Andria Segedy

Monday, 22 July 2002 09:42

To the extreme

Coming 4,000 feet short of reaching the earth’s highest point does not mean failure to Don M. Casto III. Climbing 25,000 feet to the South Col marks his Mount Everest adventure as a success, even though he didn’t reach the much-sought-after summit.

For Casto and other businessmen who are extreme sports enthusiasts, the process is the experience, a mindset that is reflected in their business life, as well.

It is their personalities that make them want to achieve more.

“These are men who are very successful, who seek a challenge in their workday world,” says Roger Hall, Ph.D., a psychologist with Compass Counseling and Consultation, Dublin, who consults with executives and their families. “It makes sense to seek an ultimate challenge elsewhere. Regular people wouldn’t want to get out of bed to do this. For these guys, it’s what they eat and drink.

“They are successful in their work because they have channeled that intellectual or physical thrill.”

Climbing is a metaphor for life and for business, says Casto, president of Don M. Casto Organization, Columbus, a third-generation developer of retail and living space. The company has developed more than 15 million square feet of shopping centers in the Midwest and 6,000 multifamily dwellings, building at a rate of 1,500 units a year.

“A life well lived involves a certain degree of risk, the management of that risk and overcoming fear to live a full life. It is no fun taking the easy route up a mountain.

“A part of climbing is that you learn early on that failure is part of the equation,” says Casto, 54.

He was 40 when he made his first climb to Mount Rainier in Washington. Since then, he’s been climbing all over the globe, with his next trip planned for Greenland in June.

“You spend a lot of time failing, so you take it for what it is. Climbing is a process. You have to enjoy the process of getting there.”

Climbing Mount Everest is a 12-week process. For those who reach the summit, the reward is, at best, a 15 minute stay at the top, because of environmental and health factors.

“If you do it for the summit, it’s a bad ratio,” he says.

The 1993 Mount Everest trip cost $45,000, plus $10,000 for airfare and hotel. With shorter climbs, as a reward, he meets his wife after the trek in fun places, including Rome after climbing Mt. Elbrus in the Russian Caucuses; Tanzania for a family safari after climbing Kilimanjaro; the Italian lake country after climbs on and around Mt. Blanc; Zermatt and Geneva after climbs on the Matterhorn; and the Indonesian resort island of Biak after climbing the Carstensz Pyramid in New Guinea.

“The reason you are there is the beautiful mountain, the vistas, the bond of the rope,” Casto says. “The lessons you learn are the patience in the process, the organizational skills. I solve puzzles for a living. I’m not sure which benefits which (business or climbing).”

Tom Mueller, 43, has worked his passion for long distance trail running into his business plan. He is president of Sport Management Inc., Westerville, which grosses $2 million in annual sales.

He competed in his first triathlon in 1983, and in 1988, before he started his sports marketing company, finished his first ultra-marathon, a 50-mile run at Mountain Masochist, Linchberg, Va.

“A lot of people like to run. But not a lot of people want to run 100 miles,” says Hall, a cognitive therapist. “They seek the ultimate challenge in every day life. They have the freedom to pursue these sports because they have the financial means to pursue them. People who don’t have the financial means to pursue this find other ways to get that mental physical thrill,” such as closing a deal. “They’ve channeled it in a good direction, something useful for society and their family.”

Mueller, who goes through as many as 15 pairs of running shoes a year, has a new deal with sports apparel company Brooks Sports Inc., Bothell, Wash.

“I’ll be on the Brooks sports team in the year 2000 and will put on seminars at some of the Brooks-sponsored running events,” he says.

He wants to build those seminars into a national tour for his own business. Meanwhile, he will gross close to $2 million in sales this year for his four-year-old business. But that success isn’t on Mueller’s mind when he trains six to 10 miles a day, or when he’s running 50- and 100-mile races. Last year, he ran two 50K races, three 50 mile races and one 10 mile race.

Running strips everything away,” he said. “It’s you and that course — what you are made out of and what is your threshold of pain. Being able to think through that whole race — 100 milers — you think your race out, what you are doing, maybe that you need to drink more water, change your socks, your bodily needs and your mentality.”

“(Even) if I didn’t have this job, I’d still be an ultra runner,” he said. “It is about discipline, goal setting and taking it to the finish. I find that applicable to anybody’s daily schedule.”

For Dan Evans, chairman, chief executive and board secretary of Bob Evans Restaurants, it can cost up to $20,000 for his annual Alaska big game hunting trip to bring home Kodiak bear and Dall sheep. He’s hunted in New Mexico for elk and when he started in the sport 30 years ago, he hunted in Ohio.

A decade ago, he was serious about competing in cutting horse competitions, and won the cutting horse championship trophy in 1991 at the All American Quarter Horse Congress.

“I won the trophy so I could talk about it,” he said. “I’m not riding at the level you have to compete now. I used to practice at 5 a.m. every morning.”

When he plays, Evans, 63, doesn’t think about his job.

“I don’t have any phones ringing,” he said. “I don’t want to worry about anything at home.”

In 1999, he visited 200 of his company’s restaurants, which employ 34,000.

“Whenever I go to a restaurant,” he says, “I have the names of all the people and try to call them all by name.”

In business and in sport, Evans says: “I’m challenging myself. I don’t say that to myself. But down deep it really is a real challenge.”

Andria Segedy (aesegedy@sprintmail.com) is a free-lance writer for SBN.

Monday, 22 July 2002 09:36

Play your cards right

Women who own businesses are more likely than their male counterparts to seek advice from associates and advisers, according to the National Foundation for Women Business Owners.

In addition, women place more emphasis on quality, service and vendor reputation.

These facts mirror the reasons for Worthington-based cardSupply.com's success and rapid sales growth during the past three years. Knowledge of the greeting card business and strong customer service, coupled with financial and technical advice from associates and minority investors, has kept this Internet business in the black since its inception for executive vice president Jody Zitsman.

Zitsman considers advice from her husband, Howard, who co-founded and co-owns the business. His business background is in investment banking, so he oversees the technical and financial aspects. She also takes advice from cardSupply.com's investors -- one has a strong retailing background; another comes from a family-owned card publishing business.

Zitsman started in 1990, selling wedding invitations out of her living room under the name Paper and Ink Promotions.

"I found quickly that I was spending 10 hours to make my $150," Zitsman says. "It wasn't cost effective. Along with Howard's help, I decided to start selling greeting cards to businesses and corporations. I went door to door like Willy Loman with my sample books. That's how we grew the first seven years."

Three years ago, she turned to the Internet. During the holiday season -- August through December -- cardSupply.com gets up to 70,000 visitors a week, she says. Off season, it drops to about 10,000 per week. She also goes from about 15 employees down to five. And now, 70 percent of her sales are from businesses and 30 percent from individuals.

"Our largest customer buys 120,000 cards for its offices throughout the world," she says. "The smallest business buys 25 cards and is equally important to us."

The privately held company projects 150 percent growth this year. Zitsman also does strategic advertising, primarily in the fall, in populated target markets that are computer savvy, such as New York, and in magazines including The New Yorker and New York magazine.

She plans to develop the business as she did from the inception: "Grow the company carefully and remain solvent. This Web site is making money. We haven't turned through hundreds of thousands of dollars of venture capital money. At the same time, we offer the best Internet experience. We have someone answering the phone 20 hours a day. We find that important. Another thing that sets us apart is that I know cards. Our customer service people can help you with etiquette questions, art and logos. I have the experience and have been doing it for a while. We hope to continue in that vein to ensure our success."

"It's a challenge being a business," she adds, more so than being a woman-owned business. "Being an Internet business, nobody cares who's on the other end of the computer key pad. They just want to order cards. I don't think it's a gender specific issue. I don't see any pros and cons to being a woman.

"The reason it works for us is not because I'm a woman or a man but because I have 10 years experience in this area," she continues. "It matters to our customers who call us that we can provide the information they need." How to reach: cardSupply.com, 430-0034 or (888) 444-CARD

Monday, 22 July 2002 09:33

The American Dream personified

In St. Joseph's Cathedral in Downtown Columbus, a railing encircles the altar and the pulpit.

Holding that railing are pillars covered with aggregate terrazzo, a special mix of tile and cement. Even the architect was unsure if terrazzo, meant for flooring, would work in a vertical format.

For his successful efforts, terrazzo specialist George Martina received the 1979 Craftsman of the Year Award of Merit jointly from the American Institute of Architects and the AFL-CIO's Building and Construction Trade Department.

North of Downtown, inside the Jerome Schottenstein Center, the 72,000-square-foot terrazzo floor includes 5,000 square feet of remarkably detailed mosaics depicting Ohio State University athletics. The National Terrazzo and Mosaic Association first recognized the work by Martina's firm, The Ardit Co., in 1998 as Job of the Year; then, ultimately, the project was named Job of the Century.

For the 68-year-old Martina, who at age 14 began studying the family trade of laying terrazzo, mosaic tile and marble, these accolades honor a man and his ability to lead and rise to the top.

At 16, he began a business with an uncle in Verona, Italy, becoming a leader among the older, more experienced tradesmen in the field, he says. He remains a perfectionist today; even in the process of retirement, he can be found at job sites motivating his fellow union members to complete complicated projects.

Martina's path to the top began in 1956, when, at the age of 23, he flew from his home in Spilimbergo, Italy, to the United States on a work visa sponsored by The Ardit Mosaic Tile & Marble Co. Ardit owner Louis Mirolo not only was from Martina's village, he was baptized by Martina's grandmother.

Martina's father wanted his young son to capitalize on that relationship and make the move to a country where the standard of living was three times better than in Italy.

Martina came to America with $500 in borrowed money and English learned in night school. Forty-four years later, Martina still goes to work at Ardit, but he does so as its owner -- and is now ready to hand down to his daughter and son-in-law the business he brought to new prominence.

Settling in

After arriving in Columbus, Martina faced many obstacles, from the language barrier to the taste of food. But he was motivated by the money.

"I spent two weeks with my boss in Upper Arlington, the richest part of the town," he says. "They spoiled me."

But Martina wasn't to stay in those posh surroundings for long. His boss found him a room in the St. Clair area where other Italian immigrants were living.

The change didn't make much difference, however, because Martina was at work more than he was at home.

"The first week, we worked all the time," he says. "On the plane, I was told, 'You work only 40 hours a week.' Instead, I end up working six to seven days a week, 10 hours a day. That was for awhile."

His first day of work was also different from what he was used to in Italy.

"The style of work was different," Martina says. "In Europe, they take more time. The construction here is on a faster track and my work had to be done faster."

Martina's adjustment to America became easier after about six months, when he met a fellow named Mario Ceschiat and they became fast friends. Martina moved in with Ceschiat's family in the Northland area, and stayed for 10 years.

This new family helped Martina overcome a few of the most difficult things to deal with when moving to a new country -- being homesick and missing traditional Italian food.

In 1962, Ceschiat's job moved out of Ohio and Martina found him work at Ardit so he could stay. Ceschiat worked side by side with Martina, learning the trade and learning even more about Martina and his work ethic.

In 1979, things slowed down.

"Ardit got into trouble," Ceschiat says, noting that during this time, he found work at another flooring company, something that's not uncommon when business at one company became scarce. "Guys were missing a lot of time."

In 1984, when Ardit's owner became ill and the family was ready to phase out the business, Ceschiat returned as the estimator and general manager. Realizing he didn't want to run Ardit by himself, Ceschiat asked Martina to join him in ownership.

Together they wrote a check to buy the then-$1 million company. They also shortened the name.

Reaching the pinnacle

Martina and Ceschiat worked well as co-owners. Ceschiat met with clients and bid the projects. Martina knew more about the trade of terrazzo, so he bid the labor, oversaw the work on site and, in many cases, trained the men of Bricklayers Union Local 55 who worked the flooring projects.

Married in 1969, Martina's wife, Norma, a certified public accountant, joined the business as company treasurer.

Martina says his only concern as a business owner was being responsible for his employees' paychecks, adding that his goal was to get enough work to keep the men busy. Ceschiat says his goal was to build the business enough to retire in 10 years. After the partners doubled the business, partly due to the economic growth in Central Ohio, Ceschiat met his goal and retired in 1995 at the age of 62.

He sold his half of the business to Martina, who again skipped financing and simply wrote a check.

When Ceschiat left, Martina's son-in-law, Alex Johnson, a computer consultant, joined the company. He had worked part time at Ardit while studying engineering in college. Martina's only child, Michele, also a CPA, joined the 26-employee business a year ago.

How he did it

Martina believes three key factors have helped him grow Ardit: the right employees, the right economy and the right leadership.

To ensure he has the right employees, Martina prefers to work with those to whom he's taught the trade.

"I trained half of my men," Martina says. "I spent months with them on the job years ago."

As for the economy, recent boom times have increased the demand for high-priced terrazzo, a highly durable mixture of granite, marble and glass.

"Being more aggressive, we bid more work" during the prosperous economic times of late, Martina says. That's resulted in a doubling of sales during the past five years and some high-profile jobs like The Schott, Nationwide Arena and Easton's Planet Movies, where bits of mirror in the floor create a sparkling effect.

"Terrazzo is more expensive than carpet, linoleum or vinyl, but it lasts forever," Martina says. "It's expensive because of the labor involved."

Laying the terrazzo on the Schottenstein Center floor, for example, took 14 members of the Bricklayers Union seven months to complete and cost a little more than $1 million, Martina says. The larger, 110,000-square-foot, four-color terrazzo floor at Nationwide Arena took five months, about 14 men and cost more than $2 million.

"Sometimes you bid on too much to get work," Martina admits, "and you can't refuse once you get the project."

That's why hiring the right workers is so important.

"Some are good and some not so good," Martina says. "You have to put the good men in each group to keep on eye on the work."

Martina remains a perfectionist. As he slowly transitions into retirement, he can still be seen at work sites, watching the progress of a trade he was born into. He can't help it.

He knows the success of this 80-year-old business came from having the right people in the office and in the field. He wants to make sure that continues. How to reach: George Martina, The Ardit Co., 895-3535

Andria Segedy (aesegedy@sprintmail.com) is a free-lance writer for SBN.

Monday, 22 July 2002 09:48

How to cultivate more sales

Refreshing the design of an existing product might seem like reinventing the wheel. But it could bring a new category of buyers to your front door.

Union Tools boosted its sales by almost $3 million the first year it redesigned products for the woman gardener, says Larry Damato, a product manager for the Columbus-based lawn and garden product maker.

“The largest success in the [109-year] history of the company has been the product line which we call Lady Gardener,” he says. “The first year we did 300,000 pieces, which was our three-year projection. As a branded program, it has outsold any other branded program Union Tools has had.”

For the 12 months ending July 31, Union Tools posted total sales of $130 million, which includes a wheelbarrow division, an injection molding division and a watering division. Its stick tools division brought in $108 million during the same period, $4.7 million of which was from Lady Gardener sales. There are 14 tools in the four-year-old Lady Gardener line.

His company isn’t resting with that victory. Union Tools just finished redesigning the old stick tool handle into a shaped fiberglass handle for use with five different tools that are expected to be on the market in February, he says. The gripping area and the handle are one piece, the first time he’s known any company to be able to mold fiberglass into a single, multishaped product.

What does it take to redesign a product? For Union Tools, the process involved:

  • A redesign team to craft a project outline. The nucleus of Union Tools’ team includes representatives from marketing, engineering, purchasing and manufacturing. For the shaped fiberglass handle, the company tapped Gahanna-based Priority Designs, whose own team includes designers, engineers, model makers, a scheduler and a communications specialist.

  • Research to determine market potential. “It’s very important to understand what the end user of the product wants,” Damato says. “Sometimes that’s not as easy to find out as you may think it is. A great example of that is the Lady Gardener. We did many focus groups, many mall intercepts [randomly chosen mall shoppers], specifically talking to women. We wanted to understand what they liked, disliked and wanted in a tool that they could not buy today. All that information was gathered and put into the design process.”

  • A compelling reason to redesign. “Some are performance-based or to make it stronger or more ergonomically correct,” says Priority Designs’ President Paul Kolada. “Find new materials [cheaper, stronger, more cost effective] and a process that may allow you to make them quicker and more economically. The key is to make more money on these products.”

  • Market knowledge. “Know the potential and take a risk sometimes,” Kolada says. “Very few product categories stay still. Business is basically competitive. It’s rare when you can stay still and keep doing well.”

  • Patience. The redesign process can take up to 12 months. The team will make computer-based product sketches, followed by three-dimensional models. Focus groups will be asked to comment. Using that input, the design will be refined and computer drawings will depict the final product. The engineering phase defines product details. Then the product is retooled for manufacture.

  • Money. Redesigning a product can cost from $2,000 up to hundreds of thousands of dollars. That doesn’t take into account production and retail costs, which must be analyzed. For the Lady Gardener, profit yield took less than six months, Damato says. The redesign process cost $100,000, including $50,000 for two machines needed in the manufacturing process.

“Force yourself to think outside the box,” Damato adds. “The key element is to understand what the consumer is looking for.”

How to reach: Union Tools, 222-4477; Priority Designs, 337-9979

Andria Segedy (aesegedy@sprintmail.com) is a freelance writer for SBN.

Monday, 22 July 2002 09:45

Time out or burn out

To walk Monument Valley, where John Wayne became an American icon, is no longer just a dream for Richard Needles.

A four-week paid sabbatical from Sterling Commerce gave Needles the time to fulfill many dreams, including riding the rails cross-country and visiting Needles, Calif. — no relation.

When he returned to Sterling’s Dublin office, he settled in with a new perspective on his job that — not uncommonly — has him working long hours, including weekends.

“When I came back, I took a more strategic look at my job,” says Needles, who is vice president of human resources for Sterling’s Commerce Group, a 650-employee division of the company, and the senior HR person for the corporation.

“I was more thoughtful. Right before I left, I was caught up with what I have to do at 8 o’clock and 9 o’clock. Now I think about what the company is going to look like in two years and how can I make a difference as a corporate vice president.”

An uncommon occurrence

Sabbaticals are not as common now as they were in the past, according to statistics from the Society for Human Resource Management. A 1999 survey of 2,500 members of the Virginia-based trade group shows only 5 percent of the 742 employers who responded offer paid sabbaticals, according to society spokeswoman Kristin Accipiter. Another 23 percent said their employer offers unpaid sabbaticals.

Accipiter says the highest occurrence of sabbaticals, both paid and unpaid, comes from the education industry, where sabbaticals have their roots in letting teachers take time off. Sixty-six percent of HR professionals representing an educational organization say they offer paid sabbaticals and 59 percent offer unpaid programs, she says. Some offer both.

“With most benefits, typically we find larger companies are better able to offer benefits, whether it be a sabbatical or telecommuting,” she adds.

For many companies, a sabbatical may be seen as an outdated benefit, Accipiter speculates.

“Today, employees are looking for day-to-day flexible arrangements,” she says. “Instead of giving me 12 weeks off to join the Peace Corps, what I really need is flex time, job sharing, telecommuting. We are seeing increases in the likelihood of employers offering those types of benefits.”

Labor pains

The largest reason for so few companies offering sabbaticals is the labor market.

“In the past few years, the labor market has squeezed employers,” Accipiter says. “They can’t afford to let employees go from six to 12 weeks. They are having a hard time filling positions. They can’t afford to let them go.

“The stress is already on co-workers. Then to let someone go for a nonmedical reason would be deemed by co-workers as unfair.”

However, the carrot of having a paid sabbatical keeps employees long term, say Needles and Cynthia Picciano, director of human resources for the Gentran Group, a 450-employee division of Sterling that focuses on business process improvement products.

“Our program requires five years of continuous service,” Picciano says. “Every time you complete five continuous years, you are eligible. I’ve been with the company four years and [am] very much looking forward to my sabbatical.”

“It’s an extra month’s pay on top of a pretty good vacation program we already have,” Needles says. “From a retention standpoint, industries are finding that three years is a critical time for people staying with a company. Having a sabbatical after five years is a reason for people to stay.

“Five years of service is a significant amount in today’s economy and should be rewarded.”

Getting started

What are the rules in creating a sabbatical program?

“A company has to think through those parameters,” Picciano says. “What is your culture? What are you attempting to do with the sabbatical program?”

The Sterling Commerce Sabbatical Policy was adopted in July 1993, Picciano says. For employees who have prior years of service — either at the time the policy was adopted, or because Sterling Commerce acquired the company at which they had prior years of service — one month of service credit is given for each full year of service. Total service credit is not to exceed 12 months. When an employee’s credits and years of service at Sterling reach five, they can be “cashed in” for sabbatical leave.

At Sterling Commerce, employees have a two-year window from their five-year anniversary to take the four weeks of paid time off, and they must take it in one chunk, Picciano adds. The employee’s manager must approve the dates, which cannot coincide with the busiest or most critical time for that employee.

“You’ll get people who decide it’s very hard to break away,” Picciano says. “There are people who find a hard time taking a week off.”

But the intent of the sabbatical is for employees to get away and come back refreshed and recommitted to their work, she adds.

Granting employees a four-week leave must be managed because of workload and assignments, Picciano says.

“But overall, Sterling Commerce is very committed to providing top-of-the-line benefits to its employees,” Picciano says. “In the high-tech industry, sabbaticals aren’t all that rare. A good number of high-tech companies offer sabbaticals. In the days of Sterling Software [the company’s predecessor], it might have been more leading edge. They saw it as a way to be very attractive as an employer of choice.

“People in our company work very hard and this is seen as a deserved R&R, if you will. One of our policies is you take the full four weeks ... Go away, enjoy, travel, be with your family, do something and get away from work.”

Calculated risk

Approximately 200 of Sterling Commerce’s 1,900 employees have taken a sabbatical since the first eligibility in July 1997.

“In the early days,” Picciano says, “we were worried that people would use the time to go job hunting. It just hasn’t happened.”

However, people do quit.

“We’ve had a couple of people leave after the sabbatical,” says Needles.

But that’s not for him.

“I enjoy the job,” he says, adding that he couldn’t live on vacation his whole life. “I like the fast pace of working in the computer software industry. I’ve been working in it for 15 years. Chilling out and getting away from it is nice, but it is my life.”

During his time away, from mid-May to mid-June 1998, Needles and his wife of 22 years took 29 days to see the country. He did not check his voice mail or his e-mail. They flew to Phoenix, rented a car and drove to the Grand Canyon, Needles and Los Angeles. They headed north on the Pacific Coast Highway to Pebble Beach, the Hearst Castle, San Francisco and Oakland.

Then they flew to Seattle and took a ferry to Vancouver and Victoria, British Columbia. Finally, they took the Amtrak to Minneapolis through Glacier National Park in Montana. Then they flew home.

“I’m looking forward to my next one,” says Needles, who has been with Sterling for more than seven years. “We’re planning a trip to Australia.”

Andria Segedy (aesegedy@sprintmail.com) is a free-lance writer for SBN.

Monday, 22 July 2002 09:43

Start collections early

Buckeye Check Cashing Inc., d.b.a. Check$mart, is writing off a $40,000 debt from a now out-of-business construction company that recently processed a few checks through the Dublin-based business.

That’s a rare mistake for Check$mart these days, since president James Frauenberg implemented a strict check approval and collections process after he and partner Michael Lenhart purchased the faltering business in 1991. From four stores and 18 employees, Check$mart has grown to 60 locations with 300 employees in Ohio, Indiana, Kentucky and Florida.

Basic retail sense is what has made this business grow, he said, although he would not reveal revenue figures for his privately held company. Not all items cashed are personal, payroll or other third-party checks; for example, the business will also cash insurance vouchers.

Convenience is the number one reason people pay a few dollars to cash a check at Check$mart. Sixty-seven percent of its customers have bank accounts, they just don’t like bankers’ hours, Frauenberg says.

Check$mart charges customers from 2 to 10 percent of the amount being cashed.

“Different companies do it different ways,” Frauenberg says. “The highest instance of bounced checks is for personal checks. We assign a percentage to the risk we take. For the vast majority of all checks we cash, it’s something less than 3 percent,” he says, declining to discuss specific numbers.

Problem identified

Before acquiring the floundering business, Frauenberg reviewed the accounting books and immediately identified the problem.

“We looked at the cash flow, not just the profit and loss statement, to see if the cash flow was insufficient to cover expenses,” he says. “There’s a couple of things to look at. One is, how do you increase cash flow, and the other, obviously, is how do you decrease expenses.

“When we looked at cash flow, we realized that an immediate impact could be had on collections. That’s how we decided we better take care of that area first. We had somewhat of a bad debt situation in the 20 percentile range, and now it’s less than 10 percent” that the company eventually has to write off.

Frauenberg identified the bad debt situation in the first day of due diligence, he says.

“It was just so obvious. It was a significant number. It was, next to payroll, the next largest number. It was that obvious.”

While he does not recall the amount of debt Check$mart carried when he acquired it, Frauenberg does remember that collections was being done in a haphazard manner.

Collections improved

“We started the turnaround within the first five or six months,” he says. “We really had completed a nice part of the turnaround after the first year. We were profitable after the first year and collections was part of it. The other part was getting back to basic customer service disciplines.

“Not everybody who comes in brings bad checks. You have to create an atmosphere where people are comfortable coming in.”

Frauenberg has been in retail ever since he got out of college, and “we looked at this check cashing business as another retail business. There are certain things you need to do in any retail atmosphere to make the experience go well with the customer and the company.” For example, employees with bad attitudes who don’t respect the customer are replaced, he says.

What did Check$mart do to improve collections?

“First, we retrained our store staff and got them back to the normal standards of what they should be doing to check the item on the front end,” he says.

Employees must verify the address, phone numbers and employment, which could mean calling the employer and asking for a physical description if there is no photo ID, Frauenberg says.

“The other thing we did was more significant,” he adds. “We had a fellow in our employ who was a professional collector in another one of our businesses. We brought him over to Check$mart and centralized our collections so we could get our arms around the problem.

“We got a proper letter writing campaign going to notify people that their check bounced.”

A systematic series of collection letters is accompanied by phone contact with the customer. Send the first notification letter the same day the NSF (nonsufficient fund) notice comes back to the company, Frauenberg says.

“Some people send six or seven letters. We only send three,” he says. “We believe phone contact is better. If our people, when the customer cashes a check, do their job properly, we have a home phone and a work phone for the customer.

“Have your process down to when that item comes back to you, your people know what to do,” he continues. “Confirm with the customer that the check bounced. About Day 3 and 4, we’ll start to call. With a lot of people, after you make the first phone call, that may be the first time they realized the check came back. The letter and call also establish with the customer that this is important enough for me to call. You have to set that up in the customer’s mind that this is an important item.”

For example, if the person doesn’t pay and the debt is $10,000, he says, the company might do an asset survey and try to get those assets attached.

“In any good collection situation, you have to weigh your end result against what you are willing to put into it,” Frauenberg says. “If a person owes $100 and they are out of work and living with a relative, it doesn’t make sense to pursue that person, because he doesn’t have any means to pay. Then you go on to the next one.”

Because of its collection system, Check$mart gets more than 50 percent of returned items paid within the first two weeks, he says.

“For the next two weeks, it’s about 15 percent. In the second month, it’s down to about 10 percent. After that, it starts trailing off.

“If you don’t hit early to establish with the customer that they owe you the money, the chances of success on that collection deteriorate pretty fast.”

Andria Segedy (aesegedy@sprintmail.com) is a free-lance writer for SBN.

Monday, 22 July 2002 09:38

It only takes five minutes

If your new business purchase isn't quite right, skip the middle management filters and take your concerns straight to the top. That's what Tom Bell expects from his customers.

Bell is CEO of Bell-Haun Systems Inc., a voice and data telecommunications company in Westerville. Within the first month after a new Bell-Haun system is installed, he phones the decision-maker, giving him or her an opportunity to express an opinion of the product, the service and the installation.

"Regardless of the size of the company, I think every CEO needs to make a part of each day dedicated to keeping his finger on the pulse of the front line," Bell says. "I can't think of a better way to do that than to talk to a client. If it's a smaller business, then I think it's important for the chief executive to do that personally. If it's a huge GM-type company, the CEO has to make a decision on how to stay in touch with reality."

Bell says relying on input from senior managers won't suffice.

"They naturally are going to filter out, rose color a little bit," he says. "The really successful CEO has figured out some way to litmus test reality."

Bell-Haun service manager Eric Morgan, who has been with the company 10 years, says he sees the benefits of Bell's approach.

"The impression we all get here is that the customers deeply appreciate our CEO taking the time to personally call and say, 'My name is on the company. We sold this to you. How is it working?'"

Bell and his partner, Mike Haun, started Bell-Haun in 1977. Haun is the scientist who keeps the company alert to new and future technologies, Bell says. Bell's role is to work with client issues and opportunities, marketing and related activities for the 54-person company.

Bell started making customer follow-up calls five or six years ago, although he can't remember a particular incident that initiated this approach.

"Necessity is the mother of invention," he says. "I probably got a call from a client who wasn't really all that happy. After the call was over, I thought: 'This would have been much better if they had been called by me.'"

Now, about three weeks after the system is in place and the training complete, Bell phones the decision-maker. His core comments and questions include:

  • Introducing himself and thanking the company for its business.

  • Asking if he or she received the products and services expected.

  • Inquiring if there was anything in particular about the process that they liked.

  • Asking if there was anything annoying or bad about the process.

The average conversation lasts less than five minutes.

"I also tell them that they can call me at any time about anything," Bell adds. "If they have any issue, good or bad, I hold them accountable. They must call me."

One client told Bell the system was great, but it was making the client learn military time. The phone was set up to display 1500 hours instead of 3 p.m., for example.

"I knew there was an option of programming the phone in military time, and I told him we'd change it," Bell says. "We could change it remotely. He called me back an hour later and was very happy of the change. That is one of those little things he may never have called us about. But we could have found out by talking with someone else.

"He could have passed that along to others that everything was great except military time. Now, he can say how quickly we changed it."

Another client was concerned because it took longer than he expected for customers calling in to eventually get to a human. The system was set up with an auto attendant, where the caller listens to choices and then picks where he or she wants to be routed. The system then determines which employee phone is open to take the call.

After Bell brought this concern to Morgan and the project manager, their analysis showed that the caller was doing what the client wanted, listening to the auto attendant options and making the right choice. Bell was then able to explain this to the client.

"The perception that Tom Bell takes this time [to contact customers] has a far greater impact than anything I could do as the service manager or anyone else," adds Morgan. "The president and CEO carries that weight." How to reach: Bell-Haun Systems Inc., www.bell-haun.com; 882-4040

Andria Segedy (aesegedy@sprintmail.com) is a free-lance writer for SBN.

Tuesday, 23 October 2001 10:48

Nothing ventured ...

Two years ago, Bob Shelton repositioned Ultryx Corp., his then-14-year-old business, in order to exploit e-business opportunities.

His challenge was to get his repackaged products to market before his competitors. To do this, he had to move fast. To move fast, he needed outside investors.

He turned to the venture capital community for financing to develop, market and sell his product, as well as to get business advice and connections that will help him sell the company when the time is right.

In doing so, he handed over control of the business to a board of directors and hired a stronger management team. In addition, his ownership stake decreased dramatically. That's fine with him; he figures he'll still end up ahead.

"The 90 percent I used to own will be worth less than the 30 percent I now have," says Shelton of the $3.1 million deal he cut with two venture capital firms and seven high net worth individuals, or angel investors, in December 1999.

In fact, by the end of this month, Shelton plans to secure another $2 million in his second round of venture funding, decreasing his ownership even further.

"This is not an issue for me," he says. "One of the attractions to this approach for me can be an impediment to others. Once you start down the venture capital track, their motivation and intent from the beginning is quite clear. They need to see liquidity on their investment in three to five years. Either you sell to the public through an IPO or sell to another company. In either case, it ain't going to be your baby anymore."

"As someone who is 56 years old," Shelton adds, "and having built the company for 16 years, a definable window for an exit strategy is good."

Few choices

Banks weren't a financing option for Shelton.

Banks secure loans on real assets, such as land, buildings and furniture -- and they want to see a profitable company producing payments on interest and principle. Ultryx didn't fit that mold.

Although the company had revenue of more than $1 million in 1998, it planned to lose $250,000 a month during its product development phase. Net loss the first year was only $1.7 million, however, because Ultryx was able to sell existing product.

But that didn't change the fact that "banks don't want to finance losses," he says.

Another option was to find a customer to fund the project, but "that's a slow way to go," Shelton says.

Venture capital and angel investors became the obvious choice.

"It was primarily a time-to-market issue -- that product development life cycle," he says. "In our previous economy, it would not be unusual for that to be a year to 18 months. By Internet standards, that's three generations. There are too many large competitors with lots of money to set aside and focus on that to capture that opportunity much faster than we could. The opportunity might have disappeared."

Shelton couldn't afford to let that happen.

Cutting a deal

There's a good amount of venture capital flowing into Columbus area businesses these days. Just how much depends on whom you ask.

According to a PricewaterhouseCoopers quarterly survey of more than 700 venture capital firms nationwide, $103.1 million, or 36 percent, of the reported $288 million in venture capital money invested in Ohio businesses went to Central Ohio firms in the past four quarters.

According to a survey done last year for The Columbus Venture Network, venture capital invested in Central Ohio accounted for more than $464 million, or nearly 70 percent, of the $665 million in venture capital invested in Ohio.

To get a piece of that pie, Shelton started networking in hopes of getting connected with the right venture capital firms and angel investors.

"I met an individual who was a venture capitalist," he says. "He became interested in the company and offered to put together a syndicate of people like himself. He eventually located The Ohio Partners and brought them to the table."

In addition to The Ohio Partners, Ultryx's investors include Venture Assets Ltd. and Bridlespur Partners LP, the investment firm of former Scotts Co. chairman Tadd Seitz.

"Most venture capital firms prefer to invest in companies where there is already a product complete and there are at least a few customers," says Mark Butterworth, vice president of The Ohio Partners, the venture fund of Dispatch Printing Co. chairman John F. Wolfe.

Ultryx met that criteria.

"At the time we started the transaction, we had 18 employees and a fairly large customer base for our products," Shelton says. "We had 300 customers on the list, half outside the U.S."

In addition, Shelton's vast knowledge of manufacturing was viewed as an asset by investors.

"The first thing I always look for is good management and good people (or the willingness to hire them)," says Ultryx angel investor George Jenkins, who is also a law partner with Vorys, Sater, Seymour and Pease LLP. "If they don't pass that test, then I have no interest in them no matter how good the idea."

Making changes

Although Shelton and his investors signed a letter of intent in September 1999, it took another 90 days to close the venture capital transaction. As a privately held company, Ultryx had never done an audit of the kind needed for a due diligence report required by investors.

Preparing that audit cost about $50,000, Shelton says, but that cost was built into the budget of how he would spend the investors' money.

Another large expenditure would be hiring a top-notch management team. When Shelton signed the term sheet, the only senior executives were himself and his vice president of marketing.

"Clearly, venture capitalists invest in people," Shelton says. "The initial investment was an investment in me. But going forward, they were betting on me and the company I assembled around me."

With the advice and consent of investors, he began recruiting vice presidents of finance, product development and professional services who are now on staff. He again turned to networking.

"Venture capitalists were helpful in nominating candidates," Shelton says. "Early round investors like to tap you into a network of talent they know of from other investments and contacts."

The deal also required Shelton to form an advisory board -- and give five of the six seats to his investors. Shelton holds the sixth seat.

The monthly four-hour board meetings "are a good discipline for the management team, knowing you have to stand up and be accountable so things can't get off track," Shelton says.

"We don't pay anyone to attend the board meetings," he says. "We get candid and savvy advice whether we want it or not."

Board members also come in individually each week to share their expertise.

Still, Shelton doesn't indicate having any regrets about seeking venture funding for his now-$2.7 million company. Perhaps that's because he was able to let go.

"You really have to cross the chasm of control and ego, of being the total entrepreneur and (in) total control of your own destiny. If you can't cross that, you're not going to have a pleasant experience." How to reach: Bob Shelton, Ultryx Corp., 410-2020; Mark Butterworth, The Ohio Partners, 621-1243; George Jenkins, Vorys, Sater, Seymour and Pease LLP, 464-6381; Columbus Venture Network, 225-6938; PricewaterhouseCoopers MoneyTree Survey, www.pwcmoneytree.com

Andria Segedy (aesegedy@sprintmail.com) is a free-lance writer for SBN Magazine.

Monday, 22 July 2002 09:45

Oh brother!

If you hear shouting down the hall at Gioffre Construction Inc., don’t worry. You know the problem is almost resolved. It’s a family thing. Siblings, actually.

Brothers Tony and John Gioffre are simply working through an issue important to their $50 million commercial construction business. If that requires a little verbal explosion, so be it. These moments usually take place after hours and when John feels closed in by construction deadlines.

It’s more like therapy, because big brother Tony helps John work through the stress.

The brothers consider themselves part of a close-knit, Italian-American family and they’ve brought that love and respect to the office at Gioffre Construction Inc. for more than 20 years. A little row between siblings now and then doesn’t mean a thing.

“In the heat of battle, when the pressure is very intense,” John says, “it’s usually me blowing the cork and Tony calming the situation down.”

The battle, he explains, comes when there are three or four jobs going, one is running into a deadline and certain subcontractors are not cooperating to meet the schedule.

“It’s one thing after another, a constant pressure cooker situation,” he says. “Then something will come up in the office. I’ll get a call that’s not favorable or totally irrelevant and I’ll just explode and people will hear that. Everybody knows to back off; but at the same time, they appreciate what’s going on and understand.”

A colorful pair

The brothers teamed up professionally in 1976 when Tony, now 53, and John, 45, decided to start a residential construction business. Tony was a salesman at an unrelated business and John was studying business and accounting in college.

John learned about the building business while working summers at Gioffre Concrete Inc., a Powell-based residential concrete business owned by Carmen Zappia, a first cousin, and by another Gioffre brother, Carl, who is 49.

Tony and John knew it wouldn’t be right to interrupt Carl’s partnership by asking to become part of that company, John says. So they created their own construction firm. Tony contributed $1,000 to the business account and John put in $500. Tony became president, but it wasn’t because he put in more money at the start of the 50-50 partnership.

“In any business, no matter what you have, there has to be one leader,” says John, who carries the titles of executive vice president and CFO. “In the beginning of the company, Tony was that individual. Tony was the oldest; it was almost a natural fit.

“Growing up, if we ran into any trouble as kids, we used to go get Tony, and Tony would settle the problem,” he adds with a laugh.

Tony is the dealmaker. He can walk into a room with his crisp, white shirt and stylish suit and feel comfortable. His personality is made for networking, John says.

John oversees and implements the contracts.

“If we were a football team,” John says, “I’d be the offensive line. I keep pounding. I’m going to open the hole and make it work. Tony would be the running back that would be more visible.

“I’m the one that will make sure that the jobs get done. The detail guy. The blue jean guy.”

While each has a markedly different personality — evidenced further by the fact that Tony drives a flashy Jaguar, while John prefers a more rugged Suburban to get around town — the brothers complement each other and have the same goals for the business.

“We grew up together, so we think alike,” Tony says. “In essence, we have the same type of attitude and the same type of mindset. There is no conflict. That’s the major asset.”

Enlarging the family

The Gioffres’ sister, Victoria Delfino, 51, joined them in the business 10 years ago as secretary/treasurer. She had worked part time for Carl, but when Tony and John needed some extra help, Victoria moved over to Gioffre Construction. When the position became full time, Victoria just stayed on, Tony says.

Victoria brings the personal, family touch to this hard hat business, John says. She knows all the right ways to treat people, especially when hard times befall an employee, and she’ll make sure an employee strapped for cash can get his car fixed.

“We had wonderful parents,” Victoria says, “very devoted, very family-oriented. We just branched off from that. We are an extension of what they believed in. They made us understand what is valuable.

“From that, you learn your values and what’s important in life. Our family is still very close.”

So close, in fact, that all the Gioffre siblings regularly gather for Sunday dinner at the home of their parents, who emigrated from Italy in 1932. They grew up in the Milo District, north of downtown Columbus, near Fifth and Cleveland.

“Have we had shouting matches? Yes,” John says. “But at the same time, when we go to mom’s house for Sunday dinner, it’s done. We sit. We laugh. We joke. We enjoy being a family. You’ve got to leave it at work. At times it’s very difficult.

“I’ve seen the stress at times, and thank God we’ve been able to overcome the stress factor at work and still stay together as family.”

Family ties, however, do not get in the way of fair trade in business dealings, they stress. Tony and John don’t favor their brother’s concrete company when it comes to bidding. In fact, it’s rare when Carl’s firm bids on a Gioffre Construction job today, John says.

As for nepotism, John says, “We try to keep everything on the up and up. We have to be careful with that.”

Big decisions

As a family, the Gioffres have grown their Dublin-based construction company from a two-man, $120,000 firm in 1976 to a 50-employee, $50 million business with separate real estate holdings of $13 million in 1999.

The trust factor is critical,” John says of the siblings’ business success. “As you grow, that trust factor has to be shared with the other employees. It’s a definite benefit to the foundation of any corporation.”

The Gioffre brothers got a good test of their trust in each other when, in the early 1980s, the two discovered they had different visions for the company’s future. At issue was whether the company should move from residential to commercial work.

“We sat down and discussed it,” John says. “I said residential brought us where we are. I didn’t want to lose it. Tony felt strongly about commercial business. It panned out that we went strictly commercial.

“We respected each other not to say, ‘If you don’t do it my way, I’m leaving and starting my own company,’” John says. “You see a lot of that. You have to have mutual respect of a partner. That plays in the hand of a family business.”

Today, Gioffre’s client list reads like a who’s who in retail centers: Sears, Target, Lowe’s, Home Depot, Toys R Us, Marshall Field’s and Marriott.

Both brothers have found commercial business “more lucrative and more professional,” John says. “There are better opportunities here. There’s more stability. You have a more educated buyer.

“Tony wanted the company to grow. My mind was along the lines of fighting the battle in the trenches. He was more visionary.”

Looking outside the family

As the company grows, Gioffre Construction has the standard pains to deal with, including the art of delegation. Over time, the key decision maker has changed from Tony to John — and soon that power will be split between two vice presidents.

“Tony, at the beginning, was the mainstay,” John says. “As Tony aged, I pretty much took on that roll. At this point, I would be called the point person. As the point person, you would make the decisions and a lot of things come across your desk.

“Now I see the company evolve and see these decisions being given to the VPs under me.”

Those VPs are Herb Jagels, who oversees construction, and Patrick Fisher, who oversees operations.

“The two VPs are excellent individuals,” John adds. “We have 100 percent faith in what they do. If you are going to evolve, you have to delegate responsibility to other individuals “

Ironically, delegating has become one of John’s biggest challenges.

“If you look at any privately held company, the hardest thing to do is give up the reins,” he confesses. “I have my nose in everything. One thing I was doing was trying to control everything. That is impossible with the size of the company today. At that point, I started delegating duty.

“It works out fine. But I’m having a difficult time doing that. It’s like giving up the care of your baby to someone else.”

Yet both brothers recognized they couldn’t always depend just on themselves.

“We were intelligent enough to know we had to go outside the family to grow,” Tony says.

Longevity in the business was a key factor in deciding who would get promoted. Both vice presidents were doing business with Gioffre Construction before joining the company. Jagels signed up more than 10 years ago and Fisher joined eight years ago.

Besides, Jagels and Fisher were always in positions of authority in the absence of Tony and John. And the two understand how the brothers operate.

“I tell people who I hire, if you are thin skinned, this is not the business to be in,” John says. “If you can’t take it on the chin, a direct hit [figuratively], and stand back up and accept it, this is not the business to be in. If you can’t have someone get into your face, then you have a problem.

“I stress that I have an open door policy. If you disagree with me, that’s not an issue. I want you to be blunt with me. If your method of doing business or handling a job is better than mine, that’s OK. But in the final analysis, I know all the pieces to the puzzle and I make a decision that’s best for the company.

“If I disagree with you, it’s not an ego move. You have to accept that the final decision, right or wrong, lies with me.”

Open communication, respect for one another and responsibility keep the brothers and the business together.

“It’s trying any time you are in any type of partnership,” John says. “A company, a marriage, whatever — you will always run into tough times. But it’s how you were brought up, and I think that’s what’s held us all together.

“We’ve always been a tight family.”

Andria Segedy (aesegedy@sprintmail.com) is a free-lance writer for SBN.

Monday, 22 July 2002 09:41

One good move

In a bull market for business growth, who has time to find a larger location to accommodate a larger staff? Your focus is on business growth, not business location.

For Bob Fisher, president and CEO of FORESIGHT Corp., the solution came in using a tenant representative when he needed to move his rapidly growing 10-year-old e-commerce business. The best part: Using a tenant rep didn’t cost him a thing.

FORESIGHT started in a 1,250-square-foot location and later moved to one measuring 5,600 square feet. When it was time to move again, Fisher decided to use a tenant rep to find his current Dublin location, which he moved to in April 1999.

“We were packed in like sardines,” says Fisher of the company’s previous place.

His tenant rep, Greg Schenk, found the 9,500-square-foot location that includes a right of first refusal for additional space that could allow the business to grow to about 18,000 square feet without having to move again. That’s important, since Fisher says he will double his staff of 40 employees by this time next year.

After Fisher started talking to prospective landlords, he was contacted by Schenk, president and founder of the Schenk Co. Inc., a firm that represents tenants in search of office space. Schenk can also negotiate contracts and help coordinate moves.

“He accelerated us in learning the [office space] market,” Fisher says, adding that Schenk explained what to look for, such as growth space, meeting room space, space development and rights of first refusal on additional space — items that otherwise would have become add-ons to an original lease agreement.

Schenk urges caution for anyone looking at lease rates, no matter the location. Most new buildings quote a base rental rate and an operating expense called net charges, which include taxes, utilities, insurance and maintenance.

Lease prices depend on location, length of contract and age of the project. Landlords look at tenant credit, lease length, square footage being considered and what kind of improvements the client says are needed to make the space workable, Schenk says.

“Most clients we work with are looking to pay $16 to $18 [per square foot], everything included,” he says.

As for his own fees, Schenk says he’s paid “the normal 3 to 4 percent of gross rental proceeds on the terms of the lease. The prospective tenant is not paying any out-of-pocket costs.

“The only time a tenant pays money to us is if they don’t do anything. If we looked for six months and they decided not to move, then they would pay us a consultant fee.”

As a tenant representative, Schenk works closely with key management. An initial meeting requires management to define its needs, including whether the company wants to buy or build, and what the budget is.

“Sometimes we’ll bring in a space planner to help them identify what they need,” Schenk says. “Sometimes they don’t have a clue. They think they’ll hire 20 people but don’t realize the amount of space needed for that. We’ll try to find out what space they need and what’s special about that space, such as a lunchroom, a boardroom, a warehouse needing docks, a small workout area with showers, or power [electrical] needs.”

After coordinating one move and working with a tenant rep on the most recent one, Fisher says a good tenant rep becomes a valuable partner.

“It’s pretty painless to use a tenant rep,” he says.

How to reach: The Schenk Co. Inc., www.irepthetenant.com; FORESIGHT Corp., www.foresightcorp.com

Andria Segedy (aesegedy@sprintmail.com) is a free-lance writer for SBN.

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