Q&A with Dan Schneider, CEO of SIB Fixed Cost Reduction
Founder and CEO of SIB Fixed Cost Reduction, Dan Schneider, is an interesting guy, a serial entrepreneur and a terrific interview. While chilling out in Charleston, South Carolina, back in 2008, he got the idea to help companies reduce their costs, which was excellent timing at the beginning of the Great Recession.
Seven years later, his company employs about 75 people, and helps a variety of companies (many in the multi-unit franchise space) reduce their recurring costs—things like utility, telecom, bank fees, maintenance and armored car services.
With a client list that includes many of the franchise heavy hitters, Yum! Brands, Taco Bell, Pizza Hut, KFC, Burger King, Hardee's, Arby's, Popeyes, Little Caesars, Dunkin' Donuts, Friendly's, Sonic and many more, SIB uses its expertise to save its clients significant money on a recurring basis.
As part of our reporting for an upcoming feature in Franchise Times, we spoke with Schneider about how he started the company, how they negotiate with vendors to save clients money and why nobody wants to tell their buddies how great their proctologist is.
You read that right. Read on for more!
Franchise Times: Under what circumstances did you start your company?
Dan Schneider: I was just in Charleston (South Carolina) relaxing, got bored and realized I needed to start working again, so that's when I started this company. It was November of 2008. I had this idea in the back of my head, the economy was horrible, so I thought getting into the cost-savings business would probably be good right about now.
FT: What type of companies make up the bulk of SIB's clients?
DS: We’re in about 20,000 locations throughout the U.S. right now and it’s a mix. We have a lot of healthcare, we have a lot of retail and by retail it could be anything from mattress stores to grocery chains, and then a lot of restaurant groups, so we’re probably in 7,000 of our 20,000 locations are restaurants and a lot of those are franchised and branded restaurant groups. All of our clients are multi-unit operators. For our model to work ... they need to be a 10+ unit operator.
FT: Why does this model appeal to the franchise community so much?
DS: They’re focusing on labor costs and operations and expansion, and we’re looking at their bottom 10-20% of spend to see if there are opportunities, if they’ve ever been overcharged or if there are better rates out there that we can obtain for them. What we also find, too, is some of these franchisees, a lot of things have to be done brand specific or there’s a brand purchasing group involved, and we’re able to work alongside those purchasing groups and sometimes we find that they’re not being billed according to the rates that they’re supposed to be from the vendors, and there’s no checks and balances. It’s another set of eyes so they have some peace of mind.
FT: You mentioned that word isn't a very big marketing tool for SIB. Why is that?
DS: Very rarely does someone tell their friend how great of a job we did, and I use this analogy—it’s kind of graphic. No one’s golfing and on their ninth hole they tell their buddy how great their proctologist is, because they don’t want to let their friend know that there was ever an issue and we found savings. They’re happy about the savings, but nobody wants to say I had this group come in and they found me $100,000.
FT: How do you actually get vendors to reduce expenses? I imagine you can't just come in with guns blazing...
DS: When we reach out to the vendor, a lot of times we’ve worked with these vendors before so they know who we are and what we’re up to, and we’re not just bullying them and saying “You need to lower the price.” First of all, we look into all of the billing errors ... And then we explain what we’re doing and why we were hired and we also let them know what our knowledge base is within their space, and once they understand that we know what their margins are, plus we know what other people are paying, they’re actually really happy to work with us because their goal is to retain the customer.
FT: How much money can you save clients?
DS: Depending on the spend category, we’re going to find between 10-40 percent. I like to use those numbers as conservative numbers. We’ve found substantially more, but if I told you we saved somebody 80 percent in a certain category it starts to sound too good to be true.
FT: How do you charge your clients?
DS: We get a percentage of savings after they’ve realized the benefit. We get 50 percent of the savings, but let’s say we obtained somebody a $20,000 refund. Once they receive that $20,000, we would share it with them, so there’s never any budgeting involved for our services. On an ongoing basis, if we save somebody $2,000/month, we would split that with them.