A few years ago, Matanya and Meira Afek – the couple who jointly own and manage a family company called “Ofek Agencies Ltd. Storage Systems,” which has been specializing in providing storage solutions for offices, businesses and marketing networks since 1997 – came to the conclusion that the credit terms that were prevalent in the Israeli market were making it very difficult for the company’s activities and stunting its growth. It was necessary to take drastic action in order to get out of this vicious cycle.
As importers of storage solutions, they were stuck between a rock and a hard place. On the one hand, they needed to maintain a large inventory for their Israeli customers who want immediate, here-and-now solutions but pay based on a credit system of 90+ days and sometimes even longer. On the other hand, the manufacturers in Europe and the Far East require paying a deposit when placing the order and the rest of the payment when the container is loaded on the ship at the port of origin.
“Like most independent businesses in Israel, we got stuck in the loop of long-term credit, when you constantly need to take loans and roll them forward until the money finally arrives,” explains Meira, who also serves as the company’s financial officer and is located in the Kidmat Galil Industrial Park near the Golani Junction.
“We have already seen many independent businesses fail because of this problematic payment culture, with the Israeli legislature having zero desire to change the situation. In the field of storage in Israel, whether one speaks about shelving, cubicles or ladders, you must have large amounts of inventory available, because without this you will not be able to make sales. After a lot of thought and examination, we made one of our most important decisions – uniquely tailoring our credit terms to our clients, based on the financial stability of each of them.”
Very nice, but how can one look into something like this?
“To begin with we subscribed to Dun and Bradstreet, which is famous for being one of the leading companies in the field of corporate knowledge. We are hooked up to the company’s computers through software that provides us with on-the-spot, detailed information regarding our client’s long term financial state, gives grades as to a client’s financial stability and even recommends which credit terms to offer him or her. The software, for example, can warn us about a customer whose checks normally bounce. In this kind of situation, we won’t necessarily forgo this client but rather be meticulous about working with him or her in exclusively cash or credit card-based transactions.”
What was the second stage of the process?
“We had to teach our salespeople to be forthright with the client and not be afraid of presenting them with the credit terms that suit us best. Meaning, a client does not decide independently how he will pay; rather Ofek Agencies offers a few payment options that the customer needs to choose from.”
How did clients take this?
“They reacted excellently. I believe that if you tell a person the truth about his financial situation and tailor-make a credit track based on his real financial capabilities, he will not have any problem with it. I have also learned that if a client is satisfied with your products, the way you conduct business with him as well as your price quote, when it comes to finalizing the terms of credit, he will not run off with competing companies. Since our cash flow has turned positive, we are no longer dependent on credit and we have a large, on hand inventory at any given moment. Most importantly – we know three months ahead and sometimes more what our cash flow will be like on a day-to-day basis. This allows us to continue to grow and develop and move in new directions.”
Such as?
We specialize in shelving storage units for chains in malls, with lots of veteran clients such as Steimatsky, Tzomet Sfarim, Fox, Shilav, Hoodies and more. Over the past year, we started getting our feet wet in terms of storage unit and manufacturing area safety, which is a very highly regulated field. We decided to not leave the field, which we are good at, but rather to expand it so that these fields could complement one another. In this way, a factory or marketing network that pays for storage solutions through our company will be able to acquire the vast amount of knowledge we have accumulated in terms of work safety and vice versa in the same breath.
What is your vision for the next stage of development for your company?
“To provide each of our clients with comprehensive solutions tailored exactly to their needs both in the field of storage and the field of safety. My vision is to approach a client and tell him or her, ‘We are experts. Come share your needs with us and we will tailor our services to those needs, without selling you something inappropriate for you or your company.’”
What ‘pro tips’ would you offer a young manager who is just starting off?
“First of all, they need to internalize the fact that they do not know and understand everything and it is not an embarrassment to seek the help of professionals and advisers, both inside and outside the company. Beyond this, you need to be updated in terms of all the new and changing things in your field and learn what the next big thing will be to help you upgrade your company.