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Jim Kudis and a partner started Allegheny Petroleum Products Co. for the same reason many people start a business — they loved what they did and saw a niche that their company could exploit.

While the company, a manufacturer of industrial lubricants and additives, was seeing annual growth of 20 percent in its early years, Kudis and his partner struggled with money and didn’t take a salary for the first year or two.

“Most small businesses are generally undercapitalized, which we were,” says Kudis, president. “We lived off whatever money we had, which definitely helped because it cut back on the expenses and some of the money going out the door.”

Starting a business is 24 hours a day, seven days a week. You have to live it and love it. You have to roll up your sleeves and do anything you have to do to run that business.

“If you don’t want it that bad, don’t do it,” Kudis says.

The company’s focus in the beginning was providing industrial lubricants to the various manufacturers in the Pittsburgh area. Back then the major oil companies were retreating from the marketplace, becoming very big and going through distributors. Most of the distributors didn’t have the technical know-how of what the lubricants do and how they work.

So Kudis saw a void in what the major companies used to be strong at and what the distributors couldn’t do and that ended up being the niche that Allegheny Petroleum jumped into.

“That was the big advantage to going into the manufacturing part of the business,” Kudis says.

Last August, Kudis and Allegheny Petroleum Products Co. celebrated 25 years in business. In December 2012, Kudis bought out his partner to become the sole owner of the 85-employee company, which saw 2012 revenue north of $110 million.

Here’s how Kudis has grown Allegheny Petroleum Products Co. from a start-up into a successful organization.

Bring in the right talent

While Kudis and Allegheny Petroleum struggled with capital early on, the turning point for the company came around its fifth or sixth year in business.

“We were supplying one of the plants in Cleveland and we made a proposal to do what was a new concept at the time, fluid management,” Kudis says. “We had to put in 125 bulk tanks, which are carbon steel, 500-gallon tanks that ran about $1,500 each.

“So we had to make a more than $200,000 investment to put these tanks in and put in consigned inventory, which ran us another couple of hundred thousand dollars. So we were about $400,000 into this.”

A year later the global buyer for that company called Kudis and told him what a great job Allegheny Petroleum was doing managing their Cleveland plant. He offered Kudis the contract to manage the company’s remaining 70 plants.

“So off it went and today they are my largest customer,” he says.

From that point on, the business has had to function much differently and required new skill sets to keep the company growing.

“My biggest focus today is making sure my managers have all the tools and things they need to do their job, whereas 20 years ago I was doing it myself,” he says. “Now it’s managing people, keeping them excited, making sure they have ownership in the things that they’re doing, and have the tools to do the job that they need.”

Allegheny Petroleum has five fairly distinct areas and Kudis is in touch with each one of the people that manage those areas.

“I’m not trying to do their job, but I’m trying to help them so they can do their job and that’s the key thing,” he says. “It’s all about people.”

To find the right leaders for his business, Kudis chased those executives down and drafted them all.

“I handpicked them and coerced them into coming to work for the company,” he says. “I chose them because I saw the qualities they had. I saw a real desire in each one of them to do well, and that’s where my attention started.

“What I saw in my interaction with them was that they could handle themselves well and present themselves well in front of people. They were knowledgeable and wanted to be more knowledgeable.”

The first thing Kudis looked for in the people he brought in was whether they were good quality people and good solid citizens.

“That’s probably the common thread through most of the people who work here,” Kudis says. “Talent would be second after that — they can manage people and enjoy the ownership of their part of the business. They embrace it and treat what they’re doing like their own.

“It’s just looking in someone’s eye and seeing that they have a desire to do well, not only for themselves, but for the company too. A lot of people want to punch in, get a paycheck, punch out and go home, and that’s not the kind of people I want managing.”

Kudis gives his team the autonomy to do things on their own, which means they have the power to make decisions.

“I give them a free hand to do what makes sense,” he says. “My motto is to make the decision on your own and if you don’t think it’s your decision, then come to me. As long as you have an explanation about why you made that decision, you’re never wrong. You’ve got to be in the game and engage and make decisions.”

Decide how to grow your business

Making decisions is a very important aspect of running a business, especially when it regards growing your company to the next level. Kudis has had to make countless decisions over 25 years and each one helps the company continue its growth. Now those decisions rest on the shoulders of his managers.

“That’s what I expect from the people in a management role,” Kudis says. “In the dealings they have, there comes a point where maybe it’s beyond where they should make a decision on something. In involving putting part of the company at risk or something of that nature, every one of them knows where that line is, where that decision should not be theirs.

“All the other decisions whether they are small, large or whatever, I expect them to make it. It’s really easy to say three or four days later that you made a wrong decision, but to be in the game and make the decision right there, to me that’s important as long as they have an answer why they made a certain decision.”

Every month or every other month Allegheny Petroleum has what it calls a What’s Up Meeting to check in on the different areas of the business.

“I grab each of the managers and we sit down for about two hours and we go around the table while everyone exchanges what they’re doing,” he says. “You get so focused on the part of the business that you’re in and sometimes you have two different groups sort of working on the same things, or maybe they’re doing something that somebody in another group has worked on and knows the answers to help them out. So those meetings have been very beneficial.”

One of the biggest decisions Kudis has made for Allegheny Petroleum was to give the company a global presence. However, global business carries many challenges along with it.

“Learning how to deal financially in different countries has been a challenge,” Kudis says. “One thing you have to learn is what the tax implications are. Each country is different. You should do business with an accounting firm or law firm that can find out answers for you. That really makes it easy.”

Allegheny Petroleum didn’t utilize those resources in the beginning on the first two countries where the company launched its efforts and there were snags.

“Had I used our law firm or our accounting firm, it would have been a lot easier,” Kudis says. “Make sure you understand what it takes to do business in a foreign country before you start doing business there.”

Another big decision that has streamlined business for the company was using a global pricing index with its major direct customers.

“We now move our pricing quarterly as these prices move,” he says. “In the past every time there was an increase you had to go in and present everything to your customer and sit and argue about the pricing. Now that it’s indexed at the end of the quarter, it’s just a matter of how the pricing has moved and that has really streamlined the pricing.

“Our customers feel very good because they know it’s indexed to something that they can see. I feel good because as my raw material costs rise or drop it keeps my profits pretty steady. It really makes it easy to not worry about the pricing side of your business as much.”

Now that Allegheny Petroleum has streamlined business, entered into global markets and become a substantial player in its industry, Kudis is excited to find where the next level is.

“My vision is how do I double and triple the business,” he says. “Everything had been done organic and we might look at doing some acquisitions. The next level will also mean being more global.

“You have to think down the road and get out of the box to think about things that maybe you haven’t thought about in the past, because once you stop growing you’re done.”

How to reach: Allegheny Petroleum Products Co., (412) 829-1990 or www.oils.com

 

Takeaways:

Find the right talent for your leadership team.

Give the leadership team the autonomy to make decisions.

Constantly look at how to keep growing your business.

 

The Kudis File

Jim Kudis

President

Allegheny Petroleum Products Co.

 

Born: Homestead, Pa.

Education: Graduated from Penn State and received a bachelor’s degree in business logistics.

What was the very first job that you had and what did you learn from it?

I worked in a steel mill. I was a laborer so I drove a high lift and moved different things around. My dad worked there and he said, ‘This man is going to pay you, so you better work so that you make sure you earn every dollar you get.’ I still live by that today.

Who is someone that you looked up to?

My grade-school basketball coach. If we played bad we would come back and practice until 11 o’clock at night to make sure we did things right. We won the state championship that year. Hard work eventually pays off.

What Allegheny Petroleum product are you most proud of?

We make what’s called a backup bearing oil for the steel mills, which is called a Morgoil. When steel mills roll steel it goes between these rolls and on the end of these rolls there are bearings. They are huge bearings that get very hot. The oil goes through to lubricate the bearings and they also cool the bearings on the outside with water to keep them from getting too hot.

So the oil has to be able to accept water and kick out the water as it goes back to the tank and it gets circulated back through the bearings. You don’t want water lubricating your bearings, so our oil kicks out the water pretty good. That’s one of our hallmark products.

If you could speak with one person, whether from the past or present, with whom would you want to speak to?

Joe Paterno. I admired the way he ran the football program at Penn State. I’m not in total agreement with what happened at the end of his career. All through the history of what he did, he represented a class act. He was very well-respected. I enjoyed watching him and what he represented for the school.

Published in Pittsburgh

“A ship in port is safe, but that’s not what ships were built for,” is a quote that hangs in Brig Sorber’s office at Two Men and a Truck in Lansing, Mich. Sorber uses that quote to define the new direction in which his company has been moving.

“I love that quote because this ship, Two Men and a Truck, has been in port for too long,” says Sorber, CEO. “We’ve got to get this into deep blue water. There are a lot of challenges out there and a lot more risk, but that’s where business is done. We need to start moving forward and accept the challenges.”

Sorber and his brother, Jon, started Two Men and a Truck International Inc., a moving company, in the early ’80s as a way to earn money using their ’67 Ford pickup. Today, the business has x4,500 employees, more than x1,400 trucks, more than x200 franchises in x34 states, Canada, the U.K. and Ireland, and 2012 revenue of x$361 million.

“We did it to make beer and book money for college,” Sorber says. “We really never thought that it would get to this point.”

However, in getting to this point, the company had neglected to make necessary changes in order to keep the operation aligned and running well.

“One of the challenges we have had is going from a mom-and-pop-type business to having to grow up and become more corporate,” Sorber says. “We needed to bring in newer and stronger skill sets.”

Here’s how Sorber has helped Two Men and a Truck grow up.

Growing pains

Two Men and a Truck incorporated its first business in Lansing, Mich., in 1985 and began franchising in 1989. The company at this time was run by Sorber’s mom since he and his brother were in college.

Upon graduation, Sorber worked as an insurance agent and also operated his own Two Men and a Truck franchise. He returned to the company in the mid-’90s, became its president in 2007 and CEO, the title he carries today, in 2009. In that time the company had grown significantly, but it wasn’t running as well as it could be. Starting in 2007, Sorber’s job was to help restructure the business.

“We had to take a look at ourselves internally,” Sorber says. “There came a time that I just knew things were broken here.”

Because the company was growing so fast there was no organization chart. It was very loose on who reported to whom. It wasn’t that people weren’t working hard, but things were not getting measured.

“I had an epiphany that something had to change big time,” he says. “I made up something that resembled an org chart on a big piece of paper in my office. I brought in five people that I greatly trusted and had confidence in and gave them three markers — green, which meant that person or that job was important; yellow, which meant I didn’t have an opinion either way about this person or about this job; and red, which meant that this job makes no sense.”

Sorber used that as a starting point to help him identify where the company could restructure and cut costs.

“I wanted to give big bonuses to everyone at the end of the year and share the winnings, but we had to prime the pump first,” he says. “We went from 78 employees down to 51 employees after I went through that chart.

“That wasn’t because we were losing money. It was because by the time we realigned everything, there were some people here who weren’t doing anything.”

To avoid issues such as this, you have to have metrics that you measure to make sure whether you’re doing well or not.

“My metrics are No. 1, customer satisfaction,” Sorber says. “Find out how every one of your customers feels about their service. No. 2 is trucks and driveways. We want to put more trucks in more driveways every year.

“No. 3 is franchisees. Make sure your franchisees are profitable and have the tools to grow. No. 4 is giving back to the community.”

Metrics are a crucial aspect of success, but so is a mission statement that helps employees and customers know what the business is about. It also makes your decisions as a CEO simple.

“If your mission statement is strong, it should be limitless,” he says. “For us, we had our mission statement when we had 25 franchises, and now we’re well over 200 and it still applies. You also need core values that comprise what’s important to your company. Once you have those, you have to stay within the confines of your core values.

“When I was a younger executive I thought that was stuff you say to be nice. It’s something that’s serious. You can’t go into work and keep turning the wheel and expect better things to happen. You’ve got to maintain your mission statement, core values, measure what you’re doing, and then you have to look for ways to make things better.”

Bring in key people

As Two Men and a Truck went through these necessary changes, new employees and executives had to be brought in to give the company the right skill sets to continue growing.

“Sometimes we hold onto our executives too long, and we get comfortable with them,” Sorber says. “They may not question what you’re doing. Not all of them, but many of them can be fine with the status quo and as the world is changing they’re not forcing you as a CEO to question what you’re doing.”

You can’t settle for the people who are in your key positions. You need to find people with the right skill sets and make sure they stay within your mission statement and core values.

“Bringing in new individuals is kind of like working on an old house,” he says. “You think if you put new windows on the house it’s good, but then the siding looks really bad. The same thing happens in business when you get somebody that’s great in a department. You start to think, ‘What if I had someone like that in marketing?’”

Sorber brought in executives to fill his company’s voids, and they began offering all kinds of new ideas for the business.

“When I started bringing in these key executives, they wore my carpet out because they have fresh eyes for the business,” he says. “They asked why we did this or that. Many of the things we were doing were the right things, but it’s good for you to make your point about why you do it.

“The new executives will say, ‘That makes sense’ or ‘That’s different.’ Other times they’ll say, ‘OK, but did you ever think about doing this?’”

That is how your business goes through an evolution, and it starts bringing in more modern thinking and different approaches. A business will have a life cycle of only so long, and you need to continually reinvent it because your customer is changing. If you bring in new people they may bring the great ideas you need.

“It’s really important as a president or CEO to hire people who are smarter than you in their specific fields,” Sorber says. “Our job as president or CEO is to look more strategically at where we want the business, make sure the executives play nice together, ensure there’s harmony in the business and keep an eye on those important metrics.”

During the course of the past six years, Sorber has been able to successfully do all those things within Two Men and a Truck. Randy Shacka became the company’s first non-family member to serve as president in 2012. Now, Sorber and Shacka are looking at the future outlook of the business.

“We think we will be a $1 billion company by the year 2020,” he says. “In the last few years we’ve been doing a lot of internal work on fixing where we are broken and getting the right people in here. Now we want to be more than just a moving company. We want to be a company for change.”

How to reach: Two Men and a Truck, (800) 345-1070 or www.twomenandatruck.com

Published in National

Many executives do not view the content they distribute as intertwined with their organization’s unique product or service. However, the two are interchangeable. Your product or service has differentiators that cause your clients to select you instead of the competition. Those same factors apply in content marketing.

If your goal is to engage prospects and ultimately lead them to conversion, you must create content that keeps them engaged. Success comes from creating consumable pieces of content that together form a singular thought leadership message and distributing those pieces across multiple channels. You never know through what channel someone will engage with your brand (or branded content), so the message needs to be consistent.

There are a few simple rules to doing this. Your content and what you’re selling should meet four criteria. It must be:

 

 

  • Useful

 

 

  • Relevant

 

 

  • Differentiated

 

 

  • Available

 

 

Useful means the content, as well as your product or service, has a defined use for a target audience. It addresses:

 

 

  • How do I use this?

 

 

  • How does this help me?

 

 

  • What problem does this solve for me?

 

 

Here’s an example: According to a recent IDC Research report, 49 percent of the entire U.S. population currently uses a smartphone. By 2017, that number is expected to reach 68 percent. That means that within four years, more than two out of every three Americans — regardless of age — will be connected via smartphone. Therefore, a useful product a company might offer could be a solar-operated phone charger. And useful content to distribute to a target audience may include “How to make your daily life easier with these top five iPhone apps.”

To be Relevant, the product, service or content must be new and interesting, and mean something to the market or industry. Your audience will ask:

 

 

  • What does this mean to me?

 

 

  • Do I need this?

 

 

Let’s say your organization provides a website portal that connects insurance companies. New and interesting content that means something might be, “How your health care plan will be affected by reform . . . and what you can do to prepare for it.”

In a world filled with noise, you must demonstrate how what you do is Differentiated from competitors and explain:

 

 

  • How does your content, product and service compare to the competition?

 

 

  • Is it unique?

 

 

Let’s go back to the smartphone example. If you sell or service iPhones and Android-platform models, think about creating engaging content that examines the needs of today’s smartphone user, and then go beyond the basic functionality.

It’s also imperative to understand your target audience and the target audience for each product. Android-based smartphones are primarily aimed at businesspeople. iPhones, for all their bells and whistles, are not. This differentiation has led to a lot of confusion in the marketplace when consumers compare one against the other. Understanding this allows smart marketers to create engaging content such as “The top 10 needs of businesspeople: A comparison of Android phones vs. iPhones.”

Finally, your product, service and content must be Available and easily obtained in any channel.

If you run a benefits company that works with employers, for example, health care reform provides a timely opportunity to help clients make sense of the landscape. This might entail delivering a variety of consumable content that’s available to them 24 hours a day, seven days a week, through any channel.

This could include a video that explains the difference in options available to employers. It could be a social media campaign that outlines the top five differences between the health care insurance exchanges and employer-sponsored health care. Or, it may be a series of print mailers or webinars, or even a dedicated microsite that’s filled with content that details what employers need to know.

When your goal is creating engaging content, your ability to consider — and address — each of these factors may be what’s required to transform engagement into measurable conversion.

Published in National

This is no fish story. Instead, this column is about one of the most important roles an owner or CEO must fulfill on an ongoing basis.

Leaders spend an inordinate amount of time dealing with the issues du jour. These range from managing people, wooing and cajoling customers, creating strategies, searching for elusive answers and just about everything in between. These are all good and necessary tasks and undertakings. Too frequently, however, these same leaders delegate this effort to others or ignore it altogether. To be “in the game,” you have to know when to fish or cut bait.

Successful fishermen know that to catch a fish they have to sometimes cast their lines dozens of times just to get a nibble or bite. The first bite might not result in reeling in that big fish. Frequently, a nibble is just a tipoff as to where the fish are swimming.

The same applies to reaching out — casting a line, if you will, to explore new, many times unorthodox, opportunities for your organization. These opportunities can be finding a competitor to buy, discovering an unlikely yet complementary business to partner with or snagging a new customer from an industry that had heretofore gone undiscovered.

All of this takes setting a portion of your time to investigate unique situations, as well as a healthy dose of creativity and the ability to think well beyond the most obvious.

Too many times even the most accomplished executives lack the motivation to look for ideas in unlikely places. Some would believe that it’s unproductive to spend a significant amount of time on untested “what ifs.” Just like sage fishermen, executives can also cultivate their own places to troll.

Of course, networking is a good starting point, particularly with people unrelated to your business, where sometimes one may fortuitously stumble onto a new idea that leads to a payoff.

Other times, a hot lead might come from simply reading trade papers, general media reports and just surfing the Internet. The creative twist is reading material that doesn’t necessarily apply to your own industry or to anything even close to what you do. New ideas come disguised in many forms and are frequently hidden in a variety of nooks and crannies. This means training yourself to read between the lines.

Once something piques your imagination, the next step is to follow through and call the other company or send an inquiry by email to state that it might be worth a short conversation to explore potential mutually beneficial arrangements. This can at times be a bit frustrating and futile. That's when you cut bait and start anew.

However, reaching out to someone today could materialize into something of substance tomorrow. The often skipped but critical next step, even after hitting a seemingly dead end, is to always close the loop with whomever you made contact. Even if there is no apparent fit or interest at the moment, it’s easy and polite to send a short note of thanks and attach your one-paragraph “elevator” pitch.

That same person just might be casting him or herself, be it in a month or even a year later, and make contact with a different organization that’s not a fit for him or her, but recall you because you followed through and created awareness about your story.

This just might lead the person with whom you first spoke to call you because you had had the courtesy to send that note. Bingo — you just got a bite all because of continuing to cast your line.

Good CEOs and honest fishermen also have one other important characteristic in common: humility. They know that when a line is cast it won’t result in a catch every time. But if nothing is ventured, it’s guaranteed there will be nothing gained. Don’t let that big one get away. Just keep casting.

Published in National

Aggregate value of domestic M&A transactions continues to swell despite a reduced number of announced deals, with dollars committed in May surpassing last year’s pace, supported by several billion-dollar-plus strategic buys.

Strategic buyers are actively pursuing acquisitions, incentivized by a slow organic growth environment and abundant cash reserves. S&P 500 companies are sitting on $1.7 trillion in cash and need to put money to work in higher earning assets. Competition for quality acquisition opportunities remains fierce, with industry buyers showing an increased willingness to pay premium valuations for growth and quantifiable synergies.

May highlights support a healthy strategic buyer appetite:

A. Schulman Inc. announced it was acquiring Akron-based Network Polymers Inc., a niche compounder of thermoplastic resins and alloys, bringing complementary business in specialty engineered plastics ABS and ASA. The deal is expected to strengthen its U.S. market presence by increasing penetration in key end markets such as building and construction, agricultural products and lawn and garden, as well as expand its distribution business. Schulman intends to continue an aggressive bolt-on acquisition strategy in its specialty plastics business, as well as other opportunities for transformational acquisitions.

The Timken Co. acquired Standard Machine Ltd., its fifth acquisition in 2013. The Saskatoon, Saskatchewan, Canada-based company provides new gearboxes, gearbox service and repair, open gearing, large fabrication, machining, and field technical services to the mining, oil and gas, and pulp and paper markets. The acquisition will expand Timken’s industrial services capabilities.

TransDigm Group Inc. announced it was acquiring Arkwin Industries Inc., a Westbury, New York-based manufacturer of hydraulic and fuel system components for commercial and military aircraft, helicopters and other specialty applications. Arkwin is TransDigm’s second acquisition this year, following Aerosonic Corp. in April, a Clearwater, Florida-based manufacturer of proprietary air data sensing, test and display components for use primarily in the business jet, helicopter and military markets. Both transactions were completed in June.

PolyOne Corp. completed the sale of its vinyl dispersion, blending and suspension resin assets to Mexichem SAB de CV. Assets acquired include manufacturing plants in Pedricktown, New Jersey; Henry, Illinois; and a resin research facility in Avon Lake, Ohio.

 

Deal of the Month

Its second major strategic partnership in the last four months, Cincinnati’s Catholic Health Partners announced an agreement with Kaiser Permanente of Ohio to acquire its existing health plan, medical group practice and care delivery operations in Northeast Ohio, which services more than 80,000 members. The transaction follows CHP’s February purchase of a minority ownership stake in Akron’s Summa Health System Inc., one of the largest integrated health care delivery systems in Ohio.

CHP is the largest health system in Ohio, serving the metropolitan markets of Cincinnati, Toledo, Youngstown, Lima, Lorain, Springfield, and Tiffin. Through its integrated health care delivery network, comprised of hospitals, long-term care facilities, home health agencies, wellness centers, and hospice programs, the company is estimated to service 38 percent of Ohio’s residents throughout 28 counties.

 

Andrew Petryk is managing director and principal of Brown Gibbons Lang & Co. LLC, an investment bank serving the middle market. Contact him at (216) 920-6613 or apetryk@bglco.com

Published in Cleveland

Any business owner can attest to the fact that running a business is no simple feat. As a small or mid-sized business owner, you must be prepared to wear many different hats, from new business guru, to HR manager, to janitor.

Running a business is all about preparing as much as possible, while still knowing that the unexpected is bound to happen, no matter how hard you anticipate. Being able to adapt quickly, think on your feet and learn as you go will help you be successful as you run your small business.

As cliché as it may sound, I often hear business owners and entrepreneurs say, “I wish I knew then what I know now.” With that in mind, here are a few simple lessons business owners have shared that might help make you successful in the business world:

•           Understand what it takes to be a business owner: One of the first steps is to decide on what you want your life to look like. If you’re looking for more control and to “make your own hours,” then entrepreneurship is probably the right step.

•           Be willing to go the distance: Leading a business takes time — time away from your personal life, spouse, family, and children. If you haven’t thought this through and developed a plan, you may find the demands of running a business pretty daunting.

•           Keep your eyes wide open: Business ownership can be a cold world and business owners may not receive as much support as they expect.

•           Know how and when to delegate tasks: Being a successful entrepreneur doesn’t mean being an ace at everything. It means knowing your strengths and working with others who complement your abilities by adding value to weak areas.

•           Be patient: Don’t expect overnight success. When you are pursuing a new venture, you need capital, and you need time. The only way to get there is by committing 100 percent.

•           Manage well: Never over-manage your employees, and learn to trust your staff. When it’s your blood, sweat and tears building a business, it is easy to become a micro-manager.

Truly trusting an employee means giving them the freedom and independence of working on their own and believing that they’ll do what is needed, even if unsupervised. Your employees will appreciate the mutual respect, and will be more inclined to reciprocate with hard work and loyalty.

•           Focus on your clients: If you’re looking for fame, get out now. Running a business isn’t about building fame and fortune; it’s about focusing on your clients and building your brand.

•           Be able to identify opportunities: Similarly, it’s important to be able to identify opportunities for profit and success. Some of the less cool, decidedly unsexy businesses are around because their owners saw an opportunity and acted on it.

The underlying theme for all of these tips is: Be prepared, be flexible and be successful, and keep in mind the tips above.

Gene Marks owns the Marks Group PC, a firm that provides sales and marketing technology and consulting services to businesses. He is a regular contributor to The New York Times, Forbes Inc. and has written five books on business, his most recent, “In God We Trust, Everyone Else Pays Cash.” Visit genemarks.com for more information. He is the featured entrepreneur and spokesperson for Hiscox Small Business Insurance's Author’s Series for Entrepreneurs.

 

Published in Columnist

You’ve worked, you’ve grown, and now it’s time to make a statement. For an emerging business, nothing says, “We’ve arrived” quite like a signature event.

Before you begin, don’t even look in an event planner’s direction until you answer one essential question: What are you trying to accomplish?

Consider whether an event is truly the best tactic to achieve that goal. An event can be an exciting coming out party for your company. But if your objective is at all unclear at the outset, there will be headaches.

This year, we hosted the Petplan Veterinary Excellence Awards for the first time in the United States. Making this event our own was no small feat; for 13 years, Petplan U.K. has presented a similar event that’s become known as “the Oscars of the vet world.” We had big shoes to fill indeed!

Here are some lessons we learned along the way:

Make it your event

Just as a handwritten signature represents your personal identity and communicates a promise, your signature event must be a symbol of your brand and deliver on your value proposition. Recognizing and awarding extraordinary veterinary professionals dovetails perfectly with Petplan’s “Pets Come First” credo.

The Petplan Veterinary Excellence Awards let us shine a light on the extraordinary veterinarians, veterinary technicians and practice managers who help keep our four-legged family in the very best health possible. These awards recognize not just their passion and excellence, but their exceptional “wow” service. The event’s purpose spoke directly to our mission.

If your event does anything less than that, you’re wasting resources.

Strategy is king

A good event engages a carefully cultivated audience, attracts media opportunities and generates goodwill in the community your business is a part of. This is where many organizations struggle.

While it is important to determine details like when, where and what’s for dinner, the focus should be on your event strategy: how you’re getting people there, what messages to communicate once you’ve got them and how to keep the conversation going when the event is over.

A feast for the eyes

A well-dressed window will compel people to gaze, so make sure the event’s visual branding lives up to the brand personality people have come to expect from you. For Petplan, that meant translating our fresh, friendly point of view into both décor and collateral.

The visual elements deftly delivered a few fun surprises that really felt “like us.” Once your strategy is firmly in place, don’t be afraid to cross your t’s and dot your i’s with a few creative touches

Face forward

A signature event is a great opportunity to put a public face on your company; think strategically about who you want to spotlight and how they’ll communicate your company values to the audience.

At the Petplan Veterinary Excellence Awards, our honored guests came face-to-face with our long-time friends and trusted advisors, not to mention key employees. Careful consideration was given to the seating plan to ensure that connections weren’t just hoped for, but inevitable. This made our event even more personal and gave attendees good insight into what we’re all about.

So many moving parts make up a corporate event. Make sure the foundation is sound and you’ll find that things will fall into place accordingly. Once you’ve nailed down your goals and hammered out the strategy, the rest is … well, a piece of cake!

Natasha Ashton is the co-CEO and co-founder of Petplan pet insurance and its quarterly glossy pet health magazine, Fetch! — both headquartered in Philadelphia. She holds an MBA from the University of Pennsylvania Wharton School of Business. She can be reached at press@gopetplan.com.

Published in Columnist

Since January 2006, when Jim Weddle first took over the managing partner position at Edward Jones, he has kept a keen focus on growing the investment firm to new heights. In 2007 he and his team laid out a five-year plan that they updated in 2010, but that was a mere steppingstone to the vision the firm rolled out last year.

In January 2012, Weddle unleashed what Edward Jones is calling its Vision for 2020. Focusing on growing the firm in three key areas — financial advisers, assets under care and households deeply served — Weddle’s vision won’t just have Edward Jones reaching new heights, it might just be soaring.

“Today, in a lot of markets, we are not the top-of-mind choice,” Weddle says. “We don’t have the presence that we need. It’s going to take us several years to get there, but we think we’ve got the way to do so.”

Edward Jones is a leader in the financial services industry that serves nearly 7 million clients with the help of 12,500 financial advisers and more than 34,000 total employees. The firm reported 2012 revenue of $4.96 billion, a mere fraction of what is planned for the years ahead.

“There is a huge demographic opportunity, and we need to better position ourselves,” Weddle says. “We’ve put a lot of tools in place. We’ve put additional products and services in place to enhance the client’s experience and to enable us and position us to do an even better job for them.”

Here is how Weddle formulated Edward Jones’ long-term vision and is beginning to make it a reality.

 

Create your strategy

In January 2012, Weddle made a big deal of explaining the long-term vision to the team at Edward Jones, not just what the vision was but why it was needed.

“Laying out a long-term vision provides the opportunity and the potential to get everybody aligned,” Weddle says.

The early success Edward Jones has seen with its plan is due to a thorough self-analysis the company performed when it first decided to create this vision.

“When we worked on our five-year plan we did so with the guidance and assistance of two gentlemen, one being Jim Collins who wrote, ‘From Good to Great,’” Weddle says. “One of the things that he suggests is that you ask yourself three questions.

“The first one is, ‘What do you do better than anybody else?’ The second is, ‘What are you most passionate about?, And third is, ‘What’s your economic driver?’”

Weddle says that Edward Jones’ business model makes the firm the better than anybody else in the investment process.

The firm is most passionate about helping its current and potential individual investors live a better life.

And lastly, its economic driver is its financial advisers.

“It’s not easy to get your arms around the answers to those questions,” Weddle says. “We had a lot of answers before we got it right.”

The second adviser that Edward Jones used in its planning process is Michael Porter, a world renowned expert on strategy, who preaches that strategy is all about a sustainable difference.

“It’s about doing things differently or doing different things than your competition and making trade-offs,” Weddle says. “It’s about making decisions as to what you’re going to offer and what you’re not. Who you’re going to serve and who you’re not. How you run your business comes down to the choices that you make.”

Those two things, the three questions and the tradeoffs, are the core of Edward Jones’ long-term plan.

“If you haven’t gone through the process of thinking those things through, good luck,” he says. “I don’t think you understand who you are or what business you’re in, which means it’s going to be very hard to optimize your results. That’s the value of the planning process for us. Yes, it does bring alignment, but it also brings focus.”

 

Identify your objectives

In order to better serve existing clients as well as to land many more clients by the year 2020, Weddle needed to set reachable goals for the staff.

“We have identified three peaks, three objectives related to that vision,” Weddle says. “First is growth of financial advisers, the number and our presence in the marketplace.”

Edward Jones currently has more than 7 million client accounts and 4 million households. However, the firm has identified about 40 million U.S. and Canada households that look like Edward Jones’ best clients.

“There’s no way that we can possibly serve even a fraction of that number of folks without increasing our presence in the market,” he says. “You might think, ‘Holy cow, how can you possibly to do that?’ Well, by growing 5-6 percent a year gets you there.”

Edward Jones has grown by more than that rate in the past, and Weddle believes the firm can reach this goal with the help of a new talent acquisition organization that was put in place, revamped FA compensation and significantly updated training and support programs.

“We anticipate supporting a good number of new folks that will be joining us each year,” Weddle says. “We’ve got amazingly strong pipelines right now. We think we’ll grow this year by 700 financial advisers in the U.S. and 80 in Canada and that will be a good start on that 2020 vision.”

The second objective of the 2020 vision is the firm’s assets under care. When the vision was first laid out, the firm had about $600 billion. In 2012 it had about $660 billion-$670 billion.

“By the end of 2020 we’d like to see those assets under care be $1 trillion,” he says. “You get there by growing 10 percent a year. We added about $34 billion of net new assets last year, which exceeded our objective of $30 billion.”

The third objective for the firm surrounds its deeply served households. Of those 4 million households Edward Jones currently serves, it identified 1 million households that the firm has a current deep relationship with. The firm wants to increase this number.

“We want to drive our deeply served households from the 1 million we had a year ago when we rolled out our vision to 4 million deeply served households in 2020. That’s a 15 percent compound annual increase and we’re ahead of where we need to be on that. I know 15 percent sounds high when we’re growing our FA’s by 5 percent and our assets by 10 percent.

“The reason we have set it at that level is because so many of our existing households can be moved to what we have defined as deeply served. It’s not just new households, but it’s going deeper with the folks that we already have a relationship with.”

 

Drive your plan forward

Now that Edward Jones had gone through the self-analysis and identified its objectives, the next step was to begin to roll out the vision and communicate how the business’ various departments and segments are going to have to contribute to meet those goals.

“One of the outcomes of the roll out of the long-term vision was to then say to every division of the firm, ‘We need you to look at the work you do and bring a critical eye to it and identify those things that need to be increased or put in place that will help us to achieve the 2020 vision. We also need you to identify the legacy work that we’re real comfortable with and we do really well, but maybe doesn’t add the value that it used to,’” Weddle says.

“You outgrow some things. You can’t just add on and add on and add on. You’ve got to also abandon things that no longer deliver value to your chosen client.

Every division of the company has got to come up with its business plan for reaching goals of the vision.

“We challenge each other, but it also allows me, if I’m in operations, to understand what the service side is doing,” he says. “It creates alignment and synergies and often times opportunities for working in a highly coordinated way that eliminates some cost and enhances productivity all driven by the vision.”

The No. 1 key to making a strategy implementation successful is having the right people driving results.

“Your results will be no better than the quality of the individuals who make up your organization,” he says. “You have to be brutally honest. At times you will outgrow some individuals.”

Sharing the business plans, challenging each other and making sure that everyone is working on the same priorities and holding people accountable is crucial to success.

“One area is dependent upon progress being made in another,” Weddle says. “We just need to make sure that we’re doing an absolutely terrific job for each one of those individual investors that we help to reach their financial goals. If we can stay focused on that we’re going to have a lot of success.” 


Takeaways:

  • Answer important questions about your business and its future.
  • Develop objectives to reach in a long-term plan.
  • Implement your plan with the right people and measures.

 

The Weddle File

Name: Jim Weddle

Title: Managing partner

Company: Edward Jones

Born: Elgin, Ill. He grew up in Naperville, Ill.

Education: Attended DePauw University and received a double major in psychology and business. He also got a MBA with a major in finance from Washington University in St. Louis.

What was your very first job, and what did you learn from it? I had a summer job in 7th grade where I worked Monday through Friday from 8 a.m. until noon for a gentleman who was a retired banker. He had a large property and I drove a tractor, cut the grass, pulled the weeds, painted the house and the barn and worked every day doing that. I learned that you make your own luck if you aspire to do or to have, there’s a way that you can go about making that a reality.

What is the best business advice someone has given you? I had interned here at Edward Jones, and I went out to Indiana where I established a new office and built it up. I had a mentor who was a very senior individual in our firm at the time named Jack. I remember confiding in Jack and he said, ‘What is your concern?’ And I said, ‘Jack, my concern is I’m 23 years old, and I look even younger. I’m afraid people won’t take me seriously.’ He said, ‘People will treat you the way that you act. If you act like a professional, they will treat you like a professional. If you act like you’re 23, they will treat you like you’re 23.’ He also said, ‘Prepare for every day, but do it the day before.’

Who is someone that you’ve admired? One was an accounting professor who had a huge impact on me. For his class he said, ‘You need to show up to class prepared or I suggest you don’t show up at all.’ He was teaching us how to be ready for the rest of our lives.

The second guy was a business adviser named Peter Drucker. We worked with Peter for 20 years. He helped us to understand very clearly who our customer was, what our value is, and the purpose of our work.

HOW TO REACH: Edward Jones, (314) 515-2000 or www.edwardjones.com

Published in St. Louis

The view from Beth Mooney’s office on the 56th floor of Key Tower in downtown Cleveland overlooks Cleveland Browns Stadium, the Rock and Roll Hall of Fame and Museum, Jacobs Pavilion and the Lake Erie shore — attractions that are part of what makes Cleveland special and reasons why Mooney loves this city and is proud that KeyCorp can call it home.

Mooney, chairman and CEO of KeyCorp, one of the nation’s largest bank-based financial services companies, with assets of approximately $87 billion and more than 15,000 employees, came to Cleveland in 2006 to lead the bank’s more than 1,000 branches. Her appointment to the CEO role in 2010 was a historic one since the move made her the first woman CEO of a top-20 U.S. bank. The announcement received national attention.

“I knew it was significant, and it wasn’t lost on me particularly from when I started in banking in 1978,” Mooney says. “It wasn’t lost on me that within a generation how transformational that was for our industry and within Key how significant it was, but it came with a degree of notoriety that I don’t think I saw coming. The world kind of took pause and noticed that banking, an industry that has long been heavily dominated by men at the top, promoted its first woman.”

While the move created big buzz, Mooney had to quickly focus on the job at hand since KeyCorp had been struggling to make a profit the previous few quarters coming out of the recession. One of the reasons she won the CEO role was her knack for developing and driving a strategy and her ability to get people to follow her. The company needed a new approach, and Mooney was ready to answer the call.

“Part of the process with the board when they selected me was to challenge me with what would be our strategy,” Mooney says. “How would Key differentiate itself? How will you make a competitive advantage? How will you know you’re winning with clients? There was a lot of dialogue around strategic vision. We just really need to stay the course, be rigorous, execute the strategy with focus and discipline and I needed to position us for that journey, reaffirm our strategic message to our employees, to our investors and find a way to capture that and bring people with us.”

Here’s how Mooney is focusing on building better relationships, providing great customer service and making sure her legacy as the first woman CEO of a top-20 U.S. bank leaves a positive and memorable mark.

 

Believe in your abilities

When Mooney started her career in banking, she didn’t think she would one day become a bank CEO. However, as she developed her skills and grew in the industry, she began realizing that the top spot could be within her grasp. She consciously sought opportunities in her career that would keep pushing her further.

“I was in it because I didn’t know that I would ever truly be a CEO, but that I wanted to go as far as my ambitions would take me,” she says. “I’ve made a lot of choices in my career and taken jobs, challenges and moves and very diverse opportunities in order to build what I call the best tool kit I could personally have and try to balance that with how far my abilities would take me.”

Throughout Mooney’s career, she has identified working well in a team environment, bringing out the best in others and accepting constructive criticism as some of the most important skills to have.

“One of the most critical skill sets is the ability to be effective in a team and work within environments where it’s groups of people solving problems, creating opportunities and driving business success that you have to think of yourself as a successful participant in a team and be able to exert pure leadership,” she says.

“As you get the opportunity to lead and get increasing responsibility, don’t lead with your differences; lead in a way where you bring out the best in others. You’re known for being a problem solver. You’re known to be somebody who is encouraging, coaching, mentoring, yet disciplined and delivers results.”

In Mooney’s career, there have been many role models and people who have mentored, coached and helped her get to this level.

“I have had a lot of bosses, both men and women, over the years who have invested in giving me opportunities — the stretch assignment, the difficult assignment because they believed I had a lot of capability,” Mooney says. “I tell people to take a tough job or take an assignment that’s outside your comfort zone so people can see you in a different light and realize that you’re scalable, nimble and can adapt to new situations. Never stop investing in your own abilities and your own learning.

“One of the things I’ve always said in interviews in my life whenever I was being considered for another opportunity … is I will always take the chance on my own abilities. If you give me this opportunity, I won’t disappoint you. Then work really hard to make good on that.”

Mooney says she is in her dream job, and as the company’s first female CEO she wants to make KeyCorp the best company she can.

“I want to do this well because I would like my legacy to be that this was a successful time for Key, for its clients, its communities, its employees, its shareholders — that it was transformational to our industry at a point in time and that it was a headline,” she says. “Hopefully by the time I’m done, it’s a footnote because there will be others who have risen to this level. Whenever you get that recognition and the spotlight is turned on you, I think it needs to bring out the best in you and that’s how I’ve internalized it as an extra obligation to do what’s already an important job well.”

 

Build better relationships

Mooney’s first steps to get KeyCorp back on track were to understand what would return the bank to profitability. She started with a focus on the company’s clients and consumers and sought to understand what they wanted from their bank.

“From a challenge point of view, what we were doing is still unique within the industry, which is a real firm focus on being very targeted about your clients and being disciplined about doing business with people that you had relationships with,” Mooney says.

“So staying very focused on our value propositions we’re going to build relationships, we’re going to do it in very targeted ways with clients who we know and appreciate our capabilities. We’re going to be clear about giving advice and solutions and not be product-pushers, and at the end of the day we have to give great service. So it was a little of back-to-basics, but with a whole new level of accountability and rigor.”

The best example of how Key showed its loyalty to its customers was when the Durbin Amendment was put in place in 2011. The legislation, which was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, limited what banks could charge for debit card activity.

“It took a huge stream of revenue out of the banking industry,” she says. “In our case, it was $60 million in revenue that went away. The last time I checked that was real money. The different banks started talking about no longer being able to offer rewards programs along with your debit card and were probably going to have to charge a fee. So you had to make your plans for what you were going to do because it was a significant revenue difference.”

The company stepped back and ultimately came to the conclusion that it should ask its customers how they felt.

“We have been building this notion of listening to our clients, being insight driven, i.e. what do they want and need?” Mooney says. “What do they value and what will they pay for? When we [asked our clients] what we heard was don’t nickel and dime us. They feel that adding a fee was nickel and diming. What they wanted was for people to recognize and value that they have a relationship with us, and if we have a relationship that should be meaningful to the bank.”

Key decided to reorient its products around the notion of relationship building. The bank not only didn’t pull its rewards program, but expanded it, which was the opposite of what other banks ended up doing. It even landed KeyBank on the “ABC Nightly News.”

“When [ABC] listed the banks that weren’t charging their customers’ fees, Key was prominently displayed, and I got a sound bite where I said, ‘We asked our clients. They didn’t want to be nickeled and dimed. They wanted to be valued, and we went for reinforcing ‘Bring us your relationship and we will reward you’ versus going the fee route.’” Mooney says.

“That is value-spaced, relationship-based and that is a commitment to an extraordinary service. That is trying to find solutions that fit the needs of your clients and positioning yourself to be different in the market. I look at that as one of those examples that you can point to that says something is different at Key.”

In order to differentiate your business from others in your industry you have to be able to use your relationships to your advantage.

“I would start with the basic premise that the more you can understand about what your client wants, needs, values or what will differentiate you is an incredibly powerful strategy,” she says.

“The power of unleashing the ability to take that which you provide and build it, package it and deliver it in a way that really resonates with what your client wants, to me, is probably the only truly valid growth strategy over time.

“To the extent that you believe that you can build something — if you build it they will buy it — is a lost strategy these days because we’ve come to an age where choice and knowledge about choices, the rapidity of change and the ability to switch has probably never been higher.

“Retaining loyalty and building relationships takes a different value proposition and takes different work. It has to be rooted in what your clients want and need and finding proactive, robust ways where you find those outlets to listen and understand is a linchpin of a successful strategy.”

 

Form a strategy

The strategy of relationship building and customer service initiatives at KeyCorp go back to before the recession hit. However, as the recession increased pressure on the banking industry, those strategies gained importance.

“Even before the downturn we stepped back and said, ‘What are the things we want to be known for?’” Mooney says. “This goes back to 2007 and we said, ‘We better get really, really good at customer service because at the end of the day nobody truly stays loyal to a product, nobody really stays loyal to a location, a brand; they stay loyal to people and they stay loyal to how you make them feel.’”

KeyCorp looked outside the industry at how others were delivering service in order to better grasp how the company should move forward.

“We looked to Lexus and Ritz-Carlton and really calibrated how we trained our people, what we asked them to do and how we measured them,” she says. “We put in customer satisfaction surveys and all sorts of things to ask what sort of experience you received. You need to teach your people this is what service looks like, and this is how it feels to the client and then you call the client and ask them did they indeed experience you that way.”

Through that kind of training and initiative, KeyCorp got its customer satisfaction levels up to what most community banks experience.

“In the last two years, the slope of that line has accelerated to the point where the Holy Grail in service has always been the local community bank,” she says. “We’re right at the level of the service that community banks have give,n and we’ve really gapped out from our competitors.”

“You’ve got to decide what it is people want. Learn from the best in the industry, not just your business. Create a way to train people to it. Test that it’s happening and then recognize and reward so it becomes a virtuous cycle within your company to make giving great service part of how people get up.”

For any strategy to be effective, there are a few critical factors that you need to make sure you do.

“For a good strategy to be great, there is only one way and that has to be the consistency of execution of the strategy,” Mooney says. “First, you have to start with clarity of the strategy to the people who have to implement it. Your employees have to understand clearly what your strategy is. What’s your strategy and how are you going to differentiate? How are you going to compete and what does winning look like?

“Secondarily, it’s the consistency with which you execute that strategy over time and that your ability to focus on execution is done with rigor and accountability. Then make appropriate course adjustments, but do so with consistency.

“I don’t think there has ever been a great strategy that wasn’t executed over time with rigor, with accountability, with clarity, with buy-in, with recognition, with reward that is meaningful to the client. This whole notion of ‘It’s a journey, not a destination’ that you have to stay with it over time and people need to understand it and believe that it’s real and get up and know what’s expected of them and do it over and over and over again, to me, it’s that clarity and consistency and the disciplined, focused execution that makes a difference.”

The course of implementing a strategy takes a lot of hard work by everyone involved, but the CEO has to play the most crucial role.

“The trajectory, the pace, the rapidity and the tone and feel of [a strategy] is uniquely a CEOs role to help shape that, to help give it a face and something that your employees can follow, your clients can understand and your communities can appreciate,” she says. “Then ultimately create the shareholder value from those strategies that will make it rewarding for them to invest in your company. It’s kind of unique being the bearer of it as well as the driver of the strategy.”

 

Gain buy-in

No matter how good a strategy sounds or how good it looks on paper, it will not succeed unless you get buy-in from your employees who have to ultimately be the ones who do the work.

“The first cornerstone for how do you get followership in a strategy has to be the simplicity of the message, the consistency of the message and you can’t communicate enough,” Mooney says. “Every chance I get it’s here’s who we are, here’s how we compete, here’s how we’re going to be different in the marketplace, here’s how you help us win. It’s consistency of messaging. Then what I hope I do effectively is, ‘I hope I’m very authentic. I’m very genuine. I’m very down-to-earth, and I put things in terms people can understand and can see themselves as part of.’

“So there is this constant, clear messaging and consistency of communication that you have to get protocols and rigor around where the content is compelling and understandable and you see yourself in that strategy.”

Another way to get people to follow you is to truly show your company how much you care about its well-being and success.

“I think the other thing that is unique to my style is that people know I’m passionate and I believe in what we’re doing,” she says. “I value our employees. I believe in our clients and our community. I’m committed to our shareholders, and I think there’s a bit of a rising tide in the messaging that people want to go with that.

“It becomes something that they can rally around. The rigor around making sure those messages are done continuously and reinforced doesn’t happen by chance. There is a whole protocol and operationalizing of that messaging to make sure that it is not just ad hoc, that it is indeed consistent, clear and inspiring.”

Today, KeyCorp is continuing to leverage its relationships and devotion to customer service. Since the downturn, the company has reported eight straight quarters of profitability, and it has further plans to keep growing.

“The cover of our annual report captures it well; it says, ‘Strong, Focused and Building Momentum,’” Mooney says. “I feel like with eight straight quarters of profitability Key is solidly back to profitability and that what we need to do as a company from here is to build on our momentum and the sources of where we’ve been able to grow our business and return to profitability – and just be relentless around doing so.”

To ensure the continued success of your business, you need to not only focus on relationships and service, but on new opportunities as well.

“You need to do both grow your core and do the things you do well as well as seek to always do new things that are additive to your business model, but with a keen sense of prioritization,” Mooney says.

“If you try to do everything, you do nothing well. You have to be disciplined in what you prioritize, ‘planful’ in what you choose to execute, and then rigorous in how you measure and hold people accountable for what you’re doing. Those three stages of attributes need to be part of a constant vigilance making sure you answer those three questions and then it becomes a virtuous loop.”

 

Takeaways

  •  Never stop investing in yourself.
  •  Build relationships and leverage them to succeed.
  •  Use strategy to deliver a consistent, clear message.

Learn more about KeyCorp at: 

Facebook: https://www.facebook.com/KeyBankCommunity

Twitter: @KeyBank_Help 

 

How to reach: KeyCorp, (216) 689-5580 or www.key.com

Published in Cleveland

A lot of people gave money to help Silverado Senior Living Inc. become a national leader in providing care to people with memory impairments. Fourteen years later, Loren B. Shook felt like it was time to give them a return on their investment.

“We made stock options to many staff members through those years,” says Shook, the company’s co-founder, chairman, president and CEO. “No one got paid anything. All of the money we made went back into expanding the company. At some point, we needed to monetize peoples’ investment.”

In addition to Shook, his co-founders, James P. Smith and Steve Winner, and those staff members, investments were also made by the private equity firm Riordan, Lewis & Haden. This funding was instrumental in building a company that has 2,800 employees and provides invaluable care to senior citizens who need it across eight states.

“A lot of people think it’s just about the money, getting the equity and the debt partners,” Shook says. “But money is just part of it. The bigger part is what kind of partner are they going forward with you?

“All of them understood the vision of the company, which was to give life to our residents in our assisted living communities, our clients in home care and our patients in hospice. The vision is to give life to their families and give life to each other as associates and colleagues in the company.”

Shook knows all too well that without money, none of it would be possible and that Silverado Senior Living would have never gotten off the ground. But the financials have never been his focus and he strongly believes that is a key reason why the company is so successful today.

And so it was through that prism that Shook and his team set out to find a way to provide a return on past financial investment while simultaneously strengthening Silverado for many more years of meaningful patient care.

Find your soul mate

One of the best options that the Silverado team initially came up with was to take the company public. But as they began to look at what that involved, they quickly soured on the idea.

“Every year, you’re spending $1.5 million to $2 million for accounting and legal fees just being a public company,” Shook says. “You’re taking up a lot of time for the CFO and CEO that could otherwise be providing service more directly to our customer base.”

Soon, their thoughts turned to Health Care REIT, a real estate investment trust that had been working side by side with Silverado since its inception.

“REDIEA is an acronym that stands for Real Estate Development Investment Empowerment Act,” Shook says. “It was very new. Health Care REIT had done one REDIEA with an LLC corporate structure. We’re a C-corp. It was a very detailed process. It took a lot of action to overcome a lot of hurdles that had never been addressed before.”

One of the biggest hurdles in any business deal is the relationship between your company and the financier you want to partner with. Shook flashes back to 1996, when he and Smith were looking for financial support to start Silverado.

“Whenever I started a meeting with a potential financial partner where there was equity or debt, I always started the meeting by telling them what the vision of the company was,” Shook says. “If they didn’t have an interest in the vision and the purpose, the meeting was over because we were not in alignment.

“A lot of experts in raising money would say, ‘Don’t do that. Go down the path of return on investment, the capital you need and the numbers.’ I never believed that was the right way to start a meeting because it’s more than just about the numbers. No one I met with was upset that I started the meeting that way.”

The fact that Silverado had built an established relationship with Health Care REIT over the years made it a lot easier to move the process along with the REDIEA. But that relationship only developed because Shook and his team took the time in the beginning to find partners who shared their vision.

One of the most important things you can do to help you find that kind of partner is to talk to people who have done business with the investor in the past and ask what happened when trouble arose.

“Tell me the hard times you went through and what it was like,” Shook says. “I want to know that I have a partner that has the experience and has been through the ups and downs and is going to be by my side when we’re going through difficult times.”

As Shook looked to finalize the REDIEA deal, he wanted to make sure there was alignment and a shared vision, just as there had been 14 years earlier.

Lean on your culture

As the REDIEA deal was being consummated, Shook was also very aware of his staff and the responsibility he felt to keep them appraised of what was happening. But he also felt confident he had established a track record of trustworthy leadership.

“The culture has to be there before big decisions come about,” Shook says. “You don’t create the culture at the time you have a big decision where you need people to be confidential and you need people to come to you and say, ‘I heard what you said in the conference call. But here’s what I’m worried about, Loren.’ You have to have that kind of open trust in the company. That has to be there before those issues come up.”

Shook shared what was happening with his senior leadership team and asked them to keep it from going public since the deal was still being finalized. He shared the good parts of the deal being discussed with Health Care REIT and the cons.

“There’s always a negative side to everything we do,” Shook says. “Here are the pros, here are the cons and here are other alternatives of what we could do to capitalize.”

Shook reiterated that there was no pressure being made to enter into this kind of deal from anyone.

“Riordan, Lewis & Haden wasn’t saying that you have to recapitalize the company,” Shook says. “They were very patient. It was just the right time and the right thing to do.”

Shook says finding employees who can thrive in your culture and have trust in the way you do things requires a similar approach as when you’re doing your due diligence on possible lenders.

“Our vision is to change peoples’ lives,” Shook says. “So people who work within a company like our’s, in order for the culture to exist, would have to have an alignment or purpose in life with that. Their individual purpose in life doesn’t have to be the same purpose, but it needs to be something that is compatible with the major purpose of the company.”

In order to stay healthy, a culture needs to be such that it can allow people to leave without creating a big problem. Even the strongest culture has people who sometimes lose their connection to the organization.

“Lives will change,” Shook says. “Where it was the right place to be before, maybe it’s not anymore. We want people who get more than they give out of working at Silverado. We want the company to get more than it gives out of having that person work with us. If both are positives, it’s a tremendous source of energy coming together. If one is negative, there is a drain on that energy and a drain on that company.”

Believe in what you do

With a strong relationship with Health Care REIT and a strong culture that trusted in its leadership, Silverado was ready to make a deal. The $298 million partnership closed in January 2011.

“Technically, we did sell the company,” Shook says. “But all of us investors, including Riordan, Lewis & Haden reinvested a great deal of money back into the company. I personally reinvested 50 percent of my proceeds back into the company.”

Silverado is poised to continue growing with seven new communities under construction, joining the 23 communities, eight hospice offices and five home care offices already up and running. Another hospice office and home care office are also in the process of opening.

“Before we started in this industry, people said the model we pursued would not work,” Shook says. “They said we would be bankrupt right away because they couldn’t connect the things we do. They would say it’s either a medical model or a social model and they couldn’t understand how both could happen.”

Shook is confident the results have proven those critics wrong.

“People who invest in business want to make a difference too,” Shook says. “If you get a good return on your investment and make a difference in peoples’ lives as well, then you will win attracting that capital to your company compared to somebody else who is just giving them a return.”

How to reach: Silverado Senior Living Inc., (888) 328-5400 or www.silveradosenior.com

The Shook File

Loren Shook

Co-founder, chairman, president and CEO

Silverado Senior Living Inc.

What’s the best business lesson you ever learned?

One of them is to understand my own strengths and bring in people who have strengths that I do not have. In other words, I don’t want to spend my energy trying to do things that are not my strengths. I’m good at seeing things that can happen that are disparate or ideations, or seeing things that people don’t see and then connecting them.

I can put together the big picture deals like a REDIEA, but I’m not good at the details. Tom Croal, my CFO, he’s good with the big picture. But he’s also terrific with the details. There are enormous numbers of them and he’s very good at that. So I have a CFO who is excellent at that and I’m not.

Shook on value: People will pay for what they value, and I should not impose my financial limitations on them. I don’t know their means and I don’t know what they value. I couldn’t afford to have a person living at home 24/7 taking care of a loved one. So one would think, ‘Who can afford that and why provide that as a service?’

Well, nonsense. We have a number of people we take care of at home 24/7 and there are plenty of people who can afford that. It’s expensive, but it’s not a problem for them. If they can afford it, they should be able to have access to that service.

We’ve taken someone’s mother with Alzheimer’s on a cruise to Mexico. We staff it 24/7 and make that cruise possible and she has a great time. Don’t put your limitations on what other people want.

Takeaways:

Vet your financing partners.

Stick to your culture.

Don’t give in to doubt.

Published in Orange County
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