by Kathy Crawford
In the last article, I discussed options for Customer Service. This article assumes that you have reviewed your options and decided to set up a customer service department as part of your new publishing business. This is a substantial long-term commitment that can pay off or bankrupt you. Let’s discuss the costs of three areas: Facilities, Utilities, and Employees. These will give you an idea of what to expect.
Finding space for your business can be as easy as setting up another desk in your spare room. I know of a two-man company (owner and one employee) that does operate out of the owner’s guest room. This is a cheap option, if you have a guest room and think that you could stand having employees in your home. Most of us will need or want to rent office space. For two to three people, you will need 500 to 1000 square feet. Offices of this size normally exist in an office complex rather than a separate building. I found our office by driving around the area in which I wanted to locate and calling all of the " Office Space For Lease" phone numbers I found. Out of eight office complexes, there were three offices in the under 1000 square foot size range. That’s not very many, but they do exist. The office is your first commitment. In San Jose, the going rate for small office space is about $1.40/square foot/month That is $700/month in rent for a 500 square foot space. Most offices are leased. In San Jose, you have to negotiate pretty hard to get a two year lease, the standard is three years. Two years at $700/month is a commitment of $16,800. There are other details about leasing that you will learn after you talk to a couple of realtors. Just make sure you know the entire cost of your lease before you sign.
There are other space options to explore. Sometimes an office will be rented month to month. This is a seductive option because if you get into trouble you can shut down quickly. BEWARE! The owner can shut you down just as quickly. I know of a company that was kicked out of its space during a critical time. The owner lost a month of productivity while she looked for new space and then had to accept the best she could find on short notice. Also, if you publish your customer service telephone number, your new space will have to be in the same telephone prefix area in order for you to retain your phone number. Sometimes the prefix area can be a few square blocks.
Another option to consider is subleasing space in an existing business. Many businesses rent space to grow into (or contract in hard times). This has the advantages of a small space and the possibility of providing secretarial, fax, or copy services as well. However, the same cautions listed above apply in this situation. When you outgrow the space, can you move in the area so that you keep the same customer service number?
Deciding what utilities you need is easy once you decide what your customer service representatives will be doing. First, there is the phone. You will need to print your customer service telephone number months before your first call. With Pacific Bell, we were able to tell them the area where our office would be located, have them assign a number, start paying a small monthly fee, and then have the line installed two months later. They would not hold a number for us for free, but the uninstalled monthly fee was small.
Second, to what address will your warranty cards be mailed? I recommend a post office box. If you publish your office address, you are limited when the time comes to move. Sure the post office will forward your mail. Sure... A post office box will cost about $50/year and take about eight weeks to get. Also, the post office will create artwork for your warranty card return address, including their special postal bar code. I haven’t tried it yet, but I think that you can get this service for free.
What do you do with the warranty cards that you receive? Before you can answer that question, you must decide what their purpose is in your business. Warranty cards are the truest measure of sell-through. The return rate ranges from 3% to 20% and once you ascertain your return rate, you can watch the sales of your products on a weekly basis. But there’s more information to be derived from warranty cards.
Look at the warranty cards from several publishers to decide what information they think is important. Name and address is standard. We included a number of check-boxes for the hardware configurations of our customers. Some publishers include demographics, such as age, income, or sex, and product rating questions. The cards are a bother for customers, especially if they have to put a stamp on the card, so make sure that you are only asking for information that you will use. That will increase the chance of your customer filling out and mailing the card. We also serialized the cards. I think that this increased the return rate.
So warranty cards can provide you with a mailing list, survey information, and registered users. But to use the information, you will need to enter the information into a data base. You can create your own, but I recommend you buy one. We use "AnswerSet Call Tracking System" from AnswerSet Corporation (21771 Stevens Creek Blvd., Cupertino, Ca 95014; 408-996-8683). I highly recommend this program. The warranty card information is entered into the data base and each incoming call is also entered. The system has some default reports and you can write your own custom ones as well. Some of the reports we get out of the system are sales by state, hardware configurations of our customers (from the check-boxes on the warranty card), number and type of calls by SKU, and mailing labels of our educational customers so we can send them additional information. There is even a report called the logbook that reports those calls that you have flagged as important. A new customer service person can read this and get a good idea of what calls to expect and how to answer them. The AnswerSet system can also be networked to grow as you grow. It costs $995 for a single station, but it’s worth it.
People are the most expensive part of customer service, in every way. There are many books on the legality, ethics, and emotional aspects of management. I will confine myself to some of the basics and save my anecdotes for another time.
Before you hire your first employee, you need to register with the IRS and probably your state for proper withholding of income tax. You will need to file a form to get a Federal ID number and, in California, with the EDD to get an EDD number. After you hire your first employee, they will have to fill out a W-4 and I-9 form. Does this sound complex? It is. I advise you to find a payroll service. It is the best $50.00 I spend every month. They write the paychecks to my account and send them to me to be signed and delivered. They figure the withholding for the various taxes, pay the taxes for me (from my account of course), and file the quarterly returns. Shop around; the prices and services really vary. You can start at your bank because many banks have a payroll service as part of their business. Most of these services charge by the payroll run, with a small per check charge, so that a monthly payroll will be cheaper than a weekly. I found every two weeks to be optimal for me and my employees.
Also, if you live in California, you can call the California Chamber of Commerce (800-331-8877) and order a "Business Start-up Kit". It is a book of forms to help you get going. It costs about $30.00 and there is a different set for individual proprietorships, partnerships and corporations. All of the forms I mentioned here are in that book with instructions, phone numbers, and addresses. If all of this sounds overwhelming, just get your spouse to do it -- like Chris did.