Newfangled’s Triple Bottom Line

I’m big on dates or, more specifically anniversaries…and traditions.

When the end of the calendar year comes up, it’s an involuntary time of reflection for me. Starting around the first of December, I can’t help but start reflecting on how the year has gone. What trends are we seeing, and which are heading in the right direction? What are our goals for next year? It’s an inventory and assessment that I do on both a personal and professional level every year, and I enjoy it tremendously. Fortunately, I’m an optimist at heart, so I tend to approach these things with a great deal of hope that things will continue to get better, even when we’ve had not-so-great years, business-wise. But it’s not just New Year’s — other dates and anniversaries have the same effect. For example, I just recently celebrated my 10th anniversary with my wife, and that was another wonderful opportunity for reflection. I appreciate those times.

This week marks another big occasion for reflection: it’s my 14th anniversary of working at Newfangled. I started out as an intern in 2000, and fourteen years later I’ve had the great fortune and experience of being able to buy the company over a five-year period, from 2009 to 2013. It’s been a wonderful journey, and over the course of the past five years, I had a lot of time to think about what sort of company I wanted Newfangled to be once the buyout was complete.

Eric Holter, who was the founder of Newfangled, created something brilliant — something I fell in love with even before I started working here, which is why I made such a plea to work at Newfangled in the first place. Obviously, when I decided to buy the company, I was already quite happy with it. I guess you can’t offer someone a better compliment than telling them you want to buy the company they created. But time goes on and things change, and we couldn’t just stay the same as a company. Newfangled has never remained static, anyway.

Something I kept coming back to when I thought about the direction I wanted to take with the company was the experience of working for Newfangled, as well as the impact Newfangled has on the community around us. Because of the nature of our positioning — we focus very closely on working with independent agencies to help them create lead development ecosystems for their own businesses and for their clients — our clients are all over the US and Canada and even in Europe, which means that our impact on the local community is sometimes hard to gauge since we’re not as tied to it professionally. There have been a few exceptions to that, especially recently, which we’ve been just thrilled about, but for the most part over the past 19 years we’ve focused more nationally than locally.

I started to think a lot about our involvement in the local community over the past two years. In many ways, the greatest impact we can have on our immediate community is made by making sure the people we employ are happy, healthy, and enjoy an extraordinary work-life balance. This means that the work they’re able to do when they show up is good work that they feel good about doing, and that their needs are being met from a financial perspective so that they’re able to do the things they want in life and achieve their dreams.

Obviously, we need to be able to compete dollar-for-dollar salary-wise with our competitors. But money isn’t everything. A lot of those other companies seem to expect to “own” their staff in exchange for a good salary, and we really don’t — nor would we want to. That’s not the company Eric created in 1995. He created a company that made me feel that my life outside of work was extraordinarily important, and it made such a huge impact on me that I wanted to be sure I could preserve that. As I started to learn more about different business models, I realized I had the opportunity not only to preserve but even extend it.

B Corporation and the Triple Bottom Line

I have a local friend who owns a very forward-thinking T-shirt making company called TS Designs, and he introduced me to the idea of B Corporations. B Corporation is an organization that has put together a series of metrics and guidelines that can be used to assess how much good a company is doing, not just in terms of profit but in terms of benefiting society. (One of our agency partners, Oliver Russell, is very involved in the B Corporation world.)

One of the tenets of B Corp is this idea of the triple bottom line: the idea that as an organization, we’re not just accountable to profit. We’re also accountable to the people who work for us and to the community in which we live. This is oftentimes referred to in shorthand as People, Planet, Profit. Let me be clear: it’s not as if profit doesn’t matter. Profit matters every single bit as much as it does for any other corporation, for all the same great reasons. But with the triple bottom line, there’s the sense that we should be aware of certain things beyond profit and actually hold ourselves accountable in a very real way to how we serve our people and how we serve the planet (or the community around us).

After doing more research, I decided I wanted to institute a triple bottom line program inside of Newfangled as quickly as possible when I became the full owner. I finished the purchase one year ago next week (that’s three big June anniversaries, if you’re counting) and launched our triple bottom line program on January 1 of this year. Now that we’re six months into 2014, one year out from the purchase, and 14 years into my Newfangled career, I thought I would take some time to document our triple bottom line commitment from a big-picture perspective. (If anybody reading this would like to talk more about the details of how we’re making this stuff work, please feel free to get in touch with me anytime you’d like.)

People

This one was pretty easy because we were already doing a lot of it right. With people, we basically want to make sure our employees have great lives. We want to make they have the money, time, and energy they need to live well. This serves two purposes. We want them to be happy personally, but we also want them to love their work so they can give us their best.

In addition to highly competitive compensation, we offer a few other exceptional benefits. First is retirement. We offer our staff a 401K with matching donations of up to 4%. We also provide a really robust health insurance policy which is offered at no cost — it’s fully covered. Our staff also gets a lot of paid time off. Between personal vacation days, company holidays, and reduced summer hours, the average employee at Newfangled has around 40 days, or two months, of paid time off per year. And, we offer performance-based bonuses so that each person’s financial success is tied directly to Newfangled’s success. There are other benefits that are pretty typical of many companies, but I’m especially proud of those four benefits, in particular. They represent a substantial investment, both in terms of each employee and in the aggregate, but they go a long way to making sure the people here feel valued and — again — have the time and the energy and wherewithal to have the kind of life they want to live.

I also believe that the location of our offices — Chapel Hill, North Carolina, and Providence, Rhode Island — is another perk. They are both very affordable markets that also happen to be in college towns with great access to the best of what the city has to offer, but also what nature has to offer. For me, that’s critical.

Profit

As far as measuring our performance with regard to profit, we use three metrics, which we learned from David Baker of ReCourses. We’d known about these metrics for a long time, but we didn’t start truly taking them seriously until 2010, when we were feeling the sting from the recession. We realized at that time that if we didn’t start taking them seriously, things wouldn’t be good. These days, I refer to our three performance metrics as my bosses.

1. Utilization. The first metric states that we ought be 60% utilized, meaning that of all the hours we work within Newfangled, we strive to be paid our full hourly rate for at least 60% of that time. Of course, depending on each person’s role, some people are quite billable, with a utilization rate of maybe 85%. Others are 0% billable. So our challenge is to make sure that the net of all our staffers’ time is 60% utilized. That also means ensuring that we have enough business coming in so that we’re actually realizing that revenue and to ensure we’re busy enough to be 60% utilized across the company. It’s OK if our utilization rate is higher than 60% — as long as that doesn’t burn anybody out or force us to overcommit. The fact that we have our Resourcer, Lindsey, is so important, because she ensures that we don’t bite off more than we can chew. There is such a thing as over-utilization, so proper resourcing is crucial.
2. Salary Costs. The second metric we strive to meet has to the do with the percentage of our overall gross expenses as represented by our salary load. The number there is 45%. That means our salary load shouldn’t exceed 45% of our total expenses. This is tough given that our people are the main cost in our industry. We don’t have much in the way of infrastructure or product on the shelves, so it’s really our employees who are our main expense. 
3. Profit Percentage. Lastly, we need to make sure our profit percentage is at least 20%, meaning that we need to be earning a 20% profit on average year-over-year.

Those numbers are really hard to attain, and we had to put a lot of work into building systems that would allow us to achieve these goals. We can thank Chris Butler for a lot of that work. Once we met our metrics, it wasn’t too hard to stay there. Our system is pretty self-sufficient — you know, as long as the sales keep up as they should and everyone continues to do stellar work. 🙂

Today, we’ve got all the right systems in place and all the right people operating those systems and delivering our work. What that means is that I’ve got complete confidence in what we can do for our clients. It’s such a luxury as a business owner to know that if someone hires us, we’re going to do phenomenal work. We’re going to deliver what we say we’ll deliver, on-time and on budget. If we didn’t take this profit stuff seriously in terms of utilization, payroll percentage, and profit percentage, we wouldn’t be a well-run business. That’s my responsibility as the owner. I’m responsible to our employees, who rely on those paychecks, and to our clients, who rely on us to help build web systems that will serve their businesses at a very high level for years to come.

Planet

The “planet” portion of the triple bottom line is the most interesting to me because it’s more unique in terms of comparing us to a typical business of our size and nature. To create our planet program, I borrowed inspiration from Marc Benioff, the CEO of Salesforce, and a charitable giving program he instituted in the very, very early days of his company, back when they weren’t nearly as successful as they are now. What he implemented then (and still maintains today) is a 1-1-1 concept, meaning they donate 1% each of the business’s time, product, and revenue to charitable causes. We’ve embraced the same strategy at Newfangled as of this past January.

Because of the nature of our work, we lumped together our time and product. We decided to offer a new website and free hosting to one non-profit each year. The way it works is that anyone inside the company is invited to nominate a non-profit in need of a new website. We then vote across the company to determine which non-profit to work with. The winning organization gets a complete Newfangled site built free of charge, along with free hosting and maintenance for as long as the site is needed. These days, the average price for a site with us is around $70,000 for the initial build, so that’s quite a donation, and it’s very much taking up a slot that we otherwise would have sold. It’s not as if the staff who are assigned to the project are working overtime to accommodate it, and we also aren’t limiting it to easy, “gimme” projects. It’s just based on whatever people at Newfangled feel like supporting.

So far, the first go-round has worked out great. This past December, we took a vote. Staffers nominated five different non-profit organizations, and one by the name of TABLE won. TABLE is an excellent organization that provides food for children in Chapel Hill and Carrboro who are food-insecure. These are kids for whom school lunch may be their only reliable meal, meaning that the weekends are a time of real hunger. Table pools resources and puts together bags of groceries to get children in need through the weekend. It’s a small but phenomenal organization serving our immediate community. Their new site will launch at the end of the summer.

Finally, we’ve also committed to donating 1% of our top-line revenue — not profit, not revenue after certain expenses, but raw, topline revenue from all of our sales — and it’s all going to one organization. For that, I chose the recipient instead of taking a vote. For this first year, I chose an organization I felt pretty strongly about called SAFE, which stands for Southern Alamance Family Empowerment. Oddly enough, I chose it before we voted on Table as our other charitable cause, but SAFE also deals with food insecurity. It’s an organization in Alamance County, which is the county in which I live and the one next to Newfangled’s Chapel Hill headquarters. Like TABLE, SAFE provides food for families in need. It just so happens that Alamance County is a very rural, poor county. One out of every five families in Alamance is food-insecure, which means they don’t know where the next meal is going to come from.

Alamance County is so blessed to have Sue Eldon, who’s the pastor of Saxapahaw United Methodist Church — but really, she’s sort of like the pastor of the entire village of Saxapahaw, the town where I live. Sue is beloved by everyone because she’s a true saint. She created SAFE out of nothing, with very little funding. By donating 1% of Newfangled’s revenues, we’ve effectively doubled SAFE’s entire budget for the year. At the end of this year, we’ll meet again to see if it makes sense to continue with them based on what their experience has been.

These new charitable activities are truly exciting. Everyone inside Newfangled can get behind them, and they bring a whole different level of value and meaning to what we do. I have to say, from an owner’s perspective, it’s also really hard. Donating 1% of top-line revenue is a huge deal. It hurts — and that’s a good sign. The fact that everyone at Newfangled has so wholeheartedly supported all these things is another good sign. It’s really a wonderful thing to   have these concrete metrics to make sure our people are happy, that we’re running an incredibly responsible, financially-sound business, and also that we’re making a real difference in our immediate community.

A year into my ownership of Newfangled and 14 years into my tenure here, our ability to commit to and fulfill all of the obligations in our triple bottom line promise is what I’m most proud of — because it represents both our ability to succeed in our mission to do extraordinary work for our clients, and our ability to do the right thing with the fruits of that labor.

To paraphrase one of my great buddy’s favorite sayings: “Technically, we’re (all) winning.”