Southwestern Company

Southwestern

Type	Private
Industry	Conglomerate
Founded	1855
Founder	Rev. J.R. Graves
Headquarters	Nashville, Tennessee, United States
Key people	Henry Bedford, Chairman and CEO of Southwestern Spencer Hays, Chairman of The Executive Committee
Slogan	We Build People
Website	www.southwestern.com

Southwestern owns Southwestern Advantage, previously known as Southwestern Company, a company that recruits and trains college and university students to sell educational books, software, and website subscriptions door-to-door using direct selling methods. Students participating in the program are independent contractors, not employees of the company, selling the products directly to private families at retail for delivery at the end of the season.

History

In 1855, Southwestern Publishing House was established in Nashville, Tennessee. The company's name was chosen because, at that time, Nashville was in the southwestern part of the United States. Founded by the Baptist minister James Robinson Graves, Southwestern originally published The Tennessee Baptist, a Southern Baptist newspaper, and religious booklets which were sold by mail for 20¢ and 30¢ each.

Prior to the Civil War, most Bibles were printed in the North, rather than the Confederacy. Graves acquired stereotype plates from the North and began printing Bibles for sale in August 1861. Southwestern also produced and sold educational books.^[1]

The December 1864 Battle of Nashville resulted in a Union victory. Feeling vulnerable due to articles he had published against the North, Graves relocated to Memphis. The company resumed publishing in 1867.^[1]

After the Civil War in 1868, Graves discontinued the company’s mail order business model, and began training young men as independent dealers to sell Bibles and educational books door-to-door as a way to earn money for college. Graves retired in 1871.^[1]

In 1879 the company relocated to Nashville under the new ownership of Jacob Florida.

In 1899, P.B. Jones, a twenty-two year veteran who started in the summer sales program, acquired majority ownership of the Southwestern Publishing House becoming its President and General Manager.

In 1921, J.B. Henderson, a sixteen-year veteran who started in the summer sales program, became the sole company owner. During the 1920s, Henderson grew Southwestern to one of the largest person-to-person sales companies in America.

By 1947, Southwestern had lost nearly all of its independent dealers as a result of World War II. J.B. Henderson, Dortch Oldham, and Fred Landers, each of whom left to serve in the Pacific during the war, struck a deal to rebuild the company with Henderson serving as President. Throughout those next twenty years, Southwestern experienced tremendous growth as the United States rebounded from the Great Depression. Led by Fred Landers, Spencer Hays, and Ted Welch, the number of independent reps grew to over 1,500.

In 1959 Oldham, a twenty-four year veteran who started in the summer sales program, became the majority shareholder of Southwestern; an ownership role that would last until 1968 and a presidential role that would last until 1972.^[2]

In 1968, Times-Mirror Company acquired ownership of Southwestern.

In 1972, Spencer Hays,^[3] a fourteen-year veteran who started in the summer sales program, became its president.

In 1975, Times-Mirror formed a fund-raising company called Nashville Educational Marketing Services under Southwestern, later to be renamed Great American Opportunities.

Jerry Heffel became the company's president in 1980. In 1982, Spencer Hays, Jerry Heffel, Ralph Mosley, and other executives organized to purchase Southwestern and sister-company Great American Opportunities 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 2011, the sales and leadership program and its operating unit updated its name to Southwestern Advantage.

Southwestern earned position 4,832 on the Inc. 5000 list in 2012 as one of the fastest growing private companies in the United States.^[4]

Southwestern Advantage Sales & Leadership Program

The company recruits between 2,500 and 3,000 college and university students each year to sell educational books, software, and subscription websites during the summer months. Student dealers come from over 300 colleges and universities in North America, South America, Africa and Europe.^[5]

The president of Southwestern Advantage 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.^[6] The program does not offer any guaranteed pay except that which is earned as profit from sales.^[7]

Program operation

The company operates on a structured network marketing platform where student dealers participating in the 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.^[5]

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.^[5][8]

Training

Students entering the program attend a week-long Southwestern Advantage Sales School in Nashville, where they learn the product line, how to make customer presentations, and the company's requirements for running a book business.^[9] 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 dealers have a separate meeting to cover common-sense safety precautions such as being aware of their surroundings. Female dealers are discouraged from working after dark and taught not to enter a home unless invited in by the woman of the house.^[10]

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).^[11]

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.^[10]

Permits and licenses

Dealers 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.^[10] Some states, counties, and towns require permits to sell goods door-to-door. Permit fees are a business expense paid by the student. To encourage students to obtain the proper permits, the company reimburses 50% of permit fees.^[10]

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. The host family is found in the same way the products are sold, by knocking on doors and asking people for referrals to families interested in hosting for the summer. Students pay rent weekly and provide their own meals. Housing is not guaranteed by the company. The company trains and advises students on how to find a host family.^[5] Methods include asking for leads when visiting potential customers and approaching members of the clergy. Managers are provided resources to arrange accommodations for first-year dealers. The company cannot guarantee housing due to the many uncontrollables involved, including possible status or plan changes by any involved party.^[12]

Working hours

Under the mentorship of a student manager, dealers work independently, approaching families in their homes by cold calling or through referrals. The most successful dealers work 72 or more hours per week, Monday through Saturday, typically from 8 a.m. to 9 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 managers or at sales meetings held each Sunday.^[5]

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.^[13] Total expenses for the summer vary by the individual, but range from $1,500 to $3,000.^[5]

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

Dealers 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, where they settle accounts and receive a check for the season's earnings.^[5]

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 managers. Managers recruit their own teams during the school year and earn a percentage commission on the sales of their team.

Products

Southwestern Advantage publishes and markets educational books, software, and subscription websites. The lead product, Southwestern Advantage, is a series of educational reference books to help families with school work. The product line also includes 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), software (programs include reading, typing, math and science), and a comprehensive College Entrance kit by Princeton Review which includes SAT and ACT review and practice exams as well as admissions and financial aid seminars. Customers may purchase a subscription to the Southwestern Advantage website which provides supplemental school aids like teacher's video example problems, practice worksheets, schedule planning, life coaching, and student goal setting.

Criticism

Criticism about the operations of Southwestern Advantage revolves around its recruiting practices and the financial risk to students whose profits from sales do not substantially cover their expenses. Because they are independent contractors, Southwestern Advantage expects students to fully finance their living expenses similar to any other career job. Southwestern Advantage does not pay for expenses like food, gas, or rent. In addition, expenses of the required Sunday meetings with managers are not covered by the company, but by the students themselves. Foreign students in particular carry a major financial burden, as they must pay for their visas and airfare themselves.^[14]

Students are taught to indirectly ask if there are other families in the neighborhood who may have small children.^[15] Such questions have sometimes been regarded as suspicious, resulting in complaints to local police, close police scrutiny and even an arrest for disorderly conduct.^[16] By traveling door to door, students sometimes draw the attention of local law enforcement.^[17] Local requirements are reviewed by the company prior to the summer in order to sell products legally, and Southwestern Advantage 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.^[14]

Harvard University banned Southwestern from recruiting on its campus in 1977; four years later Southwestern resumed recruiting despite this ban.^[18] In 2005, the University of Maryland banned Southwestern from recruiting on its campus; as of 2009, however, the University continued to receive complaints against the company.^[19]

In 2007, Southwestern Advantage 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.^[20][21] During the hearings, former Southwestern student dealers testified on both sides of the issue.^[22] The intent of the bill, known as Malinda’s Traveling Sales Crew Protection Act,^[23] 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.^[24]

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."^[25]

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.^[26]

In 2010, the University of Idaho announced that Southwestern Advantage is prohibited to recruit on campus due to misconduct and violation of University and Career Center policies.^[27]

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.^[28]

Notable alumni

• Marsha Blackburn - Tennessee congresswoman^[29]
• Martin Fridson - philanthropist and financial author^[30]
• Bruce Henderson - founder of Boston Consulting Group
• Max Lucado - philanthropist and author of Christian books^[31]
• Charles Moose - police chief who led investigation of the DC Sniper^[32]
• Ronnie Musgrove - governor of Mississippi^[33]
• Rick Perry - governor of Texas; 2012 U.S. presidential candidate^[2][34]
• David Rosen - political fundraiser for Hillary Clinton, Al Gore, and Pat Quinn^[35]
• Ken Starr - federal judge; investigator of Whitewater controversy; president of Baylor University^[36]

Subsidiaries

Since 1982, Southwestern has acquired or established companies around the world for a total of 10 companies within the corporate family as of 2013. These companies' services range from fundraising to consulting to financial services to executive search and real estate. Since regaining independence in 1982, Southwestern revenues have grown from $24 million to more than $425 million in 2012.

In 1982, Southwestern acquired Favorite Recipes Press (FRP) from Fuller and Dees as a custom book publisher focused on cookbooks to be sold for the purpose of fundraising. FRP later expanded their custom publishing services and was renamed Southwestern Publishing Group in 2011. Also in 1982, Carl Roberts, who began in the summer sales program, established an executive search company called Southwestern Business Resources (SBR). In 2012, SBR was renamed to ThinkingAhead Executive Search.

In 1989, Scott Roy, who started in the summer sales program, founded the supplemental insurance company Family Heritage along with Howard Lewis.

In 2002, Jeff Dobyns, who started in the summer sales program, founded Southwestern Investment Group, currently the largest Raymond James Financial affiliate. Also in 2002, Southwestern Consulting was established by Rory Vaden and Dustin Hillis, who each started in the summer sales program, and by Gary Michels, a twenty-plus year veteran of Great American Opportunities.

In 2004, Southwestern acquired majority ownership of Wildtree, a direct-sales company whose all-natural gourmet culinary products are sold through home tasting parties.

In 2005, Southwestern established GEC, a summer work experience program for qualified students around the world to participate in work opportunities in the United States.

In 2007, Pat Roach, a fifteen-year veteran who started in the summer sales program, established Southwestern Real Estate, a residential real estate brokerage.

In 2012, Great American Opportunities acquired the assets of QSP making Great American Opportunities the largest school fundraising company in North America. Southwestern also sold the assets of its Family Heritage insurance business to Torchmark Corporation in October 2012.

Accreditation

Southwestern Advantage is a member of:

• Better Business Bureau
• Direct Selling Association

See also

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

References

External links

• Southwestern Advantage website
• Great American Opportunities website
• Southwestern Publishing Group website
• ThinkingAhead Executive Search website
• Southwestern Investment Group website
• Southwestern Consulting website
• Wildtree website
• Global Educational Concepts website
• Southwestern Real Estate website
• Tasty Selections website
• Independent Contractor (Self-Employed) or Employee?