Twice, the Web-based electronic claims company had sent its employees home because it had no money to pay them.
When Merritt stepped in at the Louisville-based company, he instituted two bold initiatives. The first was to give all 40 employees the opportunity to become owners, to instill in them the sense of pride and urgency needed to make the business succeed. And he arranged a “paid by performance” program, which enticed workers to give their all because as the company succeeded, so would the employees be rewarded.
Secondly, he realized that no one knew about ZirMed. To remedy that, he built a new sales and marketing framework teaching employees that to sell the product, they had to know it and believe in it. He focused his approach on the customer, and expanded the company’s service from Web-based claims processing to complete revenue cycle management to provide eligibility verification, payment processing, transcription services, claims, coding and remittance.
Merritt also makes sure his employees have the knowledge and skills to keep ZirMed on the fast track for growth by establishing ZirMed University, in which all employees, from the secretary to the CIO, receive the most current updates on the company’s product.
Merritt’s ideas have worked. In the nearly two years since he took over ZirMed, he has grown the company from 40 employees to 100 employees and continues to grow revenue.
And with ZirMed processing 3 million transactions per month with partners including Humana, Blue Cross and Blue Shield, and Aetna, Merritt’s goal for continued growth is not out of reach.
And at the end of the day, Merritt is focused on one goal.
“It’s not about just being successful,” says Merritt. “It’s about making a difference.”
How to reach: ZirMed Inc., (502) 473-7709 or www.zirmed.com
Unlike traditional nursing homes, Carespring centers offer a warm atmosphere, making them a place residents want to be instead of just a hospital where they to be. Amenities include beauty shops, Starbucks coffee, Montessori schools, Jacuzzis, cable TV and other things to keep that vision going.
Bortz’s ideas have, in many instances, become leading practices throughout the industry. For instance, to enhance the nurses’ ability to monitor every patient, he designed the spoke facility layout, placing the nurses station in the center of all activity, giving nurses visual control of all facility activities. That design is now standard for all new facilities built in the industry.
Another of Bortz’s implementations, “need assistance” buttons in every room, has been adopted by skilled nursing centers to better serve their residents. He has also developed a software program that makes it more efficient to order drugs for patients, saving time and money.
To help keep his employees engaged in the highest level of care, Bortz has implemented several internal initiatives. The Angel Award is given each year to the employee who has demonstrated care beyond measure and past the normal call of duty, and service awards recognize years of service at an annual banquet.
Employees also get training via Carespring University, an online program offered to employees on paid time, and a Next Generation Leadership class, in which 12 employees each year are trained in leadership development.
Since its inception in 1986, Carespring has grown from one facility to eight in the tri-state area, with a recently opened facility in Harrison and plans for another in West Chester. It employs approximately 1,200 caregivers from nurses and chefs to hair stylists and housekeepers.
Bortz plans to double the size of the company in the next five years, but wants to stop growth before the company gets to the size that he is no longer intimately involved with his employees and the patients for whom they care.
How to reach: Carespring Health Care Management, (513) 312-7661 or www.carespring.com
Serving health care, senior living, affordable housing and private education businesses, Lancaster Pollard operates three companies that provide integrated investment banking, mortgage banking and investment advisory services, all headquartered in Columbus. The company also has regional offices in Atlanta, Denver, Kansas City and Austin.
Pollard founded the company in 1988 in Columbus, specializing in financing health care and senior living as a growing, underserved and largely misunderstood market, well before “aging baby boomer” became a common term. As the fledgling investment banking company began to address the needs of providers to grow their services, the company itself grew.
When Green replaced an original founder in 1996, he and Pollard focused on a goal of creating a strong, national company that would continue to serve those who serve others. And through an intense focus on a specialized niche and the use of an entrepreneurial approach to financing, Lancaster Pollard began identifying growth opportunities across the country.
Since then, the company has evolved from a two-person operation into a significant national presence.
Pollard and Green lead by example, focusing on and insisting on the highest business and personal ethics. They guard Lancaster Pollard’s outstanding reputation as its greatest asset, never compromising for financial gain.
Their standards and expectations create a momentum that carries through in each employee, where the personal drive to succeed and company dedication create a self-sustaining environment for growth in both market share and revenue.
The mutual respect among Lancaster Pollard associates creates a work environment where employees push themselves to do their best. Pollard and Green make personal rewards a high priority and have created a culture of learning with training and a company-sponsored MBA program.
Going forward, Pollard and Green anticipate increased competition from national players, but feel they still have the advantage with their history of service and a team experienced in delivering creative solutions.
How to reach: Lancaster Pollard, (614) 224-8800 or www.lancasterpollard.com
Pure Romance is the leader of the relationship enhancement business, raising the bar with high-quality products and a commitment to women’s health and education while giving women across the country the opportunity to achieve financial and emotional independence.
Brisben got her start in 1983 while on maternity leave from her job at a pediatrician’s office. She was looking for a rewarding and successful career that would give her the time and flexibility to raise her children. She began as a part-time consultant for Fun Parties, and within six months, was the top sales consultant.
When the company went out of business in 1993, Brisben and her consultants were left without products, sales support or coordination. She took a risk and launched Slumber Parties Inc. in the basement of her Cincinnati home.
Brisben’s success is driven by her unique approach to the in-home party business. Pure Romance is a “solution to financial independence we are experts on relationship management and a representation of every woman who wants to take control of her relationship and her self-esteem,” Brisben says.
Her approach focuses not on the products but on the experience at the parties. Her research showed that the products not only have pleasurable physical benefits but also contribute to the overall state of well-being for the relationship and the individual.
Pure Romance’s innovative strategy has expanded to include education and a focus on women’s health. In 2005, the company’s new health education department launched a revolutionary breast cancer outreach program, Sensuality, Sexuality, Survival.
Brisben also founded the Patty Brisben Foundation, a nonprofit that devotes a percentage of Pure Romance’s annual sales to breast cancer research and to the American Heart Association.
How to reach: Pure Romance, (513) 248-8656 or www.pureromance.com
Schneier, a successful energy attorney who is now chairman and CEO of Accent Energy, knew that to make the company succeed, he had to line up potential customers, find an investor and line up a supplier to provide natural gas. ACI Capital agreed to be that investor, on the condition that Accent first had an established customer base.
To do that, Accent needed an acquisition. Schneier and Chief Operating Officer Saucier met with Enron executives about their interest in purchasing small commercial blocks of its customers and became the preferred bidder. At the same time, Accent established British Petroleum as a supplier, and Accent was in business.
Today, the Dublin-based company employs 49 people. It has balanced its considerable growth with a supportive infrastructure to hedge pricing risk, capture energy usage and maintain information systems. It has expanded its reach from California and Illinois into New York and parts of New England, growing its base from 3,500 customers at inception to 69,000 today; from 2004 to 2005 alone, sales grew by about 50 percent.
Schneier and Saucier believe that the keys to their success are innovation, risk management and hiring and retaining top talent, allowing them to operate in an arena where other small players have not survived.
To differentiate itself from the competition, Accent is rolling out a green energy offering and is beginning to target and market to ethnically diverse customers in the New York market.
Schneier and Saucier hope that if energy deregulation continues, no area of the country or group of people will be out of the reach of Accent Energy. With their proven business plan and historical growth, Accent will be ready for that day.
How to reach: Accent Energy Group, (614) 408-1020 or www.accentenergy.com
“I was one of 11 children,” says Tato, president and CEO of Contract Interiors, one of the largest commercial furniture dealerships in Cincinnati. “My mother did not know what to think of my confidence at times. She would ask me, ‘Who do you think you are?’ But the truth is that I always had a strong sense of who I was and what I wanted.”
Tato put her confidence and drive to good work when she began leading Contract Interiors. And her leadership has paid off: The company’s revenue in 2005 was $12.5 million, and Tato projects 2006 revenue of $15 million.
Smart Business spoke to Tato about how she accepts mistakes, finds the right employees and earns respect.
How do you recruit and retain great employees?
If you are running a healthy company, your employees are your best advocates. They will promote your company as a fantastic place to work.
When we find a candidate with the right skill set, that is just the first step. The next, and perhaps more important, is to ensure they fit into our company culture. You will not confuse Contract Interiors with another office furniture company. We have a distinct culture where motivated and self-directed employees flourish.
I sit with every new employee and tell them they can be here 30 days or 30 years either one is fine and I mean it. I believe in cutting my losses quickly if the fit is not a good one. Typically, 30 days is enough time to determine this.
How do you handle employees’ mistakes?
One of our greatest strengths is our healthy view toward mistakes. Most corporate environments train people to fear mistakes because they are punished. We literally celebrate mistakes because they are great growth and learning opportunities. In fact, we used to reward employees in staff meetings for the biggest screw-up by giving them $50.
Although we don’t do that any longer, we still have the same perspective toward mistakes. This is a safe environment where people can be human and authentic. Failure is viewed as a stepping stone to bigger and better things.
How do you earn the respect of employees?
I can only communicate effectively if I have credibility. That means delivering on every commitment. Employees want to follow a leader who is respectable.
To be respected, you must earn credibility by showing integrity and commitment at all times. There is no margin for error.
How do you maintain a strong customer base?
It’s not complicated. We practice the Golden Rule, which is the key to happier customers. We have also modified our approach over time from expecting employees to be jacks of all trades to a more specialized approach.
We are able to draw on the strengths and talents of our staff and customize a winning team to complete a particular project. It essentially comes down to putting the right people in place depending on the priorities of the project.
What is the most important business lesson you’ve learned?
When we expanded our operation to another city, I went into it with lots of confidence. After all, the city was close by, and we certainly knew how to sell furniture. Unfortunately ... I ultimately had to close the operation. Through this experience, I realized how essential it is to have leadership in place who embraces the same value system and management philosophy.
They must have a common unchanging purpose that mirrors your own. If you choose to expand your business, pick your leaders carefully.
How to reach: Contract Interiors, (513) 641-3700 or www.contractint.com
Until this two-year-old interest rate-tightening campaign ends (which is possible later this year), what are small- and mid-sized businesses to do?
Asked about their short-term outlook, 55 percent of business owners nationwide say the likelihood of further interest-rate increases will negatively affect their business. In this recent survey of 1,100 owners and executives commissioned by The PNC Financial Services Group, Inc., 61 percent of the respondents with annual revenues up to $250 million said higher rates have a moderate to significant adverse impact on their cash flow/profitability.
Ben Willingham, senior vice president for corporate banking at PNC Bank, told Smart Business that there are a few steps that businesses can take to adjust in this higher-rate environment.
If a person is interested in investing, what should his or her first step be?
Put your money to work now. Now you can shop around and find a money market account that might yield more than percent. Even though rates aren’t as high as they were five or six years ago, don’t pass up a chance to allow your money to make money for you.
If business owners need to grow their business, is it wise to borrow now?
Review your credit lines. If you need to borrow to grow your business, don’t despair. Short-term rates can still be reasonable. So shop around. Just remember that borrowing will cost you more than it used to. Many short-term lines of credit may be indexed to an industry benchmark. That means as the rates rise, the interest rate on the line of credit may also rise.
Can companies continue to have higher debt loads?
Use excess cash to pay off debt. If borrowing is not something you need to consider right now, you might want to pay off your existing loans with the cash you have on hand. In fact, in PNC’s survey, 50 percent of business owners surveyed said they would begin to pay down their debt in light of increasing interest rates and improving cash flow in their businesses.
In the banking/financing arena, how important are the terms that banks and financial institutions offer businesses? How important are the terms suppliers offer businesses?
They are both important, so you should make sure you understand the terms. If your suppliers offer you trade terms, such as 30 days to pay your invoice, you may want to take advantage of them. This extra time may not have been important to you when rates were low. Now it may be advantageous to take the extra time.
On the other hand, taking a discount for paying early might make more sense if you have the cash. On the other side of the ledger, you may want to reconsider the terms, or time you are giving your customers to pay you. Fifty-one percent of respondents in PNC’s survey said they are considering a change to the credit terms offered to customers, and 56 percent said they would offer discounts for paying early, two actions that are likely to speed up cash flow.
What should my next step be?
Talk to your banker. Before you make any decisions, have a cash flow conversation with your banker. The cost of that precious commodity is higher right now, and when costs are rising, businesses should reconsider their thinking.
This summary is not legal or financial advice, and does not purport to be comprehensive. Please consult your own advisor. Any reliance upon this information is solely and exclusively at your own risk.
BEN WILLINGHAM is senior vice president for corporate banking in Ohio for PNC. Reach him at (513) 651-7558.
“It’s a very fragmented industry that’s consolidating,” says Drees. “We felt, to go into new markets, new cities, that it was a lot more efficient to acquire a company that already had established relationships, established land position and an established management team in place than to try to grow organically.”
For Drees, the acquisition process is rife with challenges, from keeping experienced and knowledgeable employees on board through the transition period to changing an established local brand to a relatively unknown one. But after averaging an acquisition every two years over the past decade, Drees and his company have nearly perfected the process.
One of the greatest challenges posed by an acquisition, says Drees, is getting employees and specifically, the acquired company’s management team through the sometimes-rocky transition process.
Ensuring a smooth transition for staff is vital, because a major portion of what The Drees Co. is purchasing in an acquisition is the employees’ knowledge and expertise. If that staff turns over quickly after an acquisition, much of the company’s value is lost.
For the acquired company’s top leader, the changes inherent in an acquisition can be especially disorienting.
“We’re buying a very entrepreneurial organization, and they’re used to doing their own thing and calling their own shots,” Drees says. “Now they’ve got to be a part of a much larger organization, and from that standpoint, much more bureaucratic, and it’s a huge change for them. I would say that’s the hardest part can they work for a larger organization where they don’t have all the control and call the shots?”
The answer is often discovered throughout the acquisition process. By working closely with the leadership of the potential acquisition, the Drees team can gauge the fit between the two companies.
“We want to acquire somebody that wants to be part of The Drees Co., and they have the right attitude about the deal,” says Drees. “If we feel there’s a lot of friction there, or the culture’s not right, it’s just not worth it we’ve got to be able to work with these people in the long run. So we’re looking for that cultural fit.”
The role of management isn’t the only thing that changes after an acquisition. Many of the acquired company’s processes and procedures must change to match those of Drees, as well. The acquired company adopts all of The Drees Co.’s operational systems and key metrics. And while in most areas The Drees Co.’s acquisition management style is relatively hands-off, one particular process quality-control management requires heavy corporate involvement.
“We put in place the same quality processes, as far as how our builders are trained, what kind of inspection process we go through, how we handle customer service after the sale,” Drees says. “We think we’ve got great processes, and we instill those processes into the new organization.
“From a construction quality standpoint, we have either a regional production manager or a vice president of production visit each of the cities and basically do quality audits to ensure that the quality of product is to our standards, and primarily to see that we’re following the processes that we’re trying to establish in the organization. And we’ll do that with all facets of the organization. We’ll have a marketing director that would be responsible for that city, and they’ll go down and work with that city on their advertising and their marketing and audit what they’re doing.”
Because this kind of corporate involvement can come as a shock to once-autonomous managers, Drees and his team work hard to ensure that the management team of a potential acquisition has a clear understanding of how things will work once the process is complete.
“As we go through the acquisition process, we’re communicating on how we’re organized and how we’re set up and what our expectations are and what their expectations are,” Drees says. “I would say at that point, it’s pretty clear what each party is getting into. That being the case, the biggest risk is if we fail ... it shows up in our turnover. You’ll see that three years later, you’ve had a very high percentage of employees who are no longer with you. That’s where you can tell that we’ve failed.”
Before an acquisition is complete, Drees and his team often only deal with the acquired company’s management. But as soon as it is finalized, Drees holds a meeting with all of his new employees.
“We’re down there with all the employees, in a group setting, communicating exactly what’s going on, how we’re going to approach things, what’s going to change, what’s not going to change, what’s the benefit package, the whole nine yards,” Drees says.
That initial contact is key in creating trust with employees, one of the most vital steps in smoothing the transition, because if the new staff members don’t trust the company they’re joining, they aren’t going to stick around.
Beyond the initial community meeting, Drees takes other steps to build trust with his new employees.
“We do what we say we’re going to do,” Drees says. “We’ve got a great track record with our past acquisitions to point to, and we use those as references. But more than that ... we’re keeping those doors open, those lines of communication open so it’s just creating a trusting situation. That’s really the most important thing. There’s a bunch of rumors going around out there, and they worried about this or they’re worried about that that doesn’t help anybody. So we like to be very open with our future employees.”
The company keeps those lines of communication open in part by including the new employees in all company correspondence immediately after the acquisition is completed, adding them to the employee newsletter and e-mail lists. It also ensures new employees have a complete understanding of The Drees Co. by sending them through an intense, comprehensive training program that covers everything from company culture to organization management, quality control and new policies.
And while turnover is an obvious indicator of the acquisition’s failure, Drees also searches for less-obvious signs that employees are dissatisfied.
“We have an employee survey that we do about once every 18 months where we gauge the satisfaction level of our employees,” he says. “And that gives us a very good barometer of the satisfaction of our employees in each of our cities.”
From this, he and his management team can see where the process needs improvement and what they need to do to boost employee morale.
Building the brand
Another challenge that comes with acquisitions is the transition from the acquired company’s brand to the Drees brand. Drees and his management team look to acquire companies that have strong, solid reputations in their market, but after the acquisition, they are moved under the Drees name. The trick is to execute a rebranding strategy that changes the company’s name without losing its reputation with clients.
It does that with a co-branding strategy.
“No. 1, it’s all about communicating to the general public and to your associates and your key trades that The Drees Co. has acquired Ausherman Homes, for example. Now we’re part of the Drees family, but we still have the same traditions that Ausherman Homes always had,” says Drees.
That initial communication is achieved through press releases, individual meetings with key clients and real estate agents, and by updating the way the brand is presented on signs, letterheads, cards anything with the acquired company’s brand. The dual brand may be presented as “Ausherman Homes, a division of Drees,” for example, and that dual band will be used for about a year to familiarize people with the Drees name.
After that year, the brand changes again, moving Drees to the forefront, and it continues to evolve until the Ausherman name is dropped completely.
“We understand there may be some short-term disadvantages to that,” says Drees. “Ausherman homes has been doing business in Frederick, Md., for 35 years people know the name, they trust the name. Now a couple years later, there’s no more Ausherman name, there’s the Drees name. Although we have the co-brand strategy, they are not necessarily clued in on who Drees is. We’re certainly at a disadvantage that way.”
But that short-term disadvantage is outweighed by Drees’ long-term gain in expanding its national brand, because developing and maintaining that national reputation and presence is one of the major goals of the growth-through-acquisitions plan.
Having a national presence helps Drees in two ways. First, it helps it attract more attention from one of its most valued client bases the relocation market.
“A big part of our business, especially in our price range, is the transient market people moving from one city to another because of job opportunities,” says Drees. “If they’re moving from Dallas, Texas, to Frederick, Md., they hopefully have a good impression of Drees Homes from Dallas, and that will give us a competitive advantage when they move to Frederick. A person moving from Dallas to Frederick isn’t going to know who Ausherman Homes is they won’t have any impression of Ausherman homes. [But] they’ll have this image of us. And that gives us an advantage.”
The second advantage of a national brand is evident on the Internet conduct a search for The Drees Co., and you’ll find a single, comprehensive Web site that allows visitors to access information about homes and communities in each of Drees’ 10 markets. If the company maintained the brands of each of its acquisitions, its Web site would have to promote those and could lose much of its clarity or comprehensiveness.
But having a national brand doesn’t mean that the company applies a national advertising strategy. It treats each of its 10 markets as distinct and separate, with unique needs and selling points.
“We’re in 10 different isolated cites, if you will, so advertising is very local,” says Drees. “We have the uniform Drees name, the uniform Drees standards, but we do take a slightly different position maybe in each city, as far as how we position the brand.
“We try to have consistent values, communicate our consistent values through our brand, but depending on the price range that we’re strongest in each of our cities, we’ll change our advertising message to appeal to that particular price range.”
Foundation for the future
While the challenges of keeping employees after an acquisition and changing an acquisition’s brand are daunting, The Drees Co. has conquered them and made its growth-through-acquisition strategy a success.
In the past 10 years, the company has made five successful acquisitions, expanding into new markets and further building its national reputation. In addition, it has nearly doubled its revenue, growing from $606 million in 2001 to a projected $1.16 billion in fiscal year 2005.
“(Acquisitions have) been our primary growth engine,” says Drees. “The real financial advantage to us is that we can grow their presence within that marketplace, use that organization as a vehicle to become a stronger, larger player within that marketplace. And by combining our processes, our management talent and our capital, we should be able to create a better, stronger operating company. It’s pretty good.”
How to reach: The Drees Co., (859) 578-4200 or www.dreeshomes.com
“The primary causes of large property losses are fire, wind, collapse and water damage,” says John Hudak, complex claims analyst at Westfield Insurance. These types of losses can come at any moment and result in complete devastation. Therefore, it’s essential to address these risks before the situation occurs.
Smart Business spoke with Hudak about business property losses and how to minimize the impact of these events.
What types of property losses can businesses experience?
They can experience loss to property they own or rent including: indoor and outdoor fixtures; permanently installed machinery and equipment; property used to maintain or service a facility, such as fire extinguishing equipment or outdoor furniture; floor coverings; and appliances. Businesses can also have loss to business personal property, which may include furniture, fixtures, machinery, equipment and stock. Businesses should be aware of the value of improvements they make to a building, including fixtures, alterations, installations or additions. In the case of leased personal property, companies usually have a contractual responsibility to insure the items.
How can large property losses affect a business?
The reduction in operations in whole or in part is one of the largest impacts of large property losses. Businesses that suffer losses need to focus on maintaining their revenue streams and customer bases.
The key to keeping a competitive edge is rapidly making adjustments to continue operations and therefore protect their market share. Companies should have a clear understanding of which customers they cannot afford to lose. In the case of large property losses, businesses must direct their efforts toward maintaining key customers.
What steps should companies take to prevent large property losses?
They should develop and implement a risk management plan. The benefits derived from risk management include: increasing the ability to invest money in loss control and reduction; reducing expenses and inefficiency which might result from losses; and enabling planning for an organization’s future.
Risk management departments develop two types of goals. Pre-loss goals should be accomplished even if losses never happen, and post-loss goals are accomplished only in the event of an actual loss. An example of a pre-loss goal is to know exactly how much risk an organization can afford. Post-loss goals include planning for and implementing strategies for operational continuity, marketplace survival, revenue maintenance and profit stability.
What actions can help reduce property damage in the event of a loss?
Risk control techniques such as loss prevention, loss reduction, separation, duplication and diversification can reduce loss frequency and severity. Developing a comprehensive protocol and taking immediate action after a loss also reduces or limits property damage.
In addition, timely attempts to preserve the damaged property and promptly notifying insurance carriers are vital to reducing the severity of the property damage. Insurance carriers will need to know exactly which property was involved, including inventories of the damaged and undamaged property, in order to investigate and settle the claim.
In addition, companies should have copies of important corporate documents stored off site. The business should also consider separating loss exposures, if feasible. This means dividing operations between different locations, depending on the size and type of business.
How can insurance coverage reduce the impact of large property losses on a business?
Insurance shifts costs from the insured organization to the insurer. This is one type of risk financing, which can provide money to pay for losses that risk control techniques cannot eliminate. By transferring the risk to an insurer, the business can also share the insurance carrier’s skill and experience. A large loss property handler can assist business owners in establishing the most cost-effective protocol to restore their business operations as quickly and thoroughly as possible.
What other resources can business executives use to make decisions after a large property loss?
Business executives should have a disaster recovery team to plan and identify the key resources that might be needed to respond to a given situation. Once the first action steps are in place, the team of experts can turn to repairing or replacing buildings or personal property in the most effective manner. Because of the complexity of large property losses, having an available pool of experts in various fields of expertise is critical to successful recovery.
JOHN HUDAK, a complex claims analyst at Westfield Insurance, can be reached at (330) 887-6195 or firstname.lastname@example.org. In business for more than 157 years, Westfield Insurance provides commercial and personal insurance services to customers in 17 states. Represented by leading independent insurance agencies, the product Westfield offers is peace of mind, and a promise of protection is supported by a commitment to service excellence. For more information, visit www.westfieldinsurance.com.
Stop, think and decide.
Someone recently told me to slow down and think more before I react. That was good advice. I think that’s a huge part, just being as calm as you possibly can.
The other thing I’ve been trying to work on the last couple of years is slowing down reaction time and trying to take a little extra time on processing whatever the issue or challenge might be so that you can really try to think through what all the implications are.
I think what’s interesting nowadays is that with the e-mail age and the connectivity we all have with our computers, our Blackberrys, our cell phones is everyone is looking for that instant answer. And the instant answer, a lot of times, isn’t right.
Waiting a day and stepping back and thinking about it, letting your brain think about it when you’re sleeping, helps to put out the right answer for the problem.
Identify your niche.
The best advice I got was to concentrate on a niche and to not try to do too many things within that niche. What I mean by that is we’ve finally settled on really three different types of new development property offices, townhouses and mid-rise and high-rise condominiums.
Concentrating on these things and getting really good at these things has made us much more assured of being able to process over and over new development options. Originally, we were looking at a lot of different development opportunities and spinning our wheels. When we finally decided that we had three development types that we could build, and we could use those parts and pieces in a development, business has gotten a lot easier. It’s just a lot cleaner.
Hire problem solvers.
So much of our revenue is based on development activity. In development activity, we manage architects and engineers and geotechnical companies and general contractors to facilitate these projects.
Our typical project might be $15 million to $20 million per phase of a building coming out of the ground. So we don’t necessarily have a lot of people involved in the day-to-day aspects of running those projects, although we manage all the people. T
he approach that we’ve taken in hiring people is to hire extremely experienced people that exude a lot of self-confidence because of their knowledge base, but at the same time are really are good problem-solvers. Our business is really just problem-solving. So if they can problem-solve, they can be successful in this kind of business because what we’re being asked 10 times a day is, ‘Here’s the issue, what would you like us to do?’
The people we want involved can think on their feet and they can use their experience to figure out how they can fix the issues. They have to be enormous people people, in the sense that they touch so many people every day and direct so many companies to facilitate what we’re trying to do.
Give power to the people.
Most of the people in management positions here really make the decisions on what happens in their field of the business. They might bring it back to a partners meeting once a week, but generally they are empowered to make those decisions and then bring them forward.
I think that’s helped us a lot because that has given them the ability, while we have to be patient, when it’s time to react, you need to react. And you don’t need to go to a group of people every time to get the answer to move forward.
I think trying to set up a mentality where people feel empowered is important. They know the progress they’re making is largely because of how they’re putting things together.
Build a people infrastructure that the organization can support.
The biggest risk that we have in our business is leveraging properties too high, putting so much of a financial strain on the business that you either have to sell out of partnerships or bring new partners into the partnerships, creating a panic in the business.
You can’t stop in midstream in our business. Once you go, you have to go all the way. You also have to build an infrastructure of people, and without those next projects in place, it’s difficult to carry that infrastructure for a very long time.
What we have to watch for is being very careful about how big an infrastructure we build so we don’t get out of balance in a downturn. We call it the roller coaster, because really, in the development business, it’s like a roller coaster ride. The avenue we’ve taken because of that is to have a balance of business.
Spread downturn risks over multiple business lines.
We manage about a million square feet of property and also hold some real estate assets. That can allow the business to stay stabilized in the downturns of the market and really be patient and wait for the right opportunities to come along and make them move forward.
The biggest challenge in our business ... is the aspect of that rhythm and how do you create that rhythm. We try to do it by going toward redevelopments and projects that are not as affected by the economy. In redevelopment circumstances, you are typically looking for the best locations in a community to develop, which helps to negate downturns in the market because you do typically have product moving.
From a company side, we’ve tried to design the business so that our product type is somewhat conservative ... and protect the business through some other avenues of revenue generation, through property management and existing assets.
How the reach: Ackermann Group, www.ackermanngroup.com