This story appears in the February 7, 2016 issue of Forbes. Subscribe
George Cloutier didn't become the biggest and best-known small-business turnaround artist in America by being nice. "We are very confrontational," Cloutier says with his Cheshire cat smile. "We are professionally confrontational."
Thirty years ago Cloutier, 69, founded American Management Services on a simple insight: Many small-business owners have no idea what they are doing and need someone to tell them so to their faces. Cloutier, the son of a Maine grocer, first realized this as a Harvard College and Harvard Business School student, working part-time for a variety of local businesses.
The ideas Cloutier has preached ever since, particularly in his 2009 book, Profits Aren't Everything, They're the Only Thing, are pretty commonsensical, not to mention decidedly old school: Watch cash flow like a hawk, pay yourself first, reward employees for performance only, cut costs viciously, sell constantly. "It's easy to find and diagnose the problems of small businesses," Cloutier says. "The problem is getting management to implement the solution." As he has often joked, "Nothing happens until somebody cries."
AMS' secret sauce is not the message -- it's the blunt way it's delivered. "They just beat you from one end of the room to the other," says Chuck Sprovieri, who hired AMS in 2010 to rescue the then floundering custom kitchen and bathroom counter business he and his brother bought from their father. "It's a cold slap in the face. It isn't to everyone's taste--to the point that my brother was really offended. They'd tell us things like 'You've got employees who've been with you for 30 years. Are you ready to fire them if we tell you you need to?' "
Sprovieri was, and he did. He also took AMS' advice and adopted a policy of pay tied to specific business targets for all employees: "We implemented total accountability across the board. There was some pushing back. It was rough." Sprovieri also fired as many as 10% of his customers, the especially demanding or time-consuming ones he wasn't making money on: "AMS ranks all your accounts: A, B, C and D. The D stands for 'Duh, what the hell are you doing?' "
The price tag for the haranguing and hand-holding was $260,000. As Cloutier says, "We're not the cheapest guys in the world." Sprovieri says he had no idea where he was going to get that kind of money--but AMS did. "The first thing they work on is your cash flow," he says, "and the reason is they want to know they are going to get paid. They said, 'Chuck, you'll get it back in three years.' At the end of year one I got it back." Five years later, Sprovieri says his annual sales have doubled to $20 million, and his profit margin has increased from the low single digits to more than 10%.
At least 60% of AMS' customers are family businesses, says Chris Mosca, a vice president: "Our typical client is a nice family in a crappy situation." AMS does best, Cloutier says, following an economic downturn, in the months after the bottom but before the economy has really recovered. In 2015 AMS grossed $14 million. While there are countless individual small-business consultants around the country, Cloutier says, he currently has no direct competitors.
Nonetheless, like most of the companies it advises, AMS has to fight for every nickel. It too is a small company, and it's run according to the same tough-love rules it preaches. Cloutier is semiretired and rarely visits the Orlando office, but he scrutinizes AMS' flash financial reports every day and is on the phone regularly with Lou Mosca, Chris' brother and AMS' chief operating officer, who runs the business day to day.
Keeping consultants is a constant challenge. Cloutier pays them well--top performers can make as much as $300,000--but only out of what they collect from clients. It's a high-stress, high-turnover job involving lots of travel. Numerous AMS consultants have struck out on their own. "We've had 30 years of people leaving us and failing," Cloutier sniffs. He's also made his share of hiring mistakes. One senior salesman was a former insurance company executive who went to federal prison in 2007 for running a $4 million Ponzi scheme. (His victims were not AMS clients.)
The other big challenge is finding new business. That responsibility falls to Lou Mosca, a transplanted New Yorker who could be cast as the gruff but fair senior detective in any TV cop show. His go-to metaphor for most aspects of business, including sales, is battle: "Nobody calls us to ask for our services. Nobody. Nobody wants to talk to us. Nobody. It's a virtual fistfight every time."
The business they do get comes from telemarketing. AMS buys lists of small companies from Dun & Bradstreet and targets owners with cold calls from a call center in Orlando. Cloutier started the business in Massachusetts but moved it to Florida in 2002, partly so he could live in Palm Beach, near other wealthy friends from Boston, and partly for the abundance of telemarketers who'd been trained by the time-share companies and hotel chains that have operations near Orlando. Mosca estimates that one of every thousand calls results in a meeting.
The AMS telemarketers say they are calling from Partner America, a program of small-business seminars and presentations that AMS runs in conjunction with the United States Conference of Mayors. "It gives us a foot in the door," says Lou Mosca.
On a recent gray Tuesday morning Mosca is in his corner office on the ground floor of an industrial park in Orlando. He has a collection of New York Yankees hats on top of one bookshelf. On a wall facing his desk are two flat-screen TVs--one showing CNN, another showing several black-and-white views of AMS' telemarketing operation down the hall. The call center typically has 30 to 40 people working the phones.
Mosca is on speakerphone with a representative in the field, who is trying to close a sale with a family-owned manufacturing company beset by weak cash flow and intergenerational drama. The representative has just finished the diagnosis of the company's finances and operations, a service AMS offers for $700, money back if you're not satisfied. ("You'd be amazed how many people ask for their money back," Mosca says.) Usually this review takes somewhere between one and two weeks. Now he's trying to sell the family on retaining AMS to fix things, which could take months. But he's not optimistic; the family patriarch has heard the rep's findings but hasn't committed. And the matriarch hasn't agreed to see him.
Mosca advises the consultant to drop in on the matriarch at home later in the day. He also recommends going over the list of cash-flow, sales and profit problems one more time. "Show him the list," Mosca says. "The list is to overwhelm him." It's not unlike an intervention with a drug addict. "Our sales process is built on slapping them in the face," Mosca says. What he is really trying to sell besieged owners, he says, is peace of mind. "I will give you a better quality of life," he says. But the owners have to want to change, and not all of them do.
A few minutes later Mosca has the patriarch and one of his sons on Skype. Mosca asks them how they're doing. "Great," they say. Slouching in his chair the patriarch looks as if he's been summoned to the principal's office. Mosca asks if they have any questions. They say no. The patriarch offers, "We've got a lot of work to do after your consultant leaves." And that's enough for Mosca, who knows where the conversation is headed and wastes little time getting off the call.
"He's not going to buy," he says.
