For a lot of businesses that emerged during the dot-com era, unrealistic expectations for growth proved deadly. For Bostick, president and CEO of IT consulting firm Lucrum Inc., the experience provided a painful but valuable lesson.
Lucrum landed on Cincinnati’s Fast 55 list more than once and on the Inc. 500 list of fastest-growing private companies. And Bostick was a regional Ernst & Young Entrepreneur Of The Year Award winner in 2000 in the e-commerce category.
But then the tech bubble burst, and Lucrum found itself in serious financial straits as the domino effect of crashing tech companies left it with piles of invoices it couldn’t collect on.
As a result, Lucrum’s bank essentially took control of its purse strings for 14 months. Today, the company is back on the growth track, with $21 million in annual revenue and 120 employees, and Bostick says he learned some valuable lessons about growth assumptions and how a CEO should lead.
Smart Business spoke with Bostick about how he refocused on the basics that made his company successful, he says, putting it on the rebound.
How did Lucrum get into trouble?
I took my eye off the daily habit of managing the financials and having tight financial controls. I took my eye off making sure that customer satisfaction was truly there and personally leading the charge in that effort.
I took my eye off where the market was going and where the overall economy was going. (People) may have the need to use you, but if their budget got cut, all of the wishing in the world’s not going to matter because they’re not going to buy it. That’s an external economic factor that you’ve got to watch.
When did you realize that you had to make a change in how you were leading Lucrum?
I went through this financial period when I had weekly and daily reports to the bank. I understood that for me to manage my way out of that, I needed to get back onto a momentum of identifying new business and new customers and continue to go back to old customers and make the market that way.
To me, it was all about continuing momentum through positive vision and optimism and leadership, and also just a lot of hard work.
What did you learn from that experience?
I had a very tough lesson because it was a very painful lesson. At the same time, it’s made me a heck of a lot better CEO. I can anticipate things up front.
Even though I’m more conservative in some areas, I’m a more educated risk-taker in some other areas, so I wouldn’t say that I got so conservative that I didn’t make any decisions anymore. I just try to remember my natural inclination to potentially go too fast in certain areas and slow myself down.
I get other people to do certain areas where my abilities may not be the best.
How has your management style changed as a result of your experience?
I’ve always been hands-on, leading from the front, and then when the dot-com bubble happened and we were all looking at company valuations and company success and growth for any reason, if you will, I became enamored. I got intoxicated in that, and it only took a short time for the intoxication to trash a company through some mistakes I shouldn’t have made.
When businesses have struggles, they come faster and more furiously than you’d ever expect them to come. So stylistically, I’m back to my hands-on approach. I’m not meddling in my managers’ affairs. They know who is to execute what.
I act as an adviser or leader in that area now, but in the past, I probably exercised too much micromanagement. I was emotionally involved to the point that I thought I had to make a lot more decisions than I needed to.
Where do CEOs in fast-growth companies go wrong?
I think a lot of CEOs become very internally focused about their company and themselves, yet their success originally was because they understood the external market and took advantage of the marketplace. In my opinion, very few CEOs spend too little time on internal factors.
The internal factors tend to be the politics in the company, the company’s product line, the balance sheet and financials, its board, its business strategy. It’s easy to get very wrapped up in that and not enough in what’s happening externally and how can it affect my market.
CEOs have to lead from the front of the business, not from the back of the business. Of all the generals on the battlefield, the best ones led in the front, not in the back.
If I’m having a customer satisfaction issue ... that means don’t have your people call him. You, personally, as CEO, lead the charge and you call them, you go over there and talk to them and listen to what’s going on.
How to reach: Lucrum Inc., www.lucruminc.com
Exposure to these international risks does not require a company to have an international location. Employees traveling abroad or simply sending faxes or other correspondence overseas can create an international exposure for a company.
Regardless of the degree of the exposure, a company may be uninsured or underinsured with a domestic insurance policy. Even the worldwide endorsement used by many U.S. insurers can leave gaps in your coverage.
Companies should thoroughly review their current insurance programs and make sure prospective carriers fully understand the nuances of the global market and provide a broad range of products and services to address the unique exposures of international business.
Four key areas where due diligence should be performed before going global include the following.
Does the insurance carrier understand the local market? This includes legal jurisdictions, economic climate and the language.
Various countries have unique nuances and insurance requirements that range from environmental impairment in Germany to natural catastrophe pools throughout Europe. The insurance carrier should also be able to keep you abreast of any major changes in the legal and economic climate.
The foreign landscape opens a box of exposures rarely considered.
Currency devaluation, political risk and tax liability are all issues. An insurance carrier should be able to offer a wide array of products to meet your needs as overseas expansion occurs. Ideally, a company should be able to grow with their insurance carrier from the early beginnings in international operations to full manufacturing and service operations based overseas.
A routine overseas business trip may not be as simple as it first appears. As an employer, you must consider workers’ compensation issues, automobile liability and property theft exposures. Purchasing these lines of coverage individually may be costly, but many insurance carriers can package these programs to ensure adequacy in coverage along several lines.
This simple package may later require local admitted insurance policies (those recognized and required by local countries) as your company grows. This requires an insurance carrier that understands the local insurance market and legal requirements imposed on business owners.
While it is important that your insurance partner provide a wide array of international insurance products, it is equally important that they support their products with an experienced global network of service providers.
Your carrier should provide local claims handling ability and medical assistance programs to help in the event of an injury or sickness overseas. Examples of incidents that might require global services include:
- A business traveler has a car accident and the doctor does not speak English
- A business traveler is robbed and needs help re-establishing identification
- A business traveler gets arrested and jailed for a seemingly minor infraction
In 2003, nearly 25 insurers went insolvent. In addition, many carriers left the international insurance arena, or decided to reduce their global services, which adversely affected the value of their product.
Carriers should have the financial stability and commitment to fulfill their obligations and be a long-term competitor in the international market. It is crucial that the carrier have the financial strength to make good on its promise to pay and be there in the hour of need. Common insurance carrier financial strength rating benchmarks are provided by A.M. Best, Standard & Poor’s and Moody’s.
John Sence has more than 10 years of experience in the insurance industry. Since joining Schiff, Kreidler-Shell, the Midwest’s leading independent insurance agency, he has developed key areas of expertise in international insurance and construction. For a review of your current insurance program, contact Sence at (513) 977-3198 or email@example.com.
What is a donor-advised fund?
A donor-advised fund is established by gifts to a separate account at a public charity, which acts similarly to a charitable checking account. However, unlike a checking account, the donor-advised fund is an asset of the charity, and the donor has the right to name the fund, recommend grants from the fund, and, in some cases, suggest how the fund is invested.
How do I start a donor-advised fund?
Donor-advised funds are offered by community foundations, larger charities and many investment firms. You may take a tax deduction each time you make a gift to a donor-advised fund. Investment returns on the fund increase the balance from which the donor may recommend grants in the future.
Who can be advisers for a donor-advised fund?
Often, the donor and his or her spouse are the initial donor advisers who recommend grants from the fund. Most charities allow the appointment of successor donor advisers.
Why must the charity have the authority to approve or deny recommended grants?
A donor to a public charity must relinquish control over the gift before it qualifies for a charitable tax deduction. Typically, a charity’s governing board only denies grants suggested to organizations that do not qualify for public tax-exempt status, or where the donor will receive personal benefits from the grant.
What are tax-wise ways to use a donor-advised fund?
- Unusually high taxable income in 2005 can be offset by the charitable tax deduction from a gift to a donor-advised fund, perhaps equal to several years of anticipated charitable gifts. In future years, you can recommend grants from the donor-advised fund to make the charitable gifts.
- Recurring annual gifts can be accumulated in a donor-advised fund to make a substantial grant in the future - for example, to establish a scholarship fund or endowment.
- A donor-advised fund can be the recipient of annual distributions from a charitable lead trust, a future distribution from a terminating charitable remainder trust or the designated beneficiary of an IRA, providing a charitable legacy for future family giving.
- Donors can involve grandchildren in their charitable giving by making contributions to a donor-advised fund, from which grandchildren research and propose grants. During a family gathering, grandchildren present their choice of charities to receive grants from the family’s donor-advised fund.
- Smaller private foundations, which incur sizeable costs to administer and file tax returns, can be terminated by transferring the assets to a donor-advised fund. The fund provides the same family identity and generations of donor advisers for making charitable gifts, with considerably less cost.
Michael D. Barnes, Esq. is president of the Johnson Charitable Gift Fund, a public charity providing donor-advised funds, and vice president of Johnson Trust Co., a division of Johnson Investment Counsel Inc., which manages over $3.2 billion in assets. Reach Barnes at (513) 661-3100.
“We’re not in the business of running the businesses,” Strike says. “We are coaches and trainers, people who consult and help people run their businesses.”
And that is the bare bones behind Martin Franchises’ management style. The company isn’t hands-on, and it doesn’t micromanage. Instead, it places its trust in the store owners.
“Our feeling is that franchisees run a better store than we can run ourselves, because they are on-premise and focused on the success of that store,” Strike says. “We think our expertise is in bringing franchisees together in a way that works synergistically for everyone’s benefit.”
That highlights two of the main benefits to running a franchise operation plenty of experience to draw from and the ability to specialize. Store owners are allowed to focus on what they do best running the store and Martin Franchises then has the time and resources to do what it does best focus on the big picture.
And that is revitalizing the Martinizing Dry Cleaning brand. The first Martinizing Dry Cleaning stores opened in 1949, and by the 1960s, there were thousands. But when business started to dwindle, the company stepped back to take stock.
In 1987, it designed a new franchise agreement, offering improved support in the form of marketing and advertising packages, public relations consulting and equipment assistance in exchange for a royalty of 4 percent gross annual sales and an advertising fee of 0.5 percent monthly sales. And it’s taken steps to hone in on its target customer, households with median income of $60,000 or more. Martin Franchises does this by keeping prices pretty average neither the highest nor the lowest in any market while providing the best service.
“We’re not going to be the lowest-priced cleaner in a market; we don’t want to be,” Strike says. “That does not give us the revenue we need to provide our customers the service they want. We try to provide an excellent service, excellent quality at a very reasonable price really provide an excellent value.”
This approach is one of the benefits of more than a half-century of business experience.
“It’s just a question of training,” Strike says. “[It’s from] working with a lot of stores over a long time and a lot of different markets, gaining that experience, sharing that experience between franchisees and developing slowly, over time, that reputation with customers.”
And today, the company is taking that experience and reputation into new areas in the United States and abroad.
“We’ve been around for a long time more than 50 years,” Strike says, “and a lot of the stores are older stores, so as demographics change and neighborhoods change and stores and shopping centers change, a lot of those old stores are dropping out, closing. It’s just a natural lifecycle, if you will, and we happen to have a lot of stores that are nearing the end of their lifecycle.
“But we’re replacing them with new, high-quality stores in high-growth markets. So the total number of stores happens to be dropping down in the U.S., but it’s just part of a natural growth, a natural process of aging and change.”
But while the number of stores domestically has dropped over the past five years from more than 500 to fewer than 400, the number of international stores has steadily increased from just over 150 to almost 250.
“It’s kind of like pruning in some ways,” Strike says. “We prune the stores that are no longer in the markets or neighborhoods where our key customers are. And try to put in new stores in places where we want them.”
That includes places such as Mexico, Ecuador, Peru, Hong Kong, Japan and Germany, in addition to a renewed focus on American cities such as Nashville, Orlando and Phoenix It might sound daunting to target such vastly different areas, but Strike insists that opening foreign markets isn’t all that different from opening domestic markets.
“Right now, our approach to foreign markets would be similar to what we’re doing in the United States, which is that we would like to find franchisees who are capable of opening multiple stores themselves to be the core in any particular market,” he says.
Strike says the biggest challenge to going international hasn’t been a language barrier or cutting through government red tape. The biggest problem has been distance.
“The challenge for us is being able to establish a big-enough presence in any foreign country to be able to justify the overheads involved, to provide support to the franchisees,” Strike says. “It’s more just a question of distance, distance requiring a sufficient size.”
And there are other considerations that go into market selection, whether that market is domestic or international.
“We look at markets which we feel have the potential to handle the growth of our putting in several dozen stores in a market,” he says. “And we look at stores where we have a kind of open territory, without a big presence, where we could find an area developer who really wanted to go in and put in multiple stores themselves, and we could offer them kind of an open field to do that.
“Most of these markets are areas where we’d expect there to be two, three, four area franchisees who would take parts of the market and develop them.”
Once Martin Franchises decides to open a new market, the most important factor becomes finding the right location.
“We look at the demographics, at the quality of the center, at accessibility, we look at visibility, we want to make sure we’re on the correct side of the street, we want to make sure, in short, that it’s easy for our customers to notice us, recognize us and get to us,” Strike says. “We want to provide as easy an experience as possible for them to drop their clothes off and pick their clothes up. We prefer drive-through locations, if possible, and we want to make sure there’s plenty of parking.”
Once markets are selected and store locations opened, the biggest issue becomes quality control. How, with so many different stores in so many different locations, can Martin Franchises guarantee they’re all living up to the Martinizing Dry Cleaning brand and reputation?
Training, training, training, says Strike.
“Working with our franchisees so they know what’s involved in providing a quality service to their customers,” he says. “Its not just about how you clean the clothes, it’s also about how you greet the customer, how you package the clothes, how you take care of them, how you make sure they get the clothes back, a whole variety of things that are involved in providing good customer service. Meeting the customers’ needs, promoting quick turnaround, quick service, all those.
“So what we do is, we train our franchisees and continue to work with them so that they know how to offer all those things at a price that’s reasonable and provides a good value.”
Each new franchisee must go through a training course before opening his or her store. The course consists of one week of both classroom and hands-on training at Martin Franchises headquarters in Loveland, and another 60 to 80 hours of training in the franchisee’s own store.
After the crash course in dry cleaning, headquarters keeps in touch with franchisees through multiple avenues, from annual regional meetings to a toll-free helpline. And the company drops in on owners periodically to see how they’re doing.
“We have regional managers who visit the stores, inspect, do quality checks and work to train the staff at each individual store to learn to recognize quality and produce it,” Strike says.
But there is some room for individuality in the franchise business. Strike tries to ensure that each franchisee has the power to make the business right for them, without straying from Martinizing standards.
“We try to establish a firm set of guidelines as to how to run a store,” says Strike, “And then tailor the implementation of that very specifically with each franchisee, allowing them to make decisions to run their own business.”
Built-in flexibility is essential in managing a franchise, says Strike. Because while there are definite benefits to operating through franchises the ability to expand quickly, to have many stores and still maintain close contact with each through the owners there are also disadvantages, namely dealing with varied personalities in an organization that relies on standardization.
“You have to work with multiple personalities to maintain one brand image and one approach to kind of servicing the customer,” says Strike. “And that’s the role that we play coordinating the efforts of these multiple owners and helping them get the benefits of working together. It’s not easy.”
But that doesn’t matter to Strike. He says Martin Franchises will stay on top by continuing to tweak its approach to helping store owners and keeping everything in balance.
How to reach: Martin Franchises Inc., http://www.martinizing.com
What he didn’t see were the multiple hurdles his company, General Data Co. Inc., would have to clear to introduce its technology to the labs. If he had, he says, General Data might not be on the verge of cracking this potentially huge market.
“Sometimes you do it in spite of yourself because you don’t fully understand all of the obstacles, and if you did, you would have pulled the plug two years earlier,” says Wenzel, founder, president and CEO of the nearly 200-employee company.
Wenzel launched General Data in Pittsburgh in the 1980s, then bought a Cincinnati company involved in barcode technology and moved his business here. It’s found its niche in hard-to-barcode applications.
One client, for example, wanted to apply labels to oily parts without having to clean them first, and General Data came up with a solution. Another innovation: A hospital patient identification wristband that includes a photo of the patient and other data to avoid mix-ups in medications or testing.
Wenzel talked with Smart Business about penetrating a fragmented and unfamiliar market at the right level, sustaining a spirit of innovation and choosing the right opportunities to pursue.
How does General Data stand out from other companies in the barcode industry?
Our forte is the difficult-to-barcode or the difficult-to-apply automatic identification. Typically, from a consumer standpoint, if they think of barcodes, they think of the UPC code on the side of a cereal box.
That is not our business at all. We specialize in on-demand labeling, typically in a manufacturing or distribution environment where variable data needs to be applied online or during the process, i.e., either a serial number needs to be created, a lot number, a weight, some variable data that cannot be predetermined, and so the basis of the business in the early days was to come up with the hardware/software and the media to print variable data in nasty environments.
Where is the largest concentration of your business?
Manufacturing in general, although in the last four years, we’ve made a huge commitment to health care. The other application that is huge we believe that General Data is the world leader in the segment of laboratory automation. We have come up with a patent-pending process where we can apply a label to a pathology slide, where we can encode patient identification on each slide from a computer-generated database, which sounds real simple, and according to manufacturing best practices, had been in place for 15 or 20 years.
That’s not the case in health care. Two years ago, I didn’t know much about laboratories, but the protocols, the testing procedures that a slide has to go through and is subjected to <\m> some of them require 26 steps. No one up to this point had developed a label material that could be applied and would withstand the protocols of these tests.
How have you overcome the obstacles to entering the medical lab market?
It’s interesting when you enter a new market because once we came up with the label that actually survived this, well, it’s a good news, bad news situation when you go into a new business segment where it’s never been done before. That’s good if you capture that business segment, but you are also asking your customers to change their existing business practices, which is not only a huge challenge in any industry, but particularly so in the medical industry.
It’s a new way of doing it, especially in the labs, because they use all the equipment from the lab automation companies, the ones that make the testers and the processing equipment they use. The lab may want to adopt our technology but the software to be able to deliver the patient information to a printer at the right place in the sequence of events didn’t exist. So we’ve had to work, in essence, with the OEM suppliers of equipment to labs, and to their systems and to their databases. We’ve said ‘Look, guys, we’ve come up with this wonderful invention and we can automate this process, but we need your help to either open up your software or make software changes so that we can get at the data.’
It’s not that they don’t want to do it and they want to see more errors, but they already have 10,000 requests from their customers and they only have ‘X’ that they can accomplish. So we had to develop a groundswell with early adopters to prove the technology and prove the increase in effectiveness in the lab and prove the decrease in errors so that now it’s getting legs, and our customers in the labs are now in a position where they can put pressure on the third-party equipment suppliers to work with us.
We finally had some major successes just within the past six months where we’ve had some of these large companies say they understand.
How is the health care industry different from other industries?
It’s the best in the world because it’s entrepreneurial and it’s fragmented. It’s also very slow to adopt industrywide standards because it’s entrepreneurial and fragmented. The government has been hesitant, but in the past couple of years they’re starting to put more pressure on the industry because there’s been a huge lack of uniformity in standards.
What’s interesting is they’ll all come up with the same answer at the end; it’s a different way of getting there and, unfortunately, there are hundreds of different ways of getting there.
How did you persuade medical lab companies to work with you?
The technology is so compelling, if you can just get all the parts and pieces and people involved to buy in and make it work. A, it’s compelling from a cost justification standpoint and, B, it’s not like tracking steering wheels that are going to Honda. You’re actually going to potentially save someone’s life.
So the business case for it is so compelling that we just needed to be able to show that we had a product that actually worked. It had been tried several times in the past and there were several failures out there, so that actually made it more difficult. Even some of the early adopters were very skeptical.
How do you keep the innovation coming?
We try to stay energized at the top. Some of it comes from our hiring attitude. I’d love to always have somebody smarter than me, but give me positive attitude over perceived brilliance any day and we’ll get there.
I think we have an excellent reputation as innovators. We tend to attract people who want to do things outside of the box. We don’t say no enough, perhaps, to our customer base, and that’s part of it. On just the labeling side and the industrial and the strange applications, 70 percent of that part of the business is sold to resellers, so we probably have a thousand-plus resellers across the country who are selling into labeling environments, and they come to us daily with, ‘Can you do this?’
How do you decide which products or ideas to develop?
It’s a combination of a specified process with a heaping mixture of gut feel. Some of it is anecdotal. We try to keep track of the application and try to get feedback from the dealers, keeping tabs on if we make this product, how many can they sell.
And, of course, every one of them could sell millions if only we could make them. We give the problem to our alchemists, who turn paper and film into gold and stir the secret sauce and come up with a product.
What challenge must General Data meet going forward?
One challenge is to look at how we manufacture and whether we can make a quantum leap and manufacture more of the base materials rather than purchasing them. It’s that classic make-or-buy decision, and it’s megamillions of dollars.
And it’s not just a cost consideration. When we’re doing such innovative things, if we had the volume of the product that we were manufacturing, then we could dedicate some of that manufacturing expertise to tweak and fine-tune a component we may need for a developmental project. Whereas right now, if you’re not making the next level in the supply chain, you have to rely on outsiders and beg and plead and say, ‘I only need half a drum of this to test my theories.’ And if you don’t make that half a drum it can be tough.
Another, again on the medical side, is to broaden the product to additional pieces of equipment and to be able to roll that out on a worldwide basis. We are getting requests from literally all over the globe, and putting together an international marketing force is a challenge. How to you find out who’s the best laboratory automation company in Singapore? And when you’re trying to sell something that’s brand new, it just doubles the challenge.
How to reach: General Data Co. Inc., http://www.general-data.com
When meeting with these students, the questions often posed center around the assessment of their prior learning and how it can best be applied to their area of college study, including, how have the experiences and learnings of your life influenced you? What have you learned outside the classroom that can enhance your college experience? What skill sets and knowledge do you bring with you to college?
Experiential learning is experience-based learning that occurs outside the classroom. It is the skill set you acquire along the way to becoming a business professional. The Council for Adult Education and Learning (CAEL) defines prior college level learning as learning that is:
- At a level of achievement defined by faculty as college equivalent
- Applicable outside the context in which it was learned
- Reasonably current
- Includes both a theoretical and practical understanding of a subject area
Examples of experiential learning
- Experiential learning covers a broad spectrum of experiences.
- Structured programs in the Armed Forces, nursing or business
- Regionally nonaccredited coursework from a business school, Bible college or art academy
- Comprehensive corporate training or a series of workshops
- Extensive volunteer or community service
- Extensive reading in a concentrated subject area
- Proficiency in a foreign language
Questions to ask yourself
When exploring your experiential learning options at a college, ask yourself the following questions.
- Do I have mastery of a knowledge or skill set?
- Can I apply the knowledge or use the skill in a variety of settings?
- Can I verify this knowledge or skill set? How?
- Can I demonstrate the relationship between what I’ve learned, my own goals and my degree program?
Tying it all together
Credit is not granted for the experience itself but for the learning and skills that have been acquired from that experience. How do you tie all this together?
Depending on your background, experiential learning credit may take several forms.
- College Level Examination Program (CLEP). CLEP exams are standardized, subject-specific tests that provide an opportunity for students to prove what they know. Exams are offered in an array of subjects, including management, accounting, marketing, macro and microeconomics, history, psychology, foreign languages, etc. Many colleges award credit for receiving a passing CLEP score. Visit www.collegeboard.com.
- Defense Activity for Non-Traditional Support) (DANTES). Standardized examinations used to assess competency in particular areas, such as history, math, management, psychology, banking/finance and physical sciences. Visit www.getcollegecredit.com.
- ACE evaluations. The American Council on Education has independently evaluated thousands of programs and produced college credit recommendations for noncollegiate sponsored programs and military trainings. Visit http://www.acenet.edu or http://www.militaryguides.acenet.edu
- Portfolio development. A process based on work experience whereby a student documents their learning and skills by assembling a binder in a predetermined format that highlights what they learned, how they learned it and how they applied it.
- Validation. A process similar to the portfolio development but used for documenting nonaccredited coursework or extensive training/workshops.
- Departmental or challenge exams. These are college-specific tests that enable students to prove their mastery or expertise in selected subjects.
As with anything in life, there are exceptions, so check with your college of choice to see which experiential learning options they endorse and accept.
Jennifer Querner, M.A., is the credit for experiential learning coordinator at the College of Mount St. Joseph, where she works with nontraditional and transfer students who are equating skills and life experiences with college credit. For more information, visit http://inside.msj.edu/academics/cel/
Sweep accounts are the easiest and most efficient way to manage the investment of your operating cash. A sweep account is a bank account from which, at the close of each business day, the bank automatically transfers amounts that exceed a certain level into an income-earning account or investment. Your working-capital needs are taken care of; excess funds earn income overnight; and, best of all, you don’t lift a finger. However, you may not be aware of the many ways to make a sweep account work for you.
Money market investments
Until recently, funds transferred to sweep accounts were usually invested in traditional money market investments, such as repurchase agreements or commercial paper. These short-term investments feature flexible maturities that react daily to changes in interest rates. Other investment options may not react to interest rate increases for up to 30 days, making money market investments an ideal place to park funds on a temporary basis. The funds are swept from your account after the close of business and returned the next day, along with any accrued interest.
Money market mutual funds
While repurchase agreements and commercial paper remain a viable option, money market mutual funds have become attractive to businesses due to strong ratings and diversification. These accounts allow you to determine how much operating cash you need on a daily basis, and keep the rest in a flexible money market mutual fund account to continue growing. Unlike traditional sweep accounts, the money remains in the investment account until needed in your checking account. Any cash above the account’s target balance is invested in the sweep account at the end of the day. The sweep investment balance is still available to the business, if needed.
If your business requires as little as $100,000 in daily operating cash, a sweep account may be quite useful. A low monthly fee is usually associated with sweep accounts generally less than $200. You may choose to stay with the more traditional sweep accounts involving repurchase agreements or commercial paper, based on your investment policies and guidelines. Money market mutual fund accounts, however, allow for greater flexibility in investment type (including tax-exempt options and diversification).
If you’re looking for a short-term, but not day-to-day, way to manage excess operating cash, a direct investment may be a good option. Direct investments enable you to invest some operating cash in an interest-bearing bank deposit, a U.S. Treasury bill, commercial paper or short-term, tax-exempt municipal bonds. These are generally 30-day to 90-day investments, with higher yields than traditional sweep accounts.
Keep in mind that direct investments are also more complicated and require more monitoring. Direct investments are appealing for those businesses that are willing to take on a little more risk and have at least $5 million to $10 million in assets to invest. They are a good fit if you can identify this amount of expendable operating cash each month. However, if you redeem a direct investment early, there may be a risk that the investor could lose money.
While it may take some time to learn the complexities of each sweep option, it may be well worth it especially in an environment of rising interest rates. Call on your trusted financial advisor often, if necessary for more information about all of your options.
This was prepared for general information purposes only and is not intended as specific advice or recommendations. Any reliance upon this information is solely and exclusively at your own risk.
Ben Willingham is senior vice president and sales manager for corporate banking in Ohio at PNC Bank, National Association, member of The PNC Financial Services Group Inc. Reach him at (513) 651-7558.
Gehlmann comes to First Financial from Manatt, Phelps & Phillips LLP in Washington, D.C., where he served as counsel to public and private companies, as well as investors, underwriters, directors, officers and principals regarding corporate securities, banking and general business and transactional matters. He has represented community and regional financial institutions throughout the country during his legal career.
“We are very pleased to welcome Greg to our company and our senior management team,” says Claude E. Davis, president and CEO. “He will be responsible for many issues, including legal management, corporate governance, investor relations, and regulatory and compliance concerns.”
Gehlmann earned his bachelor’s degree in political science at The University of Dayton, a master’s degree in political science from The Ohio State University and a juris doctorate from The Ohio State University College of Law. He is admitted to practice in the United States Supreme Court, the District of Columbia and in Ohio. He is a member of the Ohio, District of Columbia and American Bar associations.
First Financial Bancorp also added Richard E. Olszewski and William J. Kramer to its board of directors.
MODERN OFFICE METHODS
Modern Office Methods (MOM) named Craig Cassady vice president of sales for the newly created Pure Water Technology Division.
Cassady is responsible for managing and overseeing sales efforts for the division in Columbus, Dayton and Cincinnati. MOM serves as the exclusive regional distributor of PHSI Pure Water Technology, a proprietary state-of-the-art process for filtering and oxygenating drinking water specifically for workplace environments.
Prior to joining MOM, Cassady served as president and national sales manager for a manufacturing company in Cleveland. He attended The Ohio State University, where he earned All-Big Ten honors as a defensive back on the football team. Cassady earned his MBA from the University of South Florida.
YMCA OF GREATER CINCINNATI
The YMCA of Greater Cincinnati named Sandy Berlin Walker president and CEO. Previously, Walker was senior vice president of operations for the YMCA of Greater Boston, a position she held since 1993. She replaces Jerry Haralson who announced his retirement in last year after 12 years as president.
Walker’s goal is to reach further into the Greater Cincinnati community and establish viable partnerships, allowing the Y to serve more people. She has spent 26 years with the national organization and is known for building partnerships and growing revenue.
National City promoted Barbara L. Harper to branch manager for the National City branch on Glenway Avenue.
Harper is responsible for branch operations, as well as consumer and small business sales management. Previously, she worked as a branch manager at the Bridgetown and Norwood locations. She has 11 years of experience in financial services.
Harper is active in the Western Hills community, serving as a member of the Bridgetown Business Association.
GREAT AMERICAN INSURANCE GROUP
Great American Insurance Group promoted Kendel D. Standlee to president of Great American’s Equine Mortality Division. The division supports the largest equine mortality operation in the United States and is the country’s leading insurer of this specialized business niche. Under Standlee’s direction, the Equine Mortality Division experienced one of its strongest growth years in 2004 while posting the best profitability numbers in its history.
A graduate of Arkansas Tech University with a degree in agribusiness, Standlee joined North America Livestock Inc. in 1987 as an underwriter, a company purchased by Great American in 1990. He became manager of the Equine Mortality Division in 1998, and since then, the division’s gross written premium increased to more than $80 million at the end of 2004, a 15 percent compound annual growth rate.
Dynus Corp. selected Ralph Lee as vice president for human resources. Previously, Lee was an executive with Comair Inc.
In 1995, he began his career at Comair as director of human resources. He was named the airline’s vice president of human resources in 2004. He also served as the vice president of In-flight Services.
Prior to joining Comair, he worked at Union Central Life Insurance Co. and Lazarus. Lee received his bachelor’s degree in business management from Xavier University, where he also played on the varsity basketball team. He was inducted into the university’s Hall of Fame in 1999.
Instead of implementing new sales techniques or fancy new programs, Carmichael followed a different approach he focused on the basics, improving relationships with independent insurance agents and providing better customer service by completely rebuilding the company’s technology platform.
At the time, Ohio Casualty was experimenting with a new sales program, moving from partnerships with independent agents toward an Ohio Casualty team of agents, and it wasn’t working. Within two weeks of Carmichael’s arrival, he killed the program and recommitted to using independent agents as the only source of sales.
“[The situation] was, at best, guarded,” Carmichael says. “The company had had an initiative to sell direct, and that cost us some level of trust with our independent agents. They felt we were competing against them.
“The plus [of independent agents] is they’re independent, representing more than one company. And the challenge is they’re an independent, representing more than one company. We have to compete within that agency. We have to compete against, in some cases, other very formidable competitors. So we have to distinguish our services.”
To do that, Carmichael and his team developed an ease-of-use strategy that hinged on one key component technology.
According to Carmichael, there are two ways to approach new technology.
“You can go at it at the Web or the front end which is the way most companies have done it and put fancy Web pages and cool technology on an Internet platform,” he says. “Or you can do it the way we did it, and that’s go back to the mainframe and rebuild all the systems out so that they are Internet-friendly and they use Internet languages like HTML and can be integrated very easily with any other system, such as an agents system or a vendors system.
“It’s a harder, longer process but it fits the long term. It allows you to do what we’re doing now, and that’s roll out new systems. In 30 to 60 days, we can have a brand-new application up for our agents or for our own internal use, because you don’t have to do the hard-wiring.”
Revamping the mainframe gave Ohio Casualty a huge competitive advantage, making it faster and easier for agents to get the information they need.
“The main point that we’re trying to make for the agents is that we want them to stay in their system when they communicate with us,” Carmichael says. “They all have their own management information systems over 80 percent of them do and we would prefer that they not have to leave their system to get to us.
“A lot of our competitors put up a Web site that makes agents exit their own system, go into that Web site, do their processing and then bring that data back into their system. We want all of that data to be ... in their system.”
Agents simply highlight the policy or the claim, upload it to Ohio Casualty, and get an answer. “We believe that if we do that, then agents will prefer to use us versus our competition, who makes them jump through several hoops, from passwords to Web sites that they have to learn how to navigate.”
It sounds simple, but it’s taken Ohio Casualty time, sweat and plenty of cajoling to convince long-time agents that a brand-new technology platform will work better than the system they already know.
“The biggest challenge was change itself,” Carmichael says. “Agents and employees are not interested in making changes they’re comfortable with the way things work today. And when an agent is hiring new staff, he doesn’t want to have to train people on the new systems he prefers the old way because it works and it’s dependable. So the biggest challenge is to prove to people that the new systems are not only easier to use for all people, agents and employees, but they provide a more robust solution.”
To convince employees and agents, Carmichael implemented new training programs.
“We’ve done a lot of different kinds of training,” he says. “We have a very proactive call center, calling agents, walking them through the process in some cases they have to download new software hand-holding them through that.
“We’ve introduced Web-based, online training so agents can come online and do the training, learn the new system or the new application. We’ve sent marketing reps out and specialists out, face-to-face with our agents, to literally walk them and their staff through it. We’ve had good success through our help desk that’s much more reactive, so when somebody’s got a problem, they can call in and then we walk them through it.”
With the initial training done, Ohio Casualty continues to make an effort to keep technology in the front of people’s minds.
“We reinforce it through meetings,” Carmichael says. “We have meetings with our agents on a regular basis, and we’ll always have one part of that meeting where we highlight or talk about technology.”
Keys to success
Beyond cajoling and training, three key actions helped Ohio Casualty’s technology improvement program succeed.
The first, says Carmichael, was agent and customer contact.
“No. 1 is, talk to your customers first,” he says. “Find out, what do they need or want in the way of systems or access to systems with the company. We have a customer group that we bring together every six months to give us advice on where should we go for new technology solutions.”
The second key was to “make sure that the IT staff has strong project management skills. Every one of our senior people in IT have professional project management skills, and that has allowed us to introduce new technologies quicker, complete projects faster.”
The third thing Ohio Casualty did was to “make sure the product people the underwriters, the claims people, the actuaries make sure that they’re part of that [project management] team.”
Even with all three keys in place, Carmichael says, one more element is needed to tie it all together communication. Keeping the lines of communication open between departments such as IT and customer service, and between the company and its clients, is critical.
“The more clearly you communicate with people, the easier it is for them to do business with you,” Carmichael says.
Ohio Casualty’s technology initiative has paid off, making agents and the company more productive.
“The applications that we’ve put online for our employees and our agents are so much easier to use than the old way that even the die-hard old-timers who know how to navigate the old system will admit that it’s easier, quicker, faster, cheaper to use the new way,” Carmichael says.
“Not only do we enable claims to be handled more efficiently with technology, but in the agent’s office, we provide a lot of access to data through their system or through their laptop or through their PDA. They can get access to data about their customer, about the billing system, about claims, so that they have a better understanding of what’s going on, and they can provide better service to their customers.
“In turn, we provide better access to our policy administration system, which allows agents to receive all of the data in all of the policies that they have on the books with us, but more important, they can upload applications, they can upload requests for quotes and do inquiries, and they can actually issue them online in their office.”
As the company’s ability to respond quickly to customers online has increased, the amount of paperwork and number of customer service phone calls have decreased.
“We are now finding that more of our inquiries into billing, for example, are being handled online,” says Carmichael. “They don’t require human intervention. ... They can go direct to the online application and get the answer. Service has improved, and speed of getting the data or getting the answer has improved.”
Carmichael says it’s all the result of strong communication and finding the right technology that provided agents what the agents really needed “Better technology for their processing needs, for the support of their customers, and [on our end], providing ... better personnel and services that give the agents and their customers a high quality of service.”
How to reach: Ohio Casualty Group, http://www.ocas.com
After zigzagging the floor and running himself ragged, he knew there had to be a better way.
“I sat down with my operations people and said, ‘Can’t we design our picking slips where you start at one end of the warehouse and work your way to the other so you don’t wear people out?’” says Holzberger, founder and CEO of Aveda/Fredric’s Corp., a distributor of organic hair care products to the salon trade.
Holzberger’s hands-on style is anything but an excuse to micromanage; his employees enjoy plenty of autonomy. He simply believes that he can’t know his business and where it needs improvement without getting into the thick of it.
And his employees’ energy isn’t all that he’s committed to conserving. An avid environmentalist, Holzberger has made it a priority to run his business so that it, like the products it sells, has as little negative impact on the environment as possible.
A businessman with a keen social conscience, Holzberger, his company and his employees support a wide variety of charitable efforts in the Cincinnati area, from battered women’s shelters to Habitat for Humanity. But it isn’t the result of blind altruism; every decision must show some payback, and Holzberger isn’t shy about letting his customers and the public know about the company’s contributions.
“You have to stay in the peripheral vision of the consumer,” says Holzberger. “People don’t mind spending a little more if they know you’re doing something good for the environment.”
Holzberger talked with Smart Business about the value of people, the environment and the rewards of hard work.
Where did your commitment to environmentally sound business practices originate?
I hired a leading environmental consultant to come in here and tear my company apart. I paid them to tear it apart to find out what I could do better. I didn’t mind paying them, but I wanted them to tell me how I could save money in the long run. They measured our air quality, went through all of our utilities and talked to anyone they wanted. They gave us some great ideas. As an example, we had too many people in one area without enough air exchange, so people were getting sleepy so they were not as productive. When we put a new unit in, I noticed how much more productive people were.
The one thing that we weren’t doing as a company was enough carpooling. So I designated the whole first row of our parking lot to environmentally friendly cars or carpoolers. We currently have four vehicles in our fleet that are hybrids.
Years and years ago, I challenged our operations people to come up with the most environmentally sensitive packaging that we could. We kept challenging ourselves to be more environmentally sensitive. They’re proud of it, so we printed it on our boxes.
We let people know our story in our company information. So often, businesses don’t tell their story. There’s nothing wrong with that if it’s legitimate.
Another example is our packaging peanuts. I said, ‘Look, we’re using a lot of these Styrofoam peanuts. They last 99 years and they’re going into the landfills.’ Thinking of all the millions we use over the years, it was really bugging me.
So I challenged our people to find something that could replace them. They came back with a foam peanut made from cornstarch. They cost me 10 times the price of Styrofoam, but we did it because it was important to us to make the change. We recycle 70 percent of what comes through the front door. We’ve got a Dumpster that is strictly for cardboard, which we recycle 100 percent and get cash for.
How do you make sure that those choices are also sound business decisions?
Any time you’re going to make an investment in your company, whether it’s environmental or whatever, you’ve got to see that there’s going to be a payback. I would suggest they start with their people. You can have the greatest plan in the world, but it takes a lot of work to make it work.
It’s always about crawl, walk and run, but it’s got to be fun. It’s important that whatever you do, you explain the investment you’re making because people today, I honestly believe, want to join a brand, they don’t want to buy a brand. And they want to join people who are of the same mindset, good stewards of the Earth, good to their people, good to the environment.
Why are altruism and community involvement so important to you?
I grew up very, very poor. My father died when I was 4. Having gone through that kind of lifestyle, you learn a work ethic very early on.
I had a great mother with great values that raised us all to be good human beings. In growing up, that was a basic part of my life. As an example, we used to receive food from the Franciscan Sisters. In addition to that, our cousins used to pass down clothes to us. When you grow up in an environment like that, you have a little different philosophy.
Education has always been a cornerstone in the foundation of my success and passion. I worked my way through college; it took me 10 years because I did it in night school. I graduated from Miami University with a degree in business administration, with a major in marketing.
I worked my way through college as an electrician, so I had gone through an electrical apprenticeship program. I went to school, plus worked full time and overtime during the day. It was a tough journey but one I never regretted. I was very determined to get my degree.
I was the only one in my family to get a degree, so it was a milestone for me to achieve. So many people did so many things for us; now it’s time for us to do things for other people.
How do you track the results of your company’s charitable efforts?
We get close to 1,000 requests a year for baskets of our products for raffles. A couple of years ago, I thought we really needed to see what all this money is doing. So I created a form to make people accountable. On this form, we’re asking people to supply us with information about the charity, how much money it raised, who won the basket, just to make sure that we have accountability.
A piece of advice I give to my staff is you always have to inspect what you expect. If you don’t do it, you’re going to pay the consequences of not knowing.
It’s really amazing when you can measure and see the good that you can do. That makes you want to do more, but there’s nothing worse than feeling like you’re being used and taken advantage of.
How did you become an entrepreneur?
With my electrical background and my degree, I went to work for a large electrical manufacturer, Thomas & Betts Corp. I learned tremendous business skills from them. I worked my way up to new product development, did a lot of work with NASA.
I was giving seminars to architects and engineers about these new technologies, trying to get them to design them into their products. My former wife was a hairdresser. She wanted to open a salon. We bought a little salon and turned it into one of the premier salon spas in Cincinnati. That began my journey as an entrepreneur.
We started the company in 1983 as the distribution piece of the business. We had passive exercise equipment, active exercise equipment, tanning equipment, facial equipment and body wraps. Then the equipment became a commodity, and the math people squeezed the profit out of it.
I met a gentleman named Horst Rechelbacher, who was the founder of Aveda, while I was looking at new product lines. I liked the marketing approach that he took in that his products didn’t use detergents, which most such products do. By 1992, I had the rights to sell in Ohio, Indiana, Kentucky and Michigan. So we phased out the tanning and spa equipment and focused on the Aveda products.
I learned through the process that you’ve got to have some exclusivity because if two people are selling the same product, it becomes a commodity.
What are the critical elements for success in business?
The No. 1 asset that should be on the balance sheet is people. That’s where I’ve made the most significant investments in my business. One of my strengths is developing people, and I think most successful entrepreneurs are strong in that area.
I came across an article that told how many resumes are fictitious, how many people don’t have degrees that they claim to have. And it’s really tough getting a lot of this information because of the privacy laws. You hire someone and then you find out things about them in the field, whether they’re in sales or whatever.
So I don’t hire people; I let the staff hire people. I make a team do it independently, and they evaluate each candidate. What’s a resume? It’s just creative writing, in my opinion. An interview is nothing but creative talking. Who’s going to say anything bad about themselves? If the candidate comes in for an interview, you can find out in five minutes that it just isn’t going to work, but you go through the whole process anyway.
So I try to do career fairs instead. A career fair is really a storytelling. I think the greatest leaders of all time were great storytellers, and you’ve got to have a great story to tell what you’re all about, the good, the bad and the ugly.
So many companies paint such a blue sky, but so many times it turns gray or even black.
When you start empowering your people to take that responsibility, they love it and they want it because they don’t want someone coming in sitting next to them that isn’t going to do their job or get along with them. The kind of mindset of people that you attract is not just those looking for money. They’re here because we’re doing the right thing.
We have corporate memberships at a health club here. To me, it’s an investment in our people. If they feel better and they’re healthier, it’s going to help productivity and help with our medical insurance.
HOW TO REACH: www.fredrics.com