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Small Business | LEARNING CURVE: Business Lessons From
Southern California Entrepreneurs

Paper Trails Keep Audio Firm on Track

March 29, 2000|KAREN E. KLEIN

Mark Waldrep was working as a recording engineer when he spotted fledgling DVD technology and realized it would someday replace compact discs in commercial popularity. He founded AIX Media Group, and in 1997 his company was one of the first to release a DVD title in the United States. With Waldrep's doctorate in music composition and master's degree in computer science, he seems perfectly suited for the production and release of a whole new generation of interactive, Web-enabled DVD-audio products. But he realized his company couldn't succeed on the cutting edge when it hasn't yet mastered the more mundane art of coping with paper trails and cost overruns. Waldrep spoke about his efforts with freelance writer Karen E. Klein.

In the last two or three years, we've gone from seven or eight employees to more than 40, and our revenue has increased sixfold in the last 18 months. When we were small, the paper trail on each job was pretty easy to maintain. But now, we've got 30 to 40 jobs running through the shop at any one time. We learned some very difficult lessons recently, with customers who were unhappy, asking why their product wasn't out and asking for changes that hadn't been authorized.

We realized that we had to document all 60 steps of the production process and have the client sign off at every point--from the graphics to the artists' bios to the spelling on the copy. If we didn't, we were going to be having producers and production coordinators and graphics people demanding changes after the fact, and then refusing to pay for them.

So, we constructed a database program that everybody in the company can access through our network, including the clients, who have password-protected sites. When I get a call asking what stage a project is at, I can bring it up on the computer and see exactly what's happening. If a client wants us to go back and tweak the sound after they've already been given three chances to change it, and signed off on it, we let them know it's going to cost them more. We've established hourly rates for audio and graphic work that are billed onto the job.

What I used to find was that at the end of the year our gross revenue looked good, but our profit margins weren't where we needed them to be. We went back and figured out that a $25,000 job may have cost us $30,000 to complete. Now that we have everything spelled out in the production process, our salesmen--who aren't technical people--can put together budgets for job bids, and they know better how to price things. Plus, they put in a 20% to 25% buffer so we can come out profitable even if some things go wrong with the job.

Another lesson I've learned with all this growth is that I have to monitor cash flow on a daily basis, whereas I used to look at it every two weeks. Now, I'm much more careful.

And finally, I realized that if I'm going to ask investors for capital, I have to be willing to invest personally. I started this company on my own nickel and borrowed heavily to get the first piece of high-tech equipment, yet I still am not comfortable going into heavy debt when my own personal assets are on the line. But I learned that you have to invest your own money before you can ask other people for their money. I believe in this new technology, but I have to prove it.

If your business can provide a lesson to other entrepreneurs, contact Karen E. Klein at the Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia, CA 91016 or at kklein6349@aol.com. Include your name, address and telephone number.

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