Dustin S. Klein

Monday, 22 July 2002 09:51

Ups and downs

Downs to the Millennium Bug. The pesky menace that boosted an entire industry has now hit those same people in the pocketbook. IT consultants finished with Y2K compliance jobs are finding themselves with too much time on their hands.

Ups to American Greetings. The $100 million deal with America Online expands the Cleveland card maker’s Internet presence to AOL’s 17 million users. Now you can send your favorite IT consultant a “Happy Y2K” card.

Downs to RPM, which recently announced its 52nd consecutive year of record earnings. Why a downs? Because that same day, RPM announced a restructuring plan to close 23 facilities and slash 730 jobs — nearly 10 percent of its work force. The moves will help RPM in the long run, but it spells the likely end of the company’s streak.

Ups to CPAs. A shortage of qualified bean counters puts the entire profession in a great position. It’s better to find out now why your accountant isn’t returning your calls than it would be as April 15th rolls around.

Ups to Dell and Motorola. They joined a growing list of companies embracing the Linux computer operating system, upping the ante in a challenge to Microsoft dominance. Was that a penguin we saw tossing a rock through Microsoft’s window?

Monday, 22 July 2002 09:51

Anatomy of an IPO

Ron Weinberg stood on the floor of the New York Stock Exchange flanked by his partner, Norm Harbert, and Hawk Corp. executive vice president Jeff Berlin. Part of him waited anxiously for the opening bell to ring and Hawk’s stock to begin public trading.

“When you’re on the floor there, there’s both a sense of history and destiny,” Weinberg says.

But another part of him was simply relieved that the grueling two-week road show leading up to the IPO had reached its climax. “The road show is just a brutal exercise, where the underwriters get management out in front of as many people from the brokerage houses as they possible can,” he says.

That was May 12, 1998. Weinberg, Harbert and other Hawk execs spent the two preceding weeks telling their stories and explaining long-range strategic plans in the hope that they could convince institutional investors their business was a good investment and that they should buy shares for their clients as part of the public offering.

Hit the road

On a cool spring day in 1998, Ron Weinberg stood in front of 30 European investment bankers in Geneva, Switzerland, presenting a slide show on Hawk that described the company’s plans to increase global market share.

“I flew over the night before on the Concorde, presented over lunch, then flew back to Boston that night,” says Weinberg.

Across the Atlantic, Harbert and Berlin entertained Detroit’s top investment bankers with a similar presentation.

“Ron had the fun part of the job,” says Harbert.

Those two trips were pit stops on a road show that took the trio from the East Coast to the Midwest, then to the West Coast, and finally back east for a meeting with premier New York and Boston investment banks.

“Part of the excitement,” says Weinberg, “is just the logistical intensity of it, because you’ve got a selling team of underwriters who are constantly trying to get the institutions on the phone and book appointments. You’re constantly moving and they’re squeezing in everything they can.”

Back-to-back meetings

It’s been said that the moment your prospectus is printed, the starting gun sounds and it’s a mad sprint to the IPO finish line.

“The most interesting thing in the world of finance is that it’s really a bit of a rite of passage for managements,” says Weinberg. “It is physically brutal because you’re meeting people day and night. The drama of it is the pace and the intensity. For many management groups, it’s a very different kind of thing to be traveling around like that and selling yourself. You get very intense questions over and over again.”

The daily pace is grueling. Your first appointment may begin at 7 a.m. in front of a group of institutional investors in St. Louis. That same day, says Weinberg, may end with a dinner meeting in Chicago with the fourth group of investors you’ve seen.

Filling the book

“The whole exercise is watching the book,” explains Weinberg.

The book is a compilation of how many shares of stock investment houses indicate they’ll buy. The goal is to fill the book with two to three times the number of shares of stock your company will issue in its public offering.

“After we’d visit the institutions, they’d give an indication that they want stock,” Weinberg continues. “The big buyers would say they’re something like 10 percent buyers, the smaller firms would want less, and the whole time, the brokerage firm is building the book of what’s expected to be sold in the IPO.”

Setting the price

While the underwriters are building a book, there’s a second scenario developing — price talk.

“The underwriters are saying the stock’s going public between $17 and $19 and the institutions are playing a cat-and-mouse game,” explains Weinberg. “If that’s the range the underwriters are saying, the institutions are talking about $16 to $18. Then the underwriters come back and let those big financial buyers know that it’s a filled book and that they should up their offer because the stock’s going to come in around 17 or 18.”

But all of this, explains Weinberg, isn’t the official pricing. That occurs at the pricing meeting, on the last day before the public offering, when the road show closes.

“In the parlance of the old Wall Street days, the underwriters present us with an offer,” says Weinberg. “They say, ‘We will take your company public at $17,’ and ask us to sign the documents approving it. But the less formal discussion is when they explain why they can do it for that price; they show us the book, tell us who’s talking about the stock and that we should want it to go up a little bit the next day when the stock starts trading publicly.”

On the NYSE floor

Two minutes before Hawk’s stock began public trading, the drama truly began. The specialist on the floor, the person whose job it is to analyze all the orders coming in from different brokers and set a price, was running simulations on a computer.

“Based on how it looks, he sets the actual opening price,” Weinberg says. “He told us that they were opening trading in two minutes at $19. Then he counted down to one minute. Finally, bang, the opening bell went off.”

While the event wasn’t Weinberg’s first time watching one of his companies go public, the feeling was the same.

“I was on the floor when we started trading, and it was pure excitement.”

Monday, 22 July 2002 09:48

The king of spin

If you thought President Bill Clinton cornered the market on top notch spin doctors, meet Stephen W. FitzGerald, president of Cleveland-based The FitzGerald Group Inc.

FitzGerald was invited by PRWeek to provide a PR-based solution to the following: Changing the image of Nevada’s famous brothel, the Mustang Ranch, which was forfeited to the federal government after the ranch’s corporate owner was convicted of fraud and racketeering. The Bureau of Land Management wants control of the ranch and its surrounding land to turn it into the National Horse & Burro Center, using its many rooms as a visitors’ center.

The question: How would you use PR to change the ranch’s image? FitzGerald’s response, which was published in October, included the following quip: “Converting a brothel to a horse-burro center certainly gives new meaning to ‘Ride ’em Cowboy.’”

He suggests inviting national, state and local organizations to tour the Mustang Ranch and submit proposals for its best uses.

“Grassroots mobilizations will naturally spring up to support the various proposals, resulting in higher media and public recognition for the ranch’s eventual occupants and their missions,” he says. “With all its facilities, there would be many health and human-service agencies and nonprofits that could benefit from using the ranch.

“As memories fade, the brothel becomes an interesting, but only historical, footnote.”

Monday, 22 July 2002 09:45

Gut check

Gavin Smith and Jeff Craze know they’re not big fish in the regional microbrewing pond. They don’t have 10 years of brewpub experience behind them, nor do they possess the deep pockets necessary to buy smaller breweries and establish national and regional distribution channels.

But what Smith, CEO, and Craze, president of Western Reserve Brewing Co. do have is good old-fashioned marketing sense, an understanding of the value of hard work and a realization that even if your business has a good product, it’s worth tinkering with.

In their first three years of business, the pair has been busy, garnering local and national awards for Western Reserve’s brewing excellence. From the outside looking in, they must be doing something right.

So what can your business learn from a couple of home brewers turned pro? A lot more than you think.

Do your homework, build a plan, but trust your gut

It’s no secret that you’re unlikely to succeed in business without a solid plan. Nor can you produce a quality product without devoting countless hours to research and development. But beyond that, every good business begins with a gut feeling that something will work.

Smith and Craze spent two years developing their business plan before Western Reserve brewed its first barrel in 1997. They traveled to other breweries, including local ones, to gauge how things were done in the microbrewing industry. Now, with a bit of experience under their belts, they are in the midst of devising a new three-to-five-year plan, which Craze says encompasses a proposed expansion.

Western Reserve was the duo’s first commercial venture — both came from other industries — but they followed the old business school motto: When you’ve run the numbers enough times, trust your intuition.

“We had a couple gut checks along the way,” Smith admits. “When we built our manufacturing plant, it wasn’t easy. We had to lean on our passion for beer and passion for Cleveland in order to get through the challenges we didn’t expect.”

But trusting their guts extends deeper into the organization, allowing Smith, Craze and brewmaster Jeff Ogden to venture into the great unknown. Explains Steve Louzos, marketing and public relations manager, “One of our favorite sayings is that you learn something new every day ... if you’re not careful.”

Don’t be afraid to tinker with a good product

Western Reserve’s beers have received national awards, but Smith and Craze aren’t willing to rest on early success. That’s why Ogden constantly tries new concoctions that require the special touch of someone who is a healthy combination of alchemist, artist and mathematician.

“It’s critical to be consistent and use exact calculations,” Ogden explains. “Making sure batches taste the same requires spending that extra half hour or hour doing the math. But you have to look at what you’re doing, smell it, taste it and make it that way as well. If you go strictly by the numbers, you lose the creativity of the process.”

This tinkering has helped create Western Reserve’s seasonal beers, including the logo-fancy Bockzilla, which touts a beer-guzzling cartoon Godzilla on the label. Like any good company, Smith says, you have to stay on the cutting edge and continually adapt and develop new products.

Image is everything, so create a good experience

Public perception of your company normally translates into how well you really do. That’s why Western Reserve takes an active role in the community and puts its best spokespeople forward. Those two things, explains Louzos, are the drivers behind Western Reserve’s current marketing campaign, which features Smith and Craze as a couple of cartoon talking heads.

“They’re the best spokespeople for the company because of their passion for the product and belief of getting involved in the community,” he says.

And unlike larger businesses, where the CEO and president often leave the bulk of community relations to a team of well-seasoned professionals, Smith and Craze are apt to be found pressing the flesh with the public at events, letting people attach a face to a company name.

“We were at an event recently with a lot of country music fans,” says Smith, “and the people couldn’t get over how much we were just a couple of regular guys like them. They connected with us and our beer, and realized we were two enthusiasts who cared about the product.

“That’s what it’s all about for us — having a good time, making enough money to keep roofs over our heads and producing high quality beer.”

How to reach: Western Reserve Brewing Co., (216) 361-2888

Dustin Klein (dsklein@sbnnet.com) is editor of SBN.

Monday, 22 July 2002 09:43

Reality in the e-business world

In 1862, Congress passed the Homestead Act, which allowed anyone with $10 and a frontiersman’s attitude to acquire 160 acres of unoccupied land and stake a claim in the West.

By 1900, nearly 400,000 families had filed for land under the law. But many homesteaders struggled financially and were forced to sell their land to wealthy landowners, who, in turn, built the huge ranches that pepper the West today.

Sound familiar?

Being first doesn’t guarantee prosperity or even long-term success. In fact, a similar scenario is unfolding today on the Internet.

It shouldn’t surprise anyone that Amazon.com wasn’t the first online bookstore. That distinction goes to Bookstacks Inc., founded in 1992 by Clevelander Charles Stack (see SBN April 1999).

While Stack’s site was mildly successful, it didn’t have the financial backing of Amazon. In 1996, Stack sold his company to Cendant Corp. for about $4.8 million and launched a new Internet firm, Flashline.com, which sells digital software components.

Cendant added Bookstacks to its Internet mall operations, hoping to gain ground against not only Amazon, but the growing field of online bookstores that suddenly included traditional brick-and-mortar giants Barnes & Noble and Borders.

Last year, Book Stacks’ marginal profitability caught up with it and Cendant put it on the block. For nearly nine months, the company sought a buyer who could integrate Bookstacks into its online operations.

Those efforts failed. So with little fanfare, Bookstacks closed its operations on Halloween and quietly faded away into the darkness of cyberspace.

A few days later, on Nov. 3, Cendant sold Bookstacks’ URL — www.books.com — to Barnes & Noble. And though neither party will say exactly how much money changed hands, it’s been reported the URL fetched between $4 million and $7 million.

The lesson of Bookstacks’ story is simple: When planning a Web initiative for your business, don’t worry about being the first one up and running. Odds are, someone, somewhere, has already thought of your great e-business idea. And they’ve probably put out their shingle on the Net.

In the big scheme of things, the strategy of getting there fast is losing steam. If you look around the Web, the notion of broad-based, all-encompassing Web sites and portals is quickly being replaced by specifically targeted portals for niche markets.

It’s not much different from traditional marketing — define your audience, focus your energy and resources, design your initiative, then implement your plan.

It’s as simple — and as difficult — as that.

As for Bookstacks, its fate was similar to that of many of those original homesteaders who had great ideas and a vision to build a home for themselves in the West. They may have been quick and claimed the land first, but a lack of finances and inability to adapt led to their downfall.

What’s more, future generations will forever associate books.com with Barnes & Noble. And except by a select few, Bookstacks’ history will be forgotten, much like those original homesteaders.

If you’re worried about your company’s e-solution, the bottom line is this: Spend your time wisely and develop a strong, strategic Web initiative that won’t be outdated by the time you employ it. And, most important, don’t worry about being first.

Instead, worry about being the best.

Dustin Klein (dsklein@sbnnet.com) is editor of SBN.

Monday, 22 July 2002 09:43

Moving targets

Just days before the holiday shopping season began last Thanksgiving weekend, Amazon.com filed a temporary protection order against bookseller giant Barnes & Noble, charging B&N was violating Amazon’s patented methodology for e-commerce — one-click technology.

The case was eventually settled and B&N resumed online sales, but the implications of the action can’t be overlooked.

Everybody’s suing everybody on the Internet these days,” says J.T. Kalnay, an attorney at Ulmer & Berne’s e-law group.

That, Kalnay warns, is only going to get worse as business owners stumble over each other in a rush to protect the information, software and processes they use on the Internet to conduct business. Amazon’s technology essentially remembers customer profiles when they return to the site and allows them to purchase merchandise with a single click of a mouse without the burden of filling in a new profile every visit.

Ironically, it wasn’t that long ago (the 1970s) when the courts ruled that software was not patentable. But in a sweeping change of opinion, the courts reversed themselves in 1998, saying materials of the digital industry are drastically different these days and developers deserve some form of protection.

Amazon’s recent litigation is just one case in point. Another comes from a more unlikely source, John Benson. Benson isn’t well known in most circles, but he lays claim to the creation of fantasy sports games. Approximately 15 million people nationwide participate in fantasy games, from rotisserie baseball to fantasy football to fantasy hockey.

A few decades ago, Benson developed the Official Constitution of Rotisserie Baseball. On Feb. 4, he shocked the fantasy sports world with an unannounced FedEx package ordering Ron Shandler, head of www.baseballhq.com — and organizer of the largest baseball fantasy draft in the nation — to cease and desist his activities with all fantasy sports leagues.

Shandler was also ordered to remove all references to Benson’s rules — or any modifications of them — from his site. In the lawsuit, Benson claims full rights to the concept of fantasy sports, much in the way Amazon asserts its one-click technology can’t be duplicated by anyone else without paying royalties. Benson’s case has yet to be settled.

The issue of who owns what online is certainly not cut-and-dried, says Nicole Vickroy, also an attorney with Ulmer & Berne’s e-law group. While the information contained in databases is not patentable, the databases themselves are. Courts have held compilations of information are analogous to the phone book, which can’t be patented.

Says Vickroy, “You can’t just post whatever you want on the Internet. Right now, you better get permission first.”

But before you start pulling down every nonproprietary piece of information off your company’s Web site, there have been some clarifications of what can be patented.

“Specific machines, such as hand-held personal digital assistant devices that beam information to other machines, are patentable,” Kalnay says.

When in doubt, Kalnay suggests checking with your attorney or contacting the U.S. Patent and Trademark Office. And, though the laws remain ambiguous, the message is clear, says Kalnay.

“Basically, if you’re doing something on the Internet, protect yourself.”

How to reach: Ulmer & Berne LLP, (216) 621-8400

Dustin Klein (dsklein@sbnnet.com) is editor of SBN.

Monday, 22 July 2002 09:43

Keeping up with the Joneses

There’s no question that the workplace is changing quickly. As it does, the issues affecting business owners are changing, as well.

Adaptability has never been more important in business, and the decision-makers that recognize and address changes before it’s too late can help write the rules for the next chapter in workplace trends.

The American Society for Training and Development identified eight key issues in three distinct areas of business that owners say are at the top of their lists, and compiled them in a report, “The ASTD Trends Watch.” The report highlights critical forces shaping today’s workplace and prognosticates how those forces will affect tomorrow’s workplace.

For more information on the report visit the ASTD’s Web site at www.astd.org.

Changing competitive landscape

Demography. Population shifts will transform the workplace as baby boomers age and racial and ethnic diversity increases.

The race for talent. There’s a war afoot for the very best and brightest. It’s not about money, and only the creative will succeed.

Technical skills. Continuous employee education programs are necessary to keep pace with rapidly changing skill set needs.

Thriving and achieving growth issues

Cultural due diligence. The cultural make-up of the work force is changing as merger and acquisition mania sweeps across all levels of business and industry. Globalization is here and will grow.

Leadership. Do you know who will lead your company tomorrow? Start grooming employees now to assume key leadership roles.

Emerging requirements for governance

Intellectual capital. How can you measure or report on this all-too-important intangible? Do you even recognize it within your company?

Income inequality. The gap between high-income and low-income workers is growing. Are salaries competitive within your company? If not, what are the implications as the gap widens?

Public policy. How can changes in government regulations affect your work force development?

Dustin Klein (dsklein@sbnnet.com) is editor of SBN.

Monday, 22 July 2002 09:42

Ascension through the ranks

When James Pilla was 18, he shared two goals with his best friend.

First, he wanted to buy a car dealership by the time he was 25 years old. Second, he wanted to earn his first million by the time he was 30.

Pilla reached the first goal in June 1993, less than one month before his 26th birthday, when he bought a 5 percent stake in Motorcars Infiniti. Pilla blew by his second goal with time to spare.

At 32, the slick-haired, straight-shooting Pilla is a rare breed in today’s business world. Rather than found an Internet venture and strike it rich in the futures game, he’s taken a page from previous generations and worked his way up through the ranks.

Pilla is managing partner and 50 percent owner of Motorcars East, Motorcars West, Motorcars Infiniti East and Motorcars Infiniti West, all part of Lee Seidman’s regional auto dealership empire, The Motorcars Group. He’s also vice president of those four dealerships within The Motorcars Group.

And by the way, if the name seems familiar, it’s no coincidence. Pilla is related to that Pilla. Bishop Anthony Pilla is his uncle.

Unlike many of his contemporaries, Pilla didn’t enter the car business with a freshly minted MBA or as a hotshot salesperson. Instead, he quite literally started at the bottom of the auto food chain — washing and detailing used cars at a local Chevrolet dealer.

Since joining The Motorcars Group, Pilla has earned a reputation for taking floundering dealerships and turning them into cash cows. His four locations accounted for a total of $90 million last year, and Pilla expects that number to reach $100 million by year’s end.

Pilla’s turnaround ability is a result of his never-say-die mentality and a belief that if you invest in your customers, you will always come out ahead.

“People always told me I was too young to do this and couldn’t possibly pull it off,” he says. “I’ve spent my whole life proving them wrong. I met a partner who saw something in me years before anyone else saw it and gave me the guidance and opportunity needed.”

Pilla may have begun his career as a detailer, but he quickly decided that was not his lot in life. He tried to land a job at Fairchild Chevrolet as a car salesman in 1988, but the general manager wouldn’t hire him because he was too young and too unseasoned.

In fact, recalls Chuck Gile, that GM and now managing partner of Motorcars Honda and Motorcars Toyota in Cleveland Heights, Pilla was rebuffed three times.

“I finally hired him on the fourth time,” Gile says. “I was impressed with his persistence, and I liked his aggressiveness.”

Even then, Gile didn’t trust him to be a full-time sales rep. Instead, Pilla was offered a 30-day tryout as a sales consultant at minimum wage. That was all Pilla needed. He not only stayed on after the initial run, but in his first year was among the top-selling Chevrolet sales consultants in the country.

That earned him a promotion to aftermarket manager. In one year at that spot, he increased sales from $100,000 to $400,000.

That was the first time Pilla’s ability to drive improvements rose to the surface. But it wouldn’t be the last.

Says Gile, “He’s very aggressive and very visionary. He knows what he wants to accomplish and puts his efforts into getting it done. And, he’s willing to take risks in order to make that happen. A lot of people aren’t willing to do that.”

The next time Pilla pulled his turnaround act was shortly after he bought into his first dealership in 1993. With annual revenue of $18 million and 22 employees, Motorcars Infiniti was losing money. But Pilla believed he could make the dealership profitable. He took out a second mortgage on his house, borrowed money from friends and family and tapped into his savings to buy his 5 percent stake.

Within six months, the dealership was profitable and Pilla had garnered Seidman’s watchful eye.

“When Jamie and I talked, he was a couple months short of his 26th birthday,” says Seidman, whose Motorcars Group today stands at 12 dealerships. “When I went into business I was a couple months short of my 26th birthday. I had to borrow money to go into business. So did Jamie. There are some definite parallels between us. I saw a lot of energy, enthusiasm and bright ideas in him, so I wanted to give him a chance.”

It didn’t take long before Seidman decided to get Pilla more involved in operations. The two bought a Mercedes-Benz dealership and added it to The Motorcars Group. Pilla was put in charge, and in less than one year, took it from selling 60 to 80 new Mercedes each year to selling 160 to 200 a year.

“He’s got a lot of guts,” says Seidman. “He’s willing to make the tough choices in order to get something to work. Even if it’s not the most popular decision.”

While he deflects much of the credit for the turnaround to others within the organization, Pilla cites several things that helped spark better results: increased advertising, more follow-up calls to customers and potential customers, aggressive pricing policies and beefed up service departments.

All of which has helped bring people in the door and sent more cars out the driveway.

Despite what seems like a tireless schedule, Pilla’s carved out enough time to raise a family. He and his wife live on the East Side with their two children, ages six and four.

The importance of family was instilled in Pilla at an early age. He comes from a large, tight-knit family, and has seven older brothers and sisters, all of whom still live in the Cleveland area.

“Every Sunday, I go to Mass with my mother,” Pilla says. “Then, we go to her house for brunch. We’re a very close family and that’s very important. My brothers and sisters are there. It’s a huge deal.”

And, growing up with a father, Joseph G. Pilla, who was a former chief federal probation and parole officer for Northeast Ohio, and an uncle like Bishop Anthony Pilla, it’s safe to say that Pilla’s childhood was spent toeing the straight and narrow line.

“The rules of our house when I was growing up were simple,” Pilla recalls with a smile. “You can do anything you want, but you better not be on the front page of tomorrow’s paper.”

Seidman says Pilla’s upbringing is evident in the way he treats his co-workers and employees. “People grow up with a healthy respect for others, depending on how they’re treated,” he says. “Jamie is a good motivator because he knows how to treat people the right way.”

The unique childhood also taught him the importance of giving back to the community. Besides the numerous boards that Pilla donates his limited time to, he also sponsors a student at his alma mater, St. Ignatius, paying the student’s full tuition and serving as a mentor.

Time is so much more valuable than money,” Pilla says. “Anybody can just cut a check.”

It’s this belief and commitment to people that both tempers and drives Pilla’s vision in the business world.

Tinkering with existing operations isn’t anything new for Pilla. He’s always demonstrated a penchant for trying new ideas to drive change. In late 1994, he noticed his dealerships wasted an incredible opportunity in the new and used vehicle departments because of poor inventory management.

Further, he blamed the problem on his managers, asserting they couldn’t properly gauge the demands and demographic characteristics of their customers.

Pilla turned to technology for the answer, and hired a college student to enter customer data into an Excel spreadsheet — name, ZIP code, income level, make and color of the vehicle sold, financing option and cost of the used vehicle sold. The entire project cost less than a few thousand dollars, Pilla says, but the results were remarkable.

Between Jan. 1, 1995, and May 31, 1997, gross sales rose more than 15 percent. Advertising costs decreased 43 percent, while Internet costs shrunk 26 percent. The total cost to sell a single vehicle declined $192 per unit, and Pilla says the gross per employee rose more than 167 percent.

In 1993, he initiated three new programs into his four dealerships that few other competitors offered: loaner cars, valet service (pick-up and delivery of cars at a customer’s home) and washing every car brought in for service.

“That started the real windfall,” Pilla says.

The programs were costly, he admits, estimating the price tag at around $1,500 per car.

“I’d spend it all day long because it shows how important it is to take care of our customers,” Pilla says.

Despite his good fortune, Pilla says he doesn’t take anything for granted and often works 70 to 80-hour workweeks in order to stay one step ahead of his competitors.

“There are a couple keys to success in business,” Pilla says. “You have to be awake while your competitors are sleeping, and you always have to risk more than others think is safe. I’ve never been content. I’ve had the mentality to risk everything and never look back if I believe in something.”

Seidman says there’s one more key to Pilla’s ability to overcome whatever obstacles block his way.

“He’s a very good judge of people,” he says. “He can talk to somebody for a while, observe them and determine whether they can get the job done. That’s an important trait if you want to succeed.”

And not coincidentally, it’s a trait Seidman apparently has as well. He did it with Pilla nearly seven years ago.

But now Pilla has a new goal: “Through expansion and acquisition I would like to grow this company to a $500 million business in five years.”

Just don’t tell Pilla he can’t. Otherwise, he’ll make it his business to prove you wrong.

How to reach: Motorcars Group, (440) 232-3057

Dustin Klein (dsklein@sbnnet.com) is editor of SBN.

Monday, 22 July 2002 09:41

Virtual protection

Let’s say your company’s vice president of operations just told you he’s leaving your firm to join a fledgling Web-based company. After you wish him well, you remind him about the noncompete agreement he signed upon his hiring four years ago and reinforce its importance.

He smiles and says not to worry. But you will anyway. After all, the Web company may not be a direct competitor, but you never know which markets it may eventually enter.

If you want to protect your company in the emerging e-business world, you’ll need to re-examine the standard noncompete agreement provisions that your key employees sign, warns Carrie Menikoff, an attorney at Ulmer & Berne’s Business Litigation Group.

“We’re no longer dealing with localized markets,” Menikoff says. “Now, any company that is conducting business over the Internet is exposing itself to a global market.”

And that, she says, changes the rules of the game.

Previously — and currently, depending on your take — noncompete agreements covered several items. They protected the legitimate interests of a business owner by restricting the information that key employees who leave the company could pass along to new employers. They also enacted restrictions that limit what can amount to trade secrets and business practices from being taken to a competitor to gain a competitive edge.

Without noncompete agreements, the business world would be rife with competitors stealing away key employees at top dollar in order to secure the type of information that would otherwise be stashed away in sealed files or the CEO’s brain.

“Courts are looking at numerous components of noncompete agreements to see if they’re narrowly tailored enough to apply to Internet-based business,” Menikoff says. “Courts have recognized the Internet is a fast-changing industry.”

It’s so fast, in fact, that often by the time conventional noncompete clauses expire, the entire premise behind the restrictions is useless, protecting outmoded technology, says Isaac Schulz, also an attorney with Ulmer & Berne’s Business Litigation Group. “Simply saying you can’t compete in Internet business or telephony business isn’t going to cut it,” he says.

That’s because the job restrictions will be ruled as too broad.

On the other hand, Schulz warns it is difficult to tailor a noncompete agreement to target specific job duties because they change rapidly as technology advances force skill set readjustments every few months.

But that doesn’t mean developing noncompete agreements for your company is a no-win situation. It’s just not as simple as it used to be.

“Draft your provision narrowly enough that it covers the exact activity you want to restrict an employee from doing for a competitor,” suggests Ronald H. Isroff, an attorney with Ulmer & Berne’s Employment and Labor Law Group. “And be sure to define the geographic limitations so that it’s clear which laws apply.”

But, warn Isroff and other attorneys, the law is still evolving in this brave new world. When in doubt, put as much as you can in writing and hope the courts will back your claims.

How to reach: Ulmer & Berne LLP, (216) 621-8400

Dustin Klein (dsklein@sbnnet.com) is editor of SBN.

Monday, 22 July 2002 09:41

Building a brand name

Last year, SBN magazine changed its name from Small Business News and added the tagline “Smart ideas for growing companies” in an effort to better emphasize the changes not only in our content focus, but also our target market.

A year later, we’re still working on building that name brand identity and shaking the old one. You can’t imagine how many people still refer to our publication as “Small Business News.”

Building a brand name — one that your customers, suppliers and employees can identify with — is one of the most capital and manpower-intensive ventures any business can undertake. It goes much further than a simple public relations campaign or hiring a PR firm to fire off press releases to the local media exclaiming, “XYC Co. is now ABC Firm Inc.”

Consider Bearings Inc., which recently changed its name to Applied Industrial Technologies. Even though it built a state-of-the-art facility just down the street from its previous offices, it’s still common to hear people refer to AIT as Bearings.

One company that has successfully made the switch is Scott Technologies, the former Figgie International. That company changed its name two years ago after jettisoning its majority owner and beginning an extensive divestiture of noncore assets.

Figgie’s change arose out of necessity — the new leadership group decided the only way to regain the trust of shareholders, customers and employees was a complete facelift. So it went back to its roots, adopting the moniker of one of Figgie’s early acquisitions, the Scott Technologies Group.

Today, Scott Technologies has shed its Figgie image — pleasing not only company brass, but shareholders as well. And while Scott’s leadership team doesn’t eschew its former identity, it has refocused attention on its strengths. (See the story on the image change of Figgie International on page xxx).

But swapping monikers mid-stream in a business cycle is a risky move. Consultants regularly warn that building a brand name is one of the most important facets of your company. Why else would giants such as Xerox spend millions in litigation to protect their trademarked products?

And when Bell Laboratories made the switch to Lucent Technologies, the board of directors knew it was taking a gamble. Remember Lucent’s early advertisements reminding consumers and business partners that Lucent was formerly Bell Labs?

The bottom line is this: If you spent years — and millions — building name recognition for your company, product or service, don’t consider a change simply on a whim. Reduced sales volume, bad public relations or new products or services don’t necessarily merit switching your name.

However, if you do find your company in need of a moniker makeover, tread carefully and be prepared to reinforce the change more often than you may like.

As for SBN, I’ve gotten used to explaining to readers the reasons behind our change. I feel like I’m not only getting our point across, I’m educating them about what we really do — provide smart ideas for growing companies.

And that is reason enough for a change.

Dustin Klein (dsklein@sbnnet.com) is editor of SBN.