Patrick Rodgers

Monday, 22 July 2002 09:53

Healthy, wealthy and wise

At a time in American history when the federal government seems to place more value on spotted owls than on economic growth, more and more local businesses now have something environmentally friendly to cheer about.

Constructing an office using the principles of green design, medical electronics designer and maker Dyna Vox Corp. provided a healthier workplace for its employees, custom-designed its offices for the needs of its staff — and saved money in the process.

“The focus of green design is on employee health and building performance issues,” says Gary Gardner, a principal of Garner+Pope Architects, the firm that reworked Dyna Vox’s 30,000-square-foot office in Birmingham Towers on the South Side. “It involves a variety of decisions designed to inherently improve energy efficiency, indoor air quality and resource conservation.”

According to Gardner, the EPA has designated toxins as one of the top five health hazards American workers face in the workplace. The culprits are VOCs, or volatile organic compounds. Found in vinyl wall covering, stains, paints and adhesives, VOCs over time can contribute to cancer and respiratory ailments.

Gardner+Pope Architects employed a two-pronged strategy to minimize VOCs at Dyna Vox. First, the firm used substitute products that reduce landfill waste as well as the amount of VOCs produced. Cellulose is used instead of fiberglass for sound insulation. Partitions are made from recycled plastic soda bottles. What once was a landfill resident has found a new use and, since it doesn’t deteriorate, gives off no VOCs. Soybean was used as a substitute for wood trim. It looks the same and was finished with a water-based stain.

The other prong of Gardner+Pope’s strategy was to improve the quality of ventilation to remove existing VOCs from the air. The firm utilized a one-room design that keeps VOCs from accumulating in small offices that don’t receive sufficient circulation.

Not every green office is the same, however. Gardner+Pope worked closely with Dyna Vox president Tilden Bennett to create exactly the office he wanted.

“I wanted the office to be open and bright, with window space for everyone,” Bennett says. “The new office accomplished that. Even though the space is open, it’s still quiet.”

Gardner+Pope also took into account the creative environment needed by an electronic design firm.

“I’m pleased with the work flow and people interaction,” Bennett says. “People have more control over their environment. If they need privacy, they have it. If they need to meet in smaller break-out spaces to share information, they can do that, too.”

The office designers also factored in the potential need to change. Instead of forcing their client to redrill to attach phone and computer lines if the company arranged its setup, a power and data wiring system was suspended on the ceiling.

“Operating costs for reconfiguration were reduced by approximately $1.75 per square foot,” Gardner says. “This system enables Dyna Vox to reconfigure offices much faster.”

What’s the bottom line? Unlike most environmentally motivated improvements, green design costs the customer no more to institute than a conventional one, unless, of course, you want your rainwater collected and used in your septic system or geothermal heating introduced to your office. In fact, you’re more likely to save money.

Says Gardner: “By utilizing an intelligent combination of open and private offices, we were able to increase occupancy of the space by 20 percent, reducing their overall space requirements by 6,000 square feet, which will save them about $120,000 per year.”

Monday, 22 July 2002 09:52

Logistical nightmares

Want to lose money in business faster than you could in a casino? Fail to deliver a part to, for example, a Chrysler plant in Delaware, which causes a line shutdown, and the meter starts running to the tune of $38,000 a minute.

Not every late delivery or jackknifed tractor trailer results in such staggering losses, but how you handle the shipment of your product to market can prove costly in time and money — especially if you don’t set things up efficiently or hire someone to do it for you. Consider the following experience:

Vince Santelmo, an onsite manager for Pittsburgh Logistics Systems Inc., which manages shipping logistics for other companies, remembers an inventory nightmare he encountered when his company stepped in to overhaul the shipping and supply chain performance of a large steel producer.

When Santelmo arrived, a dock intended to hold 2,500 to 3,000 tons of steel coil was laden with 7,000 to 8,000 tons.

Each day, the company had to allocate workers and devote capital to move excess coil to warehouse space, which they were forced to rent to make room for new product coming off the line. Inventory had become inundation.

Pittsburgh Logistics is a third party logistics company (3PL in industry jargon), a firm specializing in the cost-effective coordination and administration of all transportation functions necessary to firms that ship product to distributors or customers. They may do as little as consult for companies which decide to run the shipping functions — and assume the liabilities — themselves.

Or they may take over and move into a company’s transportation and warehouse facilities to directly oversee day-to-day operations.

Two types of 3PLs exist: asset based and nonasset based. An asset based company such as Penske Logistics owns its own fleet of vehicles. A nonasset based company such as Pittsburgh Logistics owns no shipping vehicles, outsourcing customer shipping to a transportation company.

3PLs typically can pry savings from shippers because of the volume their customers move as a whole. But they also offer the expertise and costly technology that many smaller companies can ill afford on their own.

Says Santelmo of the economies of scale Pittsburgh Logistics takes advantage of on behalf of clients: “I can promise a trucking company eight loads up to Cleveland and eight loads back every day. That’s important to them, because they don’t want to deadhead any trucks back to Pittsburgh [send back empty trucks].

“Because of that, I can get the trucks for $1.30 a mile instead of the $1.50 a mile he charges to the guy who ships two loads a week.”

In general, logistics experts also coordinate shipping transportation, whether it includes trucks, trains or barges, for companies that choose to handle the logistics in-house but don’t have the time or resources to coordinate themselves.

Santelmo says many customers he initially evaluated ignored rail going east, which in most cases results in a 25 percent savings over trucks. He also instituted the use of barges when possible, arranging for cargo to be unloaded at certain points down the Mississippi River to be taken to its destination via rail or truck to other parts of the country.

3PLs often utilize satellite tracking technology, giving their customers an estimated time of arrival. This not only provides peace of mind to both shipper and customer, but also helps them pinpoint any problem that might arise.

Telling the clerk at a receiving dock that a truck is now 56 miles outside Chicago rather, than giving a vague, ‘It shouldn’t be too much longer,’ lets the manager assign dockworkers to other tasks for an hour rather than having them stand idle, waiting for a truck that could arrive in five minutes or an hour and a half.

A 3PL assumes the risk when it coordinates the shipping via its own network of shippers. Remember that $38,000 a minute the parts manufacturer owed Chrysler? If that company had coordinated the shipment through a 3PL, the loss would have been the responsibility of the 3PL.

The claims process in the case of damaged goods is always a dull headache, if not a terribly costly one. For most businesses, though, and especially smaller ones, it can quickly grow into a debilitating migraine. 3PLs handle claims on a regular basis, and shippers are more prone to expedite the process fearing the loss of an important customer if they don’t.

What’s the catch? Santelmo says that when a 3PL company moves into a location to take over operations, interpersonal tension between company employees and the 3PL managers often results, at least initially. Trust has to be built up. Pittsburgh Logistics, he says, tries to use as many workers from the company’s own staff as possible to prevent a partisan environment. Time, he stresses, usually heals the wounds, especially when the combined team gets results.

Whether you choose to handle your own shipping or hire a 3PL likely will come down to bottom line costs and efficiencies. If you think the complexity of your logistics system requires expert attention, consult a third party logistics firm.

Bill Chalmers, president of 21st Century Logistics, says it best: “No one ever asks you how cheaply you fail.”

How to reach: Pittsburgh Logistics at (724) 232-0353

Monday, 22 July 2002 09:55

Start-up

Former sales executive Tom Reda had just finished reading the book “Dig Your Well Before You’re Thirsty” by Harvey Mackay, which stresses the importance of networking in business success, when he was approached with a networking business opportunity.

Kansas City businessman Mitch Miller, who operated a year-old networking franchise called The Small Business Network, offered Reda a license to operate two chapters of the network in Pittsburgh.

For Reda, whose work in sales management required extensive travel, it was just what he was looking for.

“I had some criteria in my mind,” Reda says. “Paramount was no travel. I didn’t mind working 80 hours a week, but I wanted to be in my own bed at night.”

Reda agreed to pony up $30,000 for the franchise license. He got less than he bargained for.

Four months after Reda entered the agreement, the franchiser went out of business, and Reda lost his $30,000 investment. Or so he thought.

But after considerable reflection, Reda says he has come to realize that the seemingly painful loss has turned into the opportunity of a lifetime.

“After I got done beating myself up for giving up $30,000 without due diligence, I realized it was the best thing that could have happened,” Reda says. “Just the idea alone was worth $30,000.”

Reda still had the name and his client list, he no longer had to pay royalties to the franchiser, and he faced no limit to the number of groups he could start under the TSBN name. Under his agreement with Miller, the rights to run even three more groups would have cost an extra $20,000.


The Small Business Network at a glance Operations

Reda, whom friends and colleagues affectionately call “The Networking Guy,” operates two networking groups, one in the North Hills with 83 members (three to four times larger than an average chapter, he says) and an airport location with 30 members after only two meetings. The groups meet one evening a month for dinner and one morning a month for breakfast, in addition to special gatherings such as golf outings and wine tastings.

Like those of several local networking organizations, meetings consist of meals, followed by a formal time during which he introduces new members, raffles off prizes donated by members and moderates testimony given by members who have benefited from leads given by other members. Members then introduce themselves, and, in 10 seconds or less, describe their businesses and what makes an ideal lead for them.

Speakers sometimes make presentations. And the balance of the time is for informal networking and socializing.


Financing

Reda’s $30,000 investment from personal savings has enabled him not only to purchase the franchise rights, but also to build the organization to its present size.


Sales to date

The cost of membership is $800, with an estimated 120 members. Reda would not disclose specifics about costs or fees.


Sales strategy

“It’s almost 100 percent referral-based,” says Reda of his strategy to attract new members. In addition to prospecting for new members, Reda offers a $50 referral incentive to members who successfully recruit new members.

“My best advertisement is the members,” he says.


Marketing Strategy

Reda readily acknowledges that the concept of formal networking groups is by no means his brainchild, but says his job is to perfect the concept. Perhaps the greatest difference is his own role in the organization. Many other networks have members running the programs, members who, by necessity, are distracted by the needs of their businesses.

“This is all I do,” says Reda. “I spend 24 hours a day, seven days a week bringing value to the group.”

TSBN offers a variety of meeting formats. Some are social get-togethers, while others include formal dinner and a speaker. The night-time setting is advantageous to business people who can’t attend meetings during business hours.

Reda sets no rules — no penalties for missing meetings, no penalty for not bringing a lead. Reda realizes that some days you have a lead and others, you don’t.


Market outlook

Reda sees considerable room for growth in the region, especially since he doesn’t view his competition as competition.

“Everyone should be in a networking group,” he says. “It’s cost-effective, you get warm referrals, you develop relationships. I’ve seen people go into business together, and I’ve seen home improvement people advertise together. In fact, I regularly refer people to other networking groups.

“Networking groups are going through a change analogous to that of selling,” Reda continues. “Twenty years ago, selling was all about closing. There was the trial close, the assumptive close, the tiedown close, close, close, close, close, close. But selling over the years has evolved into a needs and benefits and relationship development and solving people’s problems. Networking is growing away from simply, ‘Who do you know who does this?’ There’s education.”


Greatest challenges

”I’m not going to grow just because I can,” says Reda. “Do I have a master plan where there’s 26 groups? The answer is no. I have two good groups; I’m focusing on them. I have three to four other areas that are targeted where other people have said, ‘Call me when you’re going to start a group here. We’re ready to go. I have 10 people.’

“Maybe in the next two or three years, you’ll see four or five new chapters, but I don’t have a grand design. I just want to continue to be passionate about what I do, continuing to stay focused and to provide new and exciting ways of getting people to network and interact and refer business to each other.”

Reda says he has retained 85 percent of his members after one year. How does he explain that success?

“Successful organizations don’t just happen,” he says. “People make them great. I’ve been lucky to attract the caliber of people who have a ‘givers gain’ mentality.”

Case in point is member Tom Meeder, owner of Auto Service Mall. Meeder got a phone call a year ago that initially left him and his wife reeling.

“We’ve sold your building,” Meeder says his landlord told him clinically, “and you have 30 days to get out.”

Meeder got in touch with fellow member Al Kollinger, owner of Kollinger Auto Body. Kollinger was looking to sell one of his locations and consolidate his operation into his Wexford location. A handshake sealed the deal.

Says Meeder: “I think it was fate Al and I got together.”

“No,” his wife Debi interjects, “it was TSBN.”

Monday, 22 July 2002 09:52

Startup

Without question, land values on Pittsburgh’s North Shore have jumped since the resolution of the stadium issues, inviting speculators to play real estate roulette.

Restaurateur Jeffrey Joyce is among the vanguard of entrepreneurs looking to capitalize on the long-term potential of a revitalized North Shore.

He has a track record of success, with nearly 20 years of ownership of the 1902 Tavern in Pittsburgh’s Market Square. Still, he harbors no illusions about the challenges he faces with his year-old eatery, Firewaters North Shore Saloon and BBQ, 120 Federal St.

Joyce’s success at the 1902 Tavern hasn’t slaked his ambition, and he knows what he has walked into. He cites two keys to Firewaters’ projected success:

Location. “The stadium [PNC Park] is the reason I moved my investment to Federal Street,” Joyce says.

Capital. Joyce is keenly aware that most start-ups fail due to undercapitalization. And clearly, Firewaters faces leaner times after baseball and football seasons end. As a cost-cutting measure, Joyce is considering a tactical retreat, shutting down Firewaters between January and April, when sales are lowest.

The time will come, however, when PNC Park and the Steeler Stadium are operational, bringing fans from roughly 100 sporting events to his doorstep. The University of Pittsburgh’s football team also will play at the Steelers’ new facility.

And although Joyce doesn’t mention it, speculation persists that the Penguins could migrate from the Hill District to the North Shore, a potential boon for Firewaters in the winter.

Operation

Firewaters North Shore Saloon and BBQ keeps the casual diner in mind. Prices are lower than one finds at Joyce’s 1902 Tavern. The restaurant features its own line of barbeque sauces, ranging from traditional ketchup-based to a spicier, vinegar-based sauce.

Financing

Firewaters was privately financed by Joyce; neither public nor private-sector lenders underwrote the venture.

Sales to date

Joyce describes Firewaters’ success only as “moderate” and won’t discuss specific figures.

Market outlook

Future North Shore development is Joyce’s greatest potential asset. Establishments close to Firewaters are bound to crop up, Joyce figures, and he foresees that nucleus becoming another South Side or Strip District.

The city learned a valuable lesson with Three Rivers Stadium, Joyce suggests: Don’t convert your most valuable real estate into parking lots. PNC Park will have garages, allowing fans to be closer to North Shore businesses.

Greatest challenges

It’s not difficult to see, as Joyce does, that maintaining a consistent sales volume during off seasons will be Firewaters’ most formidable hobgoblin until businesses and infrastructure grow up around it. As Joyce says, “It’s hard to stand alone.”

Monday, 22 July 2002 09:53

The big location incentive

Without question, the southwestern Pennsylvania region continues to showcase its building and expansion efforts most prominently from Southpointe, the airport corridor, the Pittsburgh Technology Center and prime development in the nine counties surrounding Pittsburgh.

But if location doesn’t top your list of expansion requirements, and you’d rather rent or buy lots of industrial space cheaply, save on taxes and tap larger populations of unemployed workers, the state offers what may be your perfect alternative: Keystone Opportunity Zones.

Through this statewide program, launched earlier this year, you can access any of 26,000 acres in Pennsylvania that have been given the KOZ designation. Those acres, in communities affected by high poverty, high unemployment rates, population loss and underutilized or abandoned industrial property, have been targeted for growing companies and segmented into 12 zones statewide.

The benefits are clear: Within the boundaries, the state agrees to waive the corporate net income tax, the capital stock and foreign franchise tax, the personal income tax and the sales and use tax. Local governments surrender their claim to earned income/net profits taxes and taxes on business gross receipts, occupancy, privilege, mercantile, local property and sales and use taxes. The preferential tax treatment expires Dec. 31, 2010.

The only caveats: Sales and use tax breaks are only applicable if items are sold and consumed within the KOZ. Maximizing tax savings is contingent on a person’s willingness to reside within the KOZ. Income and property tax abatements, by their nature, can only be extended to people living within the tax-free localities.

A person must reside in the KOZ for at least 184 days to be eligible, and residence must be certified annually. The goal is to repopulate depressed areas.

“For decades, government has tried numerous well-intentioned spending programs to help these neighborhoods, but they haven’t worked,” Gov. Tom Ridge said to guests at the program’s unveiling ceremony in Chester, Delaware County.

“Now in Pennsylvania, we’re going to try something different,” he continued. “Government won’t lose much revenue, because these communities don’t have much economic value to tax right now. But by temporarily giving up these taxes, we stand to turn these communities around, and ultimately, government will get additional tax revenues to boot.”

A business must increase full-time employment by 20 percent in the KOZ within the first year of operation or make a capital investment in KOZ property totaling 10 percent of the business’s gross revenues from the preceding calendar or fiscal year.

You can choose from these locations:

  • 5,000 acres in Butler, Clarion, Crawford, Erie, Forest, Lawrence, Mercer, Venango and Warren counties.

  • 5,000 acres in Allegheny, Armstrong, Beaver, Fayette, Greene, Washington and Westmoreland counties.

  • 1,836 acres in Cameron, Clearfield, Elk, Jefferson, McKean and Potter counties.

  • 2,343 acres in Bedford, Blair, Cambria, Fulton and Somerset counties.

  • 1,389 acres in Centre, Clinton, Columbia, Juniata, Lycoming, Northumberland and Union/Lycoming counties.

  • 770 acres in the south-central part of the state.

  • 3,864 acres in Luzerne and Lackawanna counties.

  • 2,551 acres in Schuylkill and Carbon counties.

  • 642 acres in Lehigh and Northampton counties.

  • 1,391 acres in Berks, Bucks, Chester, Delaware, Lancaster and Montgomery counties.

  • 1,503 acres in Philadelphia.

  • The northern tier includes KOZs in Bradford, Susquehanna, and Wyoming counties.

For more information: Lauren Brobson, Pennsylvania Department for Community and Economic Development, (717) 783-1132.


Pennsylvania’s Enterprise Zone Program

The Keystone Opportunity Zone program is the latest in building and expansion incentives to encourage growth in depressed areas. One of its older – and still active — programs, created in 1982-1983, is Pennsylvania’s Enterprise Zone Program.

Enterprise Zones are designated areas in which businesses can locate to receive grants and other financial incentives for launching locally planned projects that spur private investment and create jobs in that area.

The state requires 15 criteria be met for eligibility of specific areas within municipalities for state support. In general, those showing statistical signs of economic anemia are eligible for enterprise zone status.

Local elected officials must set boundaries and submit an application, including a comprehensive business development strategy, to the state’s Department of Community and Economic Development. The department favors applications from municipalities filing together, since more jobs can be created by combining funds into one project.

Basic grants of up to $50,000 fund the implementation of the submitted development strategy. Competitive grants/loans usually are granted directly to EZ municipalities, which administer the loans to private companies at below-market interest rates.

State funding can serve as leverage for financing, including bank loans. Allentown created more than $16 million in new investment with an EZ basic grant of $110,000 (the basic grant was capped at $50,000 in fiscal year 1996-1997) and a competitive grant/loan of $262,500. The money was used for administrative costs, technical assistance, promotion and a DCED audit.

In Corry, Pa., one competitive grant/loan went to a manufacturer of gas turbines, saving 155 jobs and creating 16 new ones. Another competitive grant/loan financed 17 percent of the $1.4 million start-up costs of a metal injection molding company that created 40 new jobs. Nearly $9 million in private investment has poured into the Corry EZ.

For more information: Emily Buka, Northside Civic Development Council Inc., (412) 322-3523

Monday, 22 July 2002 09:52

Transportation tips

Mike Antich, executive editor of Business Vehicle Management, Automotive Fleet, Fleet Financial, and Business Driver magazines, offers tips for companies trying to reduce vehicle depreciation losses, select the right insurer, decide whether to lease or buy and establish policies for driving company-owned vehicles.

Depreciation cuts employees appreciate

According to Antich, depreciation eats up half of every dollar spent on a vehicle. Car wholesalers typically bargain hardest knowing they have to add a profit margin to the top.

Employees, on the other hand, are often willing to buy used company cars above wholesale or auction prices but below used retail prices, especially if they’ve driven the car and liked it.

Consider the following benefits: By instituting this policy, you provide for your employees a perquisite at no cost, and you reduce the time it takes to sell your company cars. Such a policy tacitly encourages employees to take better care of company cars which they may one day buy.

Employees can also spread the word to relatives or friends who may be in the market for a used car.

There are a few caveats. Set a price between wholesale and retail and stick to that price. The idea is to avoid the used car selling or buying experience. And watch for employees making nonsafety-related repairs on a car shortly before it goes up for sale. Keep close track of all maintenance receipts.

Ensuring your company has the right insurer

Antich provides the following checklist for companies seeking an insurer:

1. Does the provider have a good reputation?

2. Does the provider focus on the company’s needs?

3. Does the insurer take the time to understand your business so that it can look for ways to reduce claims?

4. Is a designated contact person provided?

5. Does the insurer offer timely service?

6. Does the insurer have a subrogation program to recover first-party losses?

7. Does the company aggressively investigate questionable claims?

A potential insurance customer should have three questions when considering a policy, Antich says:

1. What are you getting for the cost of your coverage and what are the services provided?

2. How much risk does your company want to assume?

3. Does the coverage adequately protect company assets?

How leasing a fleet releases cash

Leasing executive vehicles allows your company to maintain a more luxurious fleet of automobiles for taking clients out, says Larry Isaacson, a partner in the Michael Silver accounting firm in Skokie, Ill. By leasing, you can drive away with tax advantages.

The ceiling for depreciation tax deductions, he says, is $15,800. In other words, a $40,000 Mercedes-Benz can only be depreciated over the first five and a half years at the same level as a $15,800 vehicle.

“If you’re going to acquire higher-cost vehicles, you are better off taxwise to lease them,” said Isaacson.

Keep your drivers from abusing your license

The easiest way to make employees entrusted with your cars to care about them is to show that you care about them.

When drivers are hired, don’t just hand over the paperwork and keys and wish them luck, Antich says. Go over manuals with them and establish a written vehicle policy which clearly defines the following:

1. The company’s definition of a good driver;

2. Available driver-paid options;

3. Vehicle maintenance schedule;

4. Incentives and penalties;

5. Accident procedure;

6. Insurance information, including who is covered to operate the vehicle, personal use policies, etc.

Keep in mind, it’s impractical and insulting to employees to constantly monitor them. Instead, provide an inspection checklist to be filled out weekly. An unannounced quarterly inspection in tandem with the weekly checklist will sniff out egregious offenders.

Van planning

If your business requires the use of a van, determine the weight and volume of its future cargo. Multiply one unit of cargo by the dimensions of the van.

“Most companies end up buying more van than they need,” says Jim Harter, a fleet sales manager for Landmark Ford in Niles, Ill. “Then they buy an inferior model to keep the payment down. If a vehicle is [purchased based on the correct specifications], it will run out of room before it runs out of weight capacity.”

When up-fitting a van, consider these tips.

“Be careful not to purchase a half-ton van and then up-fit it to three-quarter-ton capacity,” says Steve Leavitt, a fleet manager for Bill Utter Ford in Denton, Texas. Vans without side windows effectively prevent theft, but usually resell lower because the poor visibility usually results in denting. Large side mirrors are a cost-effective way of improving visibility.

How to reach: www.fleet-central.com

Monday, 22 July 2002 09:52

Luxury limits

Luxury cars now offer executives the kinds of amenities one would expect in a wireless world in which the office oftentimes has four wheels and travels at 65 mph.

Fax machines, touchless phones and navigation systems are providing new-car owners the chance to stay connected to the world at all times without the possibility of even getting lost in the countryside. And that is supposed to be a good thing.

If you find this depressing, know that much of the luxury car market agrees with you. According to Gary Jackson, a sales associate at Baierl Acura, only 10 percent of new-car buys include a navigation system.

Most of his customers’ top priorities, he says, are safety and value, or what he terms “underpriced luxury.” Jackson has noticed a “downward trend in pricing,” with buyers more interested in the four-year warranty, roadside assistance, AAA service and loaner program Acura offers.

This is not to say that executives don’t enjoy comfort and prestige. One Mercedes Benz salesman comments that many customers come to his lot simply “for the three-pointed star.” The wait for a Mercedes S class sedan is five months.

Sport utility vehicles have crashed the luxury car party in a big way. Terri Howell, a Lexus sales associate, says she couldn’t keep Lexus RX 300s on the lot; she had only one left at the time she was interviewed.

Three other local car sales associates cite women as the driving force behind the craze. Jackson says many women feel more in control seated higher than they would be in a sedan. He notes that many women who feel uncomfortable driving a full-size sedan opt for SUVs that actually have longer wheelbases.

Jackson considers the SUV craze “a fashion, a fad.” Most front-wheel-drive vehicles are adequate for snow driving, he says, and SUVs tend to tip more easily because their center of gravity is higher.