you gain the benefit of your experience and the input of all the other groups that we bring back to you.

Once you commit to this program, you will need to follow through and lead your teachers, room moms, or coaches and team moms toward the goal, and motivate them to lead the students or team members and the parents.

What are we going to ask you to do?  Simply tell your story clearly and in a way that will capture the interest and enthusiasm of your parents.  Explain WHY you are raising money, WHAT you will buy with that money, and HOW that will make a better life for THEIR CHILD.  This must be an ongoing effort starting well before the beginning of your sale and continuing every day through the sale, with every member of your organization doing their part as a cheerleader for the students and parents.

Did we as a company suddenly add a "risk" to our business by changing to this profit structure for our clients' projects?  

Yes and no. 

There will probably be some organizations that choose not to work with us because of this plan.  But we are sure enough that this plan will work to the mutual benefit of everyone to go forward with it.  Frankly, the high cost of fuel affects us, also.  Fuel to come to show you our programs, kick off your sale, bring your product into the warehouse, heat and cool the warehouse, deliver your product to the school...all depend on the price of oil.   So if we can help you increase your participation and can get more return on our investment, we win and you win because you have more funds from fewer fundraisers and you start to eliminate the parent burnout that has plagued fundraising in the past several years.  By getting much better results from slightly fewer clients, the clients win and so do we.

Unless everyone wins, everyone loses.

We ran this program through the Rotary Four Way Test:

First: is it the TRUTH?

Second: is it FAIR to all concerned?

Third: will it build GOOD WILL and BETTER FRIENDSHIPS?

Fourth: will it be BENEFICIAL to all concerned?

It passed.

Then we asked the all-important next question "And then what happens?"

As best we can foresee, the answer to that question is a string of very positive outcomes. 

Congratulations to the Harrisonburg High School Key Club!

Congratulations to the HARRISONBURG HIGH SCHOOL KEY CLUB for being the
second highest Key Club in the World in fundraising for UNICEF. They
have raised over $80,000 over the years that I have worked with them.
Tony Antonnicola started with our programs around 20 years ago with
DECA clubs, and has worked through us, selling Wolfgang Candy twice a
year, for at least fifteen years. Tony has a plan and a method, so
that I have had little contact with the club for the past 10 years...
they just "do their thing" and support numerous local, national, and
international charitable efforts, with excellent help from the
Wolfgang crew up in York PA.

With sixty club members and a strong club mission to make the world a
better place, this organization has set a standard that should be
emulated by all adult and student service clubs everywhere.

Heartfelt congratulations from Moody Associates. Also congratulations
to Kiwanian Tony Antonnicola and his Kiwanis club both from myself
personally and as a Rotarian and Rotary Club president.

Changes in our product line

The new Food Court brochure is just about ready to replace the first
one! New product offerings on Food Court II include a Pecan Pie, a
Lava Cake with chocolate pudding center, Triple Chocolate Cookie
Dough, Auntie Anne's new Pretzel Dippers, and Apple Dumplings. As
soon as the graphic designer finishes, we will update the photos on
our web site.

Our fall line is just about ready to show. We have taken a practical
approach this year, in light of the economy. We think you'll like the
products, the pricing, and the potential for strong results for your
organization. Some of the brochures are already shown on the "Fall
Programs" link, and the remainder are being added and will be up on
the site shortly.

Whenever you're ready to set up a project, give me a call at
1-800-326-9192 or email me at bob@bobmoody.org. Be sure to include
enough information if you leave me a voice mail or send me an email,
so that I can contact you and get things rolling!

As always, our main product is your profit. The things you sell are
the way to your means. Let us help you find the best way to your goal.