Frank met Latus through friends, and Latus bought into Frank’s vision for Simplicity Sofas and eventually invested $400,000 in the company. The $400,000 represents both an initial investment and cash calls from the first three years when Simplicity was losing money. The last two years, Simplicity has turned a small profit, though Frank said he is bullish on 2013.
“We should make a substantial profit,” Frank said.
The business plan involves keeping the company lean (there are three full-time employees and one part-timer) and selling 95 percent of its products on the Internet. The other 5 percent is sold at the High Point showroom, which Frank leases.
Frank didn’t collect a salary for three years after starting the company, and even now his $60,000 compensation — which includes salary and royalties — is modest. His vice president makes the same.
Simplicity subcontracts its manufacturing to one factory in High Point, which saved a fortune in capital investment because he didn’t have to build a plant.
The company advertises in magazines and on the Internet, linked to Google search terms.
Most people like to buy their furniture after seeing it in person. To fix that, Simplicity Sofas recruits existing customers to turn their homes into virtual showrooms. New customers can then go to their existing customers’ homes to check out the goods before they buy. Frank said roughly half of those visits end up with purchases.
By avoiding retail stores and selling directly to the customer, Simplicity is able to hold the line on prices. It also allows the company to earn a higher margin on its sales than it would by selling to a furniture retailer.
Frank said the company is maniacal about customer service and has received tons of word of mouth through customer service networks.
“It’s how we grew in the beginning, through word of mouth about our customer service,” Frank said.
Frank has one full-time customer service manager whose job is to contact every customer. Frank earned his customer service chops working two years for a consumer help organization, where he handled all the complaints involving furniture retailers.
He said he broke with tradition in the furniture retail businesses by following up every sale within 24 hours to ask if the customer was satisfied and “if there were any problems.”
When one customer accidentally sliced the upholstery on her new sofa, Simplicity shipped a new sofa arm within days — free of charge.
“If you treat customers poorly, you lose them forever, and they tell all their friends to stay away,” Frank said. “If you treat them better than they expect, there are huge rewards.”
His is selling furniture.
For previous Value Added columns, go to washingtonpost.com/business.