Greg And V
This husband and wife
team personifies the
give and take, the yin
and yang, the equal
partnership mentality
that has taken a two-man,
fax-and-filing-cabinet
operation and turned
it into the industry’s
seventh-largest distributor
conglomerate.
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an McCarthy has been a Proforma franchise ownersince July 2003. Newly introduced to promotional products, he discovered Proforma while investigat-ing other business models. “[At first] we really
didn’t see any advantage to joining, because even though we wereonly two years old, we had become pretty successful,” he says.“The one thing that kept gnawing at me was that I would readabout Proforma, and companies that were doing $1 million to $3million to $5 million [in sales] were joining! It intrigued me; ifcompanies at that level were doing it, there must be somethingto Proforma to make them join.”
There is. The thing at Proforma is that, from top to bottom, it’sall about making individual owners successful. To do that, it looksfor people with whom it can build relationships, people who impressthem – not just as professionals, but also as human beings.
“We have wonderful franchise owners,” says Greg Muzzillowho, along with his wife Vera is co-CEO of the Cleveland, OH-based firm. “At the end of the day it’s people. Programs canmake sense, systems can make sense, but it’s people that drivethe day-to-day success.”
At first glance, the way Proforma empowers distributors issimple. Franchisees are able to offer a full range of services thatinclude promotional products, commercial printing, businessforms, documents and e-business solutions. Whether a clientwants a single, creative premium item or a comprehensive incen-tive program, Proforma owners of any size can fulfill the cus-tomer’s needs. That’s because the Proforma franchise modeltakes care of all the intrinsic details so owners can go about thebusiness of selling and servicing clients. They provide supportin all aspects of the business, from lead generation to accountsreceivable.
“Proforma has increased our profitability in a lot of ways,”McCarthy continues. He is especially impressed with vendorrelations. His franchise access has led to suppliers he didn’t knowexisted and given his firm instant credibility. “The marketingassistance, we couldn’t buy,” he says. “We’re in the midst of adirect-mail campaign right now, and we never would have beenable to come up with anything close to it. And if we had gonesomeone outside to come up with this marketing program, wecouldn’t have afforded it.”
d Vera Muzzillo –
PerfectPartners
by Patrice A. Kelly
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In fact, the model is so compelling thata former president of Norelco purchaseda franchise. Upon retiring, this former cor-porate officer was looking for “somethinghe felt comfortable with but also some-thing he and his son could do together,”says Proforma president Alan Chippindale.“He was looking for something with a lowstart-up cost and looked at all types of dif-ferent businesses. He liked the industrybecause you could literally go up one sideof the street and down the other and every-body uses [promotional products]. He alsoliked the fact that the profit margins werestrong and the overhead was low.”
The Proforma model has proven suc-cessful. Of its 650 franchisees, 77 (12%)have posted $1 million or more in pro-motional products sales in their best year.(Industry-wide, the percentage of distrib-utors generating that much is only 1%.)Twenty franchises do over $4 million andtwo over $10 million. The average fran-chisee with the firm for at least a year posts$500,000 in combined promotional prod-ucts and printing sales.
Big Company, Small Perspective“We not only help people grow their
sales, grow their profits, etc., but we helpthem be better business owners,” says VeraMuzzillo. “And I just think that’s huge,because in this industry you have such a
multitude of small mom-and-pop distrib-utors, many of whom have never had anytype of financial modeling, consulting orsupport. For us, we are invested in the suc-cess and dreams of our owners, not justthe dollar amount of sales but the dollaramount of cash and profits they can putin their pockets.”
It’s this partnership and team concept thathas drawn the attention of the media andthe business community. Proforma hasreceived a plethora of recognition andawards. For example, it was named U.S.Small Business of the Year by President
Reagan in 1985, Distributor of the Year byTrade West Magazine in 1996, andDistributor of the Year by BFL&S Magazinein 2002. It made the EntrepreneurMagazine’s list as number one in the busi-ness services category for five consecutiveyears. It’s listed in the top 100 Home-BasedBusinesses, and it ranks eighth in last year’sCounselor Top 40 with $131.2 million inpromotional products sales if you add therevenues of all its franchises.
What makes Proforma a different animal?First, it’s a business-to-business franchise.Unlike companies like McDonald’s andBurger King, the model isn’t geared todirect-to-consumer sales. And although itmay sound trite, Proforma franchisees sellrelationships as much as products to theirclients. Unlike a lot of other franchises, suc-cess at Proforma isn’t based on volume salesbut on repeat business – just like the rest ofthe promotional products industry. That’swhy it works so well as a concept; a mar-riage of idea and industry.
A Bit Of HistoryProforma’s rise in the industry is inter-
esting, given its humble beginnings. In1978, Muzzillo founded Proforma witha college friend and a $200 investmentin an answering machine and a file cab-
‘We not only help people grow their sales, growtheir profits, etc., but we help them be betterbusiness owners, and I just think that’s huge.’
– Vera Muzillo, Proforma Co-CEO
Proforma’s corporate headquarters in Cleveland.
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inet. At the time, he was with the audit-ing firm of Haskins and Sells (predeces-sor to Deloitte & Touche), but wasn’thappy. The same went for his friend’sjob with a print distributor, so togetherthey decided to strike off on their own.“We knocked on a lot of doors in 1978,”Greg recalls. “By 1980 we had our firstmillion-dollar year, by the mid-1980s wehad a multi-million-dollar company andwere recognized three years in a row byInc. magazine as one their 500 FastestGrowing Companies.” In fact, it’s theonly company in the business formsindustry to make the list more than twice.
In 1985, the company won the SmallBusiness Administration National “Bus-iness of the Year” award. Muzzillo devel-oped the Proforma franchise model in1986 and took the company national.“Candidly,” he says, “even for a multi-million dollar company, I didn’t believewe were making the kind of money orprofits we should be making. I felt therehad to be a better way.”
Muzzillo took a long, hard look at thepromotional products industry and sawa market with tens of thousands of dis-tributors, lots of duplicated overhead andwhat he felt was an inefficient businessparadigm: “I thought, if there was onlya way for all of us to get together andshare a lot of overhead, have some real
marketing programs, to have some realbuying clout with the suppliers so wecould all make more money by sharingoverhead and have more resources for
the advancement of dollars. And whenyou think about it, that’s franchising.”
In 1987, Proforma made Venture mag-azine’s list of top 50 businesses, and in1988 formed an advisory council andheld it first annual convention. Threeyears later, it expanded into Canada,receiving recognition from Case WesternReserve University’s WeatherheadSchool of Business as an OutstandingGrowth Company for that year, and thenext two.
But Muzzillo and company were just get-ting started. In 1994, Proforma expandedits products and services to include pro-motional items, introducing its ProSourceonline catalog the following year and mov-ing to its present facility.
Another major milestone was achievedin 1996, when Fred DeLuca, founder/CEOof Subway, invested in Proforma. “Whenwe first decided to start franchising, Ibecame involved in the InternationalFranchise Association,” says Muzzillo. “Iwanted us to be the best franchising com-pany we could be, and I wanted to hangout with the best. I had an opportunity toserve on the [IFA] board of directors, andthat’s where I met Fred DeLuca.”
The two became friends, and after aboard meeting, started talking about eachother’s businesses. “Fred knew that busi-nesses in North America spend way more
‘Candidly, even fora multi-million dollarcompany, I didn’tbelieve we weremaking the kind ofmoney or profits weshould be making. Ifelt there had to be abetter way.’
– Greg MuzilloProforma Co-CEO
Members of the Proforma executive team (from right) Terry Tibbits, chief vendor development officer; Brian Smith, chief operating officer; John Campbell, chief ownerdevelopment officer and Todd Carpenter, chief technology officer.
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on the products we sell – printing andpromotions – than all people in NorthAmerica spend on fast food, includingburgers and pizza and chicken and sub-marine sandwiches,” Muzzillo says.“That impressed me.”
The timing was right for an investor tocome along, as Greg had recently boughtout his original partner. “Even though we’renot Subway and not retail and not restau-rants, it gave us a certain amount of cred-ibility – not just capital – to get things tothe next level,” says Muzzillo.
The year 2000 brought another changefor Greg, albeit one of a more personalnature. It was that year he met his futurewife, Vera. She joined Proforma in 2001,coming on board to help maximize strate-gic development opportunities and pro-vide comprehensive oversight to thebanking, cash management, credit, finan-cial, operations and technology aspectsof the firm. She previously held a seniorposition with Comerica Bank and was astrategic business consultant for a fewyears. All told, she brought 10 years ofcommercial lending/credit experience and comprehensive strategic planningand financial consulting experience tothe table.
“One of the things we’re the most committed to as an organization is highquality, clean, active systems,” she says,“because everyone benefits when yoursystem has quality owners. We’re verycommitted to that [principle]; we are notcommitted to growth for growth’s sake.But we are committed to growth in theright way because, for us, protecting andempowering our owners is everything.We can’t take any chances or risks thatwould detract from that goal.”
Everyone Benefits Alan Chippindale has been with
Proforma 17 years, starting as vice pres-ident of franchise success. Now, as pres-ident, his job is to concentrate on newowners and encourage their businessesto grow. “My focus today is primarilythe early stages of working with peoplewho are looking to affiliate withProforma,” he says, “and going throughthat process of understanding who they
are, their background and where theywant to go.” Currently, Proforma has 650franchisees, and plans to expand that byanother 200 in 2004.
And while personality and sales expe-rience help, they aren’t everything atProforma. The company puts potentialowners through a rigorous backgroundcheck, “We’re a very profitable compa-ny; we’re in no hurry to do anything thatwould be detrimental to the wonderfulpeople we already have,” says Greg. “Sowe’re in no hurry to add people that mightadd a bad name to Proforma or do bad
things. We look for good quality peoplethat have strong credit. We look for peo-ple who are going to add to the energy andadd to the overall success.”
Once into the process, new Proformabusiness owners participate in a week-long Owner Training School wherethey’re introduced to proven marketingand sales techniques, product training andbusiness development tools. There are alsoannual regional educational seminars tocover the latest industry trends, as well as
company support tools and updates.Then there’s the annual convention that
provides training sessions for owners ofall types – from start-up to mature – andincludes a preferred vendor trade show, arecognition ceremony and numerous net-working activities. There’s also an oppor-tunity to participate in the annual OwnerAdvisory Council Meeting and vote onimportant network issues.
In addition, franchisees have access toexperienced staff members in the supportcenter who answer questions and provideassistance by telephone. And for a morehands-on approach, Proforma providesaccess to area development coaches totake assistance to the next level. Thesecoaches provide help on anything frombrainstorming a presentation to pitchinga story to the local paper to planning atrade show.
Fighting FailureMost Proforma owners are small busi-
nesses as defined by the SBA (SmallBusiness Administration), which alsonotes that one of the chief reasons whymost small businesses fail (aside fromlack of capitalization) is lack of sustain-ing revenues within that critical, first fiveyear period. The problem is so commonbecause most start-ups don’t have theresources to conceive, implement and sus-tain an effective long-term marketingstrategy. To combat this, Proforma pro-vides its owners with a comprehensivemarketing and support program that rivalsthose found at some of the largest cor-porations in the world.
Chief marketing officer Michael Paulusis familiar with integrated marketing appli-cations, utilizing a wide array of tools toenhance sales promotion and marketingfor Proforma business owners. “We craftand implement programs that help all ofour franchise owners market themselvesand support their selling efforts,” heexplains. “It’s kind of a dual focus. Oneis to create materials and programs thatare system-wide to support the breadth ofour organization. We also try and createflexibility in order to recognize the indi-vidual differences of our franchises. Oneof the challenges in our business model
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‘We craft and implementprograms that help allof our franchise ownersmarket themselves andsupport their sellingefforts.’– Michael Paulus, Proforma
chief marketing officer
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is that while all of our owners can go outand market, sell all of the things we haveto market, there are clear differencesamong them.”
One of the persistent rumors aboutProforma is that it locks its franchiseesinto 10-year contracts. Ironically, thereverse is true. “We actually lock our-selves in,” says Greg. “The franchiseagreement has an out-clause. Franchiseowners can leave whenever they wantduring that 10 years. We believe if anowner decides to become part of theProforma family, he or she deserves toknow what he can count on from us.They can count on us being there for 10years at least.”
He also notes that, unlike some simi-lar industry set-ups, Proforma operatesin true franchise fashion: It does notassume the credit risks for its owners.“Each owner is a completely indepen-dently-owned and operated business,” heexplains. “As such, they’re free to usewhatever financial and credit system, andcontrol their own cash-flow. What we dois enable them to grow by offering thema buying cooperative that can make thema better company overall.”
“We provide them with a high level ofbusiness consulting, modeling and support,”says Vera. “We have a team that supportspeople in mergers and acquisitions and sup-ports people in understanding the businessmodel, cashflow, etc. The truth is, a lot ofsalespeople may be very good at sales, butthey’re not good on the operational andfinancial side of the business. They may notknow how to collect, how to make wisecredit decisions. And that’s another servicewe provide that I think has helped our own-ers tremendously.”
Proforma’s Preferred Limited Partner(PLP) vendor program has forged strate-gic relationships with hundreds of thepremier manufacturers in the graphiccommunications and promotional prod-ucts industries. One such vendor isBroder Bros. Co. Inc. David Grobison,vice president of sales, was formerly vice president of sales for the company’sAlpha division. He had been with Alphafor eight years when it merged withBroder in 2003. One of the first things
he did in his new position was initiate arelationship with Proforma.
“When I first approached them eightyears ago,” Grobison says, “their totalsales with our organization was about$5,000. Now they’ve done, over the lasteight years, several million dollars. Ithink that the combination of [Greg andVera] makes for a very forward-think-ing organization which enables them toleverage the scale that I bring, so thatI’m able to give them the resources thatenables them to drive their business.”
Grobison notes that the Muzzillos areupfront in terms of their communication,their goals, their expectations and theirvision for Proforma. For him, that’s whatmakes the working relationship so pro-ductive. “My relationship with them hasmade us a better company operational-ly, from a marketing perspective, froma sales perspective, from a deliverablesperspective,” he says.
Apparently, Broder isn’t alone in its thinking. Based on ASI’s Credit Directdatabase, suppliers have extended higher credit levels to Proforma, with the highest reported line at $52,000. The average highest credit line for theindustry is $9,000.
On The HorizonNot one to rest on his laurels, Greg
Muzzillo has very definite ideas aboutthe future of the industry. “Our goal is to continue to grow,” he says. “To bethe largest, most dominant brandthroughout North America and some-day the world. You know, today this industry is a highly fragmented, relatively mom-and-pop business, but it doesn’t make sense it should remainthat way forever.
“Given the size of our business, thereought to emerge a few leaders – a fewleaders with a national brand, a NorthAmerican brand, a worldwide brand, anda team that is able to handle NorthAmerican accounts, national accounts,large corporate accounts and be the mostefficient distributor, the most effectivedistributor and the most powerful dis-tributor in our industry.”
Muzzillo says that a lot of people think
the best way to do that is to hire a lot ofsalespeople. “But those models don’twork,” he adds emphatically. “The modelof the power distributors – everybodycontinuing to own their own businessesbut partnering together and workingtogether to create a brand, create a sys-tem and create the clout that gives ustoday, to reach throughout NorthAmerica and someday reach throughout the world and create a multi-billion dol-lar powerhouse – that’s what I see work-ing.”
For her part, Vera Muzzillo offers aslightly more sensitive (but no less com-petitive) version of Greg’s goal: “I thinkfor me,” she says, “the goal is that we’realways viewed as the best. I know growthis obviously a goal of ours, growth in the right way, but I want us to be viewedas the best in the industry; who have the best owners, the best tools, the bestbusiness model. If we accomplish thatthen I’ll be very pleased, because thesepeople come to us with dreams, and it’s important that we value those dreamsand we do everything in our power to ensure they have the ability to makethem happen.” ■
Patrice Kelly is a freelance writer based in Cleveland, OH.
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