Columbus (2544)

Monday, 22 July 2002 10:04

Where the money is

Written by

Securing private capital to start or grow a business is seldom easy. The key isn't just who you know-though that certainly helps-it's who they know and whether you're a good fit for that venture capitalist's portfolio.

Steve DiMauro, executive director of the Columbus Investment Interest Group, an affiliate of the Greater Columbus Chamber of Commerce, says venture-capital firms typically look to invest in companies with a substantial market opportunity and high-growth expectations. These companies should also have an experienced management team, a competitive advantage, great ideas and a clear strategy to implement them, he adds.

Below are some venture-capital firms that operate in Ohio's three largest cities: Columbus, Cleveland and Cincinnati. If you think your firm might qualify for an investment from one of them, your best bet is to get an influential accountant or attorney who believes in your business to introduce you. Many venture-capital firms do not accept unsponsored business plans.


Columbus

CID Equity Partners
Contact: Bill Oesterle
224-8185
41 S. High St., Suite 3650, Columbus 43215
Industry: All, with a focus on software, industrial and consumer goods; medical and health-related businesses; telecommunications; and specialty financial products
Preferred investment: Mezzanine fund, $3 million to $5 million; equity fund, $1 million to $10 million
Desired ownership stake: Primarily 5 percent to 45 percent


Desco Capital Partners
Contact: James Shade
885-8855
150 E. Campus View Blvd., Columbus 43235
Industry: Industrial products, software, medical equipment
Preferred investment: $500,000 to $5 million
Desired ownership stake: 5 percent to 45 percent, though sometimes a majority interest is sought


Enertek Partners
Contact: Paul Purcell
424-7005
505 King Ave., Columbus 43201
Industry: Natural gas
Preferred investment: $500,000
Desired ownership stake: Greater than 10 percent


The Ohio Partners
Contact: Maurice Cox
621-1210
62 E. Broad St., Columbus 43215
Industry: Information technology
Preferred investment: $1 million to $5 million
Desired ownership stake: Minority interest and active participation with management team


Cleveland

Brantley Venture Partners
Contact: Kevin J. Cook
(216) 283-4800
20600 Chagrin Blvd., Suite 1150, Cleveland 44122
Industry: All except real estate, oil and gas, and motion pictures
Preferred investment: $3 million to $8 million
Desired ownership stake: Between 25 percent and 80 percent


Clarion Capital Corp.
Contact: Tom Niehaus
(216) 687-1096
1801 E. Ninth St., Suite 510, Cleveland 44114
Industry: Life sciences, information technology, telecommunications
Preferred investment: $250,000 to $500,000
Desired ownership stake: Less than 10 percent


Crystal Internet Venture Fund
Contact: Daniel Kellogg
(216) 263-5515
1120 Chester Ave., Suite 310, Cleveland 44114
Industry: Internet-related
Preferred investment: $1 million to $2 million
Desired ownership stake: About 10 percent


Key Equity Capital Corp.
Contact: Lisa Root
(216) 689-5776
127 Public Square, 28th floor, Cleveland 44114
Industry: Industrial machinery and equipment, industrial chemicals and materials, health care
Preferred investment: $1 million to $40 million
Desired ownership stake: 30 percent to 80 percent


MCM Capital Partners
Contact: James Poffenberger
(216) 621-6777
55 Public Square, Suite 2150, Cleveland 44133
Industry: Manufacturing
Preferred investment: $5 million
Desired ownership stake: Majority ownership but will also consider minimum of 33 percent


Morgenthaler Ventures
Contact: Lyn Cameron
(216) 621-3070
629 Euclid Ave., Suite 700, Cleveland 44114
Industry: Health care, information technology
Preferred investment: $3 million to $7 million
Desired ownership stake: From 10 percent to 70 percent


National City Capital
Contact: Christopher Dowd
(216) 575-2491
1965 E. Sixth St., Suite 1010, Cleveland 44114
Industry: All, with emphasis on manufacturing, consumer products, and communication equipment and services
Preferred investment: $1 million to $10 million
Desired ownership stake: Variable minority interest


Ohio Innovation Fund
Contact: Tim Biro
(216) 622-8555
1400 McDonald Investment Center, 800 Superior Ave., Cleveland 44114
Industry: Health care/life sciences, advanced manufacturing, aerospace and information technologies, polymers and specialty materials, software
Preferred investment: $250,000 to $1 million
Desired ownership stake: 25 percent


Paran Management
Contact: Joseph Shafran
(216) 921-5663
2720 Van Aken Blvd., Suite 200, Cleveland 44120
Industry: Real estate, especially neighborhood and community shopping centers
Preferred investment: $1 million to $5 million
Desired ownership stake: Equal partnerships; require property management role


Primus Venture Partners
Contact: Loyal Wilson
(440) 684-7300
5900 Landerbrook Drive, Suite 200, Cleveland 44124

Industry: Information technology, health care, financial services, retail, education, training

Preferred investment: $5 million to $10 million

Desired ownership stake: Lead investor role preferred; majority interest not required.


The Northcoast Fund LP
Contact: Jonathan G. Turk
(216) 566-8084
1111 Chester Ave., Suite 830, Cleveland 44114
Industry: Health care, technology, consumer products, communications
Preferred investment: $800,000
Desired ownership stake: Lead investor role preferred; majority interest not required.


Thomas Roulston III Investment Partners Inc.
Contact: Thomas Roulston
(216) 771-9199
1350 Euclid Ave., Suite 1060, Cleveland 44115
Industry: Manufacturing, distribution, consumer products
Preferred investment: $500,000 to $2 million
Desired ownership stake: 25 percent to 100 percent


Cincinnati

Blue Chip Venture Co.
Contact: Todd Gardner
(513) 723-2300
2000 PNC Center, 201 E. Fifth St., Cincinnati 45202
Industry: Information technology, health care, retail/consumer products, communications
Preferred investment: $3 million to $5 million
Desired ownership stake: Up to 49 percent


River Cities Capital Fund
Contact: Murray Wilson
(513) 621-9700
221 E. Fourth St., Suite 2250, Cincinnati 45202
Industry: Information technology, telecommunications, manufacturing
Preferred investment: $2 million to $5 million
Desired ownership stake: Up to 49 percent


Senmed Medical Ventures
Contact: Clint Dederick
(513) 563-3240
4445 Lake Forest Drive, Suite 600, Cincinnati 45242
Industry: Medical-related technology
Preferred investment: $750,000 to $1 million
Desired ownership stake: Typically 5 percent to 10 percent


Walnut Capital Partners
Contact: Daniel Fleming
(513) 651-3300
312 Walnut St., Suite 1151, Cincinnati 45202
Industry: Low-tech
Preferred investment: $2 million to $10 million
Desired ownership stake: Varies

Monday, 22 July 2002 10:04

Say what?

Written by
Affiliated Power Producer: A company or individual project that generates power and is affiliated with an electric utility. For example, Houston Industries Energy Inc. is affiliated with Houston Lighting and Power, and both are subsidiaries of the holding company Houston Industries.

Aggregator: An entity that puts together groups of customers into a buying group that purchases a commodity service. The vertically integrated investor-owned utility, as well as municipal utilities and rural electric cooperatives, perform this function in today's power market. Other entities, such as buyer cooperatives or brokers, could perform this function in a restructured power market.

Avoided Cost: The incremental cost to an electric utility of new generator transmission capacity or both which the utility avoids through conservation or purchase from another source. (See the definition of Public Utility Regulatory Policy Act for additional information.)

BTU: British thermal unit. The standard unit for measuring the heat content of energy. One unit-the heat roughly given off by a kitchen match-is enough heat to raise the temperature of one point of water by 1 degree Fahrenheit.

Relationships:

1 kwh of electricity = 4312 BTU
1000 cubic feet of gas = 1 million Btu
A barrel of oil = 6.25 million Btu
1 ton of coal = 25 million Btu

Capacity: A measurement of the electrical output of generating usually expressed in kilowatts or megawatts. Typically, the user or manufacturer will rate the generating plant's capacity.

Cogeneration: The simultaneous production of electric energy and useful thermal energy (i.e., heat used for individual, commercial, heating or cooling services) from the same energy source.

Cogenerator: A power plant or industrial firm that sequentially produces electric energy and useful thermal energy. Excess power from the industrial firm can be sold to a local utility, while excess steam from the power plant can be sold to a local industrial or commercial business.

Competitive Procurement: A process used by utilities in many states to select supplier of new electric capacity and energy. Under this system, also known as competitive bidding, a utility solicits bids from prospective competitive generators to meet its power needs. The process often includes: the publication of a request for proposal by a utility for the purchase of capacity, energy, and/or demand-side management products and services; the submission of bids offering to provide such products and services by multiple would-be suppliers; and the selection by the utility of one or more winning bids subject to appropriate regulatory oversight.

Customer Choice: The ability of an end-user (residential, commercial or industrial customer) to purchase electricity from any supplier at negotiated rates and have that electricity delivered to a specific location.

Demand-Side Management: DSM is another word for conservation programs that are meant to save money by avoiding costs for new generation.

Direct Access: Affording customers the ability to receive transmission directly from competing power produces.

Distributing System: The substations, transformers and lines that convey electricity from high-power transmission lines to the ultimate consumers.

Embedded Cost: Funds already expended for investment in plant and operating expenses (i.e., a utility's historic average costs as shown on its books, in contrast to its "marginal cost," which is the change in costs caused by the production of each additional unit of electricity).

Exempt Wholesale Generator: An entity (or individual project) that generates power for wholesale sales only and is exempt from regulation under the Public Utility Holding Company Act of 1935, which is enforced by SEC. EWGs were created and defined by the Energy Policy Act of 1992.

Externalities: This term refers to costs that are not internalized in the stated cost of a power plant. Most of these external costs are environmental (e.g., cost of additional air pollution, increased mortality due to greater emissions).

Grid: The entire interlocking system for delivering electricity from generating station to ultimate customer.

Heat Rate: The amount of thermal energy input required to create a unit of electricity energy output, usually expressed in thousands of British thermal units per kilowatt-hour (Btu/kwh) computed by dividing the total Btu content of fuel burned for electric generation by the net kilowatt-hour generation. The heat rate serves as a proxy value for the efficiency of electricity production.

Independent Power Producer: An entity other than an electric utility that owns and/or operates one or more independent power facilities and that normally falls outside traditional utility cost-of-service regulation. Over time, this term has evolved by common usage to cover any nonutility power producer including cogenerators, nonutility generators private power producers, qualifying facilities and exempt wholesale generators.

Integrated Resource Planning: A process used by utilities to determine what resources they need to meet future demand for electricity. IRP generally emphasizes use of conservation programs and alternative resources to meet future demand.

Intra-Company Power Supply (Affiliate or Self-Service Wheeling): This involves the transmission of excess self-generated electricity from one facility of a company to another facility of the same company. No sale is involved.

Investor Owned Utilities: Utilities that issue common stock that is purchased by the public; also called privately owned utilities (as opposed to electric cooperatives or municipal utilities). Ohio IOUs are regulated by the PUCO.

Kilowatt-Hour: The basic unit of electric energy, it refers to actual electricity usage or consumption and is equal to 1 kilowatt (1,000 watts) of electricity steadily supplied to or taken from an electric circuit in one hour.

Load: The amount of electric power delivered to or required by certain end-use points on an electric distribution system. It can refer to the amount of electricity required by a customer or a piece of equipment.

Load Factor: The ratio of average load to peak load during a designated period. The higher the load factor, the better a utility or independent power producer is able to spread its fixed investment over a larger production base.

MegaWatt: The term used for expressing capacity of a power plant. One megawatt equals 1 million watts.

MegaWatt-Hour: The term used for expressing the output of a power plant in a given time frame. One megawatt-hour equals 1 million watt-hours.

Municipal Utility: An electric utility system owned and operated by a municipality that generates electricity and/or purchases electricity at wholesale for distribution to retail customers (residential, commercial, and industrial). Ohio's municipal electric utilities take their authority from the Ohio Constitution, and are locally regulated by the municipality's governing body (city or village council).

Natural Monopoly: Exclusive control of a commodity or service in a given market, or control that makes possible the fixing of prices. Utilities, including railroads, telephone companies and power companies, were often referred to as "natural" monopolies because a controlled monopoly generally was termed to be in the public interest. The generation services of power companies are no longer considered a natural monopoly.

Non-utility Generator: The broadest term used to describe a company (or individual project) that generates electricity but is not an electric utility (i.e., does not sell electricity on a franchise basis to retail customers).

Plant Efficiency: The percentage of the total energy content of a power plant's fuel that is actually converted into electricity. The remaining energy lost to the environment is waste or exhaust heat.

Power Broker: E ntities that facilitate transactions between buyers and sellers of electricity at wholesale. Unlike power marketers, they do not "take title" to electricity.

Power Pool: Two or more interconnected electric-utility transmissions and distribution systems that are operated in an integrated manner. Utilities establish power pools to handle the combined load requirements, including maintenance of the utilities' system, thereby enhancing the reliability and economic distribution throughout the region.

Public Utility Holding Company Act of 1935: PUHCA was enacted in 1935 in response to gross financial abuses by utility holding companies. Enforcement authority was assigned to the Securities and Exchange Commission. The SEC required a structural reorganization of the holding companies that eliminated most of the problems. PUHCA serves a consumer protection function by creating a check against horizontal expansions through mergers and acquisitions, providing for local control and prohibiting forum shopping.

Public Utility Regulatory Policies Act: PURPA was enacted in 1978 to advance three goals: increase conservation of electric energy, increased efficiency in the use of facilities and resources by electric utilities and equitable retail rates for electric consumers. One of the key elements of the ACT was to require electric utilities to connect with and purchase power from qualifying facilities. This provision reduced the monopoly power of electric utilities by negating the utility's position as the exclusive generator of electricity.

Rate Base: The value established by a state public utility commission on which a local utility is allowed to earn a particular rate of return. Rate base represents the utility's depreciated asset value or net investment in facilities, equipment and other property.

Rate of Return: Generally, this is the annual rate of return allowed to an investor-owned utility by its state public utility commission or to a nonqualifying facility independent power producer by the FERC. It is the ratio of allowed operating income as determined in the utility's most recent rate case to the utility's rate base expressed as a percentage.

Reliability Council: A group of interconnected utilities in a geographical area that work cooperatively to assure system reliability. There are seven electric reliability councils in North America.

Retail Wheeling: The providing of electricity transmission services to the ultimate (or retail) customer.

Rural Electric Cooperatives: Organizations composed of rural areas that band together to generate or purchase electricity at wholesale and distribute the electricity to retail customers. Cooperatives are governed by their member-owners.

System Interconnection: A connection between two electric transmission systems or electric-generating and transmission systems allowing electric energy to be transferred in either direction.

Transformer: An electromagnetic device that increases (steps up) or decreases (steps down) the voltage level of alternating current electricity.

Transmission: The process of transporting electric energy in bulk on a high-voltage power line from a source of supply to a point of use within a utility system or to a point of interconnection with another utility system or power grid.

Unbundle: To separate a utility's generation. transmission and distribution assets in terms of cost or accounting treatment. Also, to charge separate rates for the generation transmission and distribution functions.

Vertically-Integrated Utility: A utility company that sells power on a bundled basis and whose activities encompass the full range of different functional activities (e.g., generation, transmission and distribution).

Voltage: The measure of the potential difference or pressure in an electric circuit that causes electricity to flow, usually measured in volts or kilovolts.

Watt: The basic expression of electrical power or the rate of electrical work. A watt measures power in a circuit. One watt is the power equivalent of 1 ampere flowing through 1 ohm of resistance. One watt is also equivalent to approximately 1/746 horsepower, or 1 joule per second. Watts are the product of volts times amperes times a power factor.

Source: Coalition for Choice in Electricity

Monday, 22 July 2002 10:04

The connection is clear

Written by
Call him an opportunist if you want, but you've got to hand it to Don Casto. He's one shrewd businessman.

Imagine what will happen to that nearly forgotten property of his, Graceland Shopping Center, if the proposed Morse-Bethel connector road ends up running through its parking lot. That lifeless chunk of outdated real estate could become a pot of gold.

Not only would Casto get paid by Columbus for the land he'd give up to make way for a couple miles of city-poured asphalt, but also the resulting thoroughfare would bring a new crowd of potential shoppers zooming by his storefronts daily.

You know he's drooling at the thought. In fact, I have to wonder if he had a hand in stirring up the Second Coming of this crusade to bridge east and west. It certainly seems he has the most to gain by such a connector.

Apparently Casto was ahead of the mayor in studying the plausibility of using Graceland in the on-again, off-again connector campaign. Rumor has it he brought his own study to a closed-door meeting at City Hall to discuss the connector this summer. Within days, Mayor Greg Lashutka had asked his friends at the Mid-Ohio Regional Planning Commission-or "MORP-C," as insiders like to call it-to take a more detailed look at a couple options for using Casto's land. Never mind that there's already one proposal pending at the ballot box in November.

But what are the chances of the so-called Rathbone Road connector plan passing at the polls next month when another, seemingly more humane plan is already in the works? Given the choice between tearing down 40 homes in a quiet, tree-lined neighborhood or dropping a road through the center of a vast, empty shopping center parking lot, I know I'd choose the latter. It's the only way I could sleep at night. But then, let's not forget the choice of no connector at all.

It will be interesting to see if Casto hits the jackpot on this one. The $500,000 MORPC study isn't due out until later this month-just in time to let voters know what alternative plan is likely to await them on the May ballot if the November proposal fails.

Should next month's Rathbone Road connector plan get tanked, should one of the Graceland options pass MORPC's logistical test, one real question remains: What will happen to Graceland's current merchants? Will those few who have stayed loyal to the aging shopping center all these years get squeezed when Graceland's property value skyrockets? The bigger mainstays like Drug Emporium and Big Bear might be able to weather the significant rent hike that's apt to go along with a better-traveled location (though with the recent financial difficulties of Big Bear's parent company, even that isn't necessarily a given). One has to wonder, however, if longtime tenants like The Fontanelle Restaurant, the Singer Sewing Center, Graceland Jewelers and Hobbyland will be forced to find space elsewhere. I hope not. I like to think loyalty counts for something. If Casto's connector eventually gets the nod, we're sure to find out where his loyalties really stand.

Nancy Byron, editor of SBN Columbus welcomes your comments by fax at 842-6093 or by e-mail at nbyron@sbnnet.com.

Monday, 22 July 2002 10:04

Death of a business

Written by
Robert S. Schwartz wasn't there when the 75-year-old Columbus law firm founded by his grandfather slipped quietly into extinction on a damp December evening in 1996.

Schwartz, 50, says the family trip he took to Florida those last two weeks of the year was an annual wintertime escape-not a purposeful retreat from the somber task of packing up and locking the door on the once-prosperous downtown legal firm that had supported three generations of attorneys in his family.

"I'm sure it was monumentally depressing," he says of the day Schwartz Warren & Ramirez officially ceased operations. "But I wasn't going to deprive my mother, who'd been very supportive of me, of that trip."

After all, it was Schwartz's late father, Stanley Schwartz Jr., whose powerful connections and business finesse made the law firm one of the most prestigious in town-and kept it there for more than four decades. What a heart-wrenching, even humbling decision it must have been for the younger Schwartz to have to pull the plug on it all. To cancel his traditional year-end pilgrimage to visit his mother-even as the final chapter in the law firm's history came to a close-would've been unthinkable.

"You need your family there to support you," he says. "Without that, it makes an emotionally difficult situation even harder to handle."

It wasn't a single egregious event that forced Schwartz Warren & Ramirez out of business nearly two years ago. Rather, the apparent reluctance of the management team to address ongoing personnel, financial and leadership issues allowed the firm to erode until it was virtually incapable of continuing.

"There was no backbone to take steps to allow the firm to survive," says Kenneth J. Warren, a former managing partner of the firm who is now a private practice attorney in Dublin. "No one was willing to do what was necessary."

"I probably would take more decisive action sooner if I was in that situation again," echoes Schwartz, who was one of the eight partners remaining at the firm when it dissolved.

The lesson is twofold: Business problems never solve themselves; and if you can't rectify them swiftly and completely, realize you may be digging yourself into a hole that eventually could become a grave.


Losing good talent

Schwartz became a partner in the family law firm, then known as Schwartz, Kelm, Warren & Rubenstein, in 1987.

"Those were, perhaps, happier times economically," Schwartz says. "It was a good time for law firms. We had done very well."

Well enough to be recruiting ace attorneys from the East Coast-and to be representing Les Wexner's personal investment company.

"The talent was as good as you could have in Columbus," Warren says.

As recently as 1990, the firm had more than 40 lawyers-making it among the 10 largest law firms in the city-handling cases for corporate giants such as The Limited, Bank One-Columbus and Consolidated Stores Corp. Business was booming. How could it go so wrong so quickly?

Schwartz pins the turning point on two key events in the early '90s.

First, his father, who had been with the firm for 43 years before retiring as its managing partner in 1990, died of lung cancer. Then attorneys started leaving en masse.

"The death of my father in the beginning of 1992 really deprived us of a great deal of leadership," the younger Schwartz says. "From the time he died and into the next year, there were leadership issues and people leaving and situations that never really stabilized."

The first sizable group of attorneys left the firm in early 1993, he says. According to Columbus Bar Association directories, 13 attorneys-including four of the 20 partners-with Schwartz, Kelm, Warren & Rubenstein in 1993 left the firm by 1994.

"To some extent we were able to replace those people," Schwartz says. "In retrospect, all those losses hurt."

Schwartz says he's unsure why many of these attorneys left, but Warren points to a common thread: money.

"Like a lot of organizations, in order to keep good talent, your compensation structure has to be acceptable," Warren says. "You have your categories of superstars, OK performers and the less than stellar. When people are educated as to what they may otherwise attain [outside the firm], there becomes an awareness that a lot of people are being carried. When we started to have an exodus of people, with them went sizable amounts of business. So as the base got smaller, the compensation issues got exacerbated."

Rather than trying to prevent additional departures, the firm's focus turned to recruiting new attorneys and promoting associates to replace the partners who left. But without a plan to decrease turnover, recruiting soon became a futile effort.

"Whenever you're shrinking, it's a negative," Schwartz says. "With a lot of defections, people became concerned about that."

By the fall of 1996, only eight partners remained at the firm, which had been renamed twice after the departures of Richard Rubenstein in mid-1994 and Russell Kelm in late 1995. The client list at Schwartz Warren & Ramirez reflected that shrinking pool of expertise.

"You need to have a team of specialists," Schwartz explains. "That hurt the ability of any of us to continue to work for our clients in a lot of cases."

The Limited-perhaps the firm's most notable, perennial client-was even lost amid the rapid turnover.

"A law firm is a unique business," Schwartz says. "It's a service business. Your assets go down the elevator every night. When everybody decides to go their own direction, there's nothing left."


Living beyond their means

As worries of the firm's survival mounted, the partners' attention turned to controlling expenses.

"We had too many people at the rate we were paying-too many attorneys, too much support staff," says Warren, who served as the firm's managing partner during the tumultuous years of 1994 and 1995. "We had to make drastic cutbacks."

That didn't happen. The ax got swung, but not broadly enough in Warren's opinion.

"We let a couple associates go in an effort to try to be sure everybody was busy all the time," Schwartz says. But that only aggravated the problem since clients followed those associates out the door, too. And since the firm's receivables were being used to cover expenses in the two years before its closure, the combination of layoffs and resignations sent the firm's finances into an all-out tailspin.

"We were relying on people to be working and producing to pay off our expenses," Schwartz says. "When people start leaving, they're not working and producing."

Nevertheless, few at the firm seemed willing to acknowledge the true gravity of the situation.

"People said it was a seasonal problem, that revenues were going to increase," Warren says. That, he adds, was wishful thinking. It was clear that fixed costs like rent and computer equipment needed to be slashed, too.

"We had very expensive space leased in the nicest building in downtown Columbus," Schwartz says. "That made it that much harder for us. We tried to renegotiate our space at the Huntington Center, but if you have so many square feet to run a firm of [that] size and you lose people faster than you renegotiate, it does not solve the problem."

"We needed to get out of the space we were in-by whatever means necessary," agrees Warren. "The rent was killing us. And we had a lease for a computer system that was almost one-third more than we needed. The expense was too much."

When the firm signed its rent-to-own deal on the computer system in 1992, it seemed wise to invest in the best system available. In hindsight, that was a big mistake.

"A lot can be done without leading-edge technology," Schwartz says. "Especially if customers aren't buying technology from you. Nobody comes to me for my technology. My clients are buying legal advice and services. To some degree, it helps me produce that, but the technological baseline of the legal profession is the quill pen ... Now I won't buy leading-edge technology. Pioneers get arrows in their backs."

So it was. The law firm's computer system depreciated so much that, when the partners finally unloaded it, they got 3 cents on the dollar, Schwartz says.

Looking back, Schwartz wonders if focusing on revenues might have been a better way to go. If the firm could've brought in more business-or charged clients more money-perhaps Schwartz Warren & Ramirez would've had a better chance of staying afloat.

"The real problem was the top line, not the middle line," he now says.

Warren disagrees.

"If we would've downsized, sure there would've been some costs-getting out of the real-estate lease and the computer lease-but we could've [emerged] with a group of 10 to 12 timekeepers that would've been very successful ⊃ and who might have been able to think about growing the firm again," he says.


Big shoes left unfilled

In the fall of 1996, the inevitable decision was reached to dissolve the firm. Schwartz admits approaching several competing law firms before that to discuss the possibility of a merger, but nothing panned out.

"It was not a happy day," Schwartz says grimly. "I attribute my ability to get through that to the support of my family-my wife and my mother. Their support made it possible to move on."

"It was nothing that was unexpected," says Warren, who resigned as managing partner in late 1995 and nearly jumped ship before being enticed to stay with the firm in "of counsel" capacity until the bitter end. "There was a difference of opinion about what to do with the firm. I had gone to the mat over the decision ⊃ but no one was willing to take the drastic steps that some of us felt needed to be taken."

That lack of leadership ultimately sealed the law firm's fate.

"One of the key issues was succession planning," Warren says. "There was no able successor to Stanley Schwartz [Jr.]; no able successor to continue the business-myself included."

In the six years after Schwartz Jr.'s retirement, Rubenstein, Warren and Ted Ramirez all rotated through the managing-partner position Schwartz Jr. had held for more than 30 years. None of these potential replacements wielded the same influence as their predecessor, who was revered as one of the leading corporate lawyers in the country and ran in the same civic circles as the late Mel Schottenstein, former Huntington Bancshares President Zuheir Sofia and, of course, Wexner.

"Stanley was the one that really grew [the firm]," Warren says. "Stanley had the insight, the expertise and the vision to take it on to the next level.

"When you've not groomed an heir, you open yourself up to competition-and even ill will," he adds.

It was a memorable lesson.

"I will never share power again," vows Warren, who launched his own practice after his former firm's demise. "I will never give someone else the power to override a decision I see as needing to be made."

"I'm truly sorry that we didn't do something more proactive sooner," concedes Schwartz, who now serves as a partner at Benesch Friedlander Coplan & Aronoff. "In retrospect, we probably should've faced up to the situation caused by my father's death a lot sooner than we did. We could've saved a lot of people a lot of grief."


The aftermath

Mopping up after a business closure is messy work. There are state, county, city and IRS forms to file. There are clients and suppliers to notify. There are outstanding bills to pay-lest they turn into lawsuits and even personal liabilities, depending on how the business was organized.

Schwartz says the staff and office expenses of Schwartz Warren & Ramirez "were fully paid until we shut down." But the day the law firm vacated its space at the Huntington Center did not coincide with the end of its lease term. Within two months, Huntington Center Associates had filed a breach-of-contract complaint in Franklin County common pleas court against the firm. Court records indicate the case was settled more than a year later, with the firm agreeing to pay the Huntington Center $1.5 million plus interest and court costs.

"I've had to write some checks," Schwartz admits. "I and some others had to make some payments," though he declines to divulge additional details.

"In a situation like this, the first person out the door has the smallest loss. The last people absorb the largest loss," he says. "The prudent thing for anybody would've been to be the first person out. There were a number of reasons I couldn't do that-loyalty to my father's memory, loyalty to a number of people I worked with. I didn't want to do that."

Though his loyalty cost him, Schwartz says he's learned some valuable lessons through it all.

"A law firm shouldn't borrow money and should minimize fixed expenses," he says. "You have to spend prudently."

To Warren, the message is more about planning ahead.

"Prepare for succession," he advises. "The goal of any managing group is to make sure there is a succession plan. Make sure someone has been groomed so you don't miss a beat."

Monday, 22 July 2002 10:04

Why be organized?

Written by
Who do you want to be? How will you get there? These twin questions plague the success-driven. Ask yourself, where do you want to be in 10 to 20 years? Then ask, what do you have to do today to be there? Julius Caesar was 42 and the Roman Governor of Spain when, happening upon a statue of Alexander the Great, it occurred to him that the younger man had conquered the then-known world when he was 33. Caesar responded by changing his life, and the rest is history.

Planning for your future requires one important element: organization. It involves taking the various components of your life and assembling them into a systematic routine aimed toward a particular result. Absent organization, you can look forward to frustration, wasted time, poor performance and lack of perspective.

Organizing your life yields three priceless resources: time, efficiency and perspective. Everybody has the first of these. Each day contains 24 hours that can never be captured again. If the average life of a person is 73.5 years, that's 26,827 days, or 643,860 available hours.

But time is finite. When we waste it, we can't simply go back and make up for it. Like cash in the bank, it must be managed. And by managing our time, we gain control of this resource, and can accomplish more in a shorter period.

The dividend of time management is efficiency, the ability to do more with less. The wealth and ease that most people have in the United States is a direct result of increased efficiency. The evolution of the world from agricultural to industrial and now to an information age is tied to ever-increasing productivity. We thus need to look for ways to continue to increase our own productivity. Are we involved with overlapping activities with negligible rewards? Every wasted activity eliminated is time discovered to produce more results.

Perspective is the ability to form a clear view of your environment. How often have you felt so overwhelmed, only to realize that you were going in circles? The person without perspective cannot see their path. But when we can step back for a moment and consider ourselves as outsiders might, we can correct our course. The Portuguese navigators of the 14th century kept detailed log books and records of their voyages to uncharted waters. In fact, they were considered state secrets. In our life's voyage, it's only by keeping detailed records of successes and failures and the choices that brought us there that we're able to adjust our course for more profitable waters.

So where should we begin? First, take an honest look at ourselves. Three major steps will follow:

No. 1, examine every aspect of your life--work, leisure and spiritual-and make an inventory. Assess the tools you have at your disposal. What is your expertise? Who is around who might give you insight? What are your assets and liabilities? Where are you wasting time? Are you spending too much time relaxing? How much time do you spend at work? What are your work processes? Where is your work being duplicated?

No. 2, group the different parts of your life into components. Ask yourself, what is important? Then incorporate these various aspects into one central command post, sometimes called an organizer.

The Roman army was one of the most successful in history because it was one of the best-trained and best-organized ever. It was divided into divisions, or legions, of 6,000 men. These were in turn divided into cohorts, which had several centurions over various units. Through superior organization, Caesar was able to conquer the larger but less-well-organized armies of Gaul in a few years. Your organizer can likewise become a central command post from which you will be able to direct the needed resources to win the war. It should contain some lever of control over every aspect of your life.

No. 3, execute your plan of attack. Do you need to make more sales? Do you need more products? More locations? More quiet time? With a panoramic view of your personal battlefield you can begin plotting your strategy for the rest of your life.

We are only given one life, and now is the time to make it count. We can't go back and capture lost time. We can only look forward and make the time we have left count. By organizing ourselves, we can all get there.

Fred Koury is CEO of Small Business News Inc. He can be reached via e-mail at fkoury@sbnnet.com.

Monday, 22 July 2002 10:03

The next season

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Part 3 of 3

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."

Monday, 22 July 2002 10:03

More than just a sales job

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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."


Citizen Nelson

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."

Monday, 22 July 2002 10:03

Now on special: baloney

Written by

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 nbyron@sbnnet.com.

Monday, 22 July 2002 10:02

SBA Lending activity

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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

Monday, 22 July 2002 10:02

In Brief

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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."