David Lansaw helps orchestrate the financing deals bank officials write off as too risky to handle by themselves.
As a manger of business finance for the Greater Cleveland Growth Association, business owners routinely call upon him to help line up the government loans needed for building and expansion.
When it comes to securing the money to keep up with the physical needs of a growing company, Lansaw says there is no standard formula that breeds success. Much of it depends upon the industry, a companys balance sheet and how much money business owners need to meet their goals.
The journeys beginning, however, is always the same.
The first step for a company, before they start looking for financing, is to identify what their project costs are, how much they need and what they are going to use it for, he says. Most companies know by the time they get to us what the capacities of their current facilities are and whether it can be expanded to meet their needs or not. In general, companies only want to move if they have to.
The rest is a matter of shopping around for the most attractive deal that will take the least toll on your companys finances. Here are a few common funding methods to consider when setting out to borrow money for your business expansion needs:
The U.S. Small Business Administration 504 and Ohio Regional 166 loans are for business owners who want to expand but cannot handle the financial burden of traditional borrowing. Usually in these cases, there is some problem, such as cash flow or a risky industry, that keeps banks from handling the loan by themselves.
Oftentimes, the deals we get involved in are deals where there is some element of risk that the bank is not comfortable with and they want to spread the risk around a little bit, Lansaw explains. Maybe the company hasnt been profitable or maybe there is a seasonal issue or maybe the company is in a risky industry like restaurants or hospitality.
SBA 504 loans require business owners to put in 10 percent equity instead of the 15 or 20 percent banks generally require. The business owners bank pitches in 50 percent and the SBA handles the remaining 40 percent. Ohio 166 loans are similar, but are offered only to manufacturing companies.
The benefit of both types of loan is the ability of business owners to stretch out loan repayment over a longer period of time with a fixed interest rate and a lower down payment. There are small one-time fees, but many find the financial flexibility well worth it.
Some cities also offer low-interest loans to business owners in exchange for their local investment. For example, the city of Cleveland offers a host of programs for business owners who want to contribute to the redevelopment of certain portions of the city.
But remember that government programs take time. Lansaw says the Growth Association generally needs 30 to 60 days to do its share of the work on federal or state loan programs. Meanwhile, loans through city-sponsored programs can take up to four months to approve since they require a city council vote.
Lansaw says that ideally, business owners should start trying to set up financing six to 12 months prior to a project. That always starts with a visit to a bank.
Traditional bank loans
The advantages of dealing only with a bank are the speed and general anonymity with which business loans are awarded. Government loans are financed with public money, so loans are a matter of public record, a prospect that may not sit well with business owners who want to keep news of their borrowing under wraps.
But the bigger advantage of dealing directly with a bank is that loan requests are processed promptly.
What we try to do is give them a turnaround of 24 hours or less on their request, says Lisa Rucker, a vice president at National City Bank. If its real estate, that would be upon the condition that it appraises correctly and there are no environmental problems.
What do you need before you sit down with your banker and talk numbers? Rucker suggests bringing your personal financial statement and tax returns from the past two years, as well as business tax returns for the past two years and revenue projections.
When a loan request tops $750,000, Rucker says people normally have their tax accountant draft an audited statement that categorizes assets, expenses and liabilities.
However, if your bank does not want to cover a loan by itself, your banker should be able to point you in the direction of one of several different government programs available to help snare the financing. Many banks focus on attracting small business borrowers and have a comprehensive knowledge of government programs.
Banks theoretically should know or have a good idea that there is a savings plan out there available through another government agency, whether it be the SBA or the city of Cleveland, says Larry Kenny, assistant vice president of Small Business Services for KeyBank. Its always good to start with your banker.
Nontraditional lending has taken a bad rap, mostly from unscrupulous residential lenders, but is a proven success in the commercial arena where business owners can find more flexibility when it comes time to juggle cash flow. Unlike banks, which generally approve or veto loan applications based on one set of criteria, nontraditional lending firms routinely shop a businesss loan needs around to more than two dozen business lenders, which decide to either invest in a company or pass on it.
Its very creative. It is, in a lot of cases, very risky (to the lender), says Kirsten M. Grahovac, vice president of Cleveland-based CE Financial Inc. There are a lot of people putting a lot of faith into a company.
Although some business owners may be initially wary of nontraditional lenders, Grahovac says the programs are not just for those with credit problems. In some situations, business owners can find investors who are more willing to customize loan deals to meet a companys individual needs.
More than anything, people should know there are other options. It doesnt ever hurt to call somebody and explore as many opportunities as they can, she says. Especially for a company trying to expand. They should know all of their options before they make a move.
Paying up front
Paying expansion costs up front is great, but something that few companies can do. However, National Citys Rucker says there may be certain tax benefits to financing at least part of your expansion costs. She advises business owners with enough cash to pay up front to check with their accountant before plunking down the money.
You and your tax accountant discuss how you want to purchase this building, whether you want to purchase it in the corporate name, whether you want to purchase it individually or whether you want to set up a limited liability company, says Rucker.
We tell (business owners) to tell us how they want to set up the entity.
Jim Vickers (firstname.lastname@example.org) is an associate editor at SBN
He saw first hand the struggle associated with handing off the family business and found that sloppy succession planning by one generation almost always led to problems for the next.
Today, 10 years after dropping his law practice in favor of family business consulting, Levan half-jokingly refers to himself as a recovering lawyer and has written a book titled The Survival Guide for Business Families. It has struck a chord with many business owners, who Levan says have told him that, at times, they see a little too much of themselves in his characters.
Its no family in particular, but its every family, he says of his account of a family business facing change. Many people whove read the book say, Youve been reading my mail.
Later this month, Levan will travel to Cleveland from his home base of North Carolina to share advice with law and business students at Cleveland State University. In the meantime, he offers his take on four common mistakes business owners make when it comes to planning for the future.
Levan says members of the senior generation should sit down in their mid-50s and start seriously thinking about the future of the family business so the process is not rushed.
They need to talk about it as a family and need to plan while all of the players are healthy and functional, says Levan. The worst thing that can happen is that the business leader dies or becomes disabled suddenly, and with all the grief and anxiety, they have to worry about the business.
The only thing worse than putting off drafting a succession plan is avoiding the process altogether. Levan has seen many people simply ignore the matter until they can no longer escape its reality, which is never good for anyone involved.
They are concerned about creating unpleasant conflict, explains Levan. Its human nature that if it isnt banging on your door, leave it alone, maybe it will go away. These are not the kinds of things that will go away.
3. Sticking to the numbers
Too often, Levan says, people put more weight on the accounting side of the process than on the personal side.
We recommend that it be intergenerational and include the people in the business as well as the people outside of the business and the spouses and children at least 18 and over, he says. Now, you dont do this all at once, but its very, very important that the family communicate.
4. Misjudging the challenge
Just because you can get orders to your customers on time does not mean you can easily tackle the challenge of planning the future of your business. Levan says business owners dont realize that dealing with the different personalities within a family is much different than leading a successful business.
The skills to get the family through transition can be different from the skills necessary to get the stuff out the door, make a profit and run the business day to day.
How to reach: Gerald Levan, www.levanco.com
Jim Vickers (email@example.com) is an associate editor at SBN.
Presidential elections bring out lofty claims and quick gimmicks in the battle for the hearts and minds of American voters. Toss in a second-term president in dire need of leaving some sort of legacy behind and the next seven months are bound to get interesting.
One issue likely to be addressed before November is President Clintons proposal that states pay parents while they spend time away from work following the birth or adoption of a child. It is undoubtedly a political slam-dunk with voters, but Clintons idea of how to pay for this expansion of the Family Medical Leave Act is whats making business owners nervous.
Last May, Clinton suggested states dig into their unemployment trust funds and ordered the U.S. Department of Labor to prepare federal legislation enabling them to do so. Opponents argue that the money should be used solely to help people who are out of work, but want to work. Proponents counter by saying the booming economy has led to unemployment funds brimming with cash.
Spending that money may work in the short term, but observers such as Richard Millisor, an attorney with Cleveland-based Millisor & Nobil Co. L.P.A., believe an economic downturn could quickly put added stress on those funds, spelling increases in unemployment insurance payments for business owners.
Although claims have been made that rates could jump as much as 20 percent, there is some evidence that Ohios $2 billion could be burned through fairly quickly. Millisor estimates that 160,000 newborn births and adoptions each year could end up costing Ohio as much as $660 million if the state buys into Clintons plan.
Although no timetable has been set for the proposal to go from bill to law, business owners are wasting no time assembling organized opposition. The National Association of Manufacturers is on the record as sharply opposed to the idea. Millisor says lawsuits challenging whatever Congress legislates wont be far behind.
Millisor suggests business owners who want to get involved contact their trade associations or their congressmen, who have the power to kill the proposal outright but may fear appearing anti-family if they do so. Even if the measure makes it past Congress, Millisor expects Ohio will be wary of it, at least at first.
I would be very surprised if the Ohio Bureau of Employment Services would go for this, he says. I think you will very well see one or two liberal states adopt this. Then well see what happens.
How to reach: Millisor & Nobil, (440) 717-1515
Jim Vickers (firstname.lastname@example.org) is an associate editor at SBN.
When Shannon DSidocky needed to pique curiosity in a new thrill ride called the Time Warp, she sent television reporters and newspaper writers across Northeast Ohio blue and white cylindrical time capsules with an invitation to Geauga Lakes annual media day event tucked inside each one.
Ive sent out press releases and Ive sent out invitations, says DSidocky, a public relations manager with the amusement park, who swears by this brand of dimensional marketing to announce the parks new rides and attractions. Ive realized that you really need to send something thats going to grab their attention.
The idea behind dropping peculiar trinkets in the mail to tout a new product or service is simple. Distinct packages usually dont get weeded out by gatekeepers charged with sifting out the days junk mail. More often than not, they end up being delivered directly to the person you want to reach.
Twinsburg-based Traymore Marketing has focused on dimensional marketing for the past several years. The firm helped Geauga Lake on its Time Warp campaign and is working with the amusement park under its new Six Flags Ohio banner. Rob Felber, president of Traymore Marketing, points out that dimensional marketing may cost a little more than traditional paper mailings, but its a much more reliable way to get your message to decision makers.
Here are four tips he offers anyone considering a dimensional marketing campaign of their own:
Assembling a dimensional marketing campaign requires time to work out the logistics of your mail strategy, especially if you intend to send something in an odd-shaped container.
If youre looking to introduce a new product in April, youd better be thinking in December or January what you are going to do and how you are going to do it, says Felber. It can take quite a long time to put these things together.
Make your message clear
Know what you hope to achieve from your investment and make sure that message is communicated clearly by the package you send.
Ask yourself what you want the recipient to do, explains Felber. Do you want somebody to attend a trade show? Do you want someone to buy your product? Or do you want someone to simply feel good about your company?
Assemble a list of prospects
Your list of names and addresses is the most critical part of the process. If your address list is old or incorrect, your credibility will be diminished from the start.
The list is very, very critical, says Felber. Sometimes it comes from a client database and thats something you have to have a good handle on. Ask yourself whos on the list, why are they on the list and are the addresses good.
Decide what to send
The item you send doesnt have to be extravagant, but should somehow tie into the theme of your message and stand out from the onslaught of mail decision-makers receive on any given day. If your prospect information is very good, personalizing the promotional items can be even more powerful.
If it has their name on it, theyre not going to let it go, explains Felber. It just adds a whole other degree of permanence to your dimensional campaign.
How to reach: Traymore Marketing, (330) 963-3664
Jim Vickers (email@example.com) is an associate editor at SBN.
Three years ago, executives at The Geon Co. were faced with a difficult decision.
It was obvious that the plastics industry the company had dominated for years under the B.F. Goodrich banner, and later on its own after a 1993 spin-off, was now in a highly competitive commodity market
Geon was still a leader, but the question was whether it wanted to concentrate on this industry rat race or take the company in a different direction, focusing on innovation rather than perpetual cost cutting.
Its always easier and less disruptive to keep on doing what youre doing, CEO Thomas Waltermire recently told a crowd at a Cleveland Engineering Society Breakfast forum, where he discussed his companys transformation. But, we knew if we succeeded, our rewards would justify the risks.
Ultimately, company executives decided to take that road less traveled and today have impressive results to show for it. Geons revenue last year topped $1.4 billion. Add to that the sales generated by the companys six joint ventures and that figure is boosted to about $2 billion.
Revenue has doubled in three years, says Waltermire. Our goal is to more than double it again in the next few years.
Those results, however, did not come without some critical decisions and capital investments to reposition the company. Here are some of the steps that Waltermire believes made a difference.
Focus your efforts
To escape from the commodity-based resins business, Geon executives struck a joint venture with Dallas-based Oxy Vinyl LLC, a company that also produces the same basic plastic material. The 1998 move allowed Geon workers to spend more time focusing on the creation of new and specialized plastic compounds.
The strategy had become low-cost production, Waltermire says, referring to Geons commodity-driven days before the Oxy Vinyl deal. Innovation was secondary.
Expand your reach
Geon acquired eight businesses during the past three years that have not only complemented its existing product line, but also expanded its geographic scope and doubled its size.
We need to keep broadening our product lines and expand geographically, says Waltermire. We target companies that fit closely into our network.
Invest in new technology
Geon executives not only moved their business to the Web, but positioned the company as an industry e-commerce leader. They launched www.getgeon.com, an Amazon.com of sorts for the plastic compounds industry, which allows Geon customers to order products day or night, receive instant confirmation on their requests and check the status of each purchase.
Www.pvcsupply.com is a separate site Geon launched in 1998 to link worldwide buyers to surplus PVC compounds.
Reward your work force
Waltermire understands the importance of taking care of his workers. The steady string of acquisitions the past three years has increased the companys number of employees by two-thirds, but hasnt kept Waltermire and his executive team from doling out financial incentives for employees from top to bottom who produce quality work.
I believe everyone at every level who contributes in Geons success should share in the rewards, he says.
How to reach: The Geon Co., www.geon.com
Jim Vickers (firstname.lastname@example.org) is an associate editor at SBN.
It was a call that Bill Flaherty never really expected.
After nearly two years of inundating Chicago-based McDonald’s Corp. with information about his toy company, a representative of the fast food giant finally called him back. The company had received his mailings and the representative wanted to talk.
“It’s kind of like a kid’s dream,” says Flaherty, president of Cleveland-based Toy Craze, a privately-held company. “Every toy company probably dreams of having their toy in a Happy Meal, just like every kid wants to be president. Well, some kids get to be president.”
Although usually a slot reserved for toys related to movie tie-ins or perennial favorites such as Beanie Babies, Flaherty’s Crazy Bones line of collectible game pieces, with names like “Eggy,” “Speedy” and “Menace,” ultimately won a place in McDonald’s 2000 schedule of Happy Meal toys. For those who doubt the power of such a deal, consider the fact that the fast food chain sells between 50 and 70 million Happy Meals during an average three- to four-week run.
Then there is the money spent on television advertisements and the 13 million to 14 million people who walk into a McDonald’s restaurant in the United States each day and see advertisements for the toys.
Flaherty, who has 30 people on his payroll, still seems a little boggled. Sitting at a conference room table that is surrounded by Crazy Bones-related merchandise ranging from baseball caps to boxer shorts, Flaherty is careful not to let the stellar success of fellow Happy Meal toy brands such as Beanie Babies and Furbies go to his head.
“I’m not sure that kids don’t want a Happy Meal because of the toy that’s in it or they do want a Happy Meal because of the toy that’s in it,” he says. “The best you can hope for with a product like ours is they may get it the first time and not know what it is. But, they start playing with it and their friends get some, then they go to our Web site and say, ‘This is pretty cool,’ and that drives them back.”
No matter what the outcome, just getting to this stage has been an overwhelming victory for a 3-year-old company, which is admittedly in a fad market and does not have the money to invest in flashy television advertising campaigns. Instead, Toy Craze is living proof that a good product, the steady construction of a recognizable brand name and a fair amount of hard work can net big results.
“I wish I could say there’s some magic to what we do,” Flaherty says. “There is magic, but it’s the fact that we’re committed to it and we stick to it and we do it ... It would be much easier to run a zillion dollars worth of TV, but that’s not what makes us what we are and it’s really not in the cards.
“We’re a small company, but we’re doing well, we’re having fun and it seems to be working.”
Catching the eye of McDonald’s executives has been one of Flaherty’s goals since he founded Toy Craze in 1997. He had always believed the social and game-based nature of his product, an extension of traditional games such as jacks and marbles, was a natural fit for selection as a Happy Meal toy.
When the “Crazy Bones” product line was officially launched in February 1998, he dropped McDonald’s a line, just to put himself on the map with the fast food giant.
“We thought it was the kind of thing that would translate well into a Happy Meal because you could use it right there in the restaurant,” Flaherty says. “But the problem was, it wasn’t movie based and there wasn’t a lot of other ‘umph’ behind it.”
Toy Craze is nowhere near in the same league as industry heavyweights such as Hasbro and Mattel, which routinely throw bushels of marketing dollars toward television advertising campaigns to build product awareness. Flaherty instead relies on a small fleet of vans, which are driven to cities with one goal that never changes: Find children, give them the product and teach them how to play.
He knew the line would be a hit when he licensed the concept from Magic Box International, a partial owner of Toy Craze, because more than 400 million packs of Crazy Bones had already been sold in Europe.
The retail environment in the United States, however, is not the same as in Europe, where most children don’t have to go more than one or two blocks to buy a pack of Crazy Bones. When Flaherty had to choose how to position the product, which costs about $1.99 for a package of four game pieces, he skipped the convenience store route in favor of stores including Zany Brainy and Toys R Us.
All the while, he had his staff periodically mail information to McDonald’s, and waited for what could be a monumental break for the company, if it ever came.
“It was simply a matter of getting it in front of them without harassing them,” Flaherty explains of his dealings with McDonald’s. “We just sent some reminders that this is what we’re doing and they should keep an eye on us. I’m sure they probably have hundreds of submissions every year, and you don’t know if you’re connecting or not connecting.
“Then, one day they call you and say this may have some potential.”
Early tests of the Crazy Bones product in McDonald’s restaurants in Chicago showed it testing higher than Beanie Babies did on an individual store basis.
That was good news for Toy Craze, but still far from a signed deal with the giant of fast food. The research phase is just one of many steps in the process, and from the day of that initial phone call from McDonald’s, it was more than 10 months before Flaherty had an inked contract in his hands.
“You have to go through the screening processes with McDonald’s,” he explains. “You can be discarded right away. We got through the first wave and, just based off the process, I believe there are probably two or three layers it goes through, and then there’s a creative element that says how does this fit into the Happy Meal format.”
Those steps only lead to the quarterly meeting of McDonald’s owners and operators from across the U.S. It is at these events that decisions about Happy Meals and other product offerings are made, and it was at this meeting that Flaherty’s 10 months of waiting finally came to an end.
“It’s one of those situations where you pinch yourself,” he says. “You get a sense, you get a grin, and hopefully it turns into a smile, and we were very fortunate that it came down this way.”
Between now and October, Flaherty’s crew of toy designers will work very closely with McDonald’s designers to create the look of both the Crazy Bones toys and the Happy Meal boxes.
Design teams from both sides meet regularly and talk several times a week over the phone.
“Nobody makes their own product for McDonald’s,” explains Flaherty. “Nobody does, whether you’re Mattel, Hasbro or Toy Craze. They license your brand and you then have approval through the entire process ... We pick the color, we pick the shapes, we pick what will go in the bag ... It’s a very good partnership. It’s very enlightening.”
As the year of excitement winds down toward October, Flaherty says he truly has no idea what to expect once his company’s toys hit the national spotlight. Toy Craze has already been a fast success in its first two full years of existence, generating sales of $3 million in 1998 and $17 million in 1999. This year, Flaherty expects that figure to at least double, and that’s not even taking into account whatever boost the brand receives from its affiliation with McDonald’s.
If past performance is any indication, the payoff for Toy Craze from its association with the Happy Meal will be very big.
“Obviously, the effect of the Happy Meal is a wildcard that you just don’t really know,” Flaherty says. “The marketing muscle that McDonald’s brings to your brand is enormous. You have incredibly high rates of targeted television running through the entire thing, so the brand Crazy Bones will be in everybody’s face for the entire time ... Obviously, they can take your brand to the next level, anybody’s brand, whether you’re new or established.
“They have the kind of marketing clout that can take you up a dozen notches.”
How to reach: Toy Craze, (216) 595-0807
Jim Vickers (email@example.com) is an associate editor at SBN.
Roll the bonesThe genius behind the tiny 1-inch tall Crazy Bones characters is that they are used to play a variety of kid-proven games similar to the ones children have played in schoolyards for years.
The difference is the hundreds of collectible game pieces with names including “Eggy” and “Funny Bone” and “Fang,” which drive kids back to the store with allowance money in hand to add to their collection.
If you’ve made it this far, curiosity has likely gotten the best of you and you’re wondering exactly what games you can play. For a full explanation, check out the “Crazy Bones Official Handbook and Sticker Collecting Guide,” but here’s a quick rundown on how to play a couple popular games.
The traditional game
1. Each player takes turns throwing or rolling five Crazy Bones at the same time.
2. You score points depending on how your Crazy Bones land. Standing up = 5 points, on its side = 2 points, face up = 1 point and face down = 0 points.
3. The winner is the person who scores the most points after three throws.
On the line
1. Draw a straight line on the ground or use a line that is already there.
2. Each player throws a Crazy Bone.
3. The player whose Crazy Bones end up closest to the line is the winner.
4. The game can go on for as long as you like as long as everyone throws the same number of times.
Sure, they’re simple, but so were marbles and jacks. To find out more about Crazy Bones, check out www.crazybones.com. In the meantime, just remember that “Eggy” is trading 13 to 1 in schoolyards across the country.
The National Association of College Stores has not had an employee lost-time claim in the past 12 months.
HR Manager Amy Petrus chalks that up to the Oberlin-based business’s return-to-work program, which incorporates light duty to cut down on lost time, and a nurse who visits once a week to check up on occupational injuries.
It is part of a safety program sponsored by the Bureau of Workers’ Compensation and includes written policies, a first-aid team and a safety committee that meets quarterly.
“We discuss the safety issues that are out there,” Petrus explains. “We have a warehouse of around 100 employees who are dealing with lifting and equipment, so we discuss safety considerations, as well as education.”
NACS is an example of a business that has put great care into drafting its employee safety plan, but Roger Oviatt, coordinator of the American Red Cross Business and Industry Council for Emergency Planning and Preparedness (BICEP), says the level of preparation often drops in proportion to a company’s size.
“Small businesses are so busy just surviving they don’t think they have time to deal with safety plans,” says Oviatt. “They are also often the ones who can least afford to not have these plans in place because they don’t have the buffer a larger company does.”
More than 200 local companies, schools and organizations have heeded Oviatt’s message and signed on with the Cleveland Chapter’s BICEP program. Some saw firsthand the importance of being prepared late last year when the north end of East 9th Street turned into a churning river following a water main break.
For those business owners who are still on the fence, Oviatt offers a few suggestions on how to make sure you are doing all you can to create a safe environment for your workers.
In the HR white paper survey conducted by the Employers Resource Council for SBN, nearly 30 percent of respondents said that their companies do not have written safety guidelines. Many of those were light industry or office-based companies, but Oviatt says no matter what line of business you are in, safety guidelines are always a good idea.
For manufacturing firms or other types of businesses in which there is a potential for injury, employee awareness of safety measures is an absolute necessity.
“It is imperative in a manufacturing facility or a service industry like tree care that your employees know exactly what they are going to do if somebody gets injured,” he says. “I have a son who works in the tree care industry, and the company brings the employees in early, sits them down and goes through safety procedures.”
Even if your business is one in which there is not a threat of employees being injured by machinery or chemicals, Oviatt recommends making sure there are at least a few employees who have first aid and CPR training in case of an on-the-job emergency. Also make sure your workers know the appropriate safety procedures in the event of a tornado, fire or building evacuation.
Less than one-fourth of those who responded to the HR white paper survey reported their companies had specific disaster recovery measures in place to minimize business downtime in the event of an emergency. Many business owners neglect drafting specific contingency plans because they have purchased insurance to aid the company in the event of a business interruption.
Although insurance seems to be a solid fix in the short term, Oviatt says the speed with which a business can recover from a disaster is directly linked to its chances of survival afterward.
“The thing that kills the company is that downtime,” he says. “Insurance isn’t going to address this. It may pay your claims, but when you open your door, you may not have any market share left because all of your customers have gone to competitors.
“Meanwhile, you’ve lost some of your key employees, because they aren’t going to stick around waiting to see whether or not you’re going to open your doors.”
Drafting a plan
For business owners interested in creating a comprehensive safety plan, Oviatt offers a few pieces of advice. First, concentrate on immediate issues of safety, such as minimizing employee injury and creating a safe work environment. After that, tackle the other issues. Don’t try to take on too much too fast, or you’ll likely end up overwhelmed and frustrated and much less likely to follow through.
“Take the time to do it, and don’t bite off more than you can chew,” Oviatt says. “That’s what I tell most companies. Take it bit by bit. Take baby steps before you start to run.
“If you do that, you’ll get to the end eventually.”
How to reach: NACS Inc., (440) 775-7777; The Cleveland Chapter of the American Red Cross, (216) 431-3284
Jim Vickers (firstname.lastname@example.org) is an associate editor at SBN.
More than 1,000 people flocked to Mayfield Heights late last fall when Cisco Systems CEO John Chambers flew into town for a Northeast Ohio appearance at which he played the part of a new economy evangelist, urging all in attendance to merge Internet initiatives with their businesses as soon as possible.
Its hard to argue with Chambers exuberance. During the past 15 years, Cisco Systems has blossomed into a $15 billion company and acquired dozens of smaller businesses, all the while using Internet initiatives to help reach a formerly unthinkable rate of growth. And, although it may not be surprising that a company that sells products crucial to the existence of the Web is such a staunch proponent of developing Internet initiatives for your business, the numbers are difficult to ignore.
First, 87 percent of Ciscos annual revenue is derived from purchases made on the Web. That breaks down to about a cool $38 million a day. Then theres the fact that Cisco has acquired 35 businesses in the past five years and integrated them seamlessly into the company with the help of a strong electronic network.
Paul Wilson, consulting solutions manager for Ciscos Internet Business Solutions Group, says business owners should not be intimidated by the overwhelming size of Cisco when trying to figure out how to introduce similar Internet initiatives into their own companies. The owner of any type of business, he says, can look at how Cisco has used the Net during the past 10 years and see how it could spur drastic changes in the efficiency of their own organizations.
Really, its just fundamentals, basic business fundamentals, and being able to understand the changes the Internet brings, he says. It is shifting the information power from the seller to the buyer. The consumer has more information and power to switch and change than theyve ever had before.
Whether youre big or small, you have to understand that to leverage that.
In the early 1990s, Cisco executives set a goal of growing the company by 70 percent each year. Before the dawn of the Internet, such lofty goals would have required the company to hire more than 700 engineers each year just to handle the technical calls to the companys customer service center.
Besides the sheer expense of such rampant hiring, there were simply not enough qualified candidates available, even if the company had wanted to hire such a large number of people.
Executives wanted a self service way for customers to deal with technical problems, which would lessen the volume of calls to Ciscos customer service center. They settled on printing all of the technical bugs online, where customers could also download small programs to fix the problem they were experiencing.
It did two things for us, explains Wilson. It allowed customers to serve themselves 24 hours a day, seven days a week, and also created cost efficiencies for us through not having to hire all these engineers. And it also increased customers satisfaction, because the customers werent troubleshooting the problem for two weeks before they found out there was a bug fix for it.
Wilson describes Cisco Systems as an information democracy, in which the companys 6,000 employees can freely share information with each other via a corporate intranet.
It is important to have a very knowledgeable work force, because the real asset young companies are going to have is information, he explains. The ability to have empowered, knowledgeable employees reduces overhead, makes employees very efficient and provides for a constant learning organization.
But, it is not just the speed at which information can be shared that makes the difference for Cisco. The company has also developed a variety of e-HR initiatives, which cuts down on the time-consuming, yet necessary, paperwork that accompanies any new hire.
Benefit enrollments are done online, a new hire survival guide is posted on the corporate intranet, and employees can apply for a cellular phone or pager, or simply update their information in the company directory with a click of the mouse.
Supply chain management
The speed at which Cisco Systems can move has a lot to do with the way the companys supply chain is organized. First, more than 55 percent of its high-tech products are outsourced to more than 20 manufacturing firms. The arrangement allows Cisco to focus on its core competencies of design and innovation.
Meanwhile, Cisco ensures quality by placing computer pods at the end of suppliers assembly lines to ensure each product meets the companys standards for performance.
Weve created a highly networked organization to our suppliers, and we use security as an enabler rather than a barrier, explains Wilson. We allow suppliers to have direct access to our demand forecast, which keeps their inventory down, and they can build just-in-time inventories.
It also shortens the time for new product introductions.
Its not exactly news that simply selling your product online is not going to be enough to drive consumers to your door. But Cisco was way ahead of the curve when it came to researching consumer tastes and designing a site that would be the most appealing to the highest number of users.
In fact, it has a separate customer advocacy arm that essentially allows consumers to help design its e-commerce initiatives by beta testing with at least 10 large clients before rolling out any new version.
We would test that with some of our larger customers first and then, as we roll out an initiative, we monitor the use of that and try to analyze why we arent getting the participation rate we want, explains Wilson. We then go back to our customers again and revise our strategy based around input from them. Its really just keeping your fingers on the pulse of the customer before, during and after you roll out an initiative.
Customers overwhelmingly agreed that the ability to track their orders was one of the most important functions of an e-commerce site, so Cisco devised a way for them to go into the companys information technology system, pull out their Federal Express tracking label and check the status of their order.
We got very, very high customer satisfaction ratings from that, says Wilson. It also saved us a bunch of headcount in our call centers by just taking that call volume completely out.
If youre still wondering what all of this means for your company, Wilson suggests a visit to www.netreadiness.com. The Cisco Systems site asks a series of questions that allows business owners to get a feel for the Internet-readiness of not only their companies, but of themselves.
It asks some very tough questions, he says. The questions alone stimulate enough change in an organization to really be very successful. How to reach: Cisco Systems, www.ciscosystems.com
Jim Vickers (email@example.com) is an associate editor at SBN.
Ginny Hridel knows the HR shuffle all too well. Along with handling all the advertising and promotions for Chagrin Falls-based Brewster & Stroud, she has been the companys human resources manager for the better part of four years.
Lately, the family-owned furniture business has made some changes, with Hridel and the furniture retailers controller now splitting the chores as way to create a more formalized HR department.
But even after rewriting the employee handbook to address frequently asked questions, centralizing employee records at one of the companys two Chagrin Falls locations and providing a number employees can call with HR questions, Hridel says supplying the personal touch is still a great deal of work.
I find that the biggest challenge is when we do have to do (employee) meetings, says Hridel, who must field questions from the companys 55 employees not only at the Chagrin Falls facilities, but also at its Westlake showroom. I think our communication levels are very strong, but in a lot of cases, people dont think to ask questions until they see you. I think its important to be sure, as an individual, youre visible in all three locations.
Brewster & Stroud is not unlike other growing companies that have found a need to create more formalized HR processes as their businesses grow. In the HR white paper survey, conducted by the Employers Resource Council for SBN, more than half of the respondents reported their company had some sort of formal HR department, while 43 percent do not. Many of those which do not are smaller manufacturing firms, not unlike Willoughby-based GearTec Inc., which has a small yet solid core of a few dozen workers and no real need for a full-blown HR department.
Turnover is very low, and as far as human resources, I sit down and go through paperwork with people when theyre hired, explains GearTec controller Betty Herowitz. I take care of the employee handbook, and when health insurance comes up for renewal, I work with that.
Other business owners outsource their HR function. It is an industry that has grown annually by 30 percent in recent years, according to Rick Gucwa, executive vice president of The Reserve Networks Human Resource Support Group.
But no matter how you deal with the issue, the bottom line is that if you dont have a knowledgeable person handing your companys HR functions, there is always the possibility of a misstep that could result in financial losses. And in these litigious times, Gucwa says, many small business owners discover that the hard way.
Small companies absolutely need various HR functions, he says. The problem is, as a company begins in infancy and grows and grows, human resources tends to take a back seat to sales and everything else. And thats one of the sad things, because a lot of times that will tend to come back and catch up with them if something bad happens.
So how can you be sure you are not exposing your company to unnecessary legal risks? Gucwa suggests you start by taking a hard look at the employee handbook. If you dont have one, youd better start drafting one.
Thats a good first step when going down the HR path, says Gucwa. It forces you to address the issues of what are your policies and procedures.
After that, Gucwa says, the next logical step is taking an honest look at who is handling the HR function within your company. In some cases, the company owner or president delegates the responsibility to a trusted employee with no consideration of whether that person is right for the job.
If you feel comfortable with who is managing your HR ship, Gucwa suggests investing in formal training so the person is familiar with federal mandates such as the Americans with Disabilities Act and the Family Medical Leave Act.
In some cases, they dont even know they have to comply and they accidentally do something wrong, says Gucwa. That can end up with some ugly things happening.
How to reach: Brewster & Stroud, (440) 247-3355; GearTec Inc., (440) 953-3900; The Reserves Network, (440) 779-1400
Jim Vickers (firstname.lastname@example.org) is an associate editor at SBN.
William Dorsky’s words take on a solemn tone as he talks about the morning in 1994 when he awoke to discover he could not move his arms or legs.
Although he did not know it at the time, the problem was the result of a rare syndrome that strikes about one in every 100,000 people worldwide.
“My nerves degenerated, then the muscles went and I was flat on my back,” explains Dorsky, who has since recovered. “I just couldn’t move.”
He was rushed to the hospital and later diagnosed with Guillain-Barre Syndrome, a nasty side effect of a viral infection that damages the covering of the nerves that connect the brain and spinal cord to the rest of the body. It would be a nightmarish ordeal for anyone to endure. But never far from Dorsky’s mind was his business and staff of more than 50 employees, who would also be affected by this turn of events.
At the time, his Beachwood-based architecture firm, then known as William Dorsky & Associates, was already a mighty player in the elderly and commercial design markets, not only snaring high-profile projects, but in many ways helping set the tone for the industry. While other business owners may have taken time away from the daily pressures to focus on recovery, Dorsky’s fierce entrepreneurial spirit forced him to persevere, even if that meant taking short naps in his office when the fatigue became too much to handle.
It was during that period that Dorsky did a lot of thinking about his life and the way he had built his business.
“I realized how frail we all are,” Dorsky explains in a deep, friendly voice. “Whether you’re in a car accident, have a heart attack or come down with some strange malady, which in my case cured itself, it made me realize that I needed to build an organization and that I had the people here to do it.”
So after decades as a lone entrepreneur, Dorsky seriously considered taking on partners rather than calling all the shots by himself. The big question was whether he could handle sharing the responsibility for the ultimate success of the firm. What followed was a good deal of soul searching, during which Dorsky asked himself the unavoidable question: “Can I change?”
“I had to think long and hard about whether I was the type of person who could take on partners,” he explains. “It wasn’t that I didn’t think I could do it, but I wondered what it would be like after shooting from the hip for so many years as a sole proprietor. I very much wondered, ‘Is that me?’”
Six years later, the answer is a resounding yes. Dorsky’s moves during the mid 1990s set the stage for a growth phase during the last half of the decade that doubled the company’s work force and led to the opening of a new office in Washington, D.C., to secure the firm’s grasp on East Coast markets.
But reaching that point has hardly been an overnight affair. For Dorsky, it meant changing some long-held beliefs, sharpening his managerial skills and taking a long, hard look at his company. He is the first to point out, however, that he’s never enjoyed his business more than he does today.
Since nearly 85 percent of people diagnosed with Guillain-Barre make a full recovery, Dorsky was not particularly worried about a relapse.
But as the condition reversed itself, he starting looking at his business in a different light.
“I knew I would recover,” he says. “At least that was my frame of mind. It wasn’t a question of if I would get better. I knew I was going to. But I also knew the firm would be better if we made some provisions in case something else happened. The whole ordeal really focused my perspective.”
Dorsky didn’t have to look far when searching for long-time employees to bring on as partners. First, there was his wife, Cornelia C. Hodgson. She was vice president of the firm’s elderly design studio, and had built a reputation as one of the nation’s leading authorities on compassionate design for the elderly. Then there was David Parrish, vice president and director of the firm’s commercial division.
The performance of these two company leaders during the difficult times had impressed Dorsky and convinced him it was indeed the right time to revamp the firm’s management and build a stronger, better company that would benefit everyone.
Then, in 1996, a name change accompanied the transformation occurring inside the company’s walls. For the first time in more than three decades, it was no longer William Dorsky & Associates. Instead, the firm adopted a new moniker, Dorsky Hodgson & Partners Inc.
“I had people really step up,” says Dorsky, who has brought two additional partners on board within the past year. “Once I got into that frame of mind, during four or five months that followed, I decided on partners and made an organization not only for my sake, but the sake of my people.”
Focusing on the elderly and commercial design markets over the years had helped Dorsky Hodgson & Partners grow into a leader in both areas.
One side of the company worked with heavyweight commercial developers like the Simon Group and Developers Diversified; the other focused on designing innovative elderly communities that challenged traditional ideas of what retirement homes should be.
But even with a solid share of the market, competition for projects and talent was fierce. So when the changes in top management at the firm set the table for growth, Dorsky knew he and his new partners had their work cut out for them. Attracting top talent and keeping it was already an important part of the company’s culture, but Dorsky knew they needed to make it more of a focus if they hoped to grow.
“I think our attitude has always been the same,” he says. “It’s just that we realized to grow, we have to invest in our people, and that’s the key. There are a couple ways to invest, and that’s to train them and provide them with an environment that is fun to work in and will support their personal and professional growth.”
Dorsky and his partners continue that practice today through a very aggressive mentoring program that begins the moment new talent comes on board. Employees are encouraged to become involved in one of the firm’s several committees, which range from information technology to design. The interaction facilitates cooperation between workers and allows newer hires to gain experience by naturally striking up relationships with more senior members of the firm with whom they would like to work.
“That way, people can become much more acclimated and actually find their mentor,” explains Hodgson. “It lets people match themselves up and then gives them the encouragement and the resources they need, and then lets the people move on to a different mentor.”
The mentoring even reaches college students who need internship opportunities to pursue a career in architecture. Every Monday, schedules are made that outline which students will visit during the week and what types of projects they need to work on to fulfill university requirements. Inevitably, many interns have found the company culture attractive and signed on with the firm after graduation.
“We’ve established a ladder of growth in the firm,” says Dorsky. “We have taken on a very aggressive mission by mentoring young talent and we’re seeing the fruits of investing in it.”
In any given day, there may be people in Dorsky Hodgson & Partners’ Beachwood office working on designs for projects undertaken by the Fort Lauderdale office Dorsky opened in the early 1970s or the Washington, D.C., branch that opened its doors late last year.
The addition of technology, specifically a Wide Area Network, allows staff architects to work on a wide variety of projects instead of being limited to the ones based out of the Cleveland office.
“There’s no sense having an environment you spend a major portion of your life in if it doesn’t reflect what you want it to be,” says Hodgson. “We’re fortunate enough to have the ability to create it. Then, it’s an atmosphere that attracts other people who feel the same and want to be part of this.”
It is just one example of the diverse work environment Dorsky and his partners are constantly nurturing. Staff architects are not limited to designing for either the elderly or for the commercial arm of the company. Some work several years in one, then switch to the other to stay interested in their work and hone their skills. Dorsky says he tries to deliver on employee requests for different types of experience. If numbers are any indication, the firm’s current staff of 93 seems to indicate that Dorsky and his partners have created a strong and stable batch of loyal workers, which is exactly what they have wanted all along.
“We’re only looking for people who want to grow with us,” he explains. “We don’t profile a job and say we have a position open. We look for talent, then we take what they do well and build a position around them. This way, they feel we’re building a position around them. That’s one of the important things.
“We look for people first and worry about the job description later.”
As for Dorsky, he’s never been happier with the company and shape it’s in.
“I haven’t had as good a time in the 30-some years before than I’m having right now.”
How to reach: Dorsky, Hodgson & Partners, (216) 464-8600
Jim Vickers (email@example.com) is an associate editor at SBN.