Ray Marano

Tuesday, 31 August 2004 05:48

Be prepared

Innovative Designs Inc., an Etna-based apparel company, launched an IPO last fall, but CEO Joe Riccelli isn't sure he would do it again if he had it to do over. The process is distracting and time-consuming, he says, but it was the company's best option for securing the money it needs to ramp up its operations to get its wares into large retailers.

Most early stage companies don't launch IPOs to raise money. More commonly, entrepreneurs use their own money or funds from friends or family in the start-up phase of their venture. More than likely, however, the day will come when they have to approach a bank for a loan.

Unlike entrepreneurs, angel investors or shareholders, banks aren't investors. Rather, they're in the lending game to earn interest on the money they lend. To ensure that that happens, banks hedge their bets and reduce their risk by evaluating how likely a client is to make the business a success and make good on a loan.

One way of gauging that is to determine how much of their own assets business owners have devoted to the venture, says Wendy Anderson, vice president of business development at Citizens Bank.

"Banks will want to know what you have put at risk," says Anderson.

Lenders want to know how much of your savings you have put into your business and if you have borrowed against a retirement plan, an insurance policy or your residence. In short, they want to know if you have enough confidence in your venture to put your own assets at risk.

When you approach a bank for a loan, be prepared to provide information about your business. Your banker will want to know names and Social Security numbers of the owners, the legal structure of the business, the purpose of the loan, how much you are seeking to borrow and how much money the owners have put into the business. He or she will want to know the profile of your customers and the nature of your market. And the banker will want balance sheets and income statements for the previous three years or a three-year projection for a start-up.

And be ready to showcase your ability to run your business successfully.

Says Anderson: "Explain your background to demonstrate your expertise or that of other people in the company." HOW TO REACH: Citizens Bank, www.citizensbank.com

Tuesday, 31 August 2004 05:42

See you in September

September has always been a month that I favor. It has the best weather of the year, to my liking, at least.

When I was a youngster, it was usually pretty clear by September who was going to be in the World Series, and the new football season was being ushered in. The fall TV season meant the end of reruns and summer replacements and the rollout of shows for both new series and the popular ones that had survived.

And while I would never have admitted it then, I usually looked forward to the start of the school year. The auto manufacturers began to roll out their new models in September at a time when styling changed recognizably from year to year and rendered the prior versions passé.

I haven't been in school for many years, and harbor only a passing interest in professional sports. The car companies don't restyle their cars every year anymore. With hundreds of cable channels and a dizzying array of programming, most of which is pretty uninspired, I greet each new season with little anticipation.

In recent years, however, there has been a September event that I look forward to -- the St. Barnabas CEO Leadership Conference, this year scheduled for Sept. 24 at the Kean Theatre on the St. Barnabas campus. The conference invites the region's CEOs and their second-in-commands to witness business, government, academic and civic leaders discuss the region's economic development concerns and offer prescriptions for improvement. Once again, Smart Business has chosen to participate as a sponsor of this year's conference.

This year, the conference's theme is "Mad as Hell," a half-day program that promises to encourage a lively discussion centered around local government reform and restructuring proposals, and solutions to encourage economic growth in the region.

This year's keynote speaker is Dick Thornburgh, former governor of Pennsylvania and U.S. Attorney General in President George H.W. Bush's administration. Discussion panelists include Allegheny County Chief Executive Dan Onorato, Ted Arneault, CEO of Mountaineer Racetrack Gaming & Resort, and U.S. Rep. Melissa Hart.

If you are a CEO or a second-in-command at your company, you owe it to yourself to attend this year's CEO Leadership Conference. You can register by calling (724) 443-0700 ext. 258 by Sept. 17.

Maybe you'll see a few models that will inspire your imagination and won't go out of style by next year.

Tuesday, 20 July 2004 20:00

Power hunch

For Rick Zomnir, work hasn't been work at all.

"My philosophy is, if I've got to go to work, I want to have fun," says Zomnir.

Zomnir has followed that philosophy for most of his career, abandoning one profession to proceed on a markedly different, and for him, more interesting track.

And the fun isn't about to end. At 56, Zomnir is ready to take on his next challenge -- after he takes about six months, as he puts it, "to decompress."

Zomnir is stepping aside as president and CEO of 250-employee Strategic Energy, the energy consultancy and competitive retail energy supplier he co-founded in 1987. He is giving up the reins as part of an acquisition agreement with Great Plains Energy Inc., a 2,400-employee public company based in Kansas City, Mo., that racked up 2003 sales of $2.1 billion. Zomnir will remain a shareholder -- he retains one share of Strategic Energy stock -- and he sits on its four-member management committee and will have a hand in picking his successor.

After entering the law as his first career choice, Zomnir soon decided that it wasn't for him and that he didn't want to waste time and energy working in a field that didn't excite him.

"I realized early on that I didn't have a passion for the law, and that I never liked doing things that I really didn't enjoy and have a passion for," he says.

Zomnir found that business did spark his interest, particularly the energy business, and that led him down a path to reaping the rewards available to entrepreneurs in deregulated energy markets. For Zomnir and Strategic Energy, success has come out of recognizing opportunity in a changing market, a culture that demands and rewards performance and a passion for building a business.

"A lawyer can't help you"

Early in his law career, a client presented Zomnir with a case that he hoped the young lawyer could help him resolve. Zomnir reviewed it and concluded that it wasn't a problem he could remedy.

"I went back to the client with the senior partner and said, 'You don't need a lawyer, you need somebody that understands the energy business because a lawyer can't help you,'" says Zomnir.

The client encouraged him to investigate the energy business, and Zomnir, lacking interest in law practice and holding an undergraduate degree in economics, took the cue. He began to study the energy industry, and by 1987, he and his law partners at Babst Calland Clements & Zomnir had formed a consulting group to help large power users negotiate deals to save on their energy costs. The consulting arm was spun off, with Zomnir at its head, in 1991.

"I got more and more involved in the energy business, and realized that I didn't like the law at all," he says. "I liked the business side of the way the energy business worked."

In the mid-1980s, when the natural gas industry began to deregulate, Zomnir saw parallels between the gas industry and the electricity markets that led him to believe the electric power industry would ultimately undergo deregulation as well.

"I saw that gas had deregulated in 1985, and I had been part of that process as a consultant, and I saw that it made a lot of sense for the electric markets to deregulate. If you looked at the dynamics in gas, they could be applied to (electric) power," says Zomnir. "Even though the dynamics are different, the fundamentals are still the same."

And he believed that Strategic Energy was positioned and prepared particularly well to take advantage of a deregulated electricity market.

"There was a point in the mid-'90s when I really felt that if the electric market deregulated, that I and some other people here who were in the business at the time understood it better than anyone in the country, and if it deregulated, we had a vision of how we could help end users save money," Zomnir says.

When Congress passed legislation in 1992 that paved the way for electricity deregulation, Zomnir and his partners hatched a plan that they believed would put them in the game early. They concluded that if they could negotiate contracts on behalf of large customers - government entities, retailers, manufacturers, for example - they could aggregate the demand and purchase power in large quantities at low prices. The whole process would be managed through a real-time energy management center that would continuously monitor the power market to find the lowest price available to meet customer demand.

Zomnir and his partners borrowed the money with personal guarantees to build an energy management center in Two Gateway Center.

"We were borrowing $50,000 a week to build that energy management center when there was no market," Zomnir says.

While he says he was confident that he and his partners had an accurate view of the future of deregulated electric markets and how they would work, the move was nonetheless scary.

"There is that moment in time when you realize, you know, I'm about to step off the cliff here," he says.

And there was no shortage of naysayers giving the scheme little chance of succeeding.

"You run into a lot of people who say you are going to fail," says Zomnir.

The center went online in 1997, and by 1999, Strategic Energy had revenue of $63 million. Today, it has more than 50,000 commercial and industrial customers. In 2003, it posted $1.1 billion in sales and $78 million in net income. This year, Strategic Energy began negotiating contracts for clients in Maryland, the 10th state where it does business.

Zomnir expects an additional 16 states to deregulate their electric markets over the next five years, a change that will offer Strategic Energy additional opportunities for growth and an expectation by Zomnir that the company will double in size during that period.

Culture of performance

Zomnir's notion of the key to success -- working hard at something that you love -- has shaped the culture at Strategic Energy into one that values and rewards performance and weeds out those who don't meet the standards. The company has a stock option plan that offers incentives to those who perform well, and sets achievement goals that assure that laggards don't stay on for long.

While the complexities of dealing with changing markets and building a business in an essentially new industry poses its challenges, Zomnir says that human resources issues have been the toughest to deal with over Strategic Energy's history. Part of the problem, he concedes, is that it is hard to identify people who will display the same level of commitment to the job and the company that he himself maintains.

"We have a very aggressive performance review program, and if you're not doing well, you're put on a performance improvement plan, and if you flunk it, you're gone," Zomnir says.

Holding to those high standards has a cost - the company experiences employee turnover of between 10 percent and 20 percent a year.

But for those who perform, the rewards are based on merit and can be substantial. Zomnir, the father of four daughters, points out that women have done particularly well in the company, taking leadership roles. Women hold several key positions at Strategic Energy, including seats on the management committee. Additionally, Strategic Energy's general counsel, chief information officer and vice president of human resources are women.

"It's been fun to create an environment here where women are empowered," says Zomnir.

Not surprisingly, while he's not sure what's next in his professional life, it's pretty clear that whatever Zomnir decides to do, it will be for love, not for money.

Says Zomnir: "I want to find something I can be passionate about."

And, no doubt, have some fun with. How to reach: Strategic Energy, www.sel.com

Tuesday, 22 June 2004 12:59

Sign of strength

Want to get your business in shape? Think about selling it. Every day.

That's the advice of Tom Smith, a principal with Smith Evans Carrier, a business evaluation firm.

"A business is like an automobile," Smith says. "It can't run by itself unless it's going downhill."

Managers at publicly held companies have a clear notion at any given time of the value of their company simply by looking at their stock price. For private businesses, the value changes, but it's more difficult to quantify.

Too many owners of privately held companies don't have a clue what their business is worth or what the return on their investment is, says Smith, although they are investing in it every day with their effort and their assets.

"You need to know the market value of your business because you need to know the value of your investment," says Smith.

Clearing up legal matters, reviewing leases and contracts and maintaining hard assets are key to maximizing your business and keeping it in shape to sell, whether you're ready to do so or not, Smith says.

Too often, Smith says, business owners don't know if the return on their investment is commensurate with the level of risk they are assuming in their business. As with any investment, the higher the risk assumed by a business, the higher the rate of return it should command.

And while it is difficult to quantify the value of assets such as human resources and customer and supplier relationships, Smith says it pays to make sure that they are maintained, just as a piece of capital equipment would be.

Smith recommends that business owners determine the value of their business and its return on investment, then run it as if they are going to sell it.

Standard financial statements don't provide an accurate picture of the value of a business, he says. Instead, he recommends metrics that reveal:

* The true economic return of the business and the factors that affect it

* The risk-adjusted required rate of return on investment

* The market value of the business

* Whether the business is increasing or decreasing in value

Says Smith: "Running your business like you're going to sell it makes you focus on your strengths, your weaknesses, your assets and your risks."

How to reach: Smith Evans Carrier, www.smithevanscarrier.com

Tuesday, 22 June 2004 12:56

What are you worth?

It's easy to feel contempt for Dick Grasso, former CEO of the New York Stock Exchange.

Grasso's $187 million pay package at the exchange came under attack in the media and by New York Attorney General Eliot Spitzer in a suit against the CEO, the exchange and its board. The bottom line, according to many, is that Grasso made too much money.

It's more complicated than that, certainly. Among the allegations were that some of the details of Grasso's pay package were withheld from some stock exchange board members. If true, that would be the most serious violation, not the fact that Grasso earned enough to wear $2,000 cufflinks and Cartier watches.

Even without some of the alleged hidden features of his comp package, Grasso's pay would have been more than the total revenues of some pretty good Pittsburgh companies. The underlying issues, it seems, are how much pay is too much, and what are a person's skills worth?

The easy answer, of course, is that the marketplace decides. As a wage earner -- and in a broad sense, Grasso falls into that category -- you're worth what someone is willing to pay you. As an entrepreneur, in theory, anyway, you're worth whatever you can manage to produce from your investment, your sweat and your skill, with a little luck thrown in.

Compensation isn't always measured in dollars, certainly, and that brings to the fore what Spitzer's long-term plan for his own career might be. Some have questioned his motives in his aggressive prosecution of high-profile alleged corporate wrongdoers, suggesting that he has aspirations for higher office and is seeking only to burnish his reputation in preparation for a bid for a better position.

The legal system will sort out the inconsistencies between Grasso's version of events, the NYSE's side of the story and that of the aggrieved board members who say they didn't get all of the details. In the process, they'll likely decide whether Grasso really deserved that kind of pay package, and maybe boards of all kinds will be chastened to take a closer look at the finer details of their top executives' paychecks.

Should Spitzer opt to make a bid for higher office, the voters, who form another kind of marketplace, will decide whether they think he's worth the price and get a chance to find out for sure.

Monday, 24 May 2004 13:22

Anyone, anytime, anywhere

You have 200 employees dispersed over four time zones in nine locations. Training them is an ongoing need, either to upgrade their job skills or ensure regulatory compliance, but traditional methods -- bringing them all together in one location -- is costly and cumbersome, and not guaranteed to be effective.

Online training can offer a solution. Essentially training available on demand, it can offer instruction at times and locations convenient for the user. Sam Shaaban, CEO and co-founder of NuRelm E-Business Software, calls online training a combination of technology and service required to deliver effective training to the right people at the right time.

Shaaban concedes that the most effective training situation may be one-on-one, but the development of technology, improvements in curriculum and the availability of computers are making online training an attractive, cost-effective alternative to traditional methods. Online training can leverage existing technology within an organization; most companies have computers available with Internet access for some or virtually all of their employees. And for employees with computer phobia, modules can be included to help them overcome their fear of the technology.

Automation in an online program can take care of some of the grunt work involved in administering training, Shaaban says. Online learning systems employ a learning management system that can perform some tasks automatically, such as tracking learner performance or documenting course completion.

NuRelm offers an online training management tool it calls Osmosis. The training content is stored on a central server; users can access it anywhere from a PC and are quizzed to make sure they are taking the course. Osmosis is offered to clients as a software package or accessed through an application service provider.

Shaaban warns, however, that there is no one-size-fits-all solution for training, online or otherwise. Highly motivated learners for whom you have a minimal need to track their compliance and learning require one kind of program design, while learners who require motivation and detailed tracking to ensure they are taking the course and that learning takes place demand a different model.

Simple models, such as PowerPoint presentations online, can be inexpensive and easy to build, but the results are likely to be uneven, Shaaban says.

Likewise, Shaaban says, Web conferencing can be a cheap way to conduct training, but usually isn't very effective.

Says Shaaban: "I would think of it as sort of like a bad staff meeting." How to reach: NuRelm E-Business Software, www.nurelm.com

Sunday, 23 May 2004 20:00

Test of will

Chris Allison remembers clearly the calls from unnerved shareholders in the wake of the telecom industry meltdown.

"I got calls from people who wanted to know if their kids' college education was secure," says Allison, CEO of Tollgrade Communications.

Those were among the more restrained inquiries Allison took. Some, he says, were outright obscene.

Coming out of an era when manic growth was the mantra of a new economy, Allison was engineering his company to keep the bottom line from bottoming out. Shareholders - seeing valuations plummet as an overbuilt market began to shake out the weak and debt-laden performers, and scandals scarred the industry - got nervous as Tollgrade began its shrinking act.

Tollgrade founded by Allison's father, R. Craig Allison, in 1988, and taken public in 1995, manufactures hardware and software network assurance solutions for the telecommunications and cable broadband industries.

In a sense, Allison's response to the telecom industry's sag is hardly surprising. He prefers McDonald's coffee to the pricey brew served at more trendy shops and, unlike a lot of CEOs, doesn't hold a country club membership. No slave to fashion, the 43-year-old executive of the 300-employee company says he buys his clothes online from JCPenney and admits that he harbors a bit of mistrust for people he terms "flashy."

Read Allison's letters to shareholders in the company's annual reports, and you'll notice that it isn't full of the florid language employed to puff up accomplishments or the euphemisms so often used in such documents to describe or excuse poor performance.

Even Tollgrade's unpretentious Cheswick headquarters is well-removed from the trendy office parks that serve as home to some tech companies.

Allison's philosophy for survival in tough times and growth in good ones is fairly simple: "You've got to keep making money, you've got to keep making cash," he says.

That strategy, Allison says, has resulted in a company that can see light at the end of the tunnel, and not an oncoming train.

As Tollgrade's sales slid to $82 million in 2001 and to $58 million in 2002, Allison resisted trying to grow the top line. Instead, Tollgrade embarked on a strategy to preserve cash, continue to earn money and lay the groundwork for future growth by making strategic acquisitions that would complement its existing capabilities. In 2003, Tollgrade's revenue bounced back, with $65 million in sales. First-quarter 2004 sales were $17.6 million.

While Tollgrade's revenue has tailed off since 2000, when it posted $114 million in sales, the company has managed to maintain a strong cash position. That, as well as strategic acquisitions it has made since 2001, have caught the attention of at least one analyst.

"In the longer term, we continue to believe that TLGD's expanded solutions portfolio should meet the needs of (telephone companies) to reduce operating expense and improve service quality," writes Parker/Hunter analyst Tim Slevin in an April research comment.

Telecom tanks

The telecom industry made massive investments in infrastructure during the 1990s in anticipation of a boom in e-commerce and communications on the Internet.

"The expectation was that there was going to be all of these dot-coms that were going to need all of this bandwidth, so they're going to need a lot of T-1 lines, so they built up all the optical backbone to serve all of these companies," Allison says.

In 2000, carriers spent $51.9 billion on telecommunications equipment, according to a study by the Telecommunications Industry Association (TIA). But as Internet ventures continued to topple, it became obvious that the telecom system was overbuilt. Venture capitalists poured $18 billion into telecom investments in 2000, according to PricewaterhouseCoopers' MoneyTree Survey; by 2003, venture investment in telecom ventures had dropped to $2 billion. At one point, 600,000 manufacturing jobs had been lost in the industry, and corporate debt reached $1 trillion, according to the TIA.

Clearly, the industry was going into a steep spiral as telecom companies found themselves heavily in debt and without the customers they had expected to come during the overheated market of the Internet gold rush. Throw in scandals at giants like those at WorldCom and Qwest, and confidence in the industry reached an all-time low.

As a provider to telecom companies, Tollgrade was being drawn into the undertow.

Detour from Disney World

Tollgrade adopted an aggressive cost-cutting strategy to ensure the company's profitability, if not its short-term growth. In what Allison calls a "step back to step forward" approach, Tollgrade acknowledged that while its revenue might shrink or stagnate, maintaining a strong cash position was critical to survival and remaining competitive.

Tollgrade cut 62 jobs in 2001, and another 47 the following year. The annual company sales meeting at Disney World was eliminated, replaced by an event at company headquarters. Salaries were frozen, bonuses eliminated for two years and Allison took a 30 percent cut in pay, lopping $100,000 off his annual salary. Employees held onto a generous health plan but were required to share in its costs, car leases were ended and all travel had to be approved by the CFO.

Some long-term research and development was cut short. Conference participation was discontinued, trade show activity was pared back and inventories were reduced.


While the telecom crash put plenty of companies out of business and dealt serious blows to others, it provided opportunities as well. Tollgrade decided to seek out acquisitions not simply to buy revenue, but to gain market share and acquire technology and technologists.

In the average month, a telephone company finds trouble reported on 3 percent of its lines, with the problem often as simple as a phone left off the hook. Dispatching a service technician is an expensive proposition, so a testing solution like the one that Tollgrade offers can keep costs down for telephone companies.

"That's getting a lot of visibility right now," Allison says. "They're making sure their lines are getting tested. Because of that 3 percent phenomenon, they're looking at every way they can to save money, so it's really playing in to us."

While the telecom industry had shrunk, demand for broadband began to increase and migrate into the consumer arena. Overall, broadband grew by 1.31 percent in December 2003, with nearly 43 percent of Internet-connected U.S. households enjoying a high-speed connection, according to www.websiteoptimization.com.

And business demands for faster data transfer could be the strongest driver for broadband services, a study by Deloitte contends: "While overall broadband adoption will continue to grow in popularity within the United States, small businesses will be motivated to migrate toward broadband as the demand for faster e-mail and Internet access increases, while pricing falls and connection speeds rise. New broadband appliances such as game consoles, video phones, home security systems, set top boxes, VoIP phones, digital hi-fi and home media systems will also drive robust broadband adoption this year, expanding broadband's functionality beyond PC-oriented technology."

Allison says that most of Tollgrade's competitors are small divisions of large conglomerates and not the core business of an enterprise. When the telecom industry crashed, companies were looking to unload noncore or poorly performing units. Valuations fell and bargains emerged, some of them scooped up by the survivors.

To bolster its position in line testing, Tollgrade spent $60 million to acquire the software assets of the LoopCare test system, used universally by the Regional Bell Operating Companies, from Lucent Technologies, a company created as a result of the breakup of AT&T. The LoopCare product complements Tollgrade's line testing equipment. Together, the two technologies create an integrated testing solution for traditional wire-based telephone networks, as well as for DSL lines in those companies' networks. The buy added $15 million in annual revenue, but just as important, Tollgrade acquired intellectual capital that will help it to develop additional testing technologies.

"What we bought was a Bell Labs research team," says Allison.

The acquisition was critical, says Allison, from a competitive standpoint.

"If one of our competitors would have got it, they could have frozen us out," Allison says.

Last year, Tollgrade bought the status and performance monitoring product line used to monitor cable networks from Acterna LLC, a Germantown, Md., firm, for $14 million, paying for its purchase out of 2003 cash flow.

While Acterna struggled to make the product successful, Tollgrade made it profitable in 30 days, Allison says.

With the acquisition, Tollgrade secured a complementary business that allows it to offer testing products and services to the cable, telephone and broadband platforms.

"We can shrink wrap these all these products and go to one of these competitive carriers and say, for $500,000, we can put a complete test system in to test your whole network," Allison says.

Going forward

While Allison concedes that the dynamics of the telecom industry could bring abrupt changes and shifts in the future, he's confident that Tollgrade is on the right track. Investments in research and development have been increased, and the company's cash position has remained strong. The growth of DSL lines bodes well for Tollgrade's new testing systems, and its cable testing products are doing well.

Now, Allison says, Tollgrade has to persuade its existing and prospective clients that it can deliver a wider range of testing services than it has offered in the past.

Says Allison: "The big challenge is convincing our customers that we're a broadband company." How to reach: Tollgrade Communications Inc., www.tollgrade.com; Telecommunications Industry Association, www.tiaonline.org; Parker/Hunter Inc., www.parkerhunter.com; Deloitte, www.deloitte.com

Thursday, 29 April 2004 06:44

Collaring insurance costs

In response to a very hard insurance market over the past two years, business owners have been taking on more risk and opting for higher deductibles on their insurance coverage to keep their premium costs in line. That's something they should be doing in tough times or otherwise.

Insurance premiums have spiraled upward in the past two years in response to losses from natural disasters, the Sept. 11 terrorist attacks and the exit of several major carriers from the insurance industry.

The tendency to raise deductibles and take on more risk usually occurs when there is a spike in premium costs, but assuming more of the upfront burden for cost control is always a good practice.

"We've been recommending to our clients that whether it's soft or hard, they should always take more control of their risk and be less reliant on the insurance market," says Paul Hoyt, senior vice president and casualty department manager of Marsh Inc. in Pittsburgh.

Small businesses, Hoyt says, have been more adversely affected than large companies by the current hard insurance market.

"In some ways, I would say, the small business owner has been impacted more because ... an increase in their premium or their losses or their exposure to losses has much more of an impact than it would be to a large Fortune 500 company," Hoyt says.

Indeed, a Marsh study that gathered data from 1,433 of its clients and takes an exhaustive look at insurance costs found that the costs for small employers -- those with $200 million or less in sales -- are nearly 16 times greater than they are for the largest companies.

Hoyt points out, however, that a small company that effectively manages its exposure can have a lower cost of risk than a larger company with poor risk management.

The biggest bang for the buck in terms of savings is likely to come for most companies in the workers' compensation area. For every $1,000 of revenue, U.S. businesses spend an average of $2.32 on insurance and other measures to manage their workers' compensation, auto and general liability risks, according to the Marsh study. Workers' compensation alone accounts for $1.46 of those expenditures.

Hoyt says workers' compensation historically has accounted for the lion's share of casualty cost risks. It continues to be the focus of coordinated approaches by insurers and employers that examine and seek to address key cost drivers, from safety and wellness programs that aim to prevent injuries and illnesses to more effective ways to track and manage claims and to fund exposure.

But Hoyt says there is no one-size-fits-all solution to reining in costs.

"While all of these approaches can be productive in terms of managing costs, organizations need to pinpoint what's driving their costs and invest in approaches that yield the best results," Hoyt says.

The Insurance Information Institute recommends the following strategies to control business insurance costs.

* Shop around. Prices vary from company to company. Get the names of several brokers or companies and compare rates and services.

* Choose a higher deductible. The higher the deductible, the lower the premium.

* Buy a package policy. A policy that covers multiple liabilities may be cheaper than individual policies.

* Work closely with your agent or broker. Keep them informed of changes in your business that may affect your coverage or liability, including major purchases, expansions, changes in hiring or the nature of your operation.

* Ask about ways to prevent loss. You may be able to reduce your premium for certain coverages by following your insurer's recommendations. How to reach: Marsh Inc., www.marsh.com or (412) 552-5300; Insurance Information Institute, www.iii.org

Thursday, 11 March 2004 12:09

Patently defensive

If you've ever seen a wind gust tear a storm or screen door off its jamb, you know what kind of damage it can cause: Damaged doors, splintered jambs and a tough and perhaps costly repairs.

Carmen Grande had seen plenty of the above, including at his own home. A veteran building contractor and a machinist by trade, Grande set about coming up with a solution to both fix a door jamb when a door had been torn from its moorings, as well as a way to prevent it from breaking loose in the first place.

He settled on a steel plate attached by eight screws that reinforces the area where it attaches to the door jamb to prevent the wood from splitting or cracking should the door be caught by a wind gust.

Grande, who lives in Rochester, N.Y., talked up the device to his sister, Caroline LaRocco, executive vice president of American Made LLC. LaRocco decided to take a closer look at what her brother was so enthused over.

"Finally, I sat him down and said, 'Look, give me all the details on this thing," says LaRocco.

LaRocco thought the device had potential in the marketplace and decided to launch a new venture, Structural Protective Products Inc., to develop, manufacture and distribute the Ultra Jamb Reinforcer. By last fall, she had lined up a manufacturer and began to market the product through its own Web site, selling it for $6.99 plus shipping.

An article in a home repair magazine triggered 50 calls a day for the product soon after it appeared. The company sold out an initial production run of 5,000, and most of a second order of 7,500. By March 1, LaRocco, anticipating sales to hardware and other retailers, had placed an order for an additional 10,000.

Early purchasers were mostly homeowners, LaRocco says, but more recent orders have come from commercial buyers, including builders that want to use it in new homes and property managers that want to install it in rental properties.

Through her experience at American Made, LaRocco had learned the value of securing patent protection for inventions. She did some research and couldn't turn up any products on the market like the Ultra Jam Reinforcer.

Despite its simplicity, LaRocco investigated securing a patent for the product. Rick Byrne, patent attorney at The Webb Law Firm, urged LaRocco to seek patent protection for the product because, he says, it has "some unique structure and functionality."

LaRocco is making the right moves to protect the product, Byrne says. If she wants to secure a patent for the Ultra Jam Reinforcer, says Byrne, she must file before the product has been on the market for a year. Otherwise, the invention might be deemed not patentable.

A patent application won't prevent others from copying an invention during the application process, but it will protect the applicant's rights should the patent be granted.

The process isn't inexpensive, though, so inventors should seek a patent only if they have a solid business reason to do so, such as a real possibility of manufacturing and marketing the product or the likelihood of being able to license it to another party.

Encouraged by the initial success of the Ultra Jam Reinforcer, LaRocco says the company has three additional items in the pipeline for potential development, one a product for women and two others suggested by her brother, Carmen.

Says LaRocco: "I said, 'Hey Carmen. Do you have any more ideas?'" How to reach: Ultra Jamb Protective Products Inc., www.ultrajamb.com; The Webb Law Firm, www.webblaw.com

Thursday, 26 February 2004 08:41

What's your 68?

Jim Cederna loves to tell stories.

One that the former president and CEO of Calgon Carbon Corp. enjoys most is about former Pittsburgh Penguins star Jaromir Jagr when he was a member of the 1998 Czech Republic's Olympic hockey team. While nearly everyone expected the Canadians, Russians or even the U.S. hockey team to capture the gold medal, the Czech team took the top prize.

In 1968, the Soviet Union crushed a move toward democratic reforms in Czechoslovakia, and Jagr wore 68 as a symbol of the motivation behind his driving ambition to beat the Russian team.

One of the first things Cederna does in his work at Cederna International is to ask his clients and their work teams what their 68 is.

A tool to help leaders and teams find their 68 is one of several in the kit that Cederna's carrying around these days as a team-building coach under the banner of Cederna International. All the tools have been refined and polished through his experience as a turnaround specialist with several public companies, including Calgon Carbon from 1999 to 2003.

The keystone of Cederna's approach involves measuring trust and teamwork, then taking steps to improve them. He's developed a 17-point survey that he says measures trust and teamwork and can demonstrate how they vary over time. Cederna contends that trust and teamwork are measurable, and that for every 10 percent increase in the trust and teamwork index, it's reasonable to expect a 20 percent increase in financial performance.

Cederna tells another story about a family-owned business that brought in a high-performance management team to run the company. Despite their stellar credentials, the company's performance began to sag. Cederna found that there was nothing missing in the team's business skills. Instead, the problem was a lack of trust and teamwork. After addressing those issues, the company's performance rebounded.

Cederna suggests that employers use an exercise that accounts for where each dollar of income goes - and not to be surprised if even the CFO can't come up with the answer right away. He says that seeing where the money goes is eye-opening for most employees; few realize how little profit the company earns out of each dollar, or how their individual actions impact its finances.

Most critical, says Cederna, is that individuals, whether they are team members or leaders, identify the factor that motivates them to perform at their highest level, or their 68.

"Everyone's got one," says Cederna. "The question is, do you know what it is?" How to reach: Cederna International, www.cedernainternational.com