How ADA hit a home run with central billing and LBMX
We help our dealers survive in a tough market place.
When asked what the Athletic Dealers of America (ADA) does, Pete Schneider, president of the buying group, is quick to point out a commitment to their 90 entrepreneurial member-owners first and their business second.
Founded in 1980, ADA’s dealer network sells a full range of athletic equipment to school teams via 115 stores in 44 of the 50 United States, as well as Canada, the Bahamas and Puerto Rico. They count big corporations, recreation and park commissions, YMCAs and local athletic leagues as their customers as well.
The dealer network is supported by ADA’s head office team who quarterback vendor billing and program negotiations, host two annual buying shows, produce a comprehensive product catalogue, and manage several ADA-dedicated websites, two of which are e-commerce.
The market has an unmerciful way of forcing businesses to stay current or it will make them history. Changes in the sporting goods industry and the buying groups within it would soon force ADA to make changes of their own and hit a home run that would help them compete in the big leagues against big boxes.
This is the story of their journey to central billing with LBMX.
Where they were – Before Central Billing with LBMX
Early on, as a sole-owner buying group, ADA offered the same services most coops would: vendor negotiations, buying shows, a basic black and white product catalogue. Looking back, Schneider, a former ADA dealer himself, says, “I thought what we got was great and the price we got it for was reasonable.”
As time went on, the market became tougher and more competitive. Buying group amalgamation was a new reality, margins were shrinking, and the Internet was influencing customer buying decisions. ADA’s dealers wanted – needed – more services from their group to compete effectively.
Adding insult to market injury, it would come to light that a competing buying group with automated central billing was promising ADA members upwards of $10,000 in annual rebates if they made the switch. At this point, nearly all of ADA’s vendors invoiced members directly, treating each, in many ways, as individual business units. In 2007, under the central bill system ADA did have, which was done manually and accommodated only one vendor, rebates for the entire group topped out $169,000 USD.
With the promise of more money for selling the same products to the same customers with no other changes to their business, many dealers opted for more lucrative pastures. Over nine months, spanning 2005 and 2006, sixteen dealers joined other groups leaving ADA to contend with a loss representing $109M in retail sales.
It was clear: not having a central billing program was ADA’s Achilles heel. With the group’s sole owner resistant to further investment in the business, the 90+ dealers were powerless to implement the much-needed platform.
All that would change when they rallied towards a single goal. By January 5, 2007, ADA would be a dealer-owned buying group. With their collective hands firmly on the wheel, there was work to be done – unfortunately, in turbulent waters.
“We entered into the buying of the ADA at the worst possible time,” comments Schneider about the 2008 economic downturn.
They understood what it means to hold the livelihoods of others in their hands. They knew what it felt like to sit in my chair and try and do what we do.
Now at the group’s helm as president, Schneider began the task of overhauling their rebate program and focused on implementing an automated central bill system to replace their manual one. He knew their rebate amounts had to increase, fast. As Schneider puts it, “If you’re not aggressive, you’re dying.” His search for a cost-effective and robust central billing model would lead him to LBMX.
Making the Right Choice – Why Central Billing with LBMX
Of the four central billing providers he considered, along with hard points like price and system compatibility, Schneider turned to softer ones, like what they knew of ADA’s business model. He found the companies accustomed to working with big retailers tended to offer an off-theshelf solution regardless of the industry. LBMX, however, was different.
That the LBMX team developed their central billing platform with buying groups in mind impressed Schneider. It gave him a level of comfort others couldn’t. With a buying group history of their own, LBMX knew the business, knew what the dealers faced in the market, and identified with Schneider’s role as president. “They understood what it means to hold the livelihoods of others in their hands. They knew what it felt like to sit in my chair and try and do what we do.”
That comfort level with LBMX increased the closer Schneider got to “inking the deal.” Despite having previously been a dealer, buyer, a board of directors member, and executive director, all with ADA, it was foreign territory for him to be making a large-scale technology decision on behalf of the group. “Now as the president, I’m making the call on a platform I know nothing about.”
Over more than a few meetings before the deal was signed, LBMX made sure to thoroughly and clearly brief Schneider on the features and benefits of central billing. When the time came to present to his executive directors and fellow owners, he was well-equipped to educate them on the return they would see in their investment.
A business-appropriate solution, patience and thorough briefings aside, it was LBMX’s experience in the world of entrepreneurs that was the tipping point for Schneider. “They were from buying groups, and had built something for buying groups. It made me feel like they could walk the walk, and talk the talk.”
Attuned to the fact that ADA ran a lean team of five in their head office, LBMX wasn’t surprised to hear Schneider’s concern that receiving invoices from every vendor would mean an increased need for staff. Not an uncommon misperception, points out Jim McMillan, Director of Client Services with LBMX and ADA’s key contact, “Many buying groups think the only answer is to hire additional staff and run a mail room and a keypunching operation. Truth is, adding staff and manual processes is a recipe for failure. If you don’t automate, your operations will drown.”
As is their process for every client moving to central billing, LBMX’s EDI (electronic data interchange) experts handled all of the details with ADA’s vendors, mapping their data files so invoices could be sent electronically in a secure web-based portal. This would eliminate the need for rekeying – a tremendous benefit of central billing, particularly for a small team like ADA’s. EDI would also eliminate the need for email, another common, yet faulty, business practice: “Emailing invoices is simply not reliable,” says McMillan. “Groups spend more time at the end of the month following up on missing invoices and dealing with late payments. That’s to say nothing of the security issues.” After much testing and re-testing, LBMX declared the system 100% accurate.
When up and running, and ready for the go live, ADA’s fresh new LBMX central bill system would automatically track payables and receivables; scan invoices for errors (“The Data Checker ensures you only spend time on invoices that have problems,” McMillan points out); automatically create and send weekly accounting statements to dealers, and stickhandle the transfer of funds for invoices dealers wished to pay that week.
ADA prepared themselves for that much-needed jump in rebates, too. Using invoice data, the platform would also calculate rebate earnings real-time as invoices arrive, driving a comprehensive variety of new programs – a benefit that would prove a boon to Schneider’s rebate revamp efforts.
Where they are now – After Central Billing with LBMX
After ADA’s full court press on improving their rebates, the score was moving in the right direction. What once was a one-vendor, manual process central billing program with $790,000 in dealer purchases and $169,000 in rebates, now was fully automated with 39 vendors, $40M in purchases, and rebates totaling over $1M.
The one-two punch of central billing and a better rebate program have preserved ADA’s member numbers now that dealers are no longer wooed by other groups promising fat rebates. It also gives ADA what Schneider calls “the stage” to show how the group’s value goes beyond invoice discounts. “Every quarter dealers receive a cheque that shows what we’ve earned for them. It’s a lot better than saying ‘The only thing you can give is another 2% off’.”
“We were able to provide ADA with a solution without adding a single staff person or upgrading to a more expensive accounting package.”
Adding central billing didn’t impact administrative costs, as one might expect with a new system. Despite an almost 700% increase in rebates, Schneider points out they reached and will exceed that amount and still require one existing employee (trained by LBMX) to manage it. Only in a crunch time, like when issuing quarterly rebates, does another current employee (also trained by LBMX) lend a helping hand.
Vendors have responded positively to ADA’s move to central billing. Rather than dealing with 90 individual business units, big name sports companies are dealing one who pays bills on time and in full. This also means when that vendor has sellout pricing on a large quantity of product, ADA is able to take advantage of the offer. “They know we’ve got the wallet to swing that deal,” quips Schneider. The upshot? ADA passes the competitive savings onto their dealers.
It looks like ADA will keep racking up the rebate and central billing wins, too. Schneider notes there are several features in the LBMX software he has on his radar to take advantage of, like mining dealer purchasing data to ensure they’re not leaving rebates on the table. “Central billing has really put us into growth mode.”
Looking at their transformation, McMillan notes: “At the end of the day, we were able to provide ADA with a solution that allowed them to move their vendors to a central bill program, automatically deliver invoices to their dealers, generate regular accounting statements with electronic payments, and accurately calculate rebate earnings in the new model, all without adding a single staff person or upgrading to a more expensive accounting package,” says McMillan.
ADA’s journey to central billing with LBMX is a great example of how a group that is dedicated to their dealers can make a strategic investment in their business and reap huge rewards.
That’s how you help a member network not just survive, but thrive.