He's built a 60-employee firm servicing 1,200 clients, including Fortune 500 companies, small businesses and nonprofit organizations. This year, he's expecting more than $50 million in capitalized billings.
Those numbers, however, might not be the most impressive behind Matthew Grossman, especially considering that he started the firm when he was just 21 years old.
When asked if his age has in any way been a problem in growing The Axis Group, Grossman, 28, is quick to reply, "Age to me is not a deterrent, but age to others sometimes is."
It could, for example, surface when Grossman is trying to hire someone in his 40s who has been in the business a long time. It can be a challenge for some people to overcome the stereotype, knowing they will be working for someone much younger.
Grossman, on the other hand, has never let his age get in his way.
While still in high school, the first signs of a budding entrepreneur emerged when Grossman started a silk-screening company that sold T-shirts to concerts and local organizations. From there, he entered the promotional merchandise arena. During his college years at The Ohio State University and the universities of Kansas and Arizona, Grossman's business flourished, selling promotional materials to fraternities and sororities.
In 1994, he returned to Columbus and founded Promohouse, a firm providing merchandise to clients wanting to promote their businesses.
"Everything I did was very natural," explains Grossman. "I started with clients who wanted 1,000 sweatshirts for their sales force. That evolved into helping someone achieve something through promotional products."
Grossman had the vision to take the process a step further by supporting a client's brand through promotional programs, such as creative design and branding solutions, and media relations expertise.
"We believe that promotional products, premiums and awards are an extension of someone's brand. In the world of marketing, that's important," he says.
Soon Promohouse was working with marketing, communications and graphics departments and providing advertising services, and its name was changed to The Axis Group. Today, the focus has widened to a completely integrated marketing concept.
Last fall, Grossman purchased Fekete & Co., an acquisition he believes adds a wealth of expertise to the company. In December, the company's promotions, advertising and public relations services expanded with the acquisition of an interactive group, Out of the Box Inc., bringing on another 22 people, with e-commerce and Web development expertise.
"Why would you want to work with three different companies to do the exact same thing one company can do at all the same place?" Grossman says. "One company gives you a more consistent message."
Others agree. Among The Axis Group's prestigious clients are Consolidated Stores, Bath & Body Works, Columbus Symphony Orchestra, Calfee Halter & Griswold and the Ohio Oil and Gas Energy Education Program.
Grossman demonstrates a wisdom that typically comes only with years of experience. Case in point is the Axis Attitude -- his approach to handling clients. The concept stems from the early teachings of his mentor and father, Jeff Grossman, about how to treat people.
"You only have your own personal reputation," he says. "People will judge you based on your word and how you act."
So when Grossman passionately talks about The Axis Attitude to his employees, he is addressing the basics of superior service. He includes such things as returning phone calls promptly, following up on what you say you're going to do and answering every phone call with a smile on your face.
"We have to be cognizant of the fact that no matter how great we are, they can find it elsewhere," he says. "The bottom line is that I believe very much that it is a privilege to do business with our clients. So the way we treat these people is something we want them to remember."
According to Jerry Gafford, owner of The Gafford Co. consulting firm, Grossman's superior treatment of others goes far beyond his clients.
"Matthew is a bright and sensitive young man who, while having great success in building the business, consistently reflects caring about the Columbus community and people in general," says Gafford, who serves as a member of The Axis Group's board of advisers. "There are others like that. I just don't find that many of them."
He is confident that Grossman will become even more involved in the community in the years ahead. Already, his philanthropic service has included positions on the Hillel Board of Trustees and the Wexner Center Hair Ball Committee; volunteer work at the Wexner Heritage House; and support of the Champion of Children Fund, Columbus Symphony Orchestra and United Way.
Today, most of what he does on a daily basis involves his work. Although he admits enjoying a game of basketball with his 10-year-old stepson (he got married in December), work remains his greatest hobby.
"I think this work is my hobby because if I didn't have the passion for my work, I would not be able to do what I do on a daily basis," he says.
Again, early words from his father surface: "Find a job that you have a passion for and you won't think that you are working."
Says Grossman, "You lay it all on the line, and you work your tail off, and you have fun."
Still, he is quick to attribute that success to the extremely talented people he has surrounded himself with -- a group of winners. Hiring bright, intelligent people who are anxious to succeed is critical.
"The team is so much more powerful than the individual," he adds.
When asked about his greatest accomplishment, Grossman again refers to his work: "It's every time I see a success story for a client -- every time I see a client increase sales or launch a new product or get the press they are looking for -- every time we do a good job."
And while this is a highly creative business, Grossman doesn't consider himself creative. Instead, he's the leader with vision, the one who thrives on inspiring others.
"I want people to feel energized when they are done talking to me," he says. "I want everybody around me to succeed."
How to reach: Matthew Grossman, The Axis Group, 324-9200 or www.ax-is.com
Lori Murray (email@example.com) is a free-lance writer for SBN Magazine.
Akron is at the center of a new venture-capital fund
Cascade CDC will serve as regional HQ for a national SBA program.
By Teresa Dixon Murray
Akron-area entrepreneurs looking for venture capital have traditionally been forced to turn to funds based in Cleveland or Columbus. Now, Akron will have a hand in its own venture-cap fund.
The endeavor, called Development Capital Corp. Growth Fund, is a new nationwide initiative that arrives in Akron by virtue of a recent overhaul at one of the area's most successful business-development entities: the Cascade Certified Development Co.
"This fund is going to satisfy a big need," says Tim Fitzwater, president and CEO of National City Bank and president of The Cascade CDC, which is helping to organize the local venture-cap effort.
Overseen by Executive Director Deborah Victory, the Cascade CDC has helped hundreds of businesses in the five-county area obtain loans and grants.
Now, the organization has changed its operating name to Cascade Capital Corp. and it is working to raise money to capitalize the new fund.
The DCC Growth Fund, a newly organized limited partnership, is a Small Business Administration leveraged development capital fund that will be managed out of three offices across the nation. Akron will serve as the Midwest office.
Twenty CDCs from across the country will help raise money and originate deals for the fund.
Cascade Capital Corp. is in charge of raising money from investors across a loosely defined region that includes Ohio, Michigan, Pennsylvania and New York. Once capitalized, the fund will invest in companies from the same area.
"Akron has been trying to get a venture-cap effort for years and it's never worked," says Victory, who is helping to spearhead the local fund. "This will work."
Managing partner of DCC Growth Fund is Donald Murfin, founder of Lubrizol Enterprises Inc. For 20 years, Murfin has been involved in venture-capital initiatives, including New Enterprise Associates V & VI, one of the largest venture-capital funds in the nation. His focus has been on early to midstage companies in biomedicine, health care and materials technologies.
Murfin says the new fund will be of interest to businesses with capital needs that are seen as too risky by banks.
"There are a lot of venture funds out there," Fitzwater says. "But the beauty of this one is the leverage with the SBA."
For every $1 raised by Cascade CDC and the other CDCs in its region, the SBA will come up with $2. So the Midwest goal of $15 million (it started at $10 million but Victory is confident she'll surpass it) would provide a total of $45 million for investment throughout the region.
The final steps to launch the fund will occur in July. "Shortly after that," Victory says, "we'll start looking at deals."
She adds that Cascade's role in the new fund came at the suggestion of Gil Goldberg, director of the SBA's Cleveland district. "He said he wanted us to consider becoming a high-volume CDC. They gave us a challenge and we took it. But in order to do that, we had to change our mindset," she says.
One of the biggest changes was an end to the formal relationship between Cascade CDC and the Akron Regional Development Board.
Until this spring, ARDB housed Cascade CDC and paid a portion of the salaries for its four-person staff.
"A chamber is different than a CDC," Victory says. "We had a different geographic area than the ARDB before. Now we're even more of Northeast Ohio and into Pennsylvania, Michigan and New York."
Fitzwater says Cascade Capital will continue working with businesses with other financing tools, such as 504 loans and revenue bonds.
Managed care is here to stay, but costs are going up
By Teresa Dixon Murray
"I don't think the trend of managed care is going to stop. It's going to be even more restrictive," says Barry Hofer, president of Business Benefits in Akron, whose client load includes 2,000 group plans covering 7,000 employees. "PPOs are almost outdated. Now it's Point of Service alone or combined with an HMO."
Medical networks will consolidate, with smaller folding into larger. But they won't disappear.
"The only way to control what's going on is through the networks," Hofer says. "Whoever has the largest network will be the most appealing."
Meanwhile, the big cost savings of managed care are over. Annual rate increases, which have been below 10 percent for several years, will once again hit the teens.
That may contribute to the growth in self-funded insurance. "I see the rebirth of self-funded plans on the horizon," says Mike Coppola, employee benefits manager with Brunswick Cos., a Northeast Ohio health insurance broker covering 40,000 lives. "I also see the rebirth of standard major medical plans. Doctors hate managed care. Employees hate managed care. Everyone is beginning to hate it."
Also on the horizon:
More mandated coverage. What's after pre-existing conditions? How about mandated coverage of immunizations, PAP tests and other preventive care. Or a law giving consumers more power over an HMO's decisions regarding their treatment.
More plan choices within a company. For employers with at least 100 workers, insurance carriers are reluctantly agreeing to share business; one company offers the HMO, another the PPO. But each wants a guarantee of at least half the employee base.
In coming years, look for more carriers to accept a smaller slice of business-meaning a 25-employee company might have three plan choices.
Increased use of pretax premium payment. It not only saves employees money, it has the effect of giving them a raise without increasing other payroll expenses.
Decline in peripheral coverage. Many employers are cutting back on group dental or vision because usage is low. Instead, they may start letting employees shop for these services and simply provide partial reimbursement.
Premiums tied into actual claims history. In the future, shopping for companywide coverage may involve detailed health questionnaires for each employee. The result: premiums that reflect real costs, but which are far above initial price estimates.
That will bring reality ever closer to the sticky issue of screening job applicants based on their medical risk. Right now, it's limited to the legally murky territory inhabited by people who do things like smoking or skydiving. Could the marketplace bring it more into the open?
Brunswick President Todd Stein hopes not, but muses: "The law profession in the future looks really good."
A recent survey conducted by the Ohio Restaurant Association found that two-thirds of Ohio consumers believe restaurant owners should set smoking policies, not customers or the government. And the same number favors designated smoking areas.
The results seem clear-cut, but restaurant owners constantly grapple with the issue, says John Bahas II, incoming president of the Akron Area Restaurant Association, an organization comprising 350 restaurant owners in Summit and Stark counties.
Its a struggle as an operator, says Bahas, a second-generation manager at the 265-seat Waterloo Restaurant in south Akron. Just when you think everyone is non-smoking, you ban smoking and watch sales drop off 25 percent.
Because the Waterloo allows smoking in certain areas, Bahas contends with the occasional irate customer. I had a guy not long ago who was in a different dining room, but he was wigging out because he was positive he was breathing every drop of smoke. He didnt want to pay for his breakfast, and I didnt make him. What can you do?
Bahas, also a trustee with the Ohio Restaurant Association, says local owners express similar sentiments to him.
Restaurants are very concerned about liability. If youre not preventative anymore, youre going to get smashed... It only takes one suit to set a precedent.
I would love to go non-smoking, he continues. I wouldnt have to clean the ceiling tiles as often, I wouldnt have to breathe it and it would reduce my liability.
At his $2 million-a-year restaurant, Bahas uses separated seating areas and a fresh-air machine, which helps remove smoke from the air but cant eliminate the nicotine.
Its a heated issue and its going to get worse. I think until we eliminate smoking [from society], were going to have a problem.
One thing Bahas doesnt want to happen: a government mandate like the one in California.
Will the government one day tell me I cant serve fatty french fries because theyre unhealthy? he muses. Dont laugh. Crazier things have happened.
So you want your workplace to overflow with energy and ideas to help gather more customers and make more money?
It sounds great, but most companies just don’t practice creative thinking, says Richard Nichols, president and CEO of Inventure Place, which houses the National Inventors Hall of Fame. In 1989, Nichols retired in as manager of corporate engineering from Goodyear Tire & Rubber, where he directed engineering operations in 100 plants worldwide.
The lack of corporate creativity is one of the reasons Nichols recently launched the Institute for Inventive Thinking, a resource aimed at businesses. The Institute’s slogan, the “status quo just doesn’t do it anymore,” is meant to raise eyebrows. Small Business News talked with Nichols about his views on workplace creativity.
Why was the Institute for Inventive Thinking developed?
The one thing that was missing when I came back to this position is that we still had nothing for people in the workplace. This bothered me... I looked around and there were no resources for companies that want to learn how to think creatively.
So I got a blue-ribbon panel together, including David Tanner and Richard Tait. [Tanner is founder of the the DuPont Center for Creativity and Innovation and holder of 33 U.S. patents. Tait is a 22-year DuPont R&D veteran and owns a management consulting firm specializing in innovation].
We started developing this first as an overview of all of the resources that are out there all over the country. And then we wanted to develop our own program to give people enough take-away knowledge to take with them so they could start using some of this in a modified form.
You talk about both creative thinking and inventive thinking. What do you mean by those?
Inventive thinking is different than creative thinking because invention is applied creativity. All that they do with the creative thinking is tell you how to generate this fluffy stuff. They don’t tell you how you make something happen. And it’s not always only one program you use. Sometimes you use different tools you might use one tool for a while to get you to one level and then you bring in another tool to take you further.
How can managers encourage creative and inventive thinking?
What you need to do is get people to open up. One of the big problems in a lot of the company cultures out there is people can’t express themselves.
When they can’t express themselves, they forget about creativity. It sounds very simple, but if you come up with an off-the-wall idea and you get laughed under the table, or somebody says, ‘Oh, we tried that before and it was stupid,’ then you might never come up with another idea again.
Who are you aiming your program at?
Most of the participants are from R&D at corporations, but we’ve got some sessions where I’ve got a person from the U.S. Department of Labor, and I’ve got someone from the Patent and Trade office, and I’ve got people from non-profits. People are picking up and realizing that this is not just for technical people. It’s for anyone who wants to think differently.
Do companies get caught in not trying new things because people say, ‘This is the way we’ve always done it.’?
Ten years ago, the interest in corporate America was on two things: quality and productivity. If I had a work shop on quality or on productivity, it’d be standing room only.
People haven’t picked up on creativity. I say, ‘Look, I managed plants. I know the value of quality and productivity, but I also know I can have the most productive work force around, but if you don’t have the technology, who cares?’
The fact of the matter is in the last 30-plus years, 80 percent of the U.S. patents that were issued went to U.S. companies. It’s down to about 50 percent now. So at the same time as executives are concerned about quality and productivity, they downsized, and they’ve downsized a lot of engineers. Now we’re losing our edge on technology.
Are people too busy to be creative?
If they are, they’re not going to be busy for very long.
If you don’t have the new technology, you’re not going to make it... What I’m saying is people now are starting to sense, ‘Gee, perhaps we cut too far.’ I see people now are hiring more engineering. If you’re concerned about costs, why not get your people to work smarter?
Maybe you can develop more ideas more creatively, with fewer people if they’re working smarter, and they work smarter by giving them training to work creatively.
Are executives more receptive now to thinking creatively?
It’s much better now because they now understand the need. Why? They’ve made all of the improvements they can on quality and productivity, and their product still isn’t being received as well as they would expect. Now they know it’s technology.
What are the best ways managers can encourage creative thinking?
You have to make sure you have the right culture. It’s a simple five-part formula: First, keep them informed. Next, allow them to express themselves. Three is job satisfaction. Next is recognition—tell them how they’re doing on the job, good or bad. Five is motivation.
The expression and motivation are key. I’ll assure you they’re not going to be creative if they can’t express themselves and if they’re not motivated.
The Institute for Inventive Thinking offers two-day seminars once a month. For information on the seminars or the program in general, call (330) 849-6869.
Marchelle Suppan saw the storm of managed care coming in 1988, but she had no idea how severely it would hit. During the next three years, the now-president of Suppan Foot and Ankle Clinic watched gross revenues plummet 40 percent even though the number of patients remained constant, about 7,000 annually. And she watched cash flow near a crisis as receivables doubled.
The doctors who manage the three-office Suppan practice in Summit, Stark and Wayne counties always believed they provided good medical care. Suddenly, that wasn't enough anymore. They had to start acting smart in business too. Recently the Suppans wrote their first business plan.
"It used to be that the doctor-patient relationship was sacred, and it was just the patient and the doctor," says Jason Suppan, one of six physicians in the practice. "Today, instead of two people in that relationship, there are three-you, the doctor and the insurance company.
"It definitely has forced us to work harder for less money."
Marchelle Suppan, who succeeded her father, Raymond Suppan, as president in 1997, says the last 10 years have been the most difficult in the history of the 44-year-old practice.
"Doctors offices always thought of themselves as a profession," she says. "They were looking for better ways to treat people and focused on continuing education.
"Yes, we do have lifelong learning, but it's going to have to be in business as well. Doctors have had to develop the same practices as other businesses, like total quality and outcomes justification. And we have to work cheaper and faster."
The result: Scores of specialists in Ohio, including podiatrists, have closed business. The number of podiatrists national dropped slightly from 1988 to 1993, though exact figures from the American Podiatric Medical Association weren't available. Today there are 1,070 licensed podiatrists in Ohio.
Locally, two struggling podiatry practices closed last year. The Suppans purchased the client list and equipment of one and is in negotiations with the other.
Marchelle says the partners realized about a decade ago they had two choices: "Either downsize and reduce costs or else hit the gas. We chose to hit the gas."
Expand or else
Raymond Suppan opened his practice in Barberton in 1954. He left that practice and opened his Orrville office in 1968. That might have been enough if not for managed care, which demanded more volume to absorb fixed overhead costs such as a new computer system to allow bills to be filed electronically.
The company's Jackson Township office opened in 1993. Last year, the company expanded to Fairlawn. Today the practice employs 20, six of them podiatrists. The principals are siblings Marchelle, who owns 52 percent, and Jason and Ray, who each owns 24 percent. Founder Raymond Suppan, 67, works part-time since Marchelle has became president. George Kemper, the Suppans' cousin, and Steven Rusher supplement the managing physicians.
The Suppans have employed a number of tactics to become a better business. Among them:
Developing new profit centers
Building the business demanded more than just stealing patients from competitors. The Suppans, for example, last year launched a home-health service marketed in part through home-health nursing services. Home-bound patients might receive general checkups from a nurse, but they're generally not having their feet cared for by a specialist. Problems range from clogged arteries to conditions related to diabetes.
The Suppans' home service treated fewer than 10 patients a month at first; today that number is 250. After the first visit, insurance companies allow the practice to bill home visits just like office visits. Because the offices are still filled with traditional patients, the per-patient overhead costs are reduced.
Jason says 95 percent of the patients were not seeing a podiatrist previously, so the Suppans are tapping a new customer base. "There's such a profound need for it," he says. "When word got out, it just took off."
The practice makes the home visits cost-effective through software that groups patients together by Overhauling the approach to billing The Suppans spent $60,000 on a software and information system from Canton-based GBS Computer & Communication Systems. The system went live in September 1997. Doctors' offices are known for inefficient billing. So much time is wasted-and receivables are delayed-when offices bill with the wrong code or outdated insurance information. So the Suppans converted three office workers into billing specialists through seminars on coding and insurance nuances. The employees today have expertise in Medicare, Medicaid, HMOs and workers' compensation. The clinic also developed new systems for maintaining updated insurance information and for working with patients on payments. "I don't think doctors want to think of their patients as customers, but you have to," Jason says. "We're not just serving their medical needs. We're also looking after their ability to pay. It's a whole package." The average invoice used to be paid in 60 days. By 1996, that jumped to 105 days. In the last year, it's been reduced to 75 days. Another reason for the improvement includes the hiring of a claims worker who spends all day calling insurance companies in search of specific payments. Marchelle says the practice has tried to take the burden of insurance bureaucracy away from the patients. Many doctors' offices post signs at the desk saying the bill is ultimately the responsibility of the patient. The Suppans believe that's the wrong approach. "We have to help them and make dealing with the insurance easier," Marchelle says. "If you don't do it for patients and somebody else will, then you'll lose them." Realize you have to market like any business Doctors traditionally listed their practices in the Yellow Pages and didn't really do any marketing. "Not only did most not bother, but advertising used to be frowned on," Jason says. The Suppans realized that had to change. "When people need a foot doctor, they don't look in the Yellow Pages anyway, they look in their [insurance] provider book," Jason notes. Suppan Foot and Ankle Clinic tries to get in front of prospective patients in part through company health fairs. If the Suppans hear of an upcoming health fair, they'll ask if they can have a booth to talk about foot health. The Suppans also have sponsored repetitive-injury seminars for corporations, including several Fortune 500 companies. "That generated a lot of referrals," Marchelle says. Marchelle says all of their tactics have definitely made them a stronger business, but she hopes the pressures stemming from managed care will start easing slightly. Many would agree that managed care changed the climate much too fast. "One of the things I'm banking on as an entrepreneur is the pendulum swinging back a little bit." Despite the Suppans' new philosophy toward being not just doctors but also businesspeople, Jason says they still wrestle with beliefs that are ingrained. "I have a commitment to healing ... If you think of them as customers, you're going to hate them. If you think of them as patients, that's what keeps you going."
Overhauling the approach to billing
The Suppans spent $60,000 on a software and information system from Canton-based GBS Computer & Communication Systems. The system went live in September 1997.
Doctors' offices are known for inefficient billing. So much time is wasted-and receivables are delayed-when offices bill with the wrong code or outdated insurance information.
So the Suppans converted three office workers into billing specialists through seminars on coding and insurance nuances. The employees today have expertise in Medicare, Medicaid, HMOs and workers' compensation.
The clinic also developed new systems for maintaining updated insurance information and for working with patients on payments.
"I don't think doctors want to think of their patients as customers, but you have to," Jason says. "We're not just serving their medical needs. We're also looking after their ability to pay. It's a whole package."
The average invoice used to be paid in 60 days. By 1996, that jumped to 105 days. In the last year, it's been reduced to 75 days.
Another reason for the improvement includes the hiring of a claims worker who spends all day calling insurance companies in search of specific payments.
Marchelle says the practice has tried to take the burden of insurance bureaucracy away from the patients. Many doctors' offices post signs at the desk saying the bill is ultimately the responsibility of the patient. The Suppans believe that's the wrong approach.
"We have to help them and make dealing with the insurance easier," Marchelle says. "If you don't do it for patients and somebody else will, then you'll lose them."
Realize you have to market like any business
Doctors traditionally listed their practices in the Yellow Pages and didn't really do any marketing. "Not only did most not bother, but advertising used to be frowned on," Jason says.
The Suppans realized that had to change. "When people need a foot doctor, they don't look in the Yellow Pages anyway, they look in their [insurance] provider book," Jason notes.
Suppan Foot and Ankle Clinic tries to get in front of prospective patients in part through company health fairs. If the Suppans hear of an upcoming health fair, they'll ask if they can have a booth to talk about foot health. The Suppans also have sponsored repetitive-injury seminars for corporations, including several Fortune 500 companies. "That generated a lot of referrals," Marchelle says.
Marchelle says all of their tactics have definitely made them a stronger business, but she hopes the pressures stemming from managed care will start easing slightly. Many would agree that managed care changed the climate much too fast. "One of the things I'm banking on as an entrepreneur is the pendulum swinging back a little bit."
Despite the Suppans' new philosophy toward being not just doctors but also businesspeople, Jason says they still wrestle with beliefs that are ingrained. "I have a commitment to healing ... If you think of them as customers, you're going to hate them. If you think of them as patients, that's what keeps you going."
About 3,000 businesses and individual consumers can expect their phone bills to rise now that a flat-rate long-distance company has closed shop.
Ohio Direct Communications Inc., which was based in Salt Lake City and served Northeast Ohio, ceased operations July 31 after nearly three years of litigation.
It offered customers a flat rate of, perhaps $20 a month, to place up to 200 long-distance phone calls, regardless of the length of the calls.
Ohio Direct based its computer equipment in Hudson, which has local calling access to both Akron and Cleveland. Customers in Akron could dial an Ohio Direct number in Hudson, enter a personal identification number and then dial a Cleveland number toll-free.
Ohio Direct's closing came after All-Tel/Western Reserve Telephone Co. complained to the Public Utilities Commission of Ohio. A PUCO commission last year sided with All-Tel and ordered Ohio Direct to register with PUCO and become a certified telephone company and negotiate appropriate compensation among itself, All-Tel and Ameritech Corp.
PUCO spokesman Dick Kimmins says it's unclear what effect the Ohio Direct case could have statewide. "That has yet to be determined," he says. "This affects only one company, but it could be used as a precedent ... Each cases rises and falls on its own."
Kimmins adds that if another company buys Ohio Direct's customers and equipment, PUCO would expect it to comply with the same registration and compensation demands.
Ohio Direct had 2,500 customers in Akron and Cleveland and 500 customers in the Columbus area.
A spokeswoman for Ohio Direct says that adhering to the PUCO's decision would have cost 10 to 20 times more in operating costs. "Because Ohio Direct was the first business of its kind in Ohio, it was the first one targeted," she says. "Now, new companies know what to do and what not to do."
Open and shut ... and open?
Jeff Spaeth doesn't quite know what to tell his customers. His family's 15-year-old store, The Wicker Co. in Hudson, sent mailings to customers last year, announcing it was closing, along with a "liquidation sale."
Frantic customers were told that the wording was a mistake, that the Norton Road store was closing "temporarily for remodeling."
The store did close last January, however, after Spaeth couldn't negotiate a new lease for a smaller space.
Spaeth continues to operate a 6,800-square-foot store in Canton, which he says "picked up a lot of business" from the other store.
When the Hudson location closed, "there were hopes it was going to reopen and there's hope that might still happen," Spaeth says.
The company, which still rents the back portion of the building, has been negotiating with the landlord to scale back to less than a third of the 26,000 square-foot space he had.
"It was just too big," he says. "It was becoming a day-after-Christmas business. It just wasn't viable."
If it does reopen-and Spaeth should know by year's end-he could hold a grand reopening sale. Or management could stick to its original "temporary" story.
Jim Kent's rubber-soled shoes gripped the top rung of the 15-foot ladder as he worked to install a new jib crane at his Kent manufacturing plant.
His wife, Pat, had pleaded with him countless times to be more sensible about doing heavy work at TechniDrill Systems Inc. He was nearly 50 years old and president of the company. He paid other people to know how to do these things.
But TechniDrill's success, Jim mumbled to himself on such occasions, was due to his hands-on management. Jim had started the company with a few partners after watching his previous employer go bankrupt in 1985. Thanks to his own hard work, TechniDrill was flourishing. Its net income had hit $200,000 on $1.8 million in sales-a margin that he considered respectable. Jim had sold the jobs, engineered the designs and installed new equipment.
Pat could nag all she wanted, Jim thought to himself, but he knew what was best for the company.
This time, on Oct. 14, 1994, she was right.
Jim doesn't remember his foot slipping from the rung or the 15-foot fall. He doesn't remember landing on the concrete in almost a sitting position, square on the base of his spine, and then slumping over unconscious.
A yelling worker brought Pat out of the office, where she worked as the bookkeeper. "I ran out and saw him with his head bleeding. I knew it was serious," she says.
Jim was rushed to the hospital, where he was diagnosed with a broken vertebrae, fractured skull and a ruptured artery in his brain.
Doctors told Pat that they didn't see any way he would survive. They'd do their best, but if he did make it, he'd never walk again. He might have brain damage.
Jim lay unconscious for a week and has no recollection of waking up. His health remained "touch and go," he says quietly, for two weeks after the fall.
After surgery, six weeks in the hospital, and months of rehabilitation and old-fashioned rest, Jim did, in fact, recover almost fully.
But in the year it took to once again focus on business, the accident had nearly killed his 9-year-old company.
Jim Kent had made one of the most basic mistakes: He never set up the company to run without him.
Trained as a mechanical engineer, Kent left Firestone Tire & Rubber Co. in 1970 to become chief engineer for Phillips Precision Drilling, which built drilling equipment for the flourishing oil industry. Its reliance on a single industry that took a downturn, plus an illness by the owner, put the company out of business in 1984. The 54 employees lost their jobs.
Kent found a new paycheck-designing packaging for frozen pizzas at Stouffer Foods-but within weeks began getting phone calls from old customers asking where they could get parts for their Phillips equipment.
Along with three former Phillips co-workers, Kent and investor Vince Reinfeld founded TechniDrill to step into the void left by the old company.
Demand was strong; TechniDrill was one of only four companies in the United States that could build or service the specialized drilling equipment, which allowed a manufacturer to bore a hole in 14 minutes that would take up to three hours with standard machinery.
The first order was an 80,000-pound machine priced at $380,000. Too big for the company's 3,600-square-foot facility, it was assembled in the parking lot.
As the oil industry regained its health, four more contracts worth more than $1.2 million found their way to the young company's door.
That business financed TechniDrill's move to a more suitable 11,000-square-foot plant.
Then in 1987 Kent got an inquiry about designing and building equipment to drill camshafts for Ford Motor Co. Ford said it would send an assessment team to determine whether TechniDrill was a worthy vendor.
A wave of intimidation washed over Kent when he realized the assessment team would be larger than his five-person staff. So he recruited four relatives and two employees from a pair of vendors to come in that day to help fill out the plant.
"We had everything but a dirt floor," he chuckles. "I'm sure they weren't impressed."
Still, Ford awarded the company a $700,000 contract. TechniDrill has since supplied Ford with four more machines, and provided a cam shaft drilling system for a joint venture involving Ford, General Motors Co. and Chrysler Corp.
By 1994, TechniDrill was well-regarded in its niche, and services were in high demand from companies ranging from gun manufacturers to suppliers of aerospace landing gear.
Kent routinely turned away jobs because, while he now had 14 employees, he couldn't handle the workload.
It was Kent who calculated prices, engineered designs and managed local contractors. He oversaw assembly, followed the job through installation and handled customer follow-up.
His influence was so strong that when he took time off, so did everyone else.
"When I went on vacation [two weeks every other year]," he says, "I'd have a plant shutdown."
"It was impossible for him to do everything and be everywhere at the same time," Pat says. "I told him, but a lot of times he didn't like what I said."
Kent was released from the hospital Dec. 1, 1994, six weeks after his fall.
He returned to the office Dec. 23, with two 9-inch rods implanted in his back.
"I really wasn't able to get around," he recalls. "I walked from the car to the office then laid down for 20 minutes to rest. Then I went out to the plant to talk to the guys for a little bit and came back to my office to lay down again. Then I went home. I just wanted to make my presence known."
He returned full-time at the end of January, but still couldn't focus on anything but the most immediate matters, like walking without a cane and getting by without the heavy pain medication he was encouraged to take. "It was very difficult to think when you're on all of that stuff," he says.
But the business screamed for his attention. Six employees, nearly half the staff, had taken other jobs.
"Everybody was saying, 'Jim's gone and he's going to die. What's going to happen to TechniDrill?' So they left, and I can't blame them," Kent says.
At the same time, the company had taken on more work than it could possibly deliver. By mid-1995, TechniDrill had 14 jobs on backlog, worth roughly $2 million, most of it not priced accurately because Kent had never bothered to develop or teach a pricing system.
"Nothing was getting shipped," Pat says. "Nothing was getting invoiced, nothing was getting done."
Customers waited as long as six months for their orders, resulting in costly penalties that crushed the already troubled margins.
As the bills mounted, so did receivables. Again, the company didn't have a strong collections process, and many clients withheld payment for as long as their shipments had been delayed.
Pat was fending off creditors for amounts as small as $5. "I don't know how we ever paid our bills," she says. "I had to make sure I had money for payroll, and we never missed it."
TechniDrill did, however, stretch its $500,000 credit line.
Being close to the books every day, Pat was frightened by the situation, but she couldn't get through to Jim.
"I think Jim knew what was happening but he couldn't accept it. He didn't want to admit it."
Pat took her concerns to the other shareholders. Two own 30 percent, as Jim does; two others own 5 percent each.
"They turned a blind eye to it. They didn't think it was as bad as it was," she says.
Shareholder Howard Calhoun, an attorney with Calhoun, Waddell, Ufholz & Hunt in Akron, says that during Kent's six weeks out of the office, he tried to keep a stronger presence by making almost daily appearances and keeping tabs on the big-picture finances.
Despite that, he acknowledges Kent's absence demonstrated how dependent the business was on one person. "That created a crisis and we kind of limped along," he says.
In addition to his own increased involvement, Calhoun brought in management consultants and temporary engineers and focused on improving TechniDrill for the long term. "I never had any question we would pull thr ough."
Kent's recovery dragged on for nine months-until August 1995-until he felt strong enough to take control of the nightmare. He restored sanity to job- scheduling; fulfilled contracts; stepped-up collections; and tried to regain client confidence.
Financially, though, the company was still on the edge.
Bob Littman of SS&G Financial Services in Akron has been TechniDrill's C.P.A. and business adviser since 1991. He realized the scope of the problem in spring 1996, during a routine monthly meeting when the issue of pricing was discussed.
"They knew they had a problem, but we didn't have a system that could track costs at the time of the build. What they would say is, 'Oh, look, we had a terrible loss here.' By that time, the invoice was sent. It was too late."
Kent was reluctant to make the changes needed to save the business. "I was here and working, but you do all kinds of things you don't remember," he says. "I was just not aware. People would say there were problems, but I wouldn't listen."
In early 1996, Kent's partners finally started paying attention.
"We lost everything we had put into the company over 10 years," Kent winces. "That was $1 million in equity."
The partners hired a new vice president of operations from outside to take some pressure-and authority-away from Kent. One of his first actions was to fire the bookkeeper-Pat Kent-who from the start had been the only person talking about the money problems.
Littman agrees the situation was bad, but says the solution was worse. The new executive clashed with employees, vendors and customers. "Bringing him in was one of the worst things they did," Littman says.
Perhaps it took watching someone help run his company to force Jim Kent to snap out of it. "Jim went into a meeting [with the shareholders]," Pat says, "and said, 'Look, enough of this. This company is going to collapse if we don't get him out of here.'"
After some eight months, the unwelcome executive was discharged, Jim was back in control, and Pat was back on the payroll.
Now came the hard part: Overhauling the business piece by piece. It was not only hard work; it went against his nature.
"I think ego is a big part of it. I wanted to do it all," Kent says. "I didn't really want to let go of anything.
"I can't believe I didn't see these things," Kent laments today. "I don't know. I guess I wasn't paying attention. I was worried more about sales than managing the business. I'm a good example. I'm a bad example.
"I just said to myself, 'What can I do to make sure this never happens again?'"
He had to start with the gut-wrenching process of evaluating every employee, many of whom were friends and former co-workers not suited to the job that now had to be done.
By 1996, though the company had grown to 30 employees, Kent estimates at least eight never should have been hired.
Some he let go; others he tried to work with. Some were in their 50s and had trouble finding new jobs. "I felt bad for them," Kent says. "I still talk to them.... But I had to separate business and friendship. It gets to the point that to survive, you've got to run it like a business. I had to learn that."
Also difficult was his realization that others could perform some responsibilities better than he. He had resisted, for example, workers' attempts to move to a new method of deep-hole drilling. Giving in last year, he found that the process reduces labor time by a third. Now nearly all drilling uses this new method. "I wasn't wrong," Kent says. "I just wasn't right."
Other business improvements were more clinical, such as establishing a pricing structure and a system for cost analysis.
Today, TechniDrill, which is remarkably healthy, is a better company. Gross profit has increased 9 percentage points since 1994, and the net margin is up nearly 3 points in the same period.
Littman, who has seen his share of turnarounds, calls this one amazing. "There were some times," he says, "when it was close to going under."
Last year, TechniDrill repaid its credit line, and by April 1998, the beginning of its fiscal year, the company already had contracts worth $6.1 million, up from $5.7 million for 1997. Kent is projecting 12-month sales of $8 million.
Now, he's expanding again, with a $225,000 addition that will double the plant's size by early 1999. At that point, TechniDrill will hire 10 to 15 new machine tool assemblers.
He could have saved money by adding a second shift instead, but he selected expansion for two reasons, perhaps three.
He believes he has a better chance of finding good workers in a tight labor market by offering a day shift. Besides, a second shift would mean added management costs, he reasons.
The third reason? Kent still likes to be in control.
"I used to think it couldn't run without me, but now it can," he sighs. "That makes me feel bad sometimes. ... I used to be terribly important. Now I'm not important anymore."
Still, he admits, "I'm really uneasy about a second shift. We had [one] about a year and a half ago. I wondered about efficiency."
Kent pauses. "I just like to be here. I just need to be here."
His eyes grew wide and his jaw dropped, but I quickly explained: "We're not about business. We're about people in business."
I don't know whether he agreed with me. When I joined SBN in 1992, it was in its infancy. The Akron edition was a year old, while Stark was six months old, and we didn't quite know what we were.
We've since evolved into a publication of best practices-how businesses manage their daily challenges. But it's the people fretting over cash flow and employee retention that give this magazine more excitement than a textbook.
It's the people, in fact, who made it difficult for me to leave my job here as senior editor.
As I cleaned out my office and loaded my personal library of SBN back issues, I couldn't help scanning some of the pieces we've published in the last few years. The people started coming to life all over again.
Telling your tales of challenges and setbacks is hard. But so many executives have been willing to do that for me, and they've brought to life the trials of running a business day in and day out.
Here are a few of my favorite stories of humanity from the last six years:
- Norma Rist, who surprised the community by discussing her efforts to overcome a crippling shyness. Dozens of executives called to thank her for her courage and advice.
"When I encounter a situation that's difficult, I go ahead and bite it off and look in my Rolodex for people who can help me," she says.
- Ron Marhofer of Marhofer Auto Family, whose 90-hour work weeks were not only hurting him but his business too. His solution? Allowing employees to hire, fire and make decisions of any dollar amount. One of the criteria he uses to judge prospective employees: Would he trust the person to baby-sit his children?
- Mike Wojno of Akron Brick and Block, whose obsession with owning a business nearly ruined his life. It took some rude lessons for Wojno to realize what most of us discover at some point: Mom and Dad know best. His father, Karl Wojno, always managed to balance family and work. "My dad is my hero," Wojno says.
- Rick Fedorovich of Bober, Markey & Co., who echoed the sentiments of many managers and owners in a June 1998 cover story, titled Would I Hire Me? "It's like being on an island," he said.
- Tony Manna, attorney, who discussed his skills at negotiating big deals. Honesty, he noted, leads to negotiation, and candor leads to decision. "I've always found people make really stupid deals when they assume the other side isn't smart."
- Ben Suarez, the wily direct-mail genius who made enemies of the U.S. Postal Service and most state attorneys-general on his way to building a $120 million-a-year company (as of 1994, when I wrote about him). "It's not how well you succeed," he says. "It's how well you fail. And it's not just failure, it's how well you bounce."
As I store my SBN library in my home office, I don't expect I'll ever forget some of the people in those pages. Even though I've never been a business owner, I've learned from you. I hope you have too.
Senior Editor Teresa Dixon Murray left SBN in September for a position at the business desk of The Plain Dealer.
Dominic J. Bagnoli Jr. of Emergency Medicine Physicians in Canton played the high-stakes Domain Name Game and won.
Youve never heard of the Domain Name Game? You cant find it in the TV listings. Its not at Caesars Palace. And Milton Bradley didnt unveil it with a new set of board games.
Youll find it on the Internet and its one of the most popular games nationwidefor name holders and seekers alike.
A domain name is your Internet identitywww.yourbusiness.com. For their time and effort, some people are making a fortune buying and selling domain names. But unless youre one of these brokers, youre in for disappointment and frustration, because its a game you dont want to play.
Bagnoli, COO of EMP became a reluctant contestant in 1997 when he pursued emp.com to reinforce his companys branding and marketing strategy. Retail cost for a domain name from Herndon, Va.-based InterNIC, which administers Web addresses (more than 2 million to since 1995) is $70 for two years, then $35 a year.
But Bagnoli encountered one problem: Someone already had the name.
We wanted to be very clear who we were. Were not anything but EMP, says Bagnoli. His company specializes in managing and staffing emergency departments with local physicians who are residency trained and board certified.
Working with his Web site developer, Data Direct Inc. in Canton, Bagnoli tried to see what it would cost to get the name. The owner of the domain name turned out to be a broker (apparently no longer in the business) who offered to sell it for about $800.
While Bagnoli considered paying, a different broker picked up the nameprecisely how or why isnt clear. The new owner wanted nearly $10,000.
Ann Schlosser, vice president of marketing for Data Direct, was busy exploring other options, such as available variations on the EMP name. Meanwhile, Bagnoli considered paying the asking price for his name.
He says he knew it was an obvious case of profiteering, but figured it would be better for himand not a competitorto use the name. Besides, the site was integral to his businessin addition to being a marketing tool, it handles certain business functions, such as allowing physicians to post schedule requests.
Were trying to build a regional reputationmaybe a national reputation eventually. We wanted something easy for people to find, he says.
In the end, Bagnoli got what he wanted for the affordable list price; InterNIC re-released the name because the owners either failed to pay for it or didnt use it online. Its a common occurrence, according to Nancy Huddleton, an InterNIC spokeswoman.
When you apply for a domain name, InterNIC sends out an invoice, due in 30 days. If you dont pay on time, InterNIC reissues the name.
While Huddleton didnt know the specifics of Bagnolis case, she acknowledged its common practice for brokers to take out dozens of names at a time, then try to resell them before the invoices come due.
Bagnoli got off easy.
Compaq Computer Corp. recently paid a reported $3.3 million for the altavista.com domain name, which leads people to its well-known AltaVista search engine. While Compaq had acquired the search engine in its purchase last year of Digital Equipment Corp., the domain name had been the property of an unrelated companyAltaVista Technology Inc.since before the search engine existed.
More recently, the aptly named domain broker All Dot Com (www.alldotcom.com) listed www.welcomeonline.com for sale. Asking price: $100,000.
It really depends how much you want it and how much its worth to your marketing effort, Schlosser says.
You can avoid the Domain Name Game by registering your preferred name as early as possible. Get a domain and sit on it until youre ready to do a site, she says.
If the first name you want is taken, you do have alternatives. For example, rather than use a corporate name or an acronym, companies increasingly are coming up with creative names that refer to their products or services. Thats why www.tires.com takes you to Discount Tire Direct, while www.dishes.com delivers you to Procter & Gambles Web site for Dawn dish soap.
How to reach: EMP (330) 833-9400; Data Direct: (330) 499-0692
Michael M. Murray is a freelance writer specializing in online issues.
Domain name help
You can pay an Internet service provider or Web site developer such as Data Direct to register your name or you can do it yourself by visiting InterNICs Web site at www.internic.net. If you want to know whether a specific name is taken, conduct a WHOIS search by typing the desired name into the space provided on InterNICs home page. Results are free and immediate.