Pauline Chambers Yost has made careful plans to see that her company, Tech International, not only survives her but remains in her family.
She's grown the Johnstown-based business-with the support and help of her children and grandchildren, she points out-to the status of her dreams: an August acquisition of Truflex/Pang in Los Angeles made Tech the largest manufacturer of tire repair materials in the world.
Over the years, Yost has added company divisions so family members could move through the business and choose their own areas to run.
"We are large enough that each one can be a shining star in their own division," Yost says. "I expect each one of them to make that division grow. It is up to them how bright they want that star to shine."
Yost considers her grandson, Michael Chambers, her apprentice. He'll eventually take over Tech International as president and CEO. In her will, Yost, 81, has outlined her wish that the company's stock-held solely by her now-be divided equally among four family members actively involved in the business: Chambers; his brother, Gary; Yost's daughter, Cheryl Poulton; and Poulton's daughter, Nicole Layne.
"I made these plans while I was here so I could see how all four fit into their positions," Yost says.
Decisions such as Yost's are inevitable-and crucial to the continued success of any family business.
"Very, very few family businesses have explicit succession plans," says Thomas Davidow, a nationally recognized family business expert and co-founder of Genus Resources Inc., a consulting firm in Needham, Mass. That may explain why just one in 10 family businesses is able to succeed from the second generation to the third.
Tech, in its fourth generation, and North Columbus' RDP Foodservice, with three generations running the company, appear to be beating the odds.
Those odds are changing, says J. Richard Emens, a partner with Chester, Willcox & Saxbe LLP and founding director of Franklin University's Family Business Center. Recent studies indicate that once family businesses reach the third and fourth generations, they have a better chance of succeeding beyond that point.
Although neither Tech nor RDP has a written succession plan, other than Tech's ownership split detailed in Yost's will, the management at both companies says the founder's intentions are known amongst family members. Nothing, however, is scheduled to happen as long as the family leader remains active in the company.
"As far as my retirement plans, I've never figured to retire," says RDP President Richard DiPaolo Sr., 80.
Yost feels the same way.
"I'm going to work until I drop," she says, "and I hope I slump over at my desk."
According to a 1997 Arthur Andersen/MassMutual survey of more than 3,000 family businesses, nearly one in four hasn't completed estate planning. But nine in 10 believe their business will be controlled by the same family in five years.
The results indicate that succession issues will have to come to the forefront soon, with more than half the respondents expecting the CEO to retire within 10 years. Still, like Yost and DiPaolo Sr., 16.1 percent say the CEO will "never" retire.
Regardless of the fact that both Yost and DiPaolo Sr. will stay active with their companies as long as they can, they also want their businesses to remain family-run after their passing.
"I have had many opportunities to sell and many opportunities to go public," Yost says, "but I do not want that. This is my legacy to my family and to Johnstown."
Leaving the legacy
DiPaolo Sr.'s sons, Dick and Paul, say they plan to continue running RDP status quo after their father dies, and will continue to train their own sons and a nephew now involved in the business for management as well.
"What we hope to do is try to grow the business so here in the near future we-I-can step back and turn it over to the next generation," Paul DiPaolo says, acknowledging that he and his brother have different goals.
Paul DiPaolo is eager to have a hand in the business but turn over his share of operations to a younger generation, while Dick DiPaolo wants to stay with the company for a while.
"We don't think, at least at our level, in terms of who's boss," Dick DiPaolo says. "It's not a perfect setup. We just make it work. I'm not sure it's written in any business manual. The only people we really answer to are the customers, and that's the way it should be."
"Titles don't really mean a lot," DiPaolo Sr. agrees.
As it is now, his sons and one grandson, Mark Mizer, all of whom are vice presidents, make decisions amongst themselves or with him.
"It's difficult to name one person as the head guy, and I know that's not exactly kosher," DiPaolo Sr. says. "We never really thought of it in that manner, where, 'Hey, you're the boss.'"
So far, the company has not faced any major family challenges such as two relatives wanting the same position in the company.
"We're trying to make the business sizeable enough so there is plenty of room for people to be involved," Dick DiPaolo says.
The succession of actual ownership in RDP is still undecided, says DiPaolo Sr., who is meeting with attorneys to discuss the future of the company, owned by him, his two sons and his daughter, Rita Mizer.
Edward Hertenstein, an attorney with Kegler, Brown, Hill & Ritter and board member of the new Family Business Solutions program at The Ohio State University's Fisher College of Business, says ownership and management succession issues should be considered simultaneously.
"You can have all the business plans you want, but if it doesn't match up ownershipwise, when something happens to the founder or better yet during the transfer of ownership during the founder's life, [the one] who holds the marbles can make up the rules," he says.
Written business plans, he adds, must be in sync with the passing of company stock or ownership and should include provisions to pay or reduce estate taxes, which can range from 37 to 60 percent after federal exemptions.
Hertenstein suggests creating a team of advisers, including an attorney, accountant, investment expert and banker to help plan the business' succession.
Yost says Davidow, who declines to comment on Tech directly, played a role in planning the future of her company.
Family members meet with him individually and then as a group, she says, to resolve outstanding issues. Davidow says he won't work with a business unless every person in the family approves of working with him. The family members also meet monthly to discuss family interests, including the company's succession plans.
"Most families, in our experience, that get to the third or fourth generation and are successful have a [succession] plan whether it's in writing or not," says Emens. "The key to the success of a plan is whether it's communicated-even orally."
He says many business founders want to place ownership in a trust, but he cautions that such a choice could force the sale of the business, because unless directed otherwise, the corporate fiduciary will concentrate on running the business for a profit, regardless of how that profit is made.
"What I'm suggesting is that if the family business is left in trust, it really needs to be spelled out that trustees can and should continue to operate it as a family business," Emens says.
Any succession plan, he says, is better if it's in writing and approved by all involved.
"Once the original entrepreneur is gone, the next generations can have different understandings of what the plan was unless it's signed off on by everybody that needs to sign to make it happen," he says.
Yost, with advice from Davidow, has taken into her own hands the company's future in case Chambers does not, for some reason, take the reins.
She has asked an advisory group of six people-whom she will not disclose to anyone, not even her family, to prevent bias or lobbying-to watch over the company and select the company's leader should Chambers not want the post or be unable to take it.
"These people are of vast experiences and knowledge and have become very successful in their own business, and they know how to grade an individual," she says.
Even the advisory group members do not know who the others are; Yost will specify in her will how the group will convene. She says that if, upon her passing, Chambers is running the company, the group will have no reason to meet.
Yost says she's proud to see each member of her family involved in the business.
"It's a reason to get up in the morning just to see how my little trees have grown," she says. "And after all, that's what life is all about."
Beyond the family circle
Experts say family business owners need to keep in mind that, in order for the company to survive, they must consider the abilities of non-family employees.
Fairness and compensation issues are key in attracting outsiders to a family business, Hertenstein says.
"As businesses get larger, they will almost always require non-family members in key positions," he says. "A single family isn't going to be able to fill well all senior positions in the company."
Once recruiting efforts are successful, experts say, family businesses, like any other, need to concentrate on retention.
"One of the very important steps that needs to be taken with a person, a non-family member key person, is to spend extra time, effort and sometimes money making sure that they feel part of the team," Emens says. "Because otherwise they'll worry, 'I'm not a family member. If times get tough, I'm the first one to go,' and things like that."
Stacie Rodriguez, controller at RDP, says even her friends ask if she worries about the family issues and whether she'll be treated fairly even though she's not a DiPaolo.
"I think at first everyone thinks that. You start to wonder, 'What if someone's daughter decides to be an accountant?' But I think they look at your qualifications first," she says, adding that she is not concerned about job security or ability to advance at RDP.
At Tech, Mike Derenburger, director of purchasing, says communication runs both ways through the open door policies of Chambers and Yost.
"Even though they might not feel it is the right time, you're always given the opportunity to go in and say, 'We need to do this; I want to do this,'" says Derenburger, who has worked at Tech for more than 21 years, and, at age 52, is considering delaying his retirement because he's so satisfied with his job.
Weekly department-head meetings keep everyone up-to-date on activities in other areas of the company, he adds.
Emens says most family businesses he's worked with acknowledge the talented people they hire by promoting them as far as possible.
"I think family businesses are particularly alert to using underutilized talent," he says. "Part of the reason for that is most family businesses started out small, and they had to use the talents of whoever was there to get the job done."
He argues that employees at a family-owned business have advantages because their talents are recognized on a more personal level.
That's especially true because family businesses are emotion oriented, while non-family businesses tend to be task oriented, Emens adds.
"That can be a plus or a minus for each," he says. "The key for the family business is to have this emotion that's there be aligned so family members are working together and include non-family members in the emotion."
"Many family businesses don't acknowledge themselves as a family business," Davidow notes. "If they don't, they're going to miss some of the core ingredients of their business both in terms of the issues that may need to be addressed as well as the strengths that they're not taking advantage of."
It was a risky move, without a doubt. Yet no one talked Greg Nelson out of buying a bankrupt, small-town auto dealership that had been forced by a court to close amidst charges that its owner was defrauding customers.
"I don't think Greg is the kind of person you talk out of anything-or talk into anything, for that matter," says Nelson's legal counsel, Harvey Dunn, a partner with Schottenstein Zox & Dunn. "A new car dealership was something he always wanted to have."
As it turned out, that unshakable self-confidence came in handy in making this particular deal.
Even though Nelson didn't find out about the 1989 sale of Chamberlin Motors in U.S. Bankruptcy Court until after a deal had been tentatively closed, and even though he had no prior experience in new car sales, no one was going to stop him from trying to enter a bid.
According to John Cannizzaro, a partner in the Marysville law firm of Cannizzaro, Fraser & Bridges, who represented another potential buyer during the Chamberlin Motors auction, Judge Donald E. Calhoun Jr. vacated the prior sale, giving Nelson a shot at buying the shuttered Marysville dealership.
"He outbid everybody," Cannizzaro recalls.
Although his own client, Roby Inc., went home empty-handed, Cannizzaro says he was impressed by Nelson's immediate interest in learning about his new investment.
"He seemed very earnest," Cannizzaro says. "After he had outbid everyone, Greg asked me my opinion about what it was like in Marysville; about what was important to the folks here. I thought that was insightful on his part. I told him people here want to be treated fairly. Marysville is a small, close-knit community so a lot of things depend on your reputation. If you have a good reputation it will carry you. The dealership he took over did have a tarnished reputation in this community, so he had to win a lot of people over."
That was just one of the challenges Nelson would face in turning around the Chrysler dealership he paid nearly $1 million for.
"There was almost-2-year-old product on the grounds and in '89, '90 and '91, Chrysler was in a little bit of a lull, too, so we didn't have the product and we didn't have the reputation," Nelson says. "It's one thing to start a business from scratch, but instead of starting on the ground floor, we started in the basement."
Fortunately, Nelson found the stairs quickly. Though he was a novice to the new car industry and a newcomer to Marysville, he was a veteran entrepreneur. He had already built and sold off two Columbus area companies: Mobile One, a $2 million cellular phone business, and Columbus Classic Cars, a $6 million exotic and high-end used car dealership. Those past successes were proof enough for Nelson that he could make this venture work, too.
The soft sell
Nelson's plan seemed simple enough. He knew he was an outsider. He knew the dealership's image had been tainted. He also knew he was the only game in town when it came to certified Chrysler maintenance and repair. That was key.
"We had to establish ourselves in the service department first," Nelson says. "I knew a lot of the people in the area here already had Chrysler products. I figured if we won 'em over in service, we could win 'em over in sales."
Nelson hired service technicians and sent them to school for additional training. He reinforced "the importance of the customer" with them weekly. Then he started advertising in local publications. When customers came in, he did his best to make sure they left satisfied.
"If they weren't happy, I'd eat a repair bill or step up to the plate and pay for a previous problem that occurred under the previous owner," he says. "Small-town people expect that."
The word spread quickly.
"When he came to town, I was already driving Chryslers and it seemed he did a real nice job taking care of people and customers," says Ken Kraus, director of administration for the City of Marysville. "Nobody is perfect, but if there is a problem he takes care of it and he takes care of it right now."
"The previous owner seemed more concerned with getting the money in than providing service," agrees Cannizzaro, who also drives Chrysler products-four of which he's bought from Nelson Auto Group. "Greg is more concerned with making the customer satisfied. He figures the money will come later. That's, I think, what helped him turn it around."
"Greg is just good with people," adds Dunn, whom Nelson considers a mentor as well as his attorney. "Besides being a good businessman, he's honest. People can trust him. He's well liked. He has a very, very fine reputation. He's well respected by the community he serves and he's well respected by Chrysler."
Indeed. Nelson Auto Group has won every award Chrysler Corp. can give a dealer, Nelson boasts, including four 5-Star Service Quality Awards and two 5-Star Awards for Excellence. In addition, the business community has lauded Nelson's success with an Ernst & Young Retail Entrepreneur of the Year Award in 1998 and a Better Business Bureau Business Integrity Award in 1994.
"I think it took him a period of time, because of what happened to the previous dealership, to get the trust back," says Union County Commissioner Don Fraser. "People wanted to see who Greg Nelson was and what he was about. People wanted to see if he was going to be around."
It's been nearly 10 years now since Nelson bought that small, failed car dealership a dozen miles northwest of Columbus. Today, Nelson Auto Group's 115 employees operate out of a sleek, custom-built facility that's more than double the size of the dealership's original home.
"One thing's for sure," Nelson says. "We're in business for the long haul."
Shoring up the service department may have helped Nelson win business from existing Chrysler owners-even some who may have been alienated by the previous dealership-but it didn't bring new customers flocking into the showroom. Nelson needed to boost his image throughout the community, and not just as a businessman. He needed to build a reputation as a good corporate citizen.
Nelson threw his dealership's support behind local groups such as the 4-H Club, FFA, Little League and the Humane Society. He's even provided cars for the high school Homecoming parade.
"Just about any worthwhile charity in the community we got involved with," Nelson says.
A long hallway just off his dealership's showroom floor attests to his civic commitment. It's lined with plaques of appreciation, awards and banners from assorted county and state fair livestock purchases.
"You can't come into a small town and just take from it," Nelson says. "You have to give back."
That attitude has not gone unnoticed.
"The one thing that really sticks out in my mind is the fair and him coming in and buying the livestock to help the junior 4-H clubs," says Lori Harris, membership service coordinator for the Union County Chamber of Commerce. "I think that's a big thing. He might not even look at it that way, but to me, it seems like people like to see that. They like to see business owners taking part that way."
Kraus says some organizations have become almost too accustomed to Nelson's giving nature.
"Much to Greg's chagrin, it's almost like people expect it now and they don't give him the credit that's due for being such a supporter of community events," Kraus says. "Some people understand he's still running a business and he can't give the shop away; they recognize he can't give every time. But if it's a good, communitywide event ⊃ he's probably there in some sort of support role."
Nelson's involvement has clearly won him some fans-and some respect. He's confident it's brought him more sales, too.
"They started to buy from us," he says.
"He supports the community very well," Dunn concludes, "and that's another contributing factor to his success."
Smoothing out the bumps
Pulling the dealership out from under its previous cloud of controve rsy turned out to be the easy part. Getting the finances turned around was another matter.
"We lost a lot of money the first, second and third year," Nelson says. "It was almost curtains. I had to get cash advances from my credit cards to make payroll sometimes."
Still, he persisted. Though his balance sheet showed the dealership was as much as $280,000 in the red one year, sales at Nelson Auto Group kept increasing. That kept his hopes alive. In 1992, the dealership showed its first profit under Nelson's ownership. That went back into the business to help replenish what had been lost in previous years, as did the company's profits from 1993 and 1994.
"It took almost as long to make money again as it did to lose the money," Nelson recalls. "We didn't get even for six or seven years."
Part of that was due to his increased investment in product lines. In 1992, Nelson added Jeep and Eagle to his inventory. In 1994, he added Dodge trucks. In 1995 came the crown jewel of his collection: Lamborghinis.
"I had sold a lot of used Lamborghinis under Columbus Classic Cars and, because of that, I had a following of people with exotic cars," he explains, fully aware that the racy Italian sports cars lining his showroom floor are a grand deviation from the family sedans and mini-vans that have become his dealership's mainstay. "These are people I've been doing business with for eight or nine years and people I want to keep doing business with. I just can't turn it off."
In 1997, the payoff was grand. Nelson Auto Group was named the No. 1 Chrysler multi-line dealership in the region, selling roughly 2,000 new cars. That's 660 percent of what Chrysler expected the dealership to sell that year, based on its size, location and past volume. In addition, Nelson Auto Group was named the top-selling Lamborghini franchise in the nation, selling 18 of the $250,000-and-up import cars last year.
Now that Nelson has established his dealership as a high performer, his next challenge is maintaining that crown.
"When you get up there and get things rolling fairly well, it's not easy to stay there-especially when he's very subject to the winds of the economy," notes Kraus. "It's probably harder to stay on top than to get there because you've created the expectation. He spoils his customers and if there's any slippage he'll probably hear about it."
Dunn says Nelson-who is eyeing $80 million in sales by year's end and shooting for $100 million in 1999-appears ready for that test.
"Greg is a real entrepreneur," Dunn says. In fact, Dunn says he never questioned whether Nelson could pull off the turnaround.
"A lot of the proof is in the pudding in Greg's case," he says. "He's become one of the biggest Chrysler dealers in the area and the No. 1 Lamborghini dealer in the country virtually overnight. He knows how to sell and he's a good guy. You don't get people to come from all over the country to Marysville, Ohio, to buy a Lamborghini if you don't have a good reputation."
That reputation means a lot to Nelson, too.
"Having a good name is most important in my life," Nelson says. "My word is gold. That's why I've done business with the Les Wexners and the John McCoys of the world. I can do it on a handshake deal. They know they can trust Greg Nelson. If you work really hard and treat people with respect, good things will come to you."
Business owners have a lot of rights. They have the right to set their own prices. They have the right to develop a code of conduct-even dress codes-for their employees. They have the right to protect their place of business, their employees and their customers from harm.
They don't, however, have the right to discriminate while exercising these rights. Yet that's exactly what The Kroger Co. is doing by banning a 7-year-old Columbus boy, Georgio Lee Chacon, from its play areas because he's HIV-positive.
Kroger's actions are particularly shocking because I've come to expect better from this growing supermarket chain. Its Columbus stores have done a lot to build the reputation of being good corporate citizens. This short-sighted move could quickly spoil all that.
Kroger claims it's acting out of concern for customer safety by banning Georgio-and all children with infectious diseases-from its play areas. That's a bunch of baloney. First, enforcing such a policy relies heavily on the willingness of customers to disclose private, medical information to play area workers-something Georgio's guardian generously did, but which many others might not-especially after seeing how Georgio's situation was handled.
Second, though 7-year-olds can play rough and even scrape a knee or bump a head hard enough to shed some blood, the chance of transmitting HIV to another person from such a cut is miniscule. Young Georgio would have to bleed profusely into another's open wound or into their eye for infection to even be a possibility. Casual contact won't do it. Runny noses, spitting, even contact with an infected child's urine won't do it. It takes blood-to-blood contact. Kroger's unwillingness to see that-as well as the incredible odds against blood-letting injuries occurring in a supervised play area stocked primarily with books and video games-is shameful.
By banning Georgio, Kroger has fueled the lingering stigma of paranoia surrounding this potentially deadly disease. It has also alienated hundreds of Central Ohio residents believed to be infected with either HIV or AIDS, as well as other shoppers who may find Kroger's reaction ignorant and distasteful enough to take their business elsewhere.
It doesn't have to be that way. Kroger still has a chance to show a little compassion in a very public way and reverse its decision. Such a move would surely win Kroger some community service points and allow it to dispel some enduring myths about HIV transmission and AIDS. That's certainly the right thing to do. I only hope Kroger opts to exercise that right.
Nancy Byron, editor of Small Business News-Columbus, welcomes your comments by fax at 842-6093 or by e-mail at firstname.lastname@example.org.
After being in the same office for eight years, Jack Conie and his employees were starting to get a bit cramped. When people began sharing office space, he knew it was time to move to a larger building.
Conie, CEO of Environmental Pipeliners, sought a U.S. Small Business Administration-backed loan of $900,000 to buy a building about 10,000 square feet larger.
The Dublin-based company has increased its revenues from about $600,000 when it was founded in 1990, to about $5 million in 1998. Along with financial growth came more employees, from about five at the company's start to about 35 this year. Conie says the company was losing business because it was outgrowing the building and didn't have the ability to warehouse material or equipment.
"In a way, it sort of stagnated our growth," he says.
Conie worked through Bank One to get the loan, and the paperwork was approved immediately. Then Columbus Countywide Development Corp., an agency that helps business owners obtain SBA loans, needed to give its approval. That process took about six months, Conie says.
The loan for the office-warehouse building on Eiterman Road now occupied by Conie's company will let him start putting money back into the business so it can grow. Environmental Pipeliners uses technology such as robotics and televisions to find pipe defects and make repairs without excavating.
"(The loan) enables us to maintain current growth without dipping in the cash flow for more expenses," he says.
Conie also says the people at the Columbus Countywide Development Corp. were excellent to work with in securing the loan.
"All I could envision is the bureaucratic red tape that you envision with that kind of program," Conie says. "They were easy to work with and very prompt."
SBA lending activity in Central Ohio
Listings include: Company, city and net loan amount.
Ron's Express Carwash & Lube Inc., Columbus, $1,050,000
Environmental Pipeliners, Amlin, $900,000
Adrian-Poirier Chiropractic Inc., Columbus, $890,000
Results Engineering, Westerville, $725,000
Northwest Animal Hospital, Columbus, $555,000
Bordner & Associates Inc., Gahanna, $544,000
Go Express Inc., Westerville, $460,000
Law General Contracting Inc., St. Louisville, $448,000
Checkered Flag Express Lube, Marysville, $350,000
Starting Point Daycare Center, Columbus, $348,000
Lexon Corp., Columbus, $227,700
Saia & Piatt PLL, Columbus, $185,000
Sunscapes, Columbus, $152,000
Gahanna Sunoco, Gahanna, $145,300
The Columbus Post/Empower Publishing, Columbus, $125,000
Source: U.S. Small Business Administration Columbus District Office
Turns out, it wasn't all in the name.
Last year, a Worthington company called OCOM Corp. purchased the rights to reintroduce the Cellular One brand name in Ohio and Michigan-but not just for cellular service.
The company was banking on the recognition and respect of the Cellular One name to win over customers. Instead, the name hindered its efforts to market the company's local telephone service, long distance, cellular, paging, voice mail, Centrex, toll-free services and calling cards.
"We spent about the first 10 minutes of every sales call explaining we weren't just cellular," says Patty Flynt, president of OCOM-renamed CoreComm when New York-based CoreComm Ltd. purchased its assets in June. "It subtracted more than added to the equation."
Customer focus groups revealed similar problems.
"Basically they gave us the same feedback the sales people did: 'Cellular One is a great name, but when you knock on my door, I only think cellular,'" Flynt says.
In October, she dropped the Cellular One and OCOM names completely, opting instead to do all marketing under CoreComm.
Flynt doesn't expect much confusion now, she says, because the company didn't spend a lot of time advertising the Cellular One name in connection with all the services her company offers. But just to be sure, another customer survey was planned for late last month.
"What I want to do is test whether this awareness advertising really makes sense," she says of the company's recent multimedia blitz, "and whether we're running it enough that people are getting used to the name."
It was a great opportunity for the company inasmuch as Schmidt's was focused on the restaurant business and the catering business and not really promoting the Bahama Mama outside of their little world there. I thought we could improve on what was done outside with retailers, with restaurants, with other institutional feeders, and we have. Our sales in the state of Ohio of the Schmidt's Bahama Mama for January through August 1998 have improved by 64 percent versus January through August of 1997-a period of time we didn't have ownership last year.
How did the purchase come about?
Schmidt's actually approached us and said, 'We have an interest in selling the trademark.' It happened probably in a period of five to six weeks, from day one to closing on the deal. The trademark allows us to use the name Schmidt's, the name Schmidt's Bahama Mama and the name Bahama Mama.
There's limitations because within what we bought was this (pre-existing) licensing agreement, and our licensee, Hot N' Spicey, has exclusive rights to market the product outside the state of Ohio. That leaves us with the state of Ohio to develop and do what we need to do to make this a good deal for us.
Was timing an issue?
When you start negotiating, I think one thing that enters your mind is, 'What other players might have an interest in this?' Let's fish or cut bait. For instance, we didn't know if they had somebody else they'd go to and say, 'We've got an offer.' We didn't want to get in any bidding wars. We knew what we could pay and I think we paid as much as we could pay for the trademark and licensing agreement.
What's involved in purchasing a trademark?
You rely heavily on the legal system. You get your lawyers involved, make sure you're buying what you think you're buying . . . You want to make certain that (the trademark) is registered and there is some value that is protected . . . Once that's cleared, it's just a business deal. And certainly it's something that has to be run by the board of directors, and before that process, you want to make sure management is in agreement with what you're doing.
How much did the trademark cost?
On the advice of our attorneys, we can't disclose the selling price. When we look for an investment such as this, we look for something that there is no more than a four-year return of your money. In other words, we feel we paid maybe four times the earnings for this deal.
What benefits did you expect to gain by using the Bahama Mama trademark?
Exposure. It's a fun name. It's a good product. It's a quality product that has a good reputation in Central Ohio. What we need to do is build upon that and take it outside of Central Ohio. Product identity is so important in the marketplace today. We've been in business for 90 years and we truly do not have a recognizable trademark. Schmidt's Bahama Mama is probably our first recognizable trademark.
How are you marketing the Bahama Mama name in Ohio now?
I don't think we're doing a whole lot different than Schmidt's did, but this is our business-manufacturing and distribution. Schmidt's business is restaurants and special events. So we're much more focused, I believe, than Schmidt's could ever be because this is what we're best at.
What advice do you have for others considering buying a trademark?
Get a good lawyer . . . but don't overdo that. In making business decisions, people tend to rely too much on a lawyer or on an accountant, and that's good, but boy, you've got to know what you're doing yourself.
It's been five years now since the editorial staff at SBN began sharing its predictions about which Central Ohio companies were on the brink of a breakout-or breakdown-year. Here's a look at what we've predicted in years past and what those companies are doing today.
Class of 1995
St. Ann's Hospital
Top officer then: John B. Sandman
Top officer now: Joseph T. Calvaruso
Estimated revenues then: $73.2 million
Estimated revenues now: $123 million
Employees then: 1,500
Employees now: 6,300 systemwide
Forecast then: Expecting a merger with Mount Carmel
Where it is now: St. Ann's was acquired by Mount Carmel Medical System in 1995.
Cardinal Realty Services
[Now Lexford Residential Trust]
Top officer then: Frank McDowell
Top officer now: John Bartling
Estimated revenues then: $22.6 million
Estimated revenues now: $146 million*
Corp. employees then: 209
Corp. employees now: 102
Forecast then: Expecting a merger or buyout
Where it is now: Cardinal Realty purchased Lexford Properties Inc. in August 1996 and shareholders voted in October 1997 to change Cardinal's name to Lexford Inc. The company is now one of the nation's largest multifamily real estate investment trusts.
[Now Borden Inc. and Affiliates]
Top officer then: Ervin R. Shames
Top officer now: C. Robert Kidder
Estimated revenues then: $4.7 billion
Estimated revenues now: $3 billion
Employees then: 39,000 worldwide
Employees now: 12,000 worldwide
Forecast then: Expecting more profitability and the possible sale of some business units
Where they are now: Borden realigned itself into nine smaller business units in 1995. In 1996, the German bakery and plastic packaging divisions were sold. In 1997, part of its food businesses, including the Cracker Jack and Borden Cheese brands, were sold. Last year, the company acquired Corning Consumer Products and sold Borden's wallcoverings division and its Eagle Brand, ReaLemon and Cremora businesses. Company officials say profitability has improved considerably.
ConQuest Telecommunication Services
[Now ConQuest Services Corp.]
Top officer then: Ghanshyam C. Patel
Top officer now: John Burchett
Estimated revenues then: $30 million
Estimated revenues now: $25 million
Employees then: 250
Employees now: 490
Forecast then: Expecting record sales, expansion into the residential marketplace and a new wireless division
Where it is now: ConQuest was acquired by SmarTalk TeleServices, a national manufacturer and distributor of prepaid phone cards, in 1997. This past June, ConQuest was sold again, this time to New Millennium Communications Corp., which designs, operates and manages communications services worldwide. ConQuest's primary focus remains in operator-assisted call services.
Superconductive Components Inc.
Top officer then: Edward R. Funk
Top officer now: Edward R. Funk
Estimated revenues then: $1 million
Estimated revenues now: $2.75 million
Employees then: 22
Employees now: 30
Forecast then: Expecting to raise more capital and get listed on NASDAQ.
Where it is now: Superconductive has received two phase-one grants, one of $170,000 from the National Science Foundation and one for $70,000 from NASA, and hopes to get some phase-two federal research grants soon. The company has not yet been listed on NASDAQ, though it remains a goal.
Top officer then: James France
Top officer now: B.H. Eckstein
Estimated revenues then: $7 million
Estimated revenues now: $1 million
Employees then: 80
Employees now: 7
Forecast then: Expecting to capture sizable share of the market with its digital pen input system for notebook computers
Where it is now: Scriptel filed for Chapter 11 bankruptcy protection in September 1997 and submitted its reorganization plan for approval in August 1998. As part of the approved plan, the company intends to issue five million new shares of common stock Jan. 1.
Moody/Nolan Ltd. Inc.
Top officer then: Curtis J. Moody
Top officer now: Curtis J. Moody
Estimated revenues then: $7 million
Estimated revenues now: $11.5 million
Employees then: 75
Employees now: 120
Forecast then: Expecting to capture several more high-profile jobs
Where it is now: Moody/Nolan has obtained eye-catching projects including the Smith Bros. Hardware building renovation, the Bureau of Criminal Identification crime laboratory and West Virginia University's student recreation center
Agler-Davidson Sporting Goods Inc.
Top officer then: Jack Davidson
Top officer now: None
Estimated revenues then: $7 million
Estimated revenues now: None
Employees then: 125
Employees now: None
Forecast then: Expecting a switch into specialty team sales to stave off increasing competition
Where it is now: Agler-Davidson closed underperforming stores in 1995 and 1996 before ceasing all operations in 1997.
R.G. Barry Corp.
Top officer then: Gordon Zacks
Top officer now: Gordon Zacks
Estimated revenues then: $120 million
Estimated revenues now: $160 million
Employees then: 3,000
Employees now: 3,000
Forecast then: Expecting new Microcore technology to produce year-round income for company and allow expansion into new markets
Where it is now: R.G. Barry expanded its line of thermal comfort products into the food service and health care fields in 1995 and licensed its Microcore technology to Corning Inc. Since then, the company has narrowed its thermal technology focus to developing new products to aid in the delivery and preservation of prepared foods.
Top officer then: Dennis J. Geraghty
Top officer now: Dennis J. Geraghty
Estimated revenues then: $2 million
Estimated revenues now: $2.7 million**
Employees then: 30
Employees now: 21
Forecast then: Expecting an expanded reach through the Internet and a sales upswing of 30 to 40 percent
Where it is now: Greyden got into the Internet service provider business in 1995 with the launch of SmartPages Direct. In addition, the company has expanded into CD-ROM, Internet, intranet and other digital document applications.
Class of 1996
Top officer then: Ross O. Youngs
Top officer now: Ross O. Youngs
Estimated revenues then: $5.2 million
Revenues in '97: $17.2 million***
Employees then: 110
Employees now: 140+
Forecast then: Expecting to hit the $10 million mark in sales, cut a deal with investors to open an overseas distribution facility and start installing equipment on-site for some large clients
Where it is now: Univenture blew past the $10 million sales mark and made the Inc. 500 list of the fastest-growing private companies in the country for the fourth consecutive year in 1996. The company opened a manufacturing facility in Dublin, Ireland, in 1997 and was, again, named among the Inc. 500. Univenture also has some equipment on-site with select clients.
Top officer then: John R. DallePezze
Top officer now: John R. DallePezze
Estimated revenues then: $175 million
Estimated revenues now: $215 million
Employees then: 1,600
Employees now: 1,780
Forecast then: Expecting more business overseas, more big-name clients, and more product introductions
Where it is now: Holophane established a director of international sales position in 1995 and beefed up business in the Pacific Rim, Brazil and South America. The company has also introduced seven or eight new products since 1996.
Top officers then: Allan Buller and Dale Twomley
Top officer now: Allan Buller and Dale Twomley
Estimated revenues then: $101 million
Estimated revenues now: $102.2 million
Employees then: 480
Employees now: 600
Forecast then: Expecting four more restaurant deals, expansion into hospitals, prisons and universities, and acquisitions of complementary niche businesses
Where it is now: Worthington Foods set new sales records in both 1996 and 1997. Last year, the company announced plans to buy a major competitor-the Harvest Burger line of products-from Archer Daniels Midland Co., and replace the Green Giant name on this product with the Worthington Foods' Morningstar Farms brand.
Top officer then: Kurt Novak
Top officer now: Kurt Novak
Estimated revenues then: $500,000
Estimated revenues now: $2.1 million
Employees then: 10
Employees now: 24
Forecast then: Expecting new investors, big-name customers and an alliance with a larger mapping company
Where it is now: Transmap secured a $750,000 venture capital investment from River Cities Capital Fund in 1996 and won major contracts with the City of Virginia Beach and Licking and Pickaway counties in 1997. Last year, the company received another $1.3 million venture capital investment-this one from River Cities and White Pines Management.
The Limited Inc.
Top officer then: Leslie H. Wexner
Top officer now: Leslie H. Wexner
Estimated revenues then: $8 billion
Estimated revenues now: $9.2 billion
Employees then: 105,600
Employees now: 131,000
Forecast then: Expecting a spinoff of the women's apparel division, the launch of a new boys' apparel store from Abercrombie & Fitch or Structure, and the development of niche catalogs
Where it is now: The Limited spun off its Bath & Body Works and Victoria's Secret divisions in a combined 1995 IPO to create Intimate Brands. Last year, Abercrombie & Fitch became a stand-alone company, too, and created a new division of its own: abercrombie, a clothing store for teens and pre-teens.
Top officer then: Mark Corna
Top officer now: Mark Corna
Estimated revenues then: $75 million
Estimated revenues now: $102 million
Employees then: 125
Employees now: 360
Forecast then: Expecting to dominate the Central Ohio construction industry in short order
Where it is now: Corna/Kokosing has held its own against local competitors, reeling in some high-profile projects including the Buckeye Hall of Fame Cafe and the Capital University Law School, but has not monopolized the industry as expected.
Brighter Child Interactive
Top officers then: Vincent Douglas and Richard Pam
Top officer now: Richard Pam
Estimated revenues then: Not available
Estimated revenues now: $450,000**
Employees then: 10
Employees now: 4
Forecast then: Expecting licensing agreements with Marvel Entertainment, the British Broadcasting Co. and cartoon producer NELVANA, as well as a 300 to 400 percent jump in sales
Where it is now: Brighter Child has not secured licensing agreements with Marvel, the BBC or NELVANA, but has branched into religious multimedia software such as The Beginners Bible CD-ROM.
Top officers then: John L. Ridihalgh and David C. Bupp
Top officer now: John L. Ridihalgh and David C. Bupp
Estimated revenues then: $933,000
Estimated revenues now: $3.57 million
Employees then: 46
Employees now: 81
Forecast then: Expecting regulatory approval of its cancer diagnosis and treatment products and a higher stock value
Where it is now: Neoprobe's stock rose in 1996 following agreements with U.S. Surgical and Dow Chemical to advance its patents. But in 1998, the Food and Drug Administration refused to approve the sale of Neoprobe's latest device, a drug-and-probe combination, causing the company to stop clinical trials on this item and sending its stock price downward.
Q3 Stamped Metal
Top officer then: Francis Price
Top officer now: Francis Price
Estimated revenues then: Not available
Estimated revenues now: $25 million**
Employees then: 142
Employees now: 180
Forecast then: Expecting record-setting growth, a doubling of its work force, and diversification into appliances, heating and air conditioning, and refrigeration
Where it is now: Q3 has not yet doubled its work force or diversified its product line, but its continuing growth resulted in a 50,000-square-foot facility expansion in 1996.
We Do Inc.
Top officer then: Carol Feinberg
Top officer now: None
Estimated revenues then: Just opened
Estimated revenues now: None
Employees then: 71
Employees now: None
Forecast then: Expecting company to be a player in the wedding apparel industry from the start and open two more stores
Where it is now: Opened a second store in Atlanta in late 1996, shortly before investors pulled the plug on the entire operation.
Class of 1997
Sun Television & Appliances Inc.
Top officer then: James R. Copitzky
Top officer now: R. Carter Pate
Estimated revenues then: $806 million
Estimated revenues now: $508 million
Employees then: 4,000
Employees now: 3,000 before store closings
Forecast then: Expecting store closings and possibly the failure of the entire chain if turnaround plans don't show immediate promise
Where it is now: Store closings at Sun began in early 1997, followed by the elimination of more than 1,200 jobs and a complete corporate shake-up. Last year brought a Chapter 11 bankruptcy filing in September and, when Sun's new, small-town focus failed, a prompt liquidation of its remaining stores.
[Now CompuServe Interactive Services Inc.]
Top officer then: Bob Massey
Top officer now: Mayo S. Stuntz Jr.
Estimated revenues then: $793 million
Estimated revenues now: $842 million**
Employees then: 3,600
Employees now: 3,050**
Forecast then: Expecting a renewed focus on commercial customers, the demise of WOW!, and either a near-return to profitability or the beginning of the end
Where it is now: CompuServe dumped its family-oriented WOW! online service, vowed to switch its focus back to the corporate side and was sold by its parent company H&R Block-all in the first nine months of 1997. The three-way transaction left WorldCom with CompuServe's corporate customers and America Online with CompuServe's consumer online service.
AirNet Systems Inc.
Top officer then: Jerry Mercer
Top officer now: Jerry Mercer
Estimated revenues then: $75 million
Estimated revenues now: $110 million
Employees then: 650
Employees now: 1,150
Forecast then: Expecting additional acquisitions and double-digit revenue growth
Where it is now: AirNet acquired three companies in 1997 and exceeded analysts' predictions of 15 percent growth. Last year, the company acquired Mercury Business Services and anticipated a 12 percent increase in revenues.
Cameron Mitchell Restaurants
Top officer then: Cameron Mitchell
Top officer now: Cameron Mitchell
Estimated revenues then: $7 million
Estimated revenues now: $15 million
Employees then: 300
Employees now: 565
Forecast then: Expecting two more restaurant openings and sales topping $11 million
Where it is now: Cameron Mitchell opened the Columbus Brewing Co. and his second Cap City Diner in 1997, taking his sales past the $11 million mark. Last year, Mitchell's first steakhouse made its debut downtown and The Columbus Fish Market opened near Grandview.
comp/data international inc.
Top officer then: Sepehr Rajaie
Top officer now: Sepehr Rajaie
Estimated revenues then: $12 million
Estimated revenues now: $9.6 million**
Employees then: 28
Employees now: 30**
Forecast then: Expecting new offices in Connecticut and North Carolina, as well as new investors
Where it is now: Comp/data dropped its plans for out-of-state expansion in 1997, but secured equity capital from investors. The company maintained a low profile in 1998 and numerous messages left on its answering machine during the latter part of the year went unreturned. In addition, its West Spring Street offices appeared empty.
JUPITER Marketing & Advertising Inc.
Top officer then: Tom Hughes
Top officer now: Tom Hughes
Estimated billings then: $3.1 million
Estimated billings now: Not available
Employees then: 5
Employees now: 4**
Forecast then: Expecting more overseas business, specifically in Australia, and a big client in the used car industry
Where it is now: JUPITER expanded its local client list with four major deals in 1997.
Bob Evans Farms Inc.
Top officer then: Dan Evans
Top officer now: Dan Evans
Estimated revenues then: $806 million
Estimated revenues now: $887 million
Employees then: 29,000
Employees now: 32,000
Forecast then: Expecting a renewed focus on the flagship restaurant business, an expansion into frozen foods and a beefier stock price
Where it is now: Bob Evans Farms Inc. found its earnings, sales and operating profits inching back up in 1997. Last year those profit gains continued.
Karrington Health Inc.
Top officer then: Richard Slager
Top officer now: Richard Slager
Estimated revenues then: $9 million
Estimated revenues now: $45 million
Employees then: 500
Employees now: 1,500
Forecast then: Expecting expansion into middle- and lower-income markets and smaller communities to push revenues into the $25 million range and result in its first profits
Where it is now: Karrington continued to show losses in 1997, but tripled the number of assisted-living facilities it owned and operated. Last fall, the company announced it was being acquired by Sunrise Assisted Living Inc. in a $191 million stock and debt deal.
The Computer Group
Top officer then: Suzanne Erickson
Top officer now: Suzanne Erickson
Estimated revenues then: $16 million
Estimated revenues now: $15 million**
Employees then: 60
Employees now: 60**
Forecast then: Expecting to add a nationwide sales force and a new division, boosting sales to $24 million in the process
Where it is now: The Computer Group began building its national sales force in 1997 and added a media marketing division to work with CD replicators nationwide.
*Estimate provided by J.C. Bradford & Co.
**As listed in the 1999 Dun & Bradstreet Regional Business Directory, 1998 Dun & Bradstreet Million Dollar Directory and/or Dun's Microcosm
***Most recent figure available
What prompted you to start requiring these tests?
Turnover is extremely high in this industry with employment being as low as it is. We realize that one of the biggest assets are our employees.
Our primary focus is continuous education and to find more of a motivation for the employees to continually strive to bring their own level of understanding to a higher level. There is always room for improvement. Our motivation is not to penalize anyone; we expect everybody to pass. If youre always trying to improve ... you can better serve the customer.
What were your expectations for these tests?
One, the goal was primarily to expand on the [employees] knowledge. Two, and more important, is what it takes to improve. Its more knowing how to research and how to resolve the issue in the most time effective manner. Its a vast industry and you cannot be trained in a one-week time period. Its so vast that there is no way you can expect one individual to know everything. Three, one of the unexpected benefits is that you do see a little more camaraderie within the office.
What kind of questions do you ask on these tests?
[The test covers] our procedures and guidelines as far as our licensing requirements, federal guidelines and real estate settlement procedures acts. The individuals must really understand what Innova Fundings obligations are so that they understand why they are doing the items that we request.
How many questions do you usually ask on the test?
We ask five questions and one bonus. Some of those questions may have as many as 30 parts. Our final question is to name one thing you can do to improve Innova Funding.
How is the test administered?
It is transmitted electronically. It goes through our server and everybody receives it at the same time. They have 30 minutes to respond to it after they read it. People have to e-mail their response back and then I usually print them out and make comments. Then we will all sit down together and go over them as far as what the expectations were.
Have you seen improvement in employees overall work?
I see people taking the initiative to do some reading on next months topic and people are coming to me saying, Hey, I didnt know that. Whats happening is now that the people are taking time to read and research, they are getting excited because it makes them more of an asset. They can do their job better and we can provide a higher level of service to our customers. All levels of employees are taking it very seriously. They do exceptionally well. Everyone has passed to this point on it.
How and when do employees prepare for the tests?
Studying here is fine but I would expect that people are also taking the material home to get more familiar with it. People are starting to prepare four or five weeks ahead of time. In this environment we can ask people to do reading and studying but its one of those things that is never going to take priority because of the amount of work to do. We really needed to find a motivation for them to take time away from their other priorities or adjust their schedule so they could continue to study everything.
What advice would you give other business owners for motivating and educating employees?
It is something that should never be overlooked and it should be very important. It ranks up there with business planning. We spend a lot of time training and keeping [employees] knowledgeable. Were not throwing them out there in the cold. We really try to give them the tools to be successful.
Here are three rules to follow: Keep your emotions in check; play the numbers game accurately; think big picture.
They could be maxims to run your business, hire an employee or purchase a competitor, but theyre some of the many tips included in a locally authored book, Writing Effective E-Mail: Improving Your Electronic Communication, by siblings Nancy and Tom Flynn.
Nancy, president of Nancy Flynn Public Relations Inc. in Northwest Columbus, and Tom, a senior information project leader for Liebert Global Services, merged their knowledge in an 83-page book covering message composition, grammar, formatting and organizing.
- Be specific, but write as if your boss, the media or mom were reading.
- Eliminate sexist language by using the generic pronoun one, for example, or using an article such as the, this or that instead of his or her.
They also warn of times when e-mail may be inappropriate, such as when you must deliver unpleasant news or when your message is extremely important.
The book, published in October [Crisp Publications, $10.95], was a first for the sister-and-brother team.
Nancy Flynn says she proposed the book when executives in her writing skills workshops expressed an interest in electronic communicationsand when she saw the poorly written e-mail she received.
It seemed as though there was a need to get the word out that good writing is good writing whether in cyberspace or on a piece of paper, she says.
Apparently the publisher saw the same need, almost immediately accepting the Flynns August 1997 book proposal. After e-mailing draft versions to each other, the siblings delivered a copy to the publisher in January 1998.
Watch for more titles under the Flynn name. Nancy has another proposal in the works, and would not rule out a future collaborative effort with her brother.
The secret to becoming wealthy is that there is no secretjust principles.
Correspondent and radio personality Mort Crim, during the Better Business Bureaus Business Integrity Awards luncheon this fall
Look for Escape Enterprises Inc. to up the ante in development this year through franchise incentives and forays into new venues at home and abroad.
The company sweetened the pot in September 1998 when Franchise Mortgage Acceptance Co. of East Brunswick, N.J., agreed to offer a $35 million preferred finance program to Steak Escape franchisees.
This agreement has encouraged more franchisees to sign with Escape, says Robert Bruff, vice president of franchise development, because it allows them to concentrate on finding good locations and opening restaurants more quickly because theyre not spending time securing financing. Six franchisees took advantage of the opportunity within a month of the announcement.
Bruff expected the company to have 156 stores open by the end of 1998. Hes estimating another 60 in 1999twice the openings of last yearand 80 more in the year 2000. The company will back up its expansion with more corporate staff for franchise support.
Escape Enterprises will continue to build on the success its found diversifying from mall stores to sports venues, strip centers, travel plazas and college campuses. A first attempt at a free-standing unit, opened by a franchisee late last year in Charleston, W.Va., has the potential of netting twice the annual sales of mall locations, Bruff says. Two more are planned this year and deals with international developerssealed in the Middle East and pending in France and Malaysiawill open even more avenues for growth.
Also watch for the introductionlikely in the first quarter of this yearof an improved cheesesteak sandwich.
All these investments, Bruff says, should lead to system-wide sales increases in excess of 35 percent in each of the next four years.
If Escape Enterprises continues reinvesting to support this growth, expect it to exceed those projections.
Escape Enterprises Inc.
222 Neilston St., Columbus
Top local officer: Ken Smith, chairman
Employees: 29 corporate, plus 200 store
1997 revenues: $55.8 million
Estimated 1998 revenues: $66.7 million
Revenue growth, 96 to 97: 9.5%