Jim Vickers

Monday, 22 July 2002 09:39

Sales in the fast lane

If you think a round of golf is the best way to cap off a business deal, you obviously haven’t experienced the bond created by driving expensive sports cars around a race track at high rates of speed.

Scott Bove knows the thrill and discovered along the way it is also a great way to land new clients.

The owner of Avon-based Technifab Engineered Products Inc. got involved in sports car racing after attending a driving school in 1996. He did so well he was invited back free of charge. That was four years, 84 races and four championships ago. And it was during Bove’s time on the sports car racing circuit that he figured out how to use this hobby to market his foam fabricating operation.

At first, he gave away foam to other pit crews and drivers to use as padding while working on their cars. Then, he started selling it.

But, the real boon for Technifab was Bove’s discovery that nearly every other driver on the circuit was a business owner who could use his product in one way or another.

“We’re friendly with most people, and I usually ask them where they’re from or what kind of work they do,” explains Bove. “Nine times out of 10, they’re usually a manufacturing business owner, and nine times out of 10, they could be a customer of ours.”

Technifab has grown an impressive 25 percent each year since 1996, and Bove attributes a solid 10 percent of that growth to new customers he landed on the racing circuit. Whether it’s padding for a company that builds bombs for the U.S. government or packaging to ship wheels for cars, Bove has found the fraternity of racing has put him ahead of his competitors who are going after the same types of work.

“They will do business with people who are sharing their conviction,” he says. “It’s easier for me to carry on business at the track when the common denominator is racing. It gives us an advantage over a competitor who is simply going in on price.”

Bove’s racing hobby has also created a rallying point for employees, who routinely volunteer to help prepare the car for its weekend excursions around the United States, and also are invited to attend nearby races to cheer on their boss. With all these benefits, one might wonder how much of Technifab’s revenue Bove uses to maintain his love for racing.

Although many business owners he meets on the circuit use their business to subsidize their hobby, Bove points out that he has been able to finance his racing operation through sponsorships with suppliers and customers rather than digging into the company coffers.

“If we went back and did an economic analysis, there is no doubt our cost of running the motor sports business would be dwarfed by the sales benefits,” he says. “But, the intent is to grow the business and not have it be diluted by the cost of the operation.”

How to reach: Technifab Engineered Products Inc., www.technifabfoam.com; Team Tech Racing, www.teamtechracing.com

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:39

Flying high

Ken Ricci founded Corporate Wings Inc. in 1981 with the goal of building a service-oriented executive transportation company that handled every aspect of modern aircraft operations.

Ricci chartered flights for a number of corporate clients and Corporate Wings became known as a respected company in the industry.

As time passed, Ricci expected his strong employee base, industry experience and long safety record to provide the company with a great base for growth. At the time, he had no idea just how far his knowledge of the industry and keen eye for market trends would take him.

“We thought our 17 years of experience gave us a solid base for growth in the future,” says Ricci, CEO of Richmond Heights-based Flight Options, a subsidiary of Corporate Wings. “We had no idea where it would go.”

Where it’s gone is landing Ricci recognition from Ernst & Young LLP as Entrepreneur Of The Year in the Specialty Services category, while the company continues its rise from its humble beginnings.

In the late 1980s, the concept of fractional aircraft ownership gained popularity among corporate executives who wanted a jet travel option other than buying an aircraft. Jet manufacturers quickly responded to the demand, but as Ricci watched the industry mature, he thought there was a better way to serve this niche.

So in 1997, he and his team began to research the concept of building a fractional jet ownership company using previously owned aircraft. Jets depreciate like cars do, but production cycles are much longer. Ricci reasoned that offering fractional ownership of pre-owned jets would be appealing to executives and much less expensive than buying into a manufacturer’s timeshare for a new jet.

“When you buy a share of a jet, unlike when you buy a whole jet, they don’t get to paint it in their colors and they don’t have pride of ownership,” explains Ricci. “They don’t leave their umbrellas on board, so they’re more inclined to buy for value than you would be a condominium or something like that. But the industry was started by the manufacturers, so nobody really ever thought it could work unless you were a manufacturer selling a new jet.”

It all may sound logical now, but three years ago, Ricci was treading on entirely unproven ground. Still, he found investors and made the significant up-front capital investment such an undertaking requires.

“Our risk was whether people would buy a share of a jet when it wasn’t being sold by the manufacturer,” says Ricci. “Would they recognize there was value in buying a pre-owned aircraft in a share process, and that’s really what our risk was. Our market research was obviously dead on.”

Because there were already three fractional ownership companies in the industry, he realized the need to create exceptional value in his own service. Ricci was able to offer pre-owned jets for 35 percent less than the cost of comparable aircraft offered by other programs. To attract new customers, he also offered guaranteed immediate liquidity and a 30-day trial, a move unheard of in the industry.

In 17 months, Flight Options’ annual revenue jumped from $35 to $300 million, while Ricci estimates it will climb to $450 million within the next 12 months. Moreover, Flight Options is the fastest growing pre-owned fractional jet company in the United States and has captured nearly 38 percent of market share — more than any of its competitors.

Word of mouth seems to be a big driver of Flight Options’ success, with more than 54 percent of the company’s new clients referred by existing ones.

As far as being named one of the Northeast Ohio’s top entrepreneurs, Ricci deflects the credit for Flight Options’ accomplishments to the staff that has helped him build his company over the past 17 years.

“It is something our whole company deserved, because certainly building what we’ve done isn’t something I did by myself,” he says. “Being a finalist is an honor that I consider goes to our whole company.”

How to reach: Flight Options Inc., (216) 261-3500

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN Cleveland.

Monday, 22 July 2002 09:39

Classic turnaround

Five years ago, Dairy Mart CEO Robert Stein inherited a 1,100-store convenience store chain that focused on quantity of stores over quality.

The company had a difficult time reaching profitability, let alone becoming an industry leader, and Stein wanted to rethink the look and feel of the entire Dairy Mart concept.

Today, the chain is a little more than half the size it was, with 600 stores in seven states. Many of the small neighborhood stores that made up the Dairy Mart chain have been phased out in favor of new, larger facilities that offer gasoline, fast food and a wider selection of merchandise. But most important, under Stein’s guidance the company was able to once again reach profitability.

“We’ve been a little bit like Rodney Dangerfield,” he explains. “We got no respect, and what we’ve done is dusted up and jumped off the ground from where we were three or four years ago. Because we really didn’t have a great name in the industry in terms of what we offered and what we were doing.”

So Stein took the hulking chain and started whittling it down, selling off unneeded assets in an attempt to generate enough money to implement his vision. It then became a matter of finding prime pieces of real estate where Dairy Mart could enter the high-volume convenience store market that for so long had been dominated by petroleum giants like BP and Shell.

Those changes were accompanied by a total marketing makeover in which the chain’s long-time Dairy Mart logo was replaced and the chain struck exclusive partnerships that allowed it to offer brand name products including Millstone Coffee and Chevron gasoline.

We’ve worked hard for three years,” he says. “And the payoff is coming now, where people can really identify with who Dairy Mart is, what we’re trying to do, and, in terms of the scorecard, the customer count has been up consistently over the past three years. We’ve had double-digit sales increases on a per store basis. That’s the scorecard that tells us that somebody is paying attention.”

But it is not just the high-dollars changes that have made a difference for Dairy Mart. Stein says management also decided to take a look at what was going on inside each store. It evaluated how customers were treated and whether the stores carried the right products. This self-evaluation resulted in a partnership with Mr. Hero.

All of the changes at Dairy Mart garnered the attention of the industry, as one of the leading trade magazines recognized the Hudson-based company as the convenience store chain of the year for 1999. It is a victory Stein attributes as much to his people as to his product.

“We’re in the business of serving 3.6 million people a week,” explains Stein. “The way you have to do that is every day of the week, you have to do the ABCs, which is having a clean store, friendly people, being in stock, and I think we’ve gotten better at that over the years.” How to reach: Dairy Mart, (330) 342-6700

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN Cleveland.

Monday, 22 July 2002 09:36

Not your average start-up

Shortly after the NFL announced in July 1998 that Cleveland would be awarded an expansion football team to replace the one Art Modell took to Baltimore following the 1995 season, Carmen Policy visited Al Lerner's 50th floor Manhattan office to pitch a business proposition that didn't make much sense.

Policy, the architect of the San Francisco 49er football dynasty of the '80s and '90s, wanted Lerner to make a bid for the team -- an investment decision that was spotty at best, given the NFL's track record of high-priced expansion. Meanwhile, a brand name as recognized and beloved as the Cleveland Browns convinced most observers that the price tag would soar even higher than usual.

Nevertheless, Lerner and Policy joined the hunt for the new team. Even after striking a Labor Day weekend deal to pay $530 million, the most difficult work --getting the new company off the ground in only a few months -- had just begun. Policy recently took a few minutes to share with SBN his experiences during the past year with a start-up company called the Cleveland Browns.

Time being the limited factor that it was, how far in advance could you plan the budgeting process for the team's first year and how closely were you able to hold to it?

We had no process that would allow us to properly budget for the first season. It was nothing more than a series of educated guesses based upon some experiences that I have had in running the 49ers and calling upon some experiences some other teams had that were in new stadiums and operating in a similar type fashion. It was really guess work.

Another example of why we were able to literally get this organization up and running relates back to the quality of ownership. We had the luxury of having Al Lerner available at every turn in the road and it was an issue of, "Do the Browns need a capital expenditure?" It was not, "Should we spend the money?" or "Is this something that could wait?"

It was simply an issue of, "Do the Browns need it, and do they need it now?" And if the answer to those two questions was yes, you just went ahead and did it.

Obviously your track record with the 49ers speaks for itself, but it was a program that already existed. Since this was a start-up organization, were there any surprises during that first year that you didn't expect?

No matter how we anticipated the type and level of the challenges we would face, they were more in number and greater in intensity than we ever dreamed. We faced one additional task after another.

Dealing with the season ticket holder list that had been accumulated as a result of sales and transferring people who were accustomed to sitting in the old stadium into the new venue was very trying and took a lot of our time. It was like fighting a forest fire.

You know you have to get some sleep, but when you wake up, you know you're going to be trying to put out fires and you don't know whether or not the winds have shifted and you're praying for a little rain. You need some relief, but you know every day is a struggle against the elements and that's how it was for the first year.

I imagine the challenge of getting the stadium built was a weight on your mind also.

We were very concerned about how the stadium would turn out. Both Al and Norma Lerner were constantly monitoring the fan amenities and how the stadium was designed to treat the fan and how fan-friendly the stadium would be.

A great deal of time was taken with the concessionaires and the quality of the food. As a matter of fact, they are still on it. Every game, they'll solicit input from their friends from different walks of life and I'll get calls on Monday telling me what the synopsis of that polling revealed.

Did any league restrictions dictate what players you could and could not sign that first year?

Our team, as well as the two previous expansion teams, was required to select a certain number of players from the veteran expansion draft. That's done to provide veteran leadership for the team and gives you the kind of experience that allows a brand new franchise to suit up and play and at least give the appearance of being a professional team.

I believe the primary purpose was to guarantee that a certain amount of your roster is made up of players from other teams who will account for a significant portion of your salary cap expenditure so you don't go crazy trying to buy free agents.

Even in less than one year, some of those veteran players are no longer around. Is it your strategy to move the team in an even more youth-oriented direction?

Yes, very much so. We were young last year even with several older veterans. This year, the oldest human being on the roster is Ty Detmer, and he is 32 years old. The average age of our starters is 25 years old.

For the first few years, your average start-up company, even if doesn't make money, can be considered successful. Undoubtedly, a football franchise is a different situation. Inside the organization, how do you define and measure success?

You break it down into various categories. From the standpoint of the infrastructure of the organization itself, I think it's excellent. The people we have on board are truly professional. They are intelligent, hard working and they are really good people. They understand the concept of team and teamwork and they know, first of all, unless they buy into that concept, they won't fit in here. The people here now fit and fit very comfortably.

Secondly, the stadium situation was critical. Getting the stadium completed, getting it open and having it operated in a first-class fashion was a top, top priority of this organization. In fact, it's a top priority of any organization that has a new stadium. We've really accomplished that.

We also wanted to make smart decisions that created a solid foundation upon which to build not only a team that can compete, but a team that can compete at the very highest level and be consistent for several years to come. I think we're there. How to reach: The Cleveland Browns, (440) 951-5000

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:36

Balancing innovation and growth

Innovation is at the core of A. Malachi Mixon's business philosophy.

The chairman and CEO of Elyria-based Invacare has proved himself a titan of the home medical equipment industry by building a global public company with annual revenue of $875 million from a small wheelchair manufacturing firm he and a group of investors purchased from Johnson & Johnson in 1979.

"Innovation in health care" is the company's trademarked slogan and one that fits it well. Mixon orchestrated the purchase of the firm 21 years ago by way of a leveraged buyout, a then nearly unheard of financial transaction. Over the years, Invacare has acquired 35 companies and become the most powerful distributor in the home health care market.

"We're always challenging everybody not to accept the status quo," explains Mixon, when asked how he keeps the fire of innovation burning inside such a large company. "I ask how can we get better ... What are your plans to improve and how are you going to measure that improvement? That's something that permeates our company."

His experience in leading Invacare from its modest roots has given him a clear view of what it takes to balance being an industry innovator while also handling the inevitable growing pains of a successful company. Recently, Mixon sat down with SBN to share how he keeps Invacare on the right track and ahead of its competitors.

Never underestimate the competition

If you think that tiny company with barely a shred of market share is no threat to your secure industry foothold, Mixon says your success might already be slipping away.

Today, Invacare dominates the health care equipment market, but it wasn't always that way. There was a time when Mixon was the small fish, trying to chip away at a deep-pocketed competitor that had incredible industry reach but had grown stagnant from the inside out.

"The major thing that happened was a principal competitor didn't realize we were a serious threat until it was too late," recalls Mixon. "As they began to react, they were lumbering and lethargic and weren't creative and weren't really coming out with innovative products. As we began to take them by storm, their only response was to cut price and brutalize us in order to hurt us.

"It just made us more resolute, our people were even more committed that we were going to beat those guys."

The hunger with which he and his employees fought to become a market leader is never far from Mixon's mind. Today, as a global leader in the wheelchair market, he makes it a point to constantly take a hard look at whether there are weaknesses in his company that competitors could use to their advantage.

"I would say to my credit department, 'How do you know you're any good? Who are you comparing yourself to? Who is your benchmark?' he says. "You really have to benchmark yourself and not have a big ego because there is always somebody doing better than you are."

Listen to your customers

Mixon wants his customers to tell him what they don't like about Invacare and its line of products. Praise is not necessarily bad, he explains, but it is not what drives innovation.

"You have to have the mentality that no matter what you're doing, it isn't good enough for the customer," he says. "The day you think you're good is the day you're going to get in trouble."

Listening to customers is what has driven Invacare to the top of the industry and helped it evolve products like wheelchairs from their former stiff, strictly operational look to today's models that offer designer colors, added comfort and a sleek design. Mixon looks at the relationship between Invacare and its customers as more than a simple business relationship.

In fact, the company listened when many people with disabilities voiced their frustration about living in society that refused to accommodate people with physical limitations. That resulted in Invacare sending a lobbyist to Washington and the development of a governmental affairs arm of the company -- positions that exist at Invacare to this day.

"There's really no magic to why companies succeed, but I think that most of the ones I know have an insatiable focus on the customer," he says. "Most of the successful entrepreneurs and builders of businesses are very, very customer focused. They have a vision of a need that hasn't been satisfied, and they keep innovating to continually give the customer something better."

Fight bureaucracy

One may wonder how the CEO of an $875 million company with locations scattered across the globe can spur innovation and manage change. Mixon says it is not all that difficult once you trust others inside your organization to make decisions that would eat away at time, bog down those in the top office and expose the company to the risk of becoming stagnant.

"I can guarantee you that there are hundreds of decisions being made today about individual products and pricing and design and strategy that aren't coming all the way up to the top floor," says Mixon, sitting in his second floor office at Invacare's Elyria headquarters. "You have to release that, and a lot of entrepreneurs have trouble releasing because they've been successful. Therefore they think they're smarter than everyone else and should make every decision."

But, if you want to attract young creative minds to your organization, Mixon says cutting away the red tape will separate your company from the old-line, stodgy corporations in which those new to the American work force have no interest. In the end, it's about survival, and much like a champion boxer, it is the company light on its feet with a killer punch that is going to have the competitive edge.

"Companies that get bureaucratic and lumbering start losing the lightness on their feet and the ability to move quickly so the competition is surprised and doesn't have time to react," explains Mixon. "It's an issue that every company that grows has to think about and it's something I worry about a lot in terms of trying to keep the culture and the process alive." How to reach: Invacare, (440) 329-6000

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:35

What it's worth

Business valuation is not an exact science.

In the analytical nuts and bolts business world, it would be nice to think of it as a black and white proposition, but the layers upon layers of gray that accompany the appraisal of any company can make determining an exact dollar amount a difficult process.

For business appraisal experts like Rand Curtiss, president of Loveman-Curtiss Inc., the task is most successful when there is a little human judgment thrown into the mix. That's why he believes the abundance of software programs that promise to provide a business appraisal through pure numbers offer little in the way of accuracy.

What people don't realize, Curtiss says, is that the value of a business can vary widely based on when and how the appraisal is conducted.

"The purpose for the appraisal is critical," he explains. "A business could very legitimately have different values at the same time, depending on the reason why it's being appraised."

For example, someone hoping to sell a metal fabricating operation for top dollar would likely try to target a "strategic buyer," who would receive some benefit from purchasing the operation. On the other hand, business owners are only required to consider a "financial buyer," or someone who can only bring cash to the table and generally would pay much less for the same company, when it comes to tax appraisals.

There are three basic approaches to business appraisals: the market approach, the asset approach and the income approach. Each keys in on a different factor to determine the value of a business and each provides widely varying results.

Here are the good and the bad of each.

Market approach

This method is most comparable to the appraisal of real estate. When trying to value a home, an appraiser will look at the value of other homes of comparable size and location. This can also be done for businesses, but Curtiss says when it comes to closely held family businesses, there usually is not enough information to make an accurate determination.

"Even though you think the market approach may be ideal, the problem is we don't have enough data," says Curtiss. "So it doesn't fail in theory, it fails in practice."

Asset approach

This approach to setting a value for a business is fairly direct. Values of property like land, buildings and machinery are totaled and the company's debts are subtracted from that figure. The limiting factor, says Curtiss, is that intangibles like public image and personnel value cannot be figured into the equation.

That leaves the asset approach best reserved for situations in which the business is being liquidated or will not operate the same as it did before the sale.

"Usually a company's most important asset is its people and they are not reflected there," explains Curtiss. "In other words, intangible assets are not very well measured by current financial and accounting practices. It is very hard to use the asset approach for most operating businesses."

Income approach

The income approach is the most common but also the most complex. Value is determined by measuring the profitability of a company today and in the past, while making an educated prediction about how likely it is for that trend to continue.

Undoubtedly, this is the most complex way to appraise a company. But Curtiss points out it is the only method that also considers intangible factors such as personnel, which most often affects customer satisfaction and, consequently, improves the bottom line.

"You're looking at a business in terms of the expected earnings or cash flow it will generate," he says. "That's where you really get into looking at the business's historical financial performance, its current situation and its projected financial performance and all the elements that affect that and requires a total review of the business operations and financing." How to reach: Loveman-Curtiss Inc., (216) 831-1795

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:35

Morale builder

Everyone wants to be a great manager. But too often, the stodgy, traditional definition of a leader that exists inside many companies isn't compatible with the challenges and speed of the Internet age.

People don't want to work for an iron-fisted dictator; they want someone who is on their side. They want a coach.

Before making any big changes, management expert Marty Brounstein, author of "Coaching & Mentoring for Dummies," says managers need to evaluate employee performance. If your staff members aren't delivering the results you need and seem reluctant to take on new responsibilities, Brounstein says it may be time to light a fire under them.

He offers four guidelines for revamping your management style.

Be a coach, not a doer

Coaches achieve the best results by developing employee talents and abilities to their full potential. A manager who follows a "doer" style will focus more on the completion of tasks than managing the people who make up his team.

A coach understands that the success of any project is directly linked to the performance of each individual.

Manage by personal influence

Those who view their job titles as reason enough for employee respect are managing by positional influence, a practice that does nothing but frustrate your work force. Employee morale is better if managers win the allegiance of their staff members by demonstrating traits like honesty and respect.

Take your employees to lunch

Some time away from the office is a great way to stay connected. A lunch provides an opportunity for managers to discuss the details of upcoming projects with workers in a casual atmosphere. People also tend to speak more candidly about sensitive issues outside the office.

Use constructive feedback

Constructive feedback, regardless of whether it's positive or negative, is information-specific, focused and based solidly on observations. General praise and criticism about an employee's performance is usually very vague and based on feelings rather than the facts. How to reach: Marty Brounstein, (650) 341-8001 or mabruns@earthlink.net; "Coaching & Mentoring for Dummies," www.dummies.com

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:35

Heartfelt change

When Bill Voss was killed in an automobile accident three years ago, it shook the foundation of the Ohio City manufacturing firm he had worked most of his life to build.

Then, when his wife, Marianne, died a year later, there was sorrow among the employees and fear that the events marked the end of Voss Industries Inc.'s era as a closely held, solid family business.

"It was the unknown," says Daniel W. Sedor Sr., who today serves as president of the company that manufactures clamps and couplings for various industries. "People that had certainly been with the company for 25 years or more were wondering what was going to happen. It's only reasonable to ask those questions. You've either got to sell the company or at least consider how things are going to be different."

At the time, employees owned 30 percent of the business through the employee stock ownership plan the Vosses had created. But there were very real concerns that the family heirs, who still controlled the majority ownership stake, would sell or dismantle the firm.

The panic was initially abated by the ability of Sedor and his management team to calm fears on the factory floor. Then, last April, Voss family members decided to turn over 75 percent of the 43-year-old family-owned business to their employees.

"It was always the desire of my parents for this business to be employee owned," explains Marsha Voss, daughter of William and Marianne. "They cared about the employees and the products that bore their name. We wanted that legacy to continue."

The act of handing control of the company over to 200 workers was a pivotal event, and one that ensured the West 25th Street business would stay in Cleveland and stay intact. But, Sedor says, the employee stock ownership plan option that is so often used for tax purposes also helped Voss Industries regain its footing after the death of its founders.

And, it motivated workers to envision a long and secure future.

"You're sharing opportunity but not necessarily all the risk," says Sedor, explaining the advantages of an ESOP. "It is very much boilerplate and if people are going to do that (for tax purposes), they're going to do that and it's understandable. But the real advantage is looking to see what it does to the whole society that lives within these four walls that we call Voss."

Increase efficiency

For years, Voss Industries was saddled with an outdated manufacturing process that had some parts traveling 1.8 miles inside the company's 230,000-square-foot building before being shipped.

"It was ridiculous," says Sedor. "We were able to take that process with the 1.8 miles and bring it down to about 120 feet, and the advantages of that, everyone can see."

Sedor attributes the ability to make such sweeping changes in the manufacturing process to the stake employees have in the company's success under the ESOP plan. Voss' management team transformed the outdated departmentalized manufacturing process into a new cellular system that had parts moving less and employees doing more through rigorous cross-training.

This ability to get 200 employees to not only buy into such sweeping internal changes but also help make them a reality is truly one of the real benefits of an ESOP, in Sedor's eyes. Meanwhile, lead times have been dramatically reduced and product costs have dropped as much as 40 percent.

"You really use it as a vehicle to make yourself better," explains Sedor. "The ESOP definitely played a large part in that transition. Anybody doing good business with the product we make would have had to make these changes.

"But to try to make them in a situation where it was a closely held company and the employees had no interest whatsoever in the ownership of the company would have certainly been more difficult."

Strengthen the work force

The massive changes inside the company required employees to learn a more comprehensive set of skills rather than just be bound by a single task in an assembly line environment. The move to a cellular manufacturing process required cross training to implement and boosted the productivity, efficiency and overall value of those on the factory floor.

"It's basically given us a higher level of a skilled work force because of the cross training here," says Sedor. "It's not a situation where key people aren't there and work can't get done because you've got more people to rely on to get the job done."

Then there is the concept of employee retention. Although Sedor doesn't think Voss Industries attracts workers solely because of the ESOP program, he believes it has played a factor in holding on to veteran staff members. Particularly for market segments in which skilled employees are jumping ship to chase more attractive deals from other companies, Sedor says, the added financial benefit of an ESOP comes into play.

"I think the greater cause to champion is keeping those that you have and giving opportunities internally for them to gain some type of recognition with what they're doing," he says. "They're involved in the company and have success, and I think you get that even more with an ESOP.

"We try to promote from within, provide additional education opportunities and just keep it interesting."

Build morale

When worry began to fester about the future of the company after the deaths of William and Marianne Voss, it was up to Sedor and his fellow managers to ease employee fears. Instead of letting the rumor mill run wild, those in the top offices discovered employees were willing to contribute more to keep Voss Industries going even though the company's future was up in the air.

"Employees stepped forward to say, 'Hey, what can we do to make this work?'" explains Sedor. "In the face of uncertainty, in terms of not knowing what the heirs may do, it showed an awful lot of strength on the part of the people who work here."

It was not long after that that the plan for 75 percent employee ownership was announced and the level of communication inside the company, as well as the level of employee involvement and commitment to constant improvement, rose to a higher level than ever before. Quarterly meetings are scheduled to disseminate information, but much of the internal communication between management and employees is done via the traditional yet dependable bulletin board.

But as much as Voss' management team openly shares information with employees, an equally important part of the relationship is listening to the concerns of the workers. When given a financial stake in the company, Sedor says employees will become more vocal and involved and create an environment in which decisions are made from the bottom up as much as they are from the top down.

"One of the things we've learned is to listen to the people on the floor, because those are the people that, quite frankly, without them, we're nowhere," explains Sedor. "They are the ones who are really going to predicate what our successes will be." How to reach: Voss Industries Inc., (216) 771-7655

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:35

After the gold rush

The cyberpirate who registered www.worldwrestlingfederation.com likely had dreams of a handsome payday.

Instead, he got a virtual body slam from Vince McMahon's ultrapopular, big-time wrestling empire by way of a little-known domain name dispute policy that went into effect last January.

The Internet Corporation for Assigned Names and Numbers, the governing body responsible for administering the domain name system across the globe, adopted a Uniform Dispute Resolution Policy at the beginning of this year that allows domain names registered in "bad faith" to be reclaimed by their rightful owners. What's more, the dispute resolution process spans only 57 days from start to finish.

So instead of walking away with a lot of money from the World Wrestling Federation for the domain name he had registered just three days before contacting the Connecticut-based entertainment giant, the California man who registered www.worldwrestlingfederation.com was found to be acting in "bad faith" and was stripped of the name.

Since the dispute resolution policy costs a meager $1,000 to $2,500, it is no wonder the WWF has used it more than once to silence cybersquatters who hope to capitalize on the worldwide popularity of big-time wrestling. But, before you set off to capture that elusive domain name you've been trying to pin down, it's probably a good idea to see whether your case would hold water with ICANN.

"Just because a business uses a name and has used that name forever does not mean it has a right to any particular domain name that is out there," explains Candace Jones, a partner in the Cleveland office of Hahn, Loeser & Parks. "If you do not meet the bad faith requirement, you may not be able to rely on this arbitration procedure."

So, what constitutes bad faith? Someone who purchases a domain name similar or identical to your corporate trademark, then contacts you offering to sell it at an inflated price is a textbook example. Another is the case of an industry competitor which purchases a domain name for no other reason than to keep it from you.

Although these examples make the process seem rather simple, Jones says it a somewhat tricky process at best. She cites the case of Parker Brothers, which wanted the domain name www.clue.com taken from a computing firm because of the company's long-standing board game of the same name.

However, Clue Computing fought the attack and won because there was no "bad faith" involved.

"Obviously nobody is going to confuse a board game with a computing company," explains Jones. "So Clue Computing had every right to use www.clue.com to describe its business. You just can't bump somebody out of a domain name that they also have a legitimate claim to."

Nevertheless, if you're sure an appeal to ICANN will help you snare your trademarked domain name from a cyberpirate, the process for filing a complaint is relatively elementary and does not impede any court action you may take outside of it.

Complaints must be submitted to ICANN in hard copy and electronic form and address a variety of points. The party accused of cyberpirating is given time to respond and a panel is then seated to rule on the matter.

Meanwhile, the fees must be paid within 10 days of registering the complaint with ICANN or the case will be withdrawn. Detailed information about the entire process can be found at www.icann.org.

The only limitation of the dispute resolution policy, it seems, is the fact that those who file a complaint cannot seek monetary damages for the actions of the cybersquatter. For that, a company must turn to the federal anticybersquatting statute and set a date in court, a process that will undoubtedly take much longer and cost more money, but one that also allows damage claims to scale as high as $100,000. How to reach: Hahn Loeser & Parks LLP, (216) 621-0150 or www.hahnlaw.com

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:54

Rebuilding a business

Two years ago, J. William Melsop led a management buyout of the Austin Co. with more than 20 other managers, hoping the acquisition could be paid off within three years.

The team put its own personal resources on the line to purchase the Austin Co., banking on the fact that its leadership would inspire a dramatic transformation of the company in a short period of time. The level of success the new management achieved within the first 19 months following the buyout surpassed even its own expectations.

Seven months after the deal was inked, the architectural engineering firm paid off the entire acquisition cost. Today, the company is debt free, with a net worth of $15 million and investment capital of $13 million.

Melsop, chairman and CEO of Austin Holdings Inc., attributes the company’s quick success to good management, a steady market and two multimillion dollar contracts which provided extra financial punch. But the company’s biggest achievement the past 24 months has been paying off the acquisition in such a short period.

“We are debt free and have a very strong balance sheet,” says Melsop. “That gives us a lot of confidence.”

The extraordinary success of Austin Holdings was led by Melsop; Vice President and COO Patrick B. Flanagan; and Vice President and CFO M. Glenn Hobratschk.

In April of 1997, Melsop — who had been employed by Austin Holdings since 1967 — sought partners for a management buyout of the troubled company. A month later, he had nearly two dozen partners and bank financing that would allow the acquisition cost to be paid over a five-year period. The new management had plans from the beginning to take care of that debt as early as possible.

“We invited 20 other people to participate in the purchasing group and we all invested our funds for a down payment,” says Melsop. “When we set up the financing, we were pretty confident we could pay the debt in three years. The worst thing for a company is not being able to meet your financial obligations.”

Soon after the company officially changed hands in May 1997, Melsop and his fellow managers took the first steps in what would ultimately become a dramatic turnaround for the company. The first order of business was to rejuvenate enthusiasm in the 120-year-old firm that had long suffered from a large corporate culture that hindered individual creativity.

Management worked to instill the belief in employees that the company was not as successful as it could be given the industry’s healthy market. Soon after the buyout, new business was booked, existing contracts fulfilled and unneeded company assets sold off in an effort to streamline the operation.

Austin Holdings, which builds projects for aerospace, pharmaceutical and other technical industries, then received two multimillion dollar contracts that provided an enormous boost to the company’s finances. The firm received a $300 million contract from Boeing to work on the Delta 4 rocket project in Decatur, Ala., and a $275 million contract to serve as construction manager for a Lucent Technologies project in Chicago.

Those multimillion dollar contracts and a steady market were key factors in allowing the company to pay the acquisition debt so quickly.

“In addition to the two large jobs, we’ve gotten our normal workload,” Melsop says. “Our business is cyclical and we are at the top of that cycle right now.”

Attempts by management to rejuvenate the company and snare a bigger portion of the market had paid off well by the end of 1998. Shareholder equity tripled between the acquisition date and the end of 1998.

Austin Holdings employs about 1,350 people, with 600 working at its Cleveland Heights office and 700 others working in the field.

Judge’s comments: “It was inspiring to see the president, who came on board 30 years prior with the dreams and hopes of one day being a part owner and president. He never lost sight or focus of that vision. And as the company was bought and sold several times, he emerged as an owner and a president. It’s a great example of goals focus and perseverance.” Martin Tarr