Southwestern Company

Southwestern Company

Type	Private
Industry	Direct Sales
Founded	1855
Founder(s)	Rev. J.R. Graves
Headquarters	Nashville, TN, USA
Key people	Dan Moore, President Henry Bedford, SW-GA Chairman and CEO Spencer Hays, Chairman of The Executive Committee
Website	www.southwestern.com

Southwestern Company recruits and trains college students to sell educational reference books, software, and children's books door-to-door. Students participating in the Southwestern program are independent contractors, not employees of the company, purchasing books at wholesale from the company and selling them direct to private families at retail, for delivery at the end of the season.

History

Southwestern Company, founded in 1855, is located in Nashville, Tennessee. The company's name was chosen because at that time Nashville was in the southwestern part of the United States. The company was founded by Reverend James R. Graves, a Baptist minister. In 1862, Nashville fell to Union forces and Graves moved the company to Memphis, Tennessee. After the Civil War ended, Southwestern returned to Nashville and initiated programs of young people selling bibles and other books door-to-door.

In 1959, Spencer Hays, a young student at Texas Christian University, entered Southwestern's Summer Sales Program and would come to play a pivotal role in its future, becoming its president in 1973. In 1969, Southwestern was sold to the Times-Mirror Company. Jerry Heffel became the company's president in 1980. Dan Moore is the current president. In 1982, Hays, Heffel and other Southwestern executives organized to purchase the company by leveraged buyout from Times-Mirror, forming Southwestern-Great American, Inc. Hays was named executive chairman of the board and Ralph Mosley was named chairman and CEO. In 2005 Henry Bedford was named Chairman and CEO in place of the retiring Mosley. The company remains privately held.

Summer Sales Program

The company recruits between 2,500 and 3,000 students each year to sell books and software during the summer months. Student dealers come from over 300 colleges and universities in North America, South America, Africa and Europe.

Southwestern's president admits that selling books door-to-door is "incredibly hard, frustrating work," and not for everyone. Experienced dealers say the program provided them needed funds, boosted their confidence, and taught them to stick with a project despite adversity. Almost a third of the company's new dealers quit within 20 days, often with hard feelings. At website southwesterncompanytruth.com, some of these share stories about losing money, facing upset homeowners and unfriendly dogs. They call the company everything from a cult to a scam.

Program operation

Students participating in the Southwestern program are independent contractors, not employees, and as such run their own businesses. The money they earn is solely determined by their sales revenue minus their expenses and the cost of goods sold. They do not receive wages or employee benefits.

Endorsements

Students provide the company a letter of credit signed by two endorsers, typically the student's parents, in which the endorsers agree to be responsible for up to $500 each if the student fails to pay any money owed to the company at the end of the summer. This endorsement allows the company to ship startup books and sales materials to the student without requiring payment in advance.

Training

Students entering the program attend Southwestern Training School, a week-long sales school in Nashville or the UK, where they learn the product line, how to make customer presentations, and Southwestern's requirements for running a book business. They role-play in overcoming objections from customers who don't have the money right now: "I won’t cash the check until next month if that works better for you, Mrs. Jones"; and they learn to keep their morale up by talking to themselves, repeating lines like "I love my job" and "the solution to every problem is behind the next door."

Safety issues are also covered in sales school, and female students have a separate meeting to cover common-sense safety precautions such as being aware of their surroundings. Female students are discouraged from working after dark and taught not to enter a home unless invited in by the woman of the house.

The company does not charge for training or the product sample kit. Students are responsible for the cost of travel to and from the school, and for their personal expenses (food, gas, and $100 for company-subsidized lodging).

At the conclusion of sales school, students are assigned to a sales area outside their home or school states. Sales areas are predominantly suburban or rural.

Permits and licenses

Students are asked to check in with local authorities to advise them that they will be selling in the area for the summer, and to obtain solicitor's permits where one is required. Some states, counties, and towns require permits to sell goods door-to-door. In New Hampshire, persons traveling door-to-door to sell merchandise must obtain a hawker and peddler license from the state. Additional permit fees for individual towns may range from $10 to $100, a business expense paid by the student dealer. To encourage dealers to obtain the proper permits, the company reimburses 50% of permit fees.

Housing

Students typically live with a host family in their sales area, sharing the expense of lodging, food and travel with one to three other students of the same gender who often live in the same room. The host family is found the same way the products are sold, a guy knocks on their door and asks for the home to be a host family. Host families are told that the Students will be paying them rent monthly, and providing for their own meals. Housing is not guaranteed by SouthWestern; They do however have people go door to door trying to find a possible host home for them to live in, much in the same way that the learning materials are sold. This is usually done by a second or third year student of the program. The company trains and advises students on how to find a host family. Methods include asking for leads when visiting potential customers and approaching members of the clergy. For the 2011 selling season, sales managers have been provided resources to arrange accommodations for first-year dealers. If these arrangements are not finalized or if they fall through before the student leaves sales school, the company will pay for the first week's lodging in a local extended-stay hotel while helping the student find a host family. The company cannot guarantee housing due to the many uncontrollables involved, including possible status or plan changes by any involved party.

Working hours

Under the mentorship of a student manager, students work independently, approaching families in their homes by cold calling or through referrals. The most successful students work 72 or more hours per week, Monday through Saturday, typically from 7:59 a.m. to 9:31 p.m., making 30 or more presentations each day. The hours worked apply to time actually spent in the field and do not include time spent on bookkeeping, talking to student managers or at sales meetings held each Sunday.

Earnings and expenses

According to the company, in 2010 the average first-year dealer who stayed with the program for over 20 days grossed $2,415 per month before expenses. Total expenses for the summer vary by the individual, but range from $1,500 to $3,000.

As independent contractors, students pay their own travel and living expenses, but have the tax advantage that these are deductible from income. There is also a tax disadvantage, in that students must pay an additional 7.65 percent in Social Security and Medicare taxes to match the percentage normally paid to these agencies by an employer.

Settling accounts

At the end of the summer, products sold are shipped to the students, who revisit each home where they made a sale, deliver the product, show customers how to use it, and collect the balance due. Any product unsold and undamaged is repurchased by Southwestern at wholesale cost minus shipping and handling, though many students choose to avoid shipping charges by returning the products directly when they go to Nashville to settle their accounts.

Students generally pay their living expenses out of the down payments they collect, remitting the rest to the company to cover wholesale costs.

At the end of the summer, they return to headquarters in Nashville or the UK, where they settle accounts and receive a check for the season's earnings.

Students who successfully complete a summer while demonstrating an ability to be self managed, and have the potential for leadership are invited to return in subsequent years as student managers. Student managers recruit their own teams during the school year and earn a percentage commission on the sales of their team.

Products sold

Southwestern markets family-oriented reference books and software. The lead product, Southwestern Advantage, is a series of educational reference books to help families with school work. Also in the product line are children's books (My Fun With Words dictionary, Explore & Learn children's encyclopedia, My Books, including shapes, colors, numbers, and words, and the Ask Me Why series) and software (titles include Clifford Reading, SpongeBob Typing, math and science programs to help with different grade levels, and College Prep including SAT and ACT practice materials by Kaplan, Inc). Customers have an option of buying the online component Southwestern Edge which provides supplemental school aids like teacher's video example problems, online tutoring, practice worksheets, schedule planning, life coaching, and student goal setting.

Controversy

Controversy around the operations of the Southwestern Company revolve around its recruiting practices and the financial risk to students whose profits from sales do not substantially cover their expenses. Because students are independent contractors, Southwestern expects students to fully finance their living expenses similar to any other career job. Southwestern does not pay for expenses like food, gas, or rent. In addition, the recommended Sunday training expenses that Student Managers give out each weekend are not covered by the company, but the independent contractors themselves. Foreign students in particular carry a major financial burden, as they must pay for their visas and airfare themselves.

Students are taught to ask if there are other neighborhood families with small children. Such questions have sometimes been regarded as suspicious, resulting in complaints to local police, close police scrutiny and even an arrest for disorderly conduct. By traveling door to door, students sometimes draw the attention of local law enforcement. Local requirements are reviewed by the company prior to the summer in order to sell products legally, and Southwestern offers assistance in the event of permit issues. Students are encouraged to leave their cellphones at home to focus on the task at hand, but it is not required.

In 2007, Southwestern lobbied against a bill introduced in Wisconsin to regulate door-to-door sales crews and require companies to pay their dealers as salaried employees. The company argued that their independent contractor business model nurtured the entrepreneurial spirit. During the hearings, former Southwestern student dealers testified on both sides of the issue. The intent of the bill, known as Malinda’s Traveling Sales Crew Protection Act, was stated by Wisconsin governor James E. Doyle as to "stop companies from putting workers in dangerous and unfair conditions". The bill was passed in a form that applies only to sales workers who travel in groups of two or more.

In the UK University of Durham's campus in 2005, the Durham Students' Union, stating that the "Southwestern Company 'experience' is not marketed as openly as it could be, and some students may be misled", banned Southwestern from Dunelm House and mandated the union president "to liaise with Southwestern Books to work towards marketing which is clearer and to ask the company to develop its recruitment process to ensure Durham students are aware of the risks and pressures that the job entails."

The Guild of Students at the University of Birmingham passed a motion in May 2006 banning the company from its premises and encouraging the University to do the same.

In 2010, the University of Idaho announced that the Southwestern Company is prohibited to recruit on campus due to misconduct and violation of University and Career Center policies.

A non-binding motion was passed at the 2010 AGM of the Students Association at the University of Edinburgh banning the company from all union premises.

Company expansion

In the 1970s, Southwestern started to expand its operations, starting with Great American Opportunities (fundraising for schools) in 1975 and then acquiring FRP, an award-winning cookbook publishing company, in 1978. In 1982, after gaining its independence, SBR (International Headhunting) was formed, followed by Family Heritage (supplemental insurance) in 1989.

Since 1999, Southwestern-Great American has partnered with, acquired or established 10 other companies around the world, for a total of 16 companies within the corporate family. These companies' services range from non-profit fundraising to public speaking to consulting to financial services to insurance and real estate. Since regaining independence in 1982, Southwestern-Great American revenues have grown from $24 million to more than $280 million in wholesale sales.

Affiliations

Southwestern is a member of:

• Better Business Bureau
• Direct Selling Association
• Direct Selling Association - UK

See also

• Green River Ordinance - common American city ordinance prohibiting door-to-door solicitation

External links

• Southwestern U.S. web site