Ray Marano

Monday, 22 July 2002 10:05

Start-up: The great Mat Tape Lesson

When Jim Shipman ponders a major move for Score-Clocks Inc., the company he founded in 1991, he never fails to call to mind 'The Mat Tape Lesson.'

It isn't found in any textbook, and you won't likely hear any consultant expound upon its value. Yet most companies, at one time or another, have had their own Mat Tape Lesson, a definitive experience that leaves a lasting mark on a business.

For Score-Clocks Inc., The Mat Tape Lesson went something like this: The company-after a major stumble with the marketing of its principal product, an electronic scorekeeping system designed for tournament wrestling-finally found its niche. As a way to complement rentals of its scoring system, the company's principals figured they could sell, of all things, mat tape, a specialized product used to hold wrestling mats together. Coaches and program directors, they speculated, would naturally find it convenient to purchase the tape as needed when they rented a scoring system for a large tournament. Pretty obvious, right?

Obviously wrong, it turns out. After Score-Clocks had invested tens of thousands of dollars in the stuff-quite specialized and with no other apparent application that could be exploited to allow it to turn a profit-Shipman realized he had pinned down the company with a big blunder. As he discovered too late, the tape, rarely purchased alone, is usually supplied by a vendor who bids on a complete package of supplies that a wrestling program would use during an entire season.

"It sounded good," says Shipman, vice president, "but we didn't do our homework."

Score-Clocks did survive, however. With The Mat Tape Lesson now behind it, the company is likely better off for it. In a sense, however, this start-up has been characterized all along by major shifts in the way it views itself, some precipitated by necessity, others by opportunity.

Shipman started the company back in 1991-after hooking up with Art Spagnol, who was in the building-products business until 1980 and later involved in real estate-at a chance meeting. The timing was right, it turned out, because the meeting came just before Elpaz Instruments, the company Shipman was working for at the time, planned to close its doors.

A high-school wrestler and later a wrestling coach in Plum Borough schools, Shipman was aware that some of the biggest fights at wrestling tournaments occur off the mat, where officials and coaches frequently dispute over timekeeping or point scoring. He happened to have some of his own ideas for an electronic scorekeeping device that would be more accurate, easy to use by volunteer scorers and visible to all in attendance at a wrestling event. He had, in fact, tinkered and developed some scorekeeping devices he uses at some of the events where he served as a coach. He shared those ideas with Spagnol.

Spagnol was intrigued by the concept and told Shipman that he would give the idea a run if the young electrical engineer could come up with a prototype in 90 days. Spagnol scooped up the assets of Shipman's employer, and Shipman beat the deadline. So he and Spagnol went ahead with plans to produce the scorekeepers for sale to schools and youth-wrestling programs.

"We had a radically new concept," says Shipman. "The system was completely different from anything that had ever been done."

The scorekeeping system was vastly superior to the flip charts and manual timers commonly used. But the notion of selling the devices, each priced between $6,000 and $15,000, proved-at that time, at least-to be a dud. Cost was one factor, Shipman says, but the novelty of the equipment and the relatively infrequent use that school programs would get out of them (perhaps one or a few major events a year) made potential users balk at spending the money. In all, two sales were made in 1993, one to the U.S. Navy, a second to Indonesia.

"We said, 'OK, we're in trouble here,'" says Shipman. "I said 'maybe we're in the wrong business.'"

Not the wrong business, but a misguided approach to it, they concluded. By early 1994, Shipman had decided that renting out the score clocks might be a more viable option. So he set out on a nine-month course to develop a rental program, the proper packaging for shipment, and a simple, easy-to-use unit that could be quickly set up by the user and repacked for return to Score-Clocks.

Shipman redesigned the product into a single case for the displays, replacing an earlier design that required several modules to be stacked, with an interface connecting each to the other. He also developed a new shipping carton employing reusable components to reduce costs.

But marketing the service still proved problematic, and Score-Clocks spent a lot of money on promotions that fizzled. "We didn't know squat about advertising," says Shipman.

As it turns out, word-of-mouth became the company's best promotional tool, and coaches and wrestling-event sponsors soon began to pass the word around that Score-Clocks were the way to go. Now, Score-Clocks has a customer base of approximately 800. Last year, the start-up rented equipment to 24 state-tournament sponsors. Its current inventory of rental units is 310, with an additional 100 to be added in anticipation of the upcoming season.

Ironically, the rental business has spawned an interest on the part of some programs to purchase the score-keepers, sparking Shipman to resurrect the notion of selling the units. That has encouraged him to develop a smaller, less expensive table-top model. Called the Scoremaster, it includes spaces on its console that can be sold to advertisers to offset or compensate fully for the cost of the unit.

But despite renewed interest in the purchase of the products, Shipman says he doesn't believe that sales will become the major portion of Score-Clock's business.

"My opinion is the sales will be a supplement to the rentals," says Shipman. In fact, he harbors some concern that sales could cannibalize the rental market.

While Score-Clock has apparently sorted out most of its marketing issues, Shipman has moved to put into place the systems that will allow the company to grow. He has worked with several software vendors, taking on the task himself of integrating several software packages to handle administrative functions, rentals and contact management. After two years of operating a manual system to coordinate rentals, Shipman believes that the company has to phase in a computerized system to handle them more efficiently.

"We already have a good manual system to rely on," says Shipman, who adds that the new one will be implemented over upcoming seasons.


Score-Clocks Inc. at a glance

Operations
All company operations, directed by Shipman on a day-to-day basis, are conducted at Score-Clock's Murrysville complex, which is located in a building owned by Spagnol. Additional space at the site will allow for expansion, if required.

Components for Score-Clocks products are produced and assembled by several subcontractors and then shipped to Score-Clock's Murrysville headquarters. Rental units are packed in specially designed cartons with instructions for use and a label for return by UPS. All rental units are checked for proper operation before they are shipped to the next user.

Demand has increased so strongly that Shipman plans to assemble another 100 units for the upcoming season. He plans to hire four to six new employees to meet the requirements of the upcoming season.


Sales and marketing strategy
Rental business has been brisk, doubling every year since 1995, so the company has done no advertising for two years and has relied on word-of-mouth referrals for new business. As Spagnol points out, it's difficult to reach the thousands of events held each year by using advertising. While they are reluctant to provide details, he and Shipman are exploring other means of distributing the product.

Score-Clocks plans to develop additional scorekeeping products that can be used in other tournament sports. The first will be for use by outdoor volleyball tournament sponsors, but Shipman says he has about a dozen additional products planned for development, including a $1,000 model that wrestling coaches can use to program an entire season's practice schedule, a project that University of Pittsburgh's head wrestling coach Rande Stottlemyer has been urging.

While products are sold through a few independent dealers, Shipman is considering distribution of units for sale through two large networks of athletic-products distributors, Team Athletic Goods and Athletic Dealers of America.


Financing
Spagnol has invested $1.6 million in the venture to date, and he and Shipman figure additional capital will be necessary-the exact amount needed dependent on which direction the company goes. In any case, Spagnol indicates that bank financing, not additional investors, will provide the needed capital.


Sales
Although income has been modest, Shipman points out that the company is carrying no long-term debt and has sustained steady growth with limited staffing or promotion.

Score-Clock's 1996 sales were $85,000, nearly doubled to $160,000 in 1997, and should pass the $300,000 mark in 1998. Shipman expects at least $500,000 in revenue in 1999, but says sales could top $1 million with line extensions and more aggressive marketing of the rental service and sales of products.


Market outlook
Al Bevilacqua, director of championships for the National High School Coaches Association, a group that sponsors about 25 tournaments a year nationwide, including the National High School Championships held in Pittsburgh each spring, describes Score-Clocks as nothing less than a revolutionary development for amateur wrestling. Development of a softer mat in the early 1950s by another Pennsylvania company, says Bevilacqua, allowed the sport to gain significantly in popularity.

"I think (Score-Clocks) has done the same for wrestling," he says. "Now we're able to market our sport to the mass audience."

It can boost the sport's visibility, he adds, by giving audiences more information and taking some of the mystery out of what is going on during a match.

Shipman believes the company has tapped only a thin slice of a huge market that includes schools, universities and community-based youth-wrestling programs. In addition to state tournaments and collegiate wrestling, a myriad of youth programs are conducted annually by various sponsors.

Shipman believes the referral aspect of the business will continue to provide adequate rentals and sales in the short term, especially as Score-Clocks continues to land prestigious events like the Division I Wrestling Championships that were held this spring at Cleveland State University, and foster good relationships with groups like USA Wrestling, a major event sponsor.


Biggest challenge
Although Score-Clocks has had to make major marketing shifts, Shipman says he thinks those fundamental changes in the way the company does business are behind it. Going forward, he says, the practical issues of administering a business that poses some demanding logistics issues will be its biggest challenge.

Shipman says the new information-management system developed over the past year will allow Score-Clocks to accommodate new products and services as they're created, as well as handle the rapid growth of its rental business.

Equally as important, he realizes, is putting into place a strong management team that will bring strategic and tactical strength to the business to allow it to reach its potential. To this point, Shipman says, he and Spagnol have been able to run the business themselves, but those times will soon come to an end.

As the business expands, Shipman says, the stakes become greater and the need increases to bring in more specialized managers to handle the business.

The Mat Tape Lesson, it seems, has sunk in deeply. Says Shipman:."We put in too much time and too much money now to screw it up."

Monday, 22 July 2002 10:05

In Brief

Indeed, it's time again to nominate your outstanding peers for the U.S. Small Business Administration's 1999 Small Business Awards.

Nominations are being sought for: Small Business Person of the Year; Small Business Exporter; Young Entrepreneur; Entrepreneurial Success Award; Media Advocate; Financial Services Advocate; Minority Advocate; Women in Business Advocate; Accountant Advocate; and Veterans Advocate.

The SBA has added five awards: The Phoenix Award for Disaster Recovery; The Phoenix Award for Outstanding Contributions to Disaster Recovery; Welfare to Work Entrepreneur of the Year; Welfare to Work Small-Business Owner of the Year; and Welfare to Work SBA Associate of the Year.

Sponsors can nominate people in very category. To get your one-page application and list of eligibility criteria, call the SBA at (412) 395-6560, or write to: SBA, Small Business Awards Coordinator, 1128 Federal Building, 1000 Liberty Ave., Pittsburgh, PA 15222-4004.

There's only one catch: You have to have your forms in by Oct. 2, 1998.


Can you say "guanxi?"

With the help of a university and a major corporate partner, Development Dimensions International is reaching halfway around the world to foster business relations with China.

DDI, no stranger to the Pacific Rim, has offices in six countries in the region and works with more than 200 clients in the greater China region, many of them U.S.-based multinationals. Through a collaborative effort with a university and a multinational corporation, DDI is raising its visibility in a region whose economy is expected to grow exponentially in the next century and will no doubt find itself in need of services.

A team comprising West Virginia University faculty and executives of TRW Corp. traveled to China this spring to provide instruction in employee selection, retention and training techniques to some 150 officers of state-owned companies and high-level government officials unable to travel to the United States. DDI and other U.S.-based corporations underwrite the program.

DDI has given a grant of $125,000 to the university to help fund the workshops and sponsor one Chinese student a year for three years enrolled in the university's Center for Chinese Business curriculum.

"The goal of the program is to build business relationships-the Chinese call it 'guanxi'-through education, research and trade," says William Riley, director of the university's Center for Chinese Business.


When small business is big business...

Who cares about small business? Big business, that's who.

Dell Computer, the $13-billion computer manufacturer, has launched a full-scale marketing plan that targets small-business customers, which it defines as companies with fewer than 400 employees.

Dell is courting small businesses for good reason: Its sales to small businesses increased to more than $1 billion in the fiscal year ending Jan. 31, 1998-a 65 percent increase over the previous year. Since March, Dell has offered a service that provides personalized Web sites for more than 1,200 of its small-business customers. For high-volume small-business customers, the company is now offering a number of new Internet-based services.

The company, for instance, is offering a "virtual account executive," which brings on-site sales presentations to small-business customers via the Internet. Customers are briefed on Dell's latest products and are shown demonstrations to highlight features.

A monthly seminar program, in cooperation with Microsoft Corp. and Iomega Corp., which offers computer and Internet how-tos, is offered online. About 2,000 businesses attended in June, the company says.

Not far from its own small-business roots, Michael Dell started the company as PCs Limited, a one-person firm in 1984. Four years later, it went public as Dell Computer at $8.50 a share.

Dell's Web site is www.dell.com.


Here's one fall-back career that wasn't needed

As Bill Tillotson, founder and chairman of Hefren-Tillotson Inc., threw out the first pitch at a recent Pirates game in celebration of his company's 50th anniversary, he couldn't help but see the irony in that pitch.

After all, as any good entrepreneur will do in the early days, Tillotson held a side job to supplement his income. However, unlike those of most fledgling business owners, his happened to be semipro baseball.

As the story goes, Tillotson aspired briefly to become a pro ballplayer but ended his career as a fill-in catcher after missing the birth of his first child because of a double-header. Instead, he went on to join his father-in-law's stock brokerage firm, Arthur R. Hefren & Co. In 1962, Tillotson bought out his father-in-law's share and renamed the company Hefren-Tillotson Inc.


The message here: Invest early and often

Any smart business owner will tell you that, to grow effectively, you need to invest in new product development and training. Now, a study by accounting firm Alpern, Rosenthal & Co. and the University of Pittsburgh's Katz School of Business has confirmed it.

In the study, 236 senior executives of manufacturing companies in Western Pennsylvania offered the preliminary insights into the practices that make them most successful. To grow, they say, companies need to:

  • Design new products.

  • Increase expenditures for research and development.

  • Provide ongoing training to employees.

  • Use computers more.

  • Have quality and benchmark programs.

  • Create advisory boards.

  • Spend more money on new equipment.

The second phase of the study is expected early in 1999.

Monday, 22 July 2002 10:03

A survivor's tale

In books and movies, catastrophes don't take their time buffeting a protagonist. The hero usually gets hit squarely with the blow that defines the struggle and profoundly complicates his existence.

But for the business owner, failure is often less circumscribed. Its fury is felt in small increments over years; markets dry up, technology falls behind, a shortfall in management skill lets profits trickle away a few dollars at a time, a little here, a little there until it becomes a flood. Like a frog in a pot of water brought to a boil, the business tries vainly to adjust to its deadly environment, only to succumb to it.

For Larry Strobel's company, Strobel Machine Inc., the decline came slowly-but nonetheless surely. By last year, Strobel found himself with $600 in the bank, facing the first $2,800 installment payment on $200,000 worth of machinery he had purchased the year before. The purchase of the equipment, complete with modern computer-numeric-control technology, was to upgrade the Worthington machine shop his father, George, had started in 1946 in a tiny building in this tranquil Armstrong County hamlet.

The new machines brought to three the number of CNC units at Strobel, but they as yet hadn't delivered the additional revenue the company's owner had hoped would be generated to pay for them.

"I didn't know how I was going to make those $2,800-a-month payments," says Strobel, courteous and soft-spoken, but direct and candid about his business and the troubles it has endured.

With the help of a consultant who took a realistic and visionary look at the company, Larry Strobel has been able to make what might appear to be a dramatic turnaround, going in less than a year from the brink of failure to profitability and a future that seems filled with promise instead of pathos.

In fact, Strobel Machine's reversal of fortune has been impressive enough to earn it the designation as an Advanced Technology Company by the state, qualifying it for a $300,000 low-interest equipment loan from the Manufacturing Equipment Loan Fund. The company has also won the 1998 Staples/Hammermill Small Business of the Year Award, a national competition sponsored by five large companies to recognize the efforts of small businesses.

But more importantly for the company's long-term prospects, profitability has returned, and although the focus has been to control costs rather than immediately increasing revenue, net sales grew by almost 20 percent in 1997, passing the $1 million mark. Strobel Machine is expecting to reach the $5 million mark by next year, placing it in the most profitable income bracket for companies in its business. It plans to accomplish that feat through an aggressive marketing plan, a new business unit and a networking concept that will link it to several similar companies.


Rise and fall

The bottom hadn't fallen out suddenly for Strobel Machine. Larry Strobel openly concedes that his company languished for a number of years, with market changes playing a large part in the company's decline. Still, he says he accepts much of the responsibility for the problems that led to last year's troubles.

Trained as a mechanical engineer at Penn State, Strobel started working in the shop when he was 12. He came of age during a time when simply good engineering and steady customers were enough to make a shop a success. By his own admission, however, only about a third of the knowledge necessary to make his business successful lies in technical skill.

The rest, he admits, resides in sound management practices, some of which he neglected to develop and employ.

George Seeley, a senior operations consultant for Southwestern Pennsylvania Industrial Resource Center, says it's not uncommon for such businesses to run into problems because the owners, while they may have extensive technical knowledge, fall short when it comes to general management expertise.

"Managing a business involves a bunch of skills," says Seeley, "and good managers need all of those skills."


Market changes

Strobel Machine started out as a repair business for farming equipment when it was founded in 1946 by George Strobel. He found early success in providing replacement parts for the machinery that crushed and pulled coal out of Western Pennsylvania's mines. By the 1960s, when Larry entered the business after completing his degree, more than half of the products made in the shop were destined for the coal-mining industry.

The replacement-parts business proved lucrative for Strobel Machine. The mining-machinery manufacturers sold equipment to the industry at a slim profit but reaped revenue on replacement bits, which wore out and had to be replaced periodically. Strobel Machine was able to capture a chunk of the market by selling parts for less than the mining-equipment manufacturers could sell them, yet still earning a handsome profit. Until the early 1980s, it was easy to raise prices without raising eyebrows, Larry Strobel says.

But the boom was not destined to last. The coal industry found less-expensive methods to mine coal, thus depressing prices and, in the process, putting a slew of mining companies out of business.

A ton of coal that sold for $50 in 1974, for instance, now hits the market at $24 a ton. Environmental regulations, meanwhile, made coal a less attractive fuel to burn; the domestic steel industry began its sharp decline in the late 1970s and early 1980s; and other manufacturers began making replacement parts, squeezing prices and profits.

Strobel Machine was not isolated from the larger business environment. Customers became more cost-conscious and kept prices down, and the downturn in the business cycle in the early 1990s coincided with weak years for the company. Moreover, as with most businesses, costs for health care rose substantially for Strobel Machine.


A pattern of struggle

Last year's crisis wasn't the first in recent years. Sales were about $1 million in 1990, but by 1993 had sagged to $400,000, and Strobel says he took just $1,000 from the company to pay taxes but drew no salary that year. The year before, he notes, business was so bad that he had to lay off his son, Brian, who later joined the Navy, and his shop foreman.

Strobel's forecast for his own company was so dim that he advised his son not to plan on a future with Strobel Machine.

And crises weren't the only factors to degrade the health of the company. Efforts to develop products outside the mining industry flopped. One product was an extendible arm that could be tipped with a hypodermic needle, which game officials, researchers or veterinarians could use to anesthetize animals in the wild for treatment, tagging or relocation. It was a system, Strobel says, that is more accurate than other methods currently used.

Another was a cutter head for drilling machines used in the construction industry. The company invested about $25,000 in each of the failed ventures, but in the end, it couldn't develop a market for either.


A call for help

Larry Strobel became acquainted with Robert Chastain, a lawyer and consultant who had specialized in turnarounds of family-owned small businesses, when Chastain was trying to solve a hazardous-waste problem for a company in New Castle. Chastain's client needed a way to reduce the volume of waste produced by empty paint cans, since disposal costs are calculated by volume, not by weight. An associate posited that what Chastain needed was a device which would crush the cans so that the resulting mass could be stored in drums for disposal, and he suggested Strobel Machine might be able to come up with a solution.

Chastain met with Strobel, and it turned out that the machine-shop owner did have a device that he thought might be able to solve Chastain's problem. Chastain offered to buy it, but Strobel suggested that Chastain use it, stipulating that he had to pay for it only if he decided to keep it.

As it turned out, Chastain didn't use the machine, but his association with Strobe l continued, and the two stayed in touch.

Beginning in the mid-1980s, Strobel had tried a number of consultants through both private contractors and public agencies, but problems at the company remained. So when Strobel faced financial difficulty last year, he invited Chastain to lunch, laid out his situation, and asked Chastain if he thought he could help the ailing company.


Controlling the cost side

Chastain agreed that he would look at Strobel Machine, and he spent two days poring over the financials from the previous five years, interviewing employees and perusing a contract for a piece of expensive machinery that hadn't done the job its manufacturer had promised it could. He reviewed the shop's machinery and work flow.

Sales, although they had fallen off, were not the problem, Chastain concluded. In fact, he says, drumming up new business for the ailing company would only have made matters worse.

"The underlying equipment problems would not have allowed me to go out and get a lot of new business," Chastain says. "We would have bombarded them with new customers and then lost them."

So instead of bolstering income, Chastain decided that Strobel Machine first needed to get hold of its finances.

"One of the things that was obvious to me was that they weren't watching their dollars," says Chastain.

The shop was purchasing materials months before a job was scheduled to run, for instance, then running into a cash crunch when the bill came due for the materials but the order hadn't been completed and was still weeks or months away from collection.

Chastain negotiated a deal to return the $125,000 machine that didn't perform as advertised, agreeing to pay a portion of the contract that represented the actual value the company had derived from it. To accomplish it, Chastain engaged the leasing company and the dealer who had sold the machine to Strobel in the negotiations.

Chastain took some additional decisive steps to stop the bleeding. He pressed suppliers to give Strobel Machine more time to pay its bills, stretching payables to 45 days in some cases, and instituted a more aggressive plan for collecting receivables.

Finding that some employees were ordering supplies in excessively large quantities, sometimes backing up excess inventory in the process, he required everyone to put requests for purchases in writing.

"I'd ask, 'Do you really need this or can you wait?'" he says. As a result, purchases fell off significantly.

Chastain looked at industry-wide data and concluded that a boost in the hourly shop rate was needed. Strobel Machine raised it substantially, but he got no resistance to the increase, says Strobel, which indicates to him that the shop had been working on too thin a profit margin all along.

In perhaps the boldest move, Chastain cut the shop shifts from nine hours to eight, essentially eliminating five hours of guaranteed overtime weekly to the shop employees. Some employees did resist, Chastain and Strobel acknowledge, with several employees jumping ship in the wake of the cuts. But Chastain said it was necessary to restore the company's cash position and ensure that the company survives.

But while employees have had to sacrifice, the company has provided some valuable new programs that weren't available previously. Strobel Machine has made the largest commitment to its 401(k) plan in its history, brought in a financial planner to work with each employee and made a substantial investment in training its employees.

General machine shops today need employees who not only can read a micrometer, but who can operate modern CNC equipment. For a long time, however, Larry Strobel harbored the view that spending money to train his employees would simply amount to paying them to train for their next job.

Chastain was able to convince him that, to remain competitive, Strobel Machine needed highly skilled workers. Chastain says he isn't sure that Strobel might not be right in the end, but in his view, it doesn't matter.

"I don't know that it won't be the case," Chastain says, "but I don't know that, in his industry, you can't afford to do anything else."

Now, the company pays the tuition of employees pursuing job-related education. Nine of Strobel Machine's 17 employees are pursuing journeyman machinist status. Additionally, classes were offered in quantitative thinking for all employees.

"As employees learn how to ask questions," Chastain says, "they see where technology can leverage resources."


New technology

A key piece in Strobel Machine's recovery and its link to future success is a new computer system with new shop software that links the front office with the shop floor. Strobel says he envisions a system that will integrate the customer, the machine shop and suppliers electronically.

Small shops that want to serve as suppliers to large corporations will have to have electronic-data-interchange capabilities, and those systems will have to be compatible with the modern systems, says SPIRC's Seeley. "If you have an old system, it many not be appropriate for the new way," he says.

And, Seeley adds, while implementing electronic data interchange will be necessary for small manufacturers, they will still have to maintain sound manufacturing systems that will provide fast delivery times, short product-development cycles and well-trained employees whose skills are kept current.


A new business unit

Remarkably, a company that was facing collapse little more than a year ago has entered a new business. Strobel Machine is creating a computer company to handle fiber optics, computer networking, Y2K problems, Web site design, and electronic commerce. Chastain figures that the company will be able to assist small businesses in rural areas with their computer needs. To that end, they have sent one of their employees for training as a Microsoft-certified engineer and certification in Novell networks, and they already are offering customers and suppliers Y2K patches for Windows and a report detailing other potential Y2K problems.


Networking for growth

A second reason for creating the computer company is to get the virtual manufacturing project up and running. Strobel Machine plans to move into the next millennium as the lead player in a parallel manufacturing project. The effort will bring together 10 to 20 small machine shops to manufacture replacement parts for the coal-mining industry.

As Larry Strobel envisions it, orders would arrive at a central computer via the Internet. The company would then distribute the orders to each shop according to specialty and current workload.

Chastain theorizes that other functions, such as payroll, 401(k) plan administration and insurance benefits could be handled centrally with such a system, freeing up shop personnel and owners from the paperwork burden and reducing costs, in some cases, by 15 percent to 20 percent. The computer company will help the other shops upgrade their systems and provide a common platform for all.

"This will allow us to do regular maintenance of their systems, make changes they would like, and watch for potential problems without each shop needing a dedicated computer person," says Chastain.

Strobel acknowledges that the company's transformation has brought its share of upheaval and discomfort. He also realizes that Strobel Machine might have flopped had the changes not been implemented.

"It was stressful," says Strobel, "but I still thought it was the only way I was going to survive in this business."

Enduring the stress seems to be paying off so well that his son will be coming to work for the company after he is discharged from the Navy in January. After the upheaval necessary to revive his business, that should be a change that Larry Strobel will welcome.

Monday, 22 July 2002 10:01

Trumps and bumps

Legions of business owners go to work every day, sweat out making the payroll, kiss up to customers and wrestle with government regulations. We'd like to know about them all, but as they'll understand, there's just not enough hours in the day for us to ferret out every one. Here's our best shot at giving a few of them a bit of the limelight:


AMS Electronics Inc.

Gravel-voiced entrepreneur Bill Bajcz is savvy enough to know the value of cultivating trusting relationships with vendors and customers. Bajcz asked his customers to pay a little sooner, his vendors to wait a little longer for their money, and found a champion in his banker when he had the opportunity to grab $150,000 extra in annual business for his electronics manufacturing company. He knows how to take advantage of a little luck, too, like being able to negotiate a more favorable lease when a new owner took over his building. A good example of making common-sense equal uncommon dollars.

Ceiling Pro Inc.

Three middle-aged cast-offs from corporate America decided they weren't going to take the dirt that big companies threw on them anymore and started their own commercial cleaning company franchise. With complementary strengths and a willingness to get their hands dirty, Harry Schlegel, Wayne Pursh and Tom Oslick are confident they can make a success of the venture. Oslick and Schlegel have also launched a spinoff, Interior Environmental Services, which brokers the services of other cleaning companies-they now have five vendors working with them. Old dogs can learn new tricks. And teach a few, too.

Cronin Communications

Marketing consultant, speaker and author Mary Cronin has enough enthusiasm for any dozen entrepreneurs. In 1998, this dynamo put a book on the shelves, "Everyone Notices the Elephant in the Pink Tutu-How to Promote and Publicize Your Business with Impact and Style," a small tome on how to set your business apart from the pack with public relations and marketing. She also moved into new offices in Carnegie Office Park. And she still has time to service her existing clients and beat the bushes for new ones. Oh, and another book is in the works. Where can we get one of those big tutus?

Fidelity Bank

Remember the '80s, when there didn't seem to be much chance that any of the little banks would survive? And how about the '90s, when the big institutions started swallowing each other up? After all that, hardly anyone would have expected the small players could survive, let alone thrive. But some have done just that. Fidelity Bank, for instance, opened a branch office in the Strip District last fall to capture customers from among the multitude of small businesses and their employees crammed into the retail and wholesale district. Real down-the-street bankers, the Fidelity folks know there's still a market for customers who want to do business in their own neighborhood with a banker who knows their name.

Isosceles Development Co.

Four investors with little experience in consumer products-an accountant, an inventor and two manufacturing execs-are pooling their resources to market a line of products dubbed WristWave, designed to relieve stress on the wrists of computer users. The company has completed its retail packaging and inked an agreement with a 100-rep sales organization to put the product into the retail market. It's a simple concept, the kind we like the most.

Score-Clocks Inc.

Jim Shipman and partner Art Spagnol have been marketing the rental and sale of a line of electronic scorekeeping and timekeeping devices for wrestling matches for the last several years. They have struggled, as a lot of entrepreneurs do, but they've managed to learn by their successes and mistakes. They've gone from selling scorekeeping products to renting them to selling and renting them. This year's rentals are off to a great start, says Shipman, and they're poised to get into the high-growth lane with the addition of a new line of devices for sale as well as rental. They look like they've gotten a good hold on the business.

The Sharp Edge

Some entrepreneurs have gone the microbrewery route to capitalize on the craze for pricey beer with heavy flavor, and big companies are promoting their common-denominator brands with everything from comely young women to amiable amphibians. But Jeff Walewski, proprietor of the Sharp Edge on the border of Shadyside and East Liberty, has taken a different tack. He's offering a dizzying assortment of more than 300 exotic bottled beers from virtually every continent, many of them microbrews, 50 draft brews and a collection of Belgians that some beer experts gush over. He conducts beer tastings and features his customers' bios in his newsletter. Now, Walewski is exporting the concept to Crafton, where he's expected to open The Sharp Edge Creek House in a former Maggie Mae's. Cheers.

Tri Rivers Surgical

We don't often view doctors as entrepreneurs, and they're not always comfortable with the tag, either. But the realities of health care today dictate that physicians run their practices like businesses. TriRivers Surgical has done some innovative things to build relationships with its patients, attract new ones to its practice and provide a combination of care and customer service that will keep them coming back. It's using community outreach programs, health issue seminars and clinics, and, in a stab at catching a rising wave in medical care, a foray into an alliance with alternative medical providers. Here's a practice that's showing how to mix business with medicine in a way that won't make you sick.

Whole Enchilada Inc.

Restaurateurs Tom Barron and Juno Yoon didn't have such a great year in '98. Their ploy in 1997 to convert two of their restaurants-Mr. Jones in the North Hills and the Vertigo Bar in Shadyside-into Saybrook Fish Houses, ultimately floundered and landed big burrito inc. a Chapter 7 bankruptcy filing last fall. The duo still runs six other establishments, including three Mad Mex restaurants, the Casbah, Kaya, and Soba Lounge, that weren't part of the bankruptcy. Perhaps without the distraction of two money-draining businesses, they can focus their attention on their more lucrative ventures. We wish them luck.

Monday, 22 July 2002 10:01

Personnel

Ansoft Corp. hired a foreign national last year to work in the United States, a highly skilled software professional who was living and working in the States under a practical training visa. The presumption was that the company would be able to secure an H1B visa that would take effect before the training visa expired. So far, so good.

Unfortunately, the annual allotment of 65,000 H1B visas had been exhausted in May, with none available until the beginning of the federal government’s fiscal year in October. Ellen Allston, personnel manager for the software company, had to call the new recruit to inform him Ansoft had not been successful in securing a visa for him. The new hire, who had quit his job and put his possessions in storage, would have to leave the country.

Ansoft put the new employee to work in its United Kingdom office, but the snafu posed complications. The employee wasn’t able to become oriented to the company culture in quite the way Ansoft planned, and the position he was intended for went unfilled.

That case highlights only part of the problem for Ansoft and others. During that period, because of uncertainty over availability of visas, the company didn’t process any new applications.

“From May until September 30, it was very painful,” says Allston. The company suspended its recruiting and didn’t pursue any new H1B visa applications at a time when students were finishing their degrees.

Ansoft isn’t a huge employer of foreign nationals—about 15 of its 205 employees hold H1B visas—but those who do hold key positions.

“These visas are absolutely critical to high-tech firms that rely on computer professionals,” says Larry Liebowitz, a Cohen & Grigsby attorney who represents Ansoft and other high-tech companies seeking H1B and other visas.

High-tech companies such as Ansoft have been granted some relief for the next three years by legislation passed in September, with additional visas granted in 2000 and 2001. But the number will drop to 65,000 again, starting in 2002.

Companies applying for H1Bs now have to pay an additional $500 surcharge, earmarked for funding educational programs to prepare more U.S. citizens for high-tech careers, in addition to the normal filing fee. That sum, in addition to the $750 to $1,000 in legal costs companies have to bear—considerably more in other large cities—makes hiring foreign nationals an even more expensive proposition.

Monday, 22 July 2002 10:01

David Nelsen and Andy Fraley

It would be tough to imagine a candidate more well positioned than CoManage Inc. to be the next company to take shape as a superstar after the big bang of FORE Systems.

Entrepreneurs David Nelsen and Andy Fraley are former FORE Systems employees, veterans of the four-year period during which the company went from $25 million in sales annually to nearly $500 million. Both have extensive experience in large and small companies, and are graduates of Stanford University and MIT, respectively.

But their resumes are only the tip of the iceberg. The factor that makes the mix gel is that they are plowing into a segment of the telecommunications market that promises astronomic growth over the next few years. Nelsen estimates the market overall generated at least $10 billion in sales in 1996.

CoManage is developing software packages designed to manage the newest generation of telecommunications networks, those based on high-speed asynchronous-transfer-mode technology. With thousands of telecommunications companies jumping into the business of building networks, the duo believes it can capitalize on the need for software to manage these complex systems.

Bill Hulley, a partner in Adams Capital Management, the venture capital firm providing $4.2 million in start-up capital for CoManage, acknowledges Nelsen and Fraley make a dynamic management team, but emphasizes the market is what really captivates him and his partners.

“A terrific management team in a lousy market will not build a successful company,” says Hulley.

Still, the team will be critical in leading the company through the fast-changing telecommunications industry, where technological advances and deregulation have created an extremely fluid market. Seven out of 10 high-technology start-ups flop, two are moderate successes and one is a runaway hit.

CoManage expects its first product to roll out during the second half of this year. Its biggest challenge won’t be in developing the product—Nelsen and Fraley are confident they can do that with some ease—but in recruiting the software engineering talent to do the work.

Says Nelsen: “It’s really going to come down to how quickly we can find people.”

Monday, 22 July 2002 10:01

Barbara Bateman McNees

It would be tough to find a Rust Belt city where more development lies on the horizon or is in progress than Pittsburgh. And all of that activity will have been compressed into a few years, a nanosecond in a region that tends to loathe change.

It’s no wonder that Barbara Bateman McNees, executive director of the Greater Pittsburgh Chamber of Commerce, finds the local attention on the restructuring of the region’s economic development superstructure—rather than on the bricks and mortar—a bit exaggerated.

“Internally, it’s not an issue,” she insists. “It’s of more interest outside the organization.”

By contrast, McNees says, it’s not unusual to hear from movers and shakers in other cities wondering just how the heck all of this stuff is getting done in Pittsburgh.

It can prove befuddling, then, when Pittsburghers don’t see what all the fuss is about.

“We don’t always see that internally,” says McNees.

For her, the challenge this year will be to keep the momentum going that began with projects now getting up to speed, and to continue to fill the chamber’s traditional role of business retention and provider of information to business people and referral seekers.

“Our role in the region will be to continue to focus on retaining the businesses that are already here,” says McNees. “Businesses still and always will continue to look to benefits that improve their business and improve their bottom lines.”

Debate continues over how the chamber and four other economic development agencies will be guided within the context of their membership in the Pittsburgh Regional Alliance. Some leaders have suggested a single board govern all five organizations under the PRA. Another camp favors individual board governance. McNees says, the five share some administrative functions already, and even a consolidation of boards would likely mean most involved in the individual agencies would be at the table in any new board.

But it would be naive to assume that a few dozen powerful and influential business leaders, whose board memberships serve at least some self-interest, would not clash on this issue.

As the major projects reach completion, the chamber no doubt will be trumpeting its role in job creation and business retention. The problem for the chamber and McNees may be in dealing with the crush of businesses that want to locate operations in the city.

Not a bad problem to have.

Monday, 22 July 2002 10:00

Reaping referrals

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Generating new business is a constant challenge and referrals are one of the most valuable sources for leads that can be converted to sales.

Many business people, though, miss opportunities to land them. Tom Reda, who heads The Small Business Network in the North Hills, offers suggestions to boost your referral pool.

  • Offer incentives. Give cash, discounts, trips, gift certificates or other enticements for referrals.

  • Installers, delivery people, customer service reps and cashiers should all be coached to ask for referrals. Prepare a form for them to hand out.

  • When someone asks how your business is going, don't say, ""It couldn't be better."" Instead, say, ""Business is good, but we have to fight for every customer. Do you know anyone who would benefit from our product?""

  • Identify parallel businesses that have a strong synergy with yours. Make phoning, faxing, writing and visiting them part of your business plan.

  • Have a written referral business plan. Brainstorm with your staff for ways to get referrals. Review your plan every month and adjust accordingly.

  • Tell your clients that referrals are needed and important to your business.

    "
Monday, 22 July 2002 10:00

How the Butlers do it

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Anyone who thinks Butler Gas Products has made employee training cheap, easy or painless can think again.

""There's no magic formula,"" says Jack Butler, the company's president. ""You've got to force yourself into doing the training.""

One way to make sure training is an integral part of the company, Butler says, is to institutionalize it. Four times a year, all employees meet at the McKees Rocks headquarters to attend ""Butler Gas University,"" a session of training and reinforcement of company values. Before the one-day session, employees are polled to determine what topics they would like to cover.

Whatever the topics, says Barb Glessner, vice president and sales coordinator, the intent is always to relate the information back to the company's mission and vision.

The company's owners offer no panacea for employee education, but do follow some fundamental principles to make the process as efficient and cost-effective as possible.

  • Designate someone to be responsible for training. Glessner coordinates all training at Butler Gas Products and conducts some of the sessions.

  • Use the ""piggy-back"" method. Training sessions often are incorporated into other regular meetings at Butler Gas Products. The twice-monthly sales meetings often include a brief presentation by someone from another department who disseminates information to the sales force. The monthly safety meeting is another venue often used for training and to give information about sales and financials.

  • Use internal resources when possible. Glessner brings in outside consultants if no one in the company has a given expertise, but often the skill resides in one of the company's employees. If your employees want to learn more about some other function in the company, let another employee conduct a training session.

    Nell Hartley, head of management at Robert Morris College, says small businesses too often buy off-the-shelf training that is a poor fit for their companies. ""Nine times out of 10, you're wasting your money,"" she says. Canned programs can be of value, she adds, if the company is willing to develop a curriculum around it and not rely solely on the information in the course.

    The potential downside when using insiders, Hartley points out, is that while an employee may be an expert in her particular area, she may not have the skill to teach it to others.

  • Leverage employee training. Butler Gas Products sends employees to seminars and training sessions off-site, including at colleges and universities, then recruits them to train the rest of their department or, in some cases, all employees. Sales representatives may attend a sales seminar, then pass that knowledge on to the rest of the sales staff during a special session or a sales meeting.

  • Tap into your vendors. Butler Gas Products frequently enlists its vendors to make presentations. Your suppliers, often much larger concerns than your company, can be a wealth of information and instruction. They know more about their products and how they are used than anyone, and will often be eager for the opportunity to tell their story to your employees.

  • Take advantage of technology. Programs presented by vendors and suppliers at Butler Gas Products often are taped for use later. A program on safety can be recorded and used later as a refresher course or for new employee orientation.

  • Make it meaningful. All of Butler Gas Products' training is related back to the company's mission of superior customer service and being the low-cost provider. Employees have significant say in what kind of training they receive.

  • Evaluate the results. Butler Gas Products uses some simple tests to determine how much employees have retained from a session. While it's often hard to quantify what value a training experience has had, Hartley says attitudinal surveys and questionnaires can give a fairly accurate indication of how well the programs were received. If employees enjoy a training session, she says, they will probably derive some value from it.

"
Monday, 22 July 2002 09:59

Thanks for the raise

Not everyone is upset about the recent one cent postage increase. According to a group that represents small businesses, the penny increase is reason for some companies to breathe a sigh of relief.

The Alliance of Independent Store Owners and Professionals says that, while previous increases have been the undoing of some small businesses, its members can live with the new rates. AISOP is a Minneapolis-based organization representing small business retailers, service providers and professionals who depend on advertising mail to distribute coupons and ads to customers, as well as the mailers who serve them.

“Huge advertising mail rate increases in the past hurt many small businesses and even put some out of business,” says Donna Hanbery, AISOP’s executive director.

According to AISOP, the Postal Service in the past has been pressured to keep first-class rates down, often to the detriment of mail advertisers. The increase in advertising mail rates—about 2 percent—is lower than the rate of inflation, says AISOP, and affordable for advertising mail users. Further, AISOP says it hopes the latest increase is indicative of the Postal Service’s willingness to keep its increases “predictable and affordable.”