Akron/Canton (3279)

Monday, 22 July 2002 10:00

A million dollars in the wash

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Employees of The 101 Group wear T-shirts with clever sayings such as "Just because we serve you doesn't mean we like you."

The advertising slogan? "You threw up on yourself last night. We can help."

The delivery boy has been promoted to vice president of corporate development.

No one in the management team has yet celebrated a 31st birthday.

Armed with these selling points, Justin Clemens-president and CEO of The 101 Group and a guy who often looks as though he's just crawled off the couch-put on his baseball cap with the brim pointing behind him and set out in search of investors.

Sound like a long shot? Clemens and his partners in The 101 Group, which runs a do-it-yourself laundry on the campus of Kent State University, raised $1 million to begin expansion to other college towns across the country. And they didn't give up control of the fledgling business.

In the world of growing business, access to capital consistently ranks as a top problem for executives and owners. But if this unlikely group of Gen X dreamers can find the capital for growth, so can you.

In 1992, Clemens, now 29, along with the goateed and sharp-dressing Steve McConochy, 28, and the scruffy James Thorrat, 30, pooled $15,000 and opened Video 101. It wasn't just another corner video store; it served the particular needs of a college town's population with a delivery and pick-up service.

In 1994, they expanded the student services concept with Laundry 101, a well-maintained art deco "lounge-ro-mat," a place with washers and dryers, but more important, a full-service bar, pool table, juke box, cable television and, most recently, a cyber cafe. In 1996, they opened 101 Bottles of Beer on the Wall, a store that delivers beer and cigarettes.

As the punchy little empire grew, 25-year-old Zach Brandon left behind his delivery duties and became the fourth equity partner as VP, corporate development.

"We hit maximum capacity for a Laundromat in just over a year," Brandon says. He declines to say just how much business that is. But based on a rough standard of four or five loads per day per machine-not quite a national average, says Brian Wallace of the national Coin Laundry Association, but a solid performance benchmark-Laundry 101's revenue from washers and dryers would be at least $140,000 a year.

It's admittedly a business with a very low ceiling, particularly when you consider the overhead of utilities and maintenance. But by turning laundry into a social event for the college set, Laundry 101 stays crowded from opening to closing, while selling an undisclosed amount of high-margin goods: namely beer and munchies.

Most important, the concept is easily duplicated. By 1995, the foursome was thinking seriously about expansion.

"If you're not growing, you're dying. If you're not changing, you're dying," Clemens says. "With certain members of our company, big disagreements came where they felt we were making good money, why mess with it? ... But others felt that, if you don't grow, eventually ... someone's going to come and knock you out."

So they assembled a plan to open Laundry 101 locations in the Midwest's largest college towns. All they needed was money.

"We pretty much went out looking for an investor right from the get-go," Thorrat says. But he, like the other partners, was realistic about the source. "Banks aren't likely to hand out this kind of money."

Through a mutual friend, The 101 Group met Burton D. Morgan (none of the Laundry 101 partners would identify Morgan as the prospect, though their lawyer confirmed the contact), a well-known Hudson industrialist, banker and investor who has made himself no small amount of money by investing in "sin"-companies that profit from dealings in things such as alcohol, tobacco and gambling.

After two weeks of negotiating, Clemens says the prospect handed him a check for $80,000-demanding, in return, a majority stake in the business.

"He wanted a percentage of the company future and present," Brandon says. "He had done nothing to establish the first one and then wanted equity in it."

"It was like selling our souls," McConochy adds.

The decision was simple, but when Clemens refused the money, Morgan allegedly told him, "You're really making a big mistake, kid."

"Like he was the only guy out there with any money to invest," Clemens says.

For the next year, not much happened. Clemens and his partners got distracted by the opening of the beer/cigarette delivery business and conducted only a passive search for capital, leaving word with business advisers and friends.

They did continue to pare down their choices for an ideal market for their second location, conducting demographic research and analyzing operating costs in a number of cities.

There were some nibbles along the way. Clemens' father, Barry-a broker for McDonald and Co. Securities Inc. (and formerly a player with the Cleveland Cavs)-introduced The 101 Group to a Cleveland housing developer who showed some interest.

They spent several months cultivating a relationship, "Then one day he just stopped calling," Brandon says.

Eventually, the developer rattled off the list of problems. At the top was "youth of management." The group's oldest executive hadn't yet reached 30.

Also a concern was his impression the college market would only provide steady revenue nine months a year.

Then he mentioned articles he'd seen in Forbes and The Wall Street Journal about two well-capitalized companies that had announced plans to open hundreds of laundromats nationwide.

There was also the matter of style. The investor didn't like the group's advertising slogan and told them the "attitude" would have to go.

Then he demanded the four partners sign personal guarantees for his money and show how they could double the projected return on investment.

The four don't have a business degree among them, but they knew a non-offer when they heard one. It was time to rethink their approach to finding money.

If Laundry 101 kept attracting the wrong kind of investors, the partners decided it was a reflection on the way they communicated their vision. To that end, there is only one document that matters: the business plan.

They wrote a new one, using off-the-shelf business planning software, and hired a graphic designer to help assemble a package that would attract interest from people who saw the value in their ideas and execution.

Around the same time, they bought extra help and credibility by hiring Hahn, Loeser and Parks, one of Cleveland's top corporate law firms.

Steve Sneiderman, co-chair of the firm's entrepreneurial services group, helped them develop the new plan.

"Their initial plan was very long on style. They didn't have a lot of the hard numbers and people couldn't follow it. I think that was a painful process for them, where it all comes down to the numbers," Sneiderman says. "But anybody who has the money to get involved is not going to be taken in by a catchy slogan."

After nailing the content under pressure from Sneiderman, the partners hired a designer to assemble a book that reads and looks like a college syllabus. They spent $2,500 to produce a dozen hard-bound copies containing a 30-page business plan, a management summary and all the humor and attitude that contributed to their early success.

They included examples of their advertising slogans, such as this call to action: "What do you do in bed? When's the last time you washed your sheets? That's disgusting!"

One section includes "Important Assumptions:"

  • We assume that it will never be trendy to wear dirty clothing.

  • We assume that prohibition is not a national legislative agenda item.

  • We assume that Alan Greenspan and the Federal Reserve Board will not re-instate the barter system.

  • We assume that college students will find us particularly funny and that is why they will choose Laundry 101 as their laundromat.

Then they resumed the search for investors. Sneiderman helped them hook up with venture capitalists, but this time the approach was different. They didn't ask for money.

"We weren't really looking for investors," Brandon says. "We were just trying to feel things out and say, 'What would you say if we came to you with this deal?'"

Brandon describes the people they met as a close knit group, adding it was "very easy to get recommended from one to another."

But they also learned about the nature of people who describe themselves as "vulture capitalists."

"They are very concerned about control and return and they already have an exit strategy. They come to the table ready to sell off and maybe that's not where we're headed," Brandon says.

"You walk that line of 'how badly do you want it,'" adds Clemens. "These guys will almost leave you busting your ass, doing all the work for nothing. Your ideas have been completely diluted and prostituted and then pretty soon you just work for them and it was your idea."

The process taught them that venture capital was not the kind of money they wanted.

Without exception, prospective investors told the owners their particular brand of humor had no business in business and that they would have to lose it.

"One guy wanted to buy his kid a job," Brandon says. "He brought his kid down from college and basically showed him around to see if this was the kind of place he'd like to work."

The 101 Group's owners kept flip-flopping between being rejector and rejectee until they reached three important conclusions:

1. Finding an investor is not just about finding the first person willing to dump his pockets on the table; it's a matter of chemistry as much as finance.

2. The right investor would accept the strategic importance of humor in their business model (and maybe even find their brand of humor funny).

3. They would not give up control of the business.

"A lot of young entrepreneurs who want to expand rapidly find themselves giving up that control," Brandon says.

Adds Clemens: "I think its important that the guys who created the idea that worked-that people want to invest in-are able to steer the car."

Enter Edward Rosenthal, owner of Northern Stamping Co. in Cleveland (and minority owner of the New York Yankees). Rosenthal is good friends with Cindy Jandik, a broker's assistant to Justin's dad.

Over steak and Scotch at Morton's one night, Jandik, Rosenthal and Barry Clemens started talking about their children. When Justin's young business came up, Rosenthal started asking questions. After reading the business plan and talking with the elder Clemens, Rosenthal drove to Kent to see Laundry 101.

"I was very impressed with the boys and how immaculate it was. The machines were almost four years old and they looked brand new."

But sparkling washers and dryers and four young men who know how to carry themselves does not a wise investment make. What makes an astute business man drop $1 million into the pockets of four wise-cracking guys?

"I wasn't really impressed with the numbers," Rosenthal says, "but I was impressed with the numbers if we built five or 10 of these places. The concept is what I liked. We're not going after mass quantity. We're going after a niche and that is very important."

What closed the deal is the quality of the research the partners had done during the first "wasted" year of looking for money.

"All their ideas, where to go and how to go about it, they knew everything about the towns they wanted to go into. They knew all the demographics and that was important," Rosenthal says. "I wasn't ready to get into something and then do all the research and development."

And what about that brash sense of humor?

"I like innovation. I like controversy," says Rosenthal, who can't seem to help referring to his partners as boys. "I think that's part of their concept. It's their personality."

The second laundry-8,000 square-feet in Rose Bowl crazy Madison, Wis.-opened Dec. 28. A third location is planned after No. 2 rolls in three months of positive numbers-possibly by April. The goal is to have seven locations by the end of 2000. The targeted cities are one of the company's most valuable secrets.

What isn't a secret is how well the owners are getting along with their new partner.

"He ended up being a really fair guy," Brandon says of Rosenthal. "Where everybody else wanted majority control, he didn't. He took an extremely fair return on investment and gave us 10 years to pay him back."

Rosenthal receives 30 percent equity in all the expansion locations.

"We are pretty much in debt to him," Justin Clemens says. "We're more motivated than ever to make it work. When somebody takes a gamble on you like that, you really want to deliver.

"It's more than just money. You've got to have somebody you can work with and he's a guy that we can work with. He's got great business experience, he gives us great advice and he also doesn't try and take over the show. He's a perfect ingredient. Plus he's ridiculously immature so he fits in well with us."

Monday, 22 July 2002 09:59

What Lauren International does

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On payday, Dale Foland opens his check with a smile that says, after 35 years, the thrill of running his own business is as fresh as ever. He is not a high profile character and he is not as polished talking about his business as you might expect of a seasoned CEO. But there’s a charming innocence about him as he nervously shuffles items on his desk during an interview with a reporter.

When the topic settles on company growth, he becomes more animated. The business—which leads the industry as an extruder of continuous rubber seals and gaskets used in insulated doors and windows, insulated glass and weatherstripping—is divided into five operating divisions: Lauren Manufacturing, Edgetech IG, Fluorolast, Lauren/Meteor LLC and LMI Custom Mixing.

The company recently signed a contract with Daimler-Benz—before the merger with Chrysler—to make door seals for Mercedes and Volkswagen. The window insulation made by Edgetech and Fluorolast’s flexible paint-like coating are starting to create excitement in their markets.

Fluorolast has been in development for 15 years and should turn a profit for the first time in 1999. Lauren International also is developing two new products that Foland won’t say anything about. One of them, he thinks, will do for Lauren what Scotch Tape did for 3M.

When asked about his work philosophies, he replies, “Train, train, train and take care of the customers regardless of the cost. If you establish trust, never betray it. Those types of things.

“I don’t have anything you could write a book about. I guess it’s instincts. ... I always say, ‘Give everybody a reason to get up in the morning.’”

Monday, 22 July 2002 09:59

Seven lessons in Yellow Pages advertising

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Yellow Pages advertising works.

According the Small Business Administration, the average rate of business dissolutions over a six-year period is 62 percent. Less than 20 percent of businesses advertising in the Akron Yellow Pages six years ago have disappeared.

What those successful advertisers learned can help you predict the success of your ad and make it better. Here are seven lessons.

1. Bigger is rarely better.

The most successful ads in competitive categories were close in size. Where one ad was larger than all the others, it was later reduced or eliminated in almost 80 percent of the cases.

Of all the ads in the Yellow Pages six years ago, almost 90 percent were one-quarter page in size or smaller. Less than 2 percent were full page ads.

2. Smaller equals more vulnerable.

Advertisers with smaller sized ads were the ones most likely to “disappear” or go out of business. Seventy percent of the businesses with one-sixteenth page ads (the smallest size available) in the book six years ago are now missing. But the size of the ad isn’t necessarily to blame. In most cases, businesses with larger ads are more financially stable. Insufficient capital, a primary cause of business failure, may be what led to the disappearance of many smaller advertisers.

3. One is the loneliest number.

Having no competition had a negative impact on advertisers, whereas heavy competition did not seem to affect the success rate. Only 30 percent have kept their ads in categories where there were no other advertisers.

4. Yellow Pages readers are colorblind.

Most of the ads that have remained the same or increased in size were printed in simple black ink. Of these ads that were successful, less than 2 percent were printed in full color. A study conducted by the National Association of Directory Marketing proves that conservative use of color is more appealing to Yellow Pages readers. Why pay higher rates to get a lower response?

5. Don’t accept a Trojan horse

Despite designing billions of dollars worth of Yellow Pages ads for others, Ameritech hires professional advertising agencies to develop its own ad campaigns. This alone should convince you to seek outside help. Keep in mind that what you want—the least expensive ad that takes away the most possible business from your competitors—is the exact opposite of what a Yellow Pages publisher is trying to accomplish.

Anything that threatens the survival of your competitors and the renewal of their advertising is a major threat to the publisher’s profits. An independent ad agency is only concerned with your success.

6. What you don’t know (or understand) can hurt you.

Newspaper and magazine publishers generally provide rate sheets to their advertisers. This clearly shows ad costs as well as available discounts and when they apply. Ameritech does not.

Your Yellow Pages sales rep “discusses” your advertising needs with you, makes recommendations and provides rates accordingly. To qualify for discounts, you must increase your ad size. Your sales rep may be focused more on short term gain than maintaining a long term relationship with you. This means you could end up with a larger ad than you need or can afford. There are many things you can do to reduce this risk.

n Ask your rep to send you printed information before scheduling a face to face meeting. Ask to be provided with full price rates for each of the ad sizes printed in black ink only, black and one color, black and two colors, three colors and full color.

n Ask for the exact closing date. Some reps will imply that you have much less time than you really do. They are in a hurry to get you “signed.”

n The number of directories delivered is not the same as the actual number of households and businesses receiving them. Statistics can be manipulated to prove different points.

n Read the fine print. Your ad is not guaranteed any specific position. The publisher isn’t liable for errors or omissions. So make certain that you inspect and approve every detail on the final proof of your ad.

7. Keep your expectations realistic.

If your research shows that an average of 50 area residents purchase the product or service you sell each month, a Yellow Pages ad will not increase that. Television and other forms of advertising can work to create an interest in something where none previously existed. But a great Yellow Pages ad helps you get the attention of someone already looking for what you are selling.

Monday, 22 July 2002 09:59

News clips

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Commitment to excellence

Goodwill Industries of Akron received its seventh consecutive Three-Year Accreditation award from CARF, The Rehabilitation Accreditation Commission. Goodwill was recognized with the highest level of accreditation possible for Employment Services, Comprehensive Vocational Evaluation Services, Employee Development Services and Community Employment Services. Donald E. Galvin, Ph.D., president and CEO of CARF says, “Goodwill Industries of Akron demonstrates quality rehabilitation programs, measured by rigorous standards.”

Do it for the needy, if not for the government

The IRS Volunteer Income Tax Assistance (VITA) program is looking for people to help those with special needs—such as low-income taxpayers, disabled persons, non-English speaking and older taxpayers—to prepare and file tax returns, perform clerical work, publicize VITA’s free service, and other jobs. Hours are flexible, (2 to 4 hours weekly through April 15), and the environments (libraries, community centers and churches) are nicer than your usual federal office. “The time commitment is brief and the personal satisfaction is great,” says Taxpayer Education Coordinator Rachel Ragan. For more information, call (513) 684-2828.

Hard copy

While news hounds feed frenetically on the tidbits of Clinton’s peccadilloes, Connie Bloom, owner of Remember Me Biographies, is busy documenting the not so infamous people who hire her to write and typeset their life stories in a hardbound biography that comes complete with photographs. “Grandpa’s tall tales and grandma’s gentle recollections are their greatest legacies,” Bloom says, “and these are things that fame and money cannot buy.” There is, of course, a price for this—between $1,500 and $2,500, which is considerably less than the bill Clinton will ultimately receive. How to reach: Remember Me Biographies, (330) 836-0918

Even number crunchers need to get out

In a recent Accountemps survey, CFOs at companies with more than 20 employees were asked: “How important is networking with other professionals in your field or industry in furthering your career?” Eighty percent of the 1,400 respondents said networking with others in their field has been instrumental in their professional success. Here’s how it broke down:

  • Very important: 41 percent
  • Somewhat important: 39 percent
  • Somewhat unimportant: 13 percent
  • Not at all important: 6 percent
  • Don’t know/no answer: 1 percent

Trades labor shortage

The Akron-Canton chapter of The American Subcontractors Association will address the labor shortage in the construction industry at its meeting on from 6 to 9 p.m. Wednesday, April 7, at Tangier Restaurant. Association leaders and trade instructors from vocational training departments of participating school districts will be guest presenters at the event. Call (330) 753-9958 for more information.

Learning curve

The Western Reserve Small Business Development Center for Women is offering no-cost business counseling for women, and a variety of classes ranging from financial statements, accounting software and information systems to business communications, marketing, financing and government procurement. For course and counseling information, call (330) 972-5592.

Teaming up

The Employer’s Resource Council, which is based in Cleveland and serves all of Northern Ohio, has launched a new “dream team” of 20 firms that offer discounts on a wide range of human resource management services, including technology, financial and environmental. Each provider has a market presence in Akron and Canton, and services the ERC’s entire 22-county region. To get the discounts, all you need is a membership in the ERC. For information, call the ERC at (216) 696-3636.

Monday, 22 July 2002 09:59

Business Notes

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Prominence Homes Inc. has been named 1998 Builder of the Year by its peers in the Home Builders Association of Greater Akron.

Kimberly Walkup has opened Colonial Curtains and Interiors at 140 W. Washington St., Suite 4, Medina.

ASW Services affiliates ASW Logistics Inc. and Gilchrist Polymer Center Inc. have been registered by Underwriters Laboratories Inc. to the ISO 9000 Series Standards at seven of their operating locations.

Akron-based The Urda Co. has been named agency of record for the National Truck Equipment Association.

The Flood Co., a producer of paint additives and finishes for exterior wood, has announced the acquisition of Tropitech Coatings & Research of Naples, Fla.

Lou Ciraldo is now sole owner of Summit Construction Co.

The Summerfall Cos. has been named to the 1998 Weatherhead 100 as one of Northeast Ohio’s fastest growing companies.

The Akron Community Foundation’s board of trustees approved grants totaling $687,094 at its quarterly meeting.

The Western Reserve Bank has opened for business at 4015 Medina Road, Medina.

Monday, 22 July 2002 09:58

A fable for our times

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This is a true story about a guy named Frank who was struggling to build his business. Aw heck, he was struggling just to pay the rent while a whole lot of other bills weren’t getting paid at all. He was just months from going under, though he didn’t know it at the time.

All he did know was that his mentors, advisers, friends and business associates kept telling him: “Frank, if you want to grow, you can’t do everything yourself. You need to give your employees a chance to grow too, and if you take a break from the daily details, you’ll be amazed at what your employees can accomplish on your behalf.”

So last winter, when the company needed a new delivery driver, Frank saw it as a chance to delegate. He handed off the task to his trusted warehouse manager. Let’s call him Roger.

Roger had never hired an employee before and didn’t know much about the process—what questions he should and couldn’t ask, what qualifications he should seek among the candidates.

Roger had a friend who had recently been laid off. Figuring anybody could drive a light delivery truck, Roger interviewed and hired his friend, Les.

Now you know the cast of characters:

  • Frank, the earnest but struggling owner;

  • Roger, the able and trusted manager;

  • Les, the new driver.

There’s a fourth character—a nameless insurance agent who Frank contacted as soon as Les was on the job. What the insurance agent found when he tried to add the new driver’s name to Frank’s business policy is that Les had a less-than-sterling driving record. In fact, it was so tarnished, he was uninsurable.

The insurance company made Frank sign a document stating that Les would never be allowed to drive any company vehicles.

It was quite a lesson in delegation; the first time he actually hands off an important job, it gets botched up.

“I should have done a pre-employment screening on the driver,” Frank says in hindsight. “When we found out about his driving record, I should have taken care of the problem fast and not tried to be the nice guy. The minute I learned he was uninsurable, I should have let him go. I guess I learned you can’t be a nice guy to everyone. I hired him as a driver, but I couldn’t use him as a driver.”

Instead, Les went to work on the loading dock and in the warehouse, while Roger—the guy who hired him—started making deliveries.

It might have all worked, but Les started to feel guilty; he had taken over the job of the guy who hired him and caused the struggling owner a whole new set of headaches.

That’s why Les was always looking to do more. Which brings us to the day Les found himself alone on the loading dock with one truck idle in the bay and another waiting to load up.

Les hopped behind the wheel of the idle truck and moved it out of the way. Somewhere in the three minutes the whole transaction required, Les managed to bump into—and damage—the corner of another company’s truck.

The accident gave Frank a reason to get Les off the payroll immediately—an act that was probably a relief to everyone involved.

But Frank’s problems continued. He couldn’t turn in the claim to his insurance company, so he asked an acquaintance in the auto body repair business to look at the damaged truck.

“The body shop gave the guy an estimate of $947,” Frank says. Not a lot of money for a commercial fender bender perhaps, but more than Frank’s little business could absorb in its weak financial condition.

“I wrote out the check to the body shop,” Frank continues. “But when the owner of the truck came to pick up the check, he refused it because it wasn’t made out to him personally.”

Now feeling like he was being hustled, Frank called his attorney. “That 12 minutes cost me some bucks,” Frank says. “The guy [who owned the vehicle] made it clear he was using the money to go on vacation. My attorney told me there was nothing we could do about it.”

The truck never did get fixed.

“It burned me, seeing that truck every day ... knowing how badly we needed that money,” Frank says. “That $947 may as well have been $9,000.”

In retrospect, Frank says, “It’s a matter of principle and business ethics. That situation helped me learn more about [me] than anything, and I ask myself, ‘Why am I like this?’”

Today, his company is closed and liquidated, and Frank is relieved to be on somebody else’s payroll. Roger found a new job quickly enough too, and we don’t know what Les is doing—though we’re reasonably sure it wouldn’t involve mileage reimbursement.

For what it’s worth, Frank learned some important lessons about the responsibilities that come with delegation, and about the owner’s careful balancing act between concern for the employees and the business.

If this were really a fable, you would now get the moral of the story. And it might go something like this: The best way to look out for your employees is to look out for the business first.

But since this is a true story, and fables, by definition, are not, all that’s left to say is that Frank’s painfully learned lessons have probably helped him become an ideal employee for some lucky owner.

Editor’s note: The names in this article have been changed as a condition of telling this story. The facts, however, are true, and occurred between late 1997 and early 1998.

Monday, 22 July 2002 09:58

Working against a handicap

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What if you could get your packaging and assembly needs met expeditiously, get quality work for a competitive price, and provide work opportunities for people with disabilities — all at the same time?

It may seem like an easy question, but the fact is, Windfall Industries is providing just that, and executive director Jeff Johnson is finding it’s not such an easy sell.

Windfall Industries’ mission is to find employment for those enrolled in the Adult Services Program of the Medina County Board of Mental Retardation and Development Disabilities.

Johnson says competition from for-profit contract packagers who perform the same jobs makes it tough for nonprofit agencies like Windfall.

“In these business times, we’re just viewed as an alternative source,” he says. “We don’t see any preferential treatment because of who our employees are. Businesses are bottom line conscious, and if we can’t do jobs at a competitive price, they’ll go somewhere else.”

That — in combination with Windfall’s charge to be a self-sustaining nonprofit separate from the MRDB — makes the agency’s administration more bottom line focused. Johnson and his staff are not employed by Medina County, but by Windfall itself, which reports to a board of directors. Windfall, incorporated in 1963, is a holder of the Department of Labor’s Commensurate Wage Certificate, which empowers it to serve as an employer for workers with disabilities.

All those challenges and realities drive Johnson to worry about where Windfall’s next customer will come from.

“We’re always trying to develop core customers, where it’s not just a one-time job they’re giving us,” Johnson says. “We realize that to be self-sustaining, we have to do whatever it takes to offer quality services, or there will be no opportunity to employ those individuals.”

By taking whatever steps are necessary to produce quality work at competitive prices, Windfall has earned preferred supplier awards Diebold Inc., for one. Still, Johnson frets and aggressively targets packaging and assembly contracts to ensure the nonprofit’s growth.

Some of those contracts include packaging parts and repair kits for automated teller machines manufactured by Diebold, fitting o-ring parts on automobile headlight parts for Par Industries Inc. and assembling more than a million tea-lights a year for A.I. Root Co.

Jobs of this sort are brought into the Windfall workshop — a 10,000-square-foot facility where package and assembly kits are split into steps that can be accomplished by individuals with varying degrees of disability. Windfall’s nondisabled supervisory staff teaches the workers how to accomplish the tasks, and implements assisted or adaptive technology to help them complete the jobs faster or better.

When it comes to cost, Windfall prices a job much like any other packager. Product samples are acquired, then a task analysis and time study are completed to set a direct labor rate for each of the separate steps. The combined piece rates are tabulated for total direct labor. Overhead is also included in the formal quotation when, like any other business, Windfall must purchase special equipment for specific jobs.

“We’re normally competitive in price, and the only time it gets difficult for us is when it’s a very large volume job and our competitors have equipment that allows them to automate a portion of it, like a poly-bagging machine. They can get their price down a little lower,” Johnson admits.

Windfall must also determine whether the contract is long-term and if other job orders from that customer are likely. That question came up when Plastipak Packaging Inc.’s research and development department approached Windfall about a project in which 2,000 bottles would need to be sprayed lightly with a low-tack adhesive to prevent the glass from getting scratched in transit. Special transport boxes also had to be constructed.

“We had to look at the possibility that, if this was a one-time-only job where we jumped through hoops to meet their needs, we must add some overhead to that,” Johnson says. “If it was going to be a job that would lead into more work, that was a different story.”

After Windfall’s bid was accepted, Plastipak boosted the order to 24,000 bottles, which had to be completed in the same time frame as the 2,000 bottle order. To meet the customer’s volume and deadline requirements, members of Windfall’s sales staff rolled up their sleeves and got involved to help get the job done.

“We bid on jobs, big or small. If they can be done 100 percent by individuals with disabilities, great — that’s the bonus. If we need to step it up and bring in nondisabled workers, we’ve done that, too,” Johnson says. “We may split a job, with 50 percent disabled workers doing some of the steps and nondisabled doing the other 50 percent. If we didn’t accept that job because we don’t want to bring in nondisabled workers, the people with disabilities wouldn’t have that opportunity to do the other 50 percent of that job.”

Most of Windfall’s contract packaging assembly is done in house. Some companies require that Windfall comply with their individual Quality Standards and ISO 9000 standards, but such certification can be too costly an endeavor for a nonprofit. So, Windfall hosts period audits where customers can come into Windfall’s facility to quality inspect work being expedited on site.

How to reach: Windfall Industries (330) 764-8988, Ext. 253

Monday, 22 July 2002 09:58

Pay to play

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Are you having trouble getting financing for the equipment you need to grow your company? Leasing is one alternative to purchasing pricey equipment outright, and a solution when the bank says no.

Sure, you’re going to have to make payments similar to those you would have made had you bought the equipment, but in the short term, leasing equipment — everything from computers to back hoes — keeps your capital fluid. Your money won’t be tied up in thousands or millions of dollars of assets, when all you really need is the use of the equipment, not ownership.

Steve Fuller, owner of Alpha Graphics in Akron, leases large copiers and digital color printers from companies such as Xerox, Cannon and IBM. He says that along with not having to outlay large amounts of cash, he leases for what he calls the “obsolescence factor.”

To stay on top of the rapidly changing technology he deals with, he leases certain equipment. When it becomes obsolete, he contacts the manufacturer and arranges a new lease with updated equipment.

“It’s not like they give you something for nothing,” he says. “They factor all the costs into the new lease.”

This option saves Fuller the time of trying to get rid of obsolete equipment.

“Leasing has allowed me to expand faster than I would have otherwise,” he says.

The Equipment Leasing Association of America reports that new leasing business has increased 32 percent since the first quarter of 1998. The same study concludes that eight out of 10 American companies now lease some portion of their equipment.

“Leasing companies nationwide, not just us, have been working with small businesses for the past 30 years — helping them grow by letting them obtain the equipment they need to do what they do and grow their business,” says Anthony Polito Jr., executive vice president of Preferred Capital Inc. in Brecksville. “Our bread and butter customer is a company with 50 or less employees.”

Preferred Capital leases everything from mowing equipment for landscapers to office furniture and restaurant and medical equipment. The firm is even trying to purchase an armored car for a client.

“What you find is that there’s a lot of equipment that the consumer or even small business person, in the normal course of the day, would look around and not realize is leased,” says Jeffrey Eakin, senior vice president of Preferred Capital. “What I call very, very ordinary things.”

A common misperception about leasing companies is that they are like rental houses, where the customer comes in and picks equipment from what is available. In reality, customers choose what equipment they need and from which manufacturer. The leasing company then steps in, purchases it, and leases the brand new equipment to the customer.

“What leasing does is allows the end user to enjoy the equipment and pay small monthly fees, hopefully equal to or less than the generated profit or savings,” Polito says.

In many cases, leasing companies are taking the place of banks, but without many of the hassles associated with applying for a loan. “It happens much faster,” says Polito. “Generally speaking, the terms are far more flexible. The ability to structure a transaction to meet the customers needs is far easier for an equipment leasing company than it would be for a more traditional lender.”

Another advantage is the leasing company’s ability to bundle the costs of installation, warranties, insurance and other add-ons into the lease, making things simpler for the end user.

Polito enjoys watching his clients’ businesses grow, in part because that’s his job, but also because he has been there, as owner of King Cantina in Hudson.

“The bad news is, in our situation, is often times we lose a customer as they get more and more successful, because at that point, they are buying more expensive equipment and more traditional lenders step in.”

Revenue streaming 101

An Ohio landscaper’s business operates, on average, seven months a year. To operate his business, he needs a $10,000 mower.

Under traditional financing, the landscaper would have to make 12 monthly payments a year on the mower. With the revenue streaming option, he can make payments based on his monthly income, which may be heavier in some months and nonexistent in others. Many leasing companies offer a “five and seven program,” under which the landscaper makes payments on the mower during the seven months it is being used.

“We might also then flip it around and say, ‘We’ll lease you a truck and a snowplow,’ and adjust the payments to take into account the fact he’s using the truck year round,” says Jeffrey Eakin, senior vice president of Preferred Capital. “That payment might be a 12-month payment, but we adjust it a little bit around the winter months to take into account that’s when he’s generating money to pay for the plow.”

Monday, 22 July 2002 09:58

Inside looking back

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When Jeffrey Crowl was 9 years old, his father came home from his job as a sales manager at a local newspaper and asked his family what it thought of him starting his own advertising agency. The younger Crowl voted against it for purely financial reasons. His allowance would go from 50 cents to a quarter.

This early cutback would lead to substantial gain.

Jeffrey colored in the letters of ads his dad worked on at home while getting the business off the ground. This was before computers did all the work.

In 1981, 31-year-old Jeffrey Crowl purchased the business from his father and has advanced it to what it is today, Crowl, Montgomery & Clark Inc., an advertising and sales promotion firm with a waiting room full of awards.

When he and his partner, Mark Clark, bought the company, interest rates were at 17.5 percent. It only took them a year to pay back the bank.

“At that age, you have no fear,” he says. “It’s one of those things that you probably don’t know enough to stay out of business.”

He didn’t have much trouble keeping the business growing as he had worked for his father for 10 years. However they did lose a major account shortly after acquiring the firm. They took it in stride.

“Because you’re put in a position that you’ve got to succeed, you do. And that’s the perspective we took.”

One thing he noticed as he grew older was a change in attitudes toward him as a person and business associate, a change that today’s young professionals may be happy to hear.

“I don’t know if there is a ceiling or a plateau at which people say, ‘Well, he’s no longer that young whippersnapper that doesn’t know anything,’ — to someone whose opinion they respect on a business level,” Crowl says. “It seemed like it had to be somewhere around that 35-year age where I could almost feel it overnight. All of a sudden there was a change. I can’t describe it. It just happened. I can tell you that it was very clear in my mind that all of a sudden, people were showing a respect for my opinion and my business sense.”