When Michael Dunlap graduated from The Ohio State University in 1958, he found himself with an all-too-common problem: he didnt have a job. With his girlfriend now his wife still in school, Dunlaps first instinct was to look around the university for an employment opportunity.
The universitys new president was dealing with his own dilemma, and Dunlap thought it might be his ticket to employment. The university had just built a new cultural arts facility, Mershon Auditorium, with money donated by Col. Ralph Mershon. The problem was that the money ran out before the building could be equipped with seating, draperies, lights and speakers.
I was too stupid to know I couldnt go across the country and ask big companies to donate, Dunlap remembers. The young opportunist raised $3 million in corporate donations to fill the auditorium by selling nameplates on seats and drapes.
The 22-year-olds success in that venture shaped the way he views business. After directing the launch of five successful start-ups, and a full-time career as chief development officer for Diebold Inc., Dunlap is still knocking on the doors of large companies.
The strategy he stumbled onto now has a name: sponsorship marketing, or co-op marketing.
Two years ago, Dunlap founded a company, Petshealth Insurance, which as its name suggests provides insurance policies for pets.
Dunlap prepared for the launch by conducting demographic studies that pinpointed five major target audiences:
- young professionals;
- childless couples;
- empty nesters; and
- those between 72 and 85.
He knows each groups buying power and what percentage owns pets what kind and how many.
For Dunlap, the next step was second nature. He identified the groups he needed to speak to, picked up the phone and called them.
Youre going to get a lot of rejections, he warns. For every one hit, youre going to get 99 rejections.
In the beginning, Dunlap went to his most logical ally, veterinarians. He was quick to get their approval and endorsement, but found it wasnt enough. His acquisition cost per policy was still too high. Thats when he decided to look for sponsorship opportunities with larger corporations.
By attending trade shows and calling people, Dunlap started drumming up interest.
I probably have 30 years of networking contacts, he says. They all came because I knew people who could open doors.
From his Ohio State experience, Dunlap learned to go to the presidents of companies.
If I dont know him, I know somebody who knows someone to get me in, he says.
He shows up with charts and graphs and summary information on how both sides can benefit. Petshealth now has partnerships with AAA, Chase Manhattan Bank, Iams Company and the ASPCA.
We get to ride the coattails of the industry, Dunlap says. It allows us to come in as endorsed by AAA, and that means a lot to their members, Dunlap says. They can trust the new kid on the block.
In the case of the ASPCA, Petshealth gets access to 260,000 pet owners or ASPCA supporters. With AAA, Petshealth gets thousands of people who know the value of preventive plans, such as a AAA membership. With Iams, its a 100 percent hit for his target market.
And what does the other side get? The buzz words are value added service.
With the ASPCA, Dunlaps company offers members a free short-term accident policy. In exchange, when new clients are sent letters asking if they would like to pay and stay with the policy, there is a section they may check to donate $2 to the ASPCA.
With Iams, its a similar arrangement. Petshealth offers the free policy and Iams customers get the added value of a health insurance policy for their pets if they respond. Dunlap is betting that purchasers of high quality pet foods are the people who would be willing to pay for health insurance for their pets.
John Maggiore, executive vice president of the advertising and public relations firm Innis Maggiore Group, says these co-op arrangements follow a traditional model.
One company offers a financial incentive to another for including them in their advertising, he says. Your local heating and cooling company probably takes advantage of their air conditioning manufacturers co-op advertising fund by featuring their product or logo in an advertisement.
In the early 90s, co-op advertising began morphing into co-op marketing. Maggiore says, Theres a whole shift in the point of view that has kind of arisen from looking at target audiences more closely.
Businesses have gone from co-op advertising, based strictly on financial incentive, to co-op marketing, based on co-operative partnering, target audience similarities and mutual gain.
Maggiore says the principle can be applied in various ways. You see Taco Bells in gas stations and ATMs in bars. Blockbuster video distributes promotional snack packs in conjunction with candy, soft drink and popcorn manufacturers.
The possibilities are endless and business people need to keep their eyes open, Maggiore says.
The reason co-op arrangements have evolved so quickly is because people have begun to understand the synergies gained by integrating their marketing efforts with other marketers who share the same target audience, he says. Its really finding ways to put your arms around the customer with other things that appeal to them.
With the databases and demographic studies available via the Internet, its much easier now to find out exactly what other interests your customers have.
You want to find all the ways you can to build relationships with your customers, Dunlap says. You want to thread and weave relationships and any way you can be a better service, or a value added service, will help.
Its all about networking and being aware of whats going on in the world.
Maggiore points out that Dunlap makes it sound too easy. Thats why advertising firms exist.
In this case, he is more sophisticated, Maggiore says of Dunlap. Hes really understanding of all the avenues that his potential customers might come upon. What hes done is he has identified some commonalties and he has gone out and talked to these businesses.
Maggiore suggests a few simple steps for small businesses which want to reap the rewards of co-oping.
- Identify the lifestyle type of your customers.
- Identify other products and services that customer type uses.
- Identify manufacturers and providers of those products and services.
- Start talking to those people.
Its creating alliances by talking to people, Maggiore says. Who you talk with will help you determine the things you have in common with your product and the customer type.
Kevin Lamarr Jones has always believed growth through acquisition was the fastest way to build a successful business. Thats why, in 1995, he quit his day job as a venture capitalist for The Northcoast Fund investment group in Cleveland to solo-scout full time for deals with a promise of quick, aggressive growth. But never in his wildest dreams did Jones foresee fighting such an uphill battle to follow his faith.
When SBN featured Jones in April 1998, he had made his first acquisition seven months earlier. To close the deal, he put his home and life savings on the line to purchase Permold, a 77-year-old foundry in Medina that specializes in aluminum castings for the trucking industry and manufactures parts such as clutches and transmission casings.
At first sight and face value, Permold wasnt a pretty picture. The business had been languishing in Chapter 11 bankruptcy since 1996. It was furiously fending off impatient creditors. Looming large was $6.59 million in total liabilities.
The companys lender declined to advance Permold money to continue operations. The plant was days from having its doors shut. The staff had dwindled from 300 to 100.
Despite all that, Jones saw promise in Permold. The company once had a robust reputation in the custom aluminum molding industry. It served myriad industries, boasting $10 million in annual sales. It listed $6.2 million in assets that Jones could take to the bank. And the aluminum industry was predicted to climb from $7.7 billion in 1996 to $10 billion in 2000.
Jones had a mechanical engineering degree, an MBA in finance and solid experience in the banking and venture capital sectors. But more than anything, Jones says his faith in God prompted him to pursue Permold as his first acquisition.
My wife and I really committed ourselves to faith and prayer, and now Ive come to believe that this is a ministry in terms of the impact weve had on the lives of so many employees, their families and other business associates along the way, Jones says.
Homestead Capital LLC the Shaker Heights-based private investment firm Jones formed in 1996 to acquire businesses in manufacturing and distribution industries served as parent to Permold. Although Homestead (named after a street Jones lived on in his youth) was supported by a team of outside advisers and investors, the firm at that time was essentially a one-man band.
Jones set the bid price, wrote the proposal, met with creditors, organized financing, lined up investors and coordinated legal and accounting details. Since the September 97 purchase of Permold, Jones, as president and CEO, has been nurturing the foundry past the problems that had plummeted it to bankruptcy. Jones feels as if hes been climbing a mountain.
Its still steep, but not as steep now, Jones says, adding that he still faces an incredible number of challenges ahead. Jones says restructuring Permolds management was his first order of business, having determined the financial quandary wasnt due to a deficiency in quality.
Permolds predicament, he ascertained, was caused by a lack of leadership and strategic direction. He says he wanted to do business with a sense of honor, integrity and commitment to other people. Thats why, in addition to all the other elements that make a business successful, he wanted a united management team that engendered a sincere, caring atmosphere for the workers.
To do that, he had to bring in a completely new management staff. And then, getting that team to gel, mesh and click that took time, Jones says.
For his executive vice president, Jones enlisted the support and sagacity of Richard E. Pelzer, a former president of ECC Financial Group (once a subsidiary of Eaton Corp). He tapped Doug Pohly, former president of Superior Diecasting in Cleveland, for his chief operating officer.
Stephen Olson, formerly with Amcast Automotive (one of the largest aluminum casting companies in the world), headed up day-to-day production for Permold. For quality assurance, Jones persuaded Fred Brady, a former Permold employee, to come back. Jones applauds his entire management staff and Permolds union work force for their endeavors in seeking to revive Permold. Their goal is to return the once-prosperous foundry to its former position as a Northeast Ohio industrial leader.
The game plan was to go for low-volume production featuring large parts suitable for the heavy truck, HVAC and utilities industries. Even today, Permold continues to resist the temptation to target business from OEM automakers that require large part volumes at low cost prices.
Jones forges other revenue streams, such as machining and finishing, heat treat, casting impregnation, blast cleaning and quenching services. He acknowledges that since previous Permold management had totally neglected the customers, customer service has been an equally pressing priority. His team has made enormous investments of time and energy to repair relationships and build new ones.
Another of our foundational beliefs is that we try to make the lives of our customers easier and better. So, whatever weve done has been geared to trying to produce the best part with the highest quality at a reasonable price, and trying to get the part there when they need it, he says.
Then theres that all-encompassing QS 9000 thing.
Its one of the most important things in the supply chain today, and it totally transforms how you do business from a standpoint of quality, consistency and efficiency. Were striving to get there and we expect to have our QS 9000 certification by June. That process is making us a better company, Jones says.
Another challenge is balancing cost structure with revenues.
Just trying to be good at the basics and go from there, thats been a day-to-day challenge, Jones says, revealing that hes done everything from scrutinizing the cost of paper towels at the office to raiding his kids piggy banks. I did that in the beginning, but I dont have to do that anymore, he laughs.
Perhaps thats because he recently refinanced the original high-interest loan he acquired to purchase Permold. When he rescued the foundry from bankruptcy, he was required to use a higher cost of capital for the loan.
It was some pretty expensive money, he says.
Last year, Jones worked with Strongsville-based Bennington Financial Group and Cleveland-based Knisely Consultants to deliver a proposal to The Money Stores Commercial Lending Division and Business Alliance Capital (both Cleveland companies). The $4 million deal empowered Permold to climb out from under its original high interest loan.
Multiple lenders added to the complexity of the deal. The Cleveland District SBA Office provided $1 million; the State of Ohio afforded $750,000; The Money Store fronted $1.5 million; and Business Alliance Capital provided the credit line. Cascade Capital Corporation of Summit County was also a major player in pulling the deal together.
This deal doesnt happen without Cascade and Debbie Victory, Jones says. Because of her energy and enthusiasm for me and for what were doing, that transferred to a lot of the other people that were involved.
Jones has one regret about the refinancing: I only wish Id done it much sooner.
Why did he wait so long?
It was challenging to get financing sources around here to back me. I think it was the credit and the perception of the deal. A company in bankruptcy thats been losing money. A business person coming in whos not a proven operator. A guy who doesnt have a lot of his own money to put into the deal. Pick a reason! he jokes.
Jones says the refinancing will greatly improve cash flow, enable him to upgrade and automate equipment and plan fo r future growth. The 188,000-square-foot facility houses 85 employees and he expects that, within the next three to five years, hell hire 20 to 25 more workers.
One of the biggest mistakes he made in the beginning, Jones admits, was failing to right-size immediately after purchasing Permold. He rationalized that if you have a highly skilled work force, you dont want to lay those people off, because when business bounces back, you may not be able to get them back. He also didnt want to adversely affect the lives of Permold employees and their families.
A lot of people who work for us are the sole breadwinner for their family, so a layoff doesnt just affect the employee. You have to multiply that number by four or five, he says.
Besides, hes an optimist. He thought he could turn things around sooner and regain more profitable business faster.
We didnt lay anyone off until six months into it. But on further review, we should have had downsizing immediately, to balance the cost structure of the business with the revenues.
The steps hes taken are finally leading somewhere.
We are now approaching an annual run rate of $10 million, he says. What Im focusing on now is growing the company internally and externally. Our plan is to turn it around in three years, reaching $15 million at that point. And our five-year plan is to grow this business to $30 million before we have to do a major plant expansion.
With nearly two years of accomplishment behind him as Permolds owner, Jones says his customers, suppliers and employees have had a chance to evaluate his modus operandi. The vote is in, he says, and he believes its a unanimous vote of confidence. And while hes toiling for metallurgical excellence, Jones is also seeking capital to fuel growth and browsing for new acquisition opportunities.
His preferred approach is to find capital that buys into his growth strategy and use that money to acquire more companies.
In a corporate divestiture, leveraged buyout this past December, Jones acquired TRWs high-performance forged piston division in Cleveland. The 160,000-square-foot Clarkwood Plant (TRWs original headquarters) provides jobs for 55 people and complements Permold because, like other foundries and industrial companies, Permold tended to be one-dimensional.
Our customers wanted us to be able to do more than just produce a raw casting, he says. We must be able to machine the casting, assemble other parts and weld if needed. Clarkwood has a very solid machining arm, so theres a real fit there.
And now, as we look at new business opportunities, were able to market our machining capabilities at Clarkwood along with our casting abilities at Permold.
Jones is also buying more metal for both companies, creating economics of sale for raw materials.
Its been a great deal so far, he says.
With annual sales of about $10 million, Clarkwood Industries falls in line with Permolds rollup strategy of pursuing mid-sized industrial companies to grow and build through acquisitions. Not a bad choice for a second purchase, Jones notes.
In retrospect, he says that had Homesteads first acquisition been any other company but Permold, his climb wouldnt have been so steep. But then, the lessons likely wouldnt have been the same. During the bidding process for Permold, Jones originally
one of 50 potential owners was notified of the loss of one of Permolds major customers a company that accounted for about 10 percent of the companys estimated $10 million in annual sales.
It was a setback that left Jones unable to secure the financing for his bid and caused him to miss the Aug. 15, 1997 deadline to acquire Permold for $5.1 million. While he was upset about that at the time, he says everything happened for a reason.
Ironically, his opponent sought to reduce his bid price. Consequently, Akron Judge Marilyn Shea-Stonum reopened negotiations and allowed both parties to return with lower bids, with a stern warning that any new offers must be firm. In true winner-take-all fashion, Jones closed on Permold a month later for $4.5 million and a plan for payments to creditors that would bring the company out of bankruptcy.
In addition to financing from Gordon Bros. Capital of New York, money was raised from friends and business associates.
That whole process was the catalyst that helped build character in me, in terms of the patience and perseverance, and the things you have to learn when you want something and it doesnt happen the way you want it to happen, he says.
While there have been other companies Jones passed up before and since the Permold acquisition, to every season theres a time and purpose, Jones muses.
When youre making deals, timing is everything. When I originally looked at some of those other companies, the timing just wasnt right. But later this year or a year from now, the timing might be just right, he says.
Most important, Jones says, This business has afforded us the opportunity to share some real business principles from a godly perspective. And if not for God, it wouldnt have come together.
How to reach: Permold, 820 West Liberty St., Medina, Ohio 44256, (330) 723-3251, or on the Web at www.permold.com.
Scott Madzia, manager of corporate accounts for Nextel, demands a lot from his top sales people. Its tough sometimes to manage great sales people, he maintains. Theyre often arrogant and cocky.
It is the attitude of those overachievers, however, that separates them from the ones who struggle to meet their monthly quota.
I treat top performers harder than others because the expectations are higher, Madzia says. Its a pitfall for some managers, though, because other reps see all the attention they get and feel shortchanged.
Madzia is not alone with his dilemma. As any supervisor who manages superstar talent knows, there is a fine line between giving top performers what they need and ignoring the rest of the staff. The last thing you want to do is neglect young sales people who may need, or want, a little extra help to get them over the hump.
The balancing act means ensuring the stars dont rest on past laurels and let their numbers fall.
I dont want my top guys to get comfortable, Madzia says. I want them to keep their edge.
Keeping that edge is what helps drives superior sales numbers month after month, maintains Joe LaGuardia, regional vice president of Ohio Sales for Anthem Blue Cross and Blue Shield.
Fire in the gut is what keeps salespeople in the top 20 percent, he says, referring to the commonly held perception that 20 percent of your sales force produces 80 percent of your revenues. Its like Vince Lombardi said, If youre not fired up with enthusiasm, youll be fired with enthusiasm.
Its why LaGuardia gives his top people as much of his time as they need.
I tell them Im available from 6 a.m. to midnight, seven days a week. That way, theyve got my attention if they need it.
LaGuardia combines that access with extensive freedom, letting his most consistent performers make command decisions without micromanaging.
They know what needs to be done without me, he says.
When his input is required, it is usually to land a major account or lend his expertise to a large-scale project.
But not every sales manager subscribes to the let-them-loose-and-see-what-happens theory.
They have to be coachable, says Paul Hanna, president of Meritech Blue. Sales people are not born, they are developed. There is no such thing as a natural born sales person. They have to be trained. Thats not to say they dont start with those talents, but they have to be brought out and developed properly. Im a firm believer of constant training.
At Meritech Blue, sales people even the top ones undergo weekly training sessions to keep them sharp. I preach one thing, says Hanna. A disciplined, well-trained, highly motivated sales force.
Despite any difference in philosophy, the desired result is the same production.
So what happens when your sales people hit upon a formula that works and duplicate it over and over? Madzia says at that point, its important to devise new challenges to keep their competitive spirits active.
Ill challenge my guys to come up with new applications for existing accounts or other ways to improve their numbers, he says.
Another school of thought is to give them more responsibility, such as tutoring other sales people.
Were a team, explains Michael Faix, manager of sales and marketing for Great Lakes Computer Corp. Individual accomplishments are part of a bigger whole. The very best sales people are those who not only meet and exceed individual goals, but also assist others in meeting their goals and improving themselves.
At Sprint PCS, district sales manager Chuck Schiffhauer offers his top sales people the opportunity to get involved in the planning process.
Its motivational, he says. A smart manager knows when to jump in and assist when he sees his top guys eyes starting to wander. Ill get them to start thinking about ideas which can help improve our entire organization.
But no matter what your philosophy for managing top sales people, one constant remains: Do whatever it takes to keep them performing.
Sales is not an easy profession, Schiffhauer says. And you have to treat every person in it differently.
Theres a quote next to Chuck Schiffhauers desk that reads Failure is not an option, and every member of Schiffhauers nine-person sales staff at Sprint PCS is indoctrinated.
When the company launched its Northeast Ohio operations last year, Schiffhauer painstakingly interviewed more than 120 people.
I wanted people with winning attitudes who youd never hear say something wont work, he explains. I probe very carefully when Im interviewing to make sure the person Im getting is whats advertised.
He has developed a carefully crafted set of interview questions, which he uses to build a profile for each prospective hire. The questions cover six areas: work standards, energy, resilience, initiative, change agent and motivational fit. In 15 years of sales management, Schiffhauer has found a common thread among every successful person hes hired through this process: They have blind optimism in their own abilities. There isnt anything that would prevent them from being successful.
And if there is a consensus among other sales managers about the search for the best of the best, its that sifting out the wannabes from the real deal is an art unto itself.
Everyone we interview is sky high, explains Paul Hanna, president of Meritech Blue. He or she tells me they plan to conquer the world. But unfortunately, for some of them, thats the peak of their career the interview.
The interview process is a chess match. On one side, the interviewer tries to discover the prospects true character. On the other, the prospects goal is to land the job no matter what it takes. The best sales people make the right decisions when theyre under pressure, explains David Browning, general manager of CB Richard Ellis. And that includes when Im grilling them in the interview.
Ned Bergen, sales manager for Northcoast Business Systems, looks for the three Ds drive, determination and desire when hes sitting across from a prospective hire.
I want someone who has a pure unwillingness to quit, he says. And they have to be someone who wants to go out and light the world on fire. You can tell from how they carry themselves during the interview what kind of person they are.
And once the decision to hire is made, how long should you wait before demanding results? It depends on the industry ... and your patience.
The first 60 days are critical, says Scott Madzia, corporate accounts manager for Nextel. Some find success fast and then coast. Others struggle out of the gate and never catch up. But the best ones start strong and keep giving you that effort.
For Mari Sloan, vice president of sales for OBM, the timeline calls for six months.
Youll know by then whether theyll ever be a top performer, she says. If you see their results arent improving, then you have to question whether theyre able to handle the job.
At the far end spectrum, Browning says it takes up to five years before you see someone who you know hits the ball out of the park. That, he explains, is a combination of three years to learn the real estate business and another two years to develop consistent superior performance.
Often, top performers sparkle from Day One. For example, after Schiffhauer hired account rep Aaron Gonzales, his sales results grew every month. By Gonzales third month, he set a company record with 203 phones sold. Its an obsession with me, explains Gonzales, who says he once made a pitch while watching a baseball game at Jacobs Field. My wife hates it. Im always looking for opportunities to sell.
Adds Schiffhauer, The sales person who isnt will never succeed.
Every interviewer asks tough questions. But Chuck Schiffhauer at Sprint PCS has made difficult an art form. Here are 10 questions he uses to cull the cream from the top of the candidate barrel:
- n Tell me about the most memorable time when you werent pleased with your own performance. What did you do about it?
- In your current position, how do you define doing a good job? Are you doing a good job? How do you know?
- Tell me about a time when your job demanded extensive effort. How did you handle that demand?
- What job activities do you find require the most energy? What did you do to maintain your energy level?
- Tell me about a time when you were competing with another person and lost. What was the situation? How did you respond?
- What have you done differently from your peers in your organization? Why have you done things differently?
- Have you made any recommendations to your manager recently? Give me an example. What happened to the idea?
- Describe a situation in which you had to adjust quickly to a change in organizational, departmental or team priorities and how that change affected you.
- Discuss a time when you had to meet a deadline while your work was being constantly interrupted. What made this difficult?
- Tell me about a time when your work contained a lot of challenging situations. How satisfied were you with that and why?
Family succession guru Dr. Cindy Iannarelli grew up in a family business. Now shes building a multifaceted company that teaches others about the importance of the experience. In this special interview, she tells family business owners how to begin.
By Daniel Bates
Dr. Cindy Iannarelli, remembers vividly the times her Italian-born father would take the family out to dinner in one of his dry-cleaning trucks.
No matter where we were, whenever he saw another dry cleaner, he would stop, look in the window, and he would always have us count the clothes on the racks, says Iannarelli, who is known to most around her simply as Dr. Cindy. Then he would stand back, look at the sign, look to see if the windows were clean, and look to see how far the nearest grocery store was, and Id be right there hanging onto him.
He would then begin a discussion in the truck, she adds, on how much volume that dry cleaner was doing and whether we should open one of our places nearby. I swear, to this day, Im an expert on site location analysis because of that.
So it went for a young Pittsburgh girl who grew up in her fathers growing dry-cleaning and real estate businesses and who, with her brother, eventually helped their mother take over the family businesses when their father got sick and died.
The impact of that childhood experience, she says, didnt hit her until one day while she was attending a class in post-graduate pharmacy school, where she had hoped to get a pharmacy degree before going on to medical school.
I didnt even realize I knew anything about business until one of my professors, whom I credit with much of my success today, brought it to my attention, she says. His class was pharmacy administration, which meant he taught how to open pharmacies. And of course, when I got into that class, I realized you open pharmacies the same way you open dry cleaners.
I was whizzing through this class location, insurance, customers, employees I just knew everything, she continues. Thats when he said to me, Cin, you know all this stuff because you already had the course. You should focus on that. I think youd be a good pharmacist, and I think youd be a very good doctor, but I think youd be an excellent business woman.
Dr. Cindy went on to earn MBA and doctoral degrees. Today, her brother and his family run the dry-cleaning company, known as Fi-Del Cleaners, and Dr. Cindy and her family manage the real estate portion of the business.
But Dr. Cindy didnt stop there with her lifelong entrepreneurial training. She has converted her experience and studies into a burgeoning family business consulting firm aimed at helping others with succession issues. In working with business owners and their families, she says she came to realize that many owners arent doing nearly enough to teach their kids presumably the businesss next generation about business and entrepreneurial values. When they do get around to teaching them, its often too late.
Thats when Dr. Cindy says she realized she needed to do something about it in a way that would bring her own childhood experience to bear. Her solution: a new company called Business Cents, designed to teach kids as young as 3 years old about business.
Her business is built entirely around the Business Cents brand and a character she created calls Bizbee (because of the industriousness of bees in making wax and honey, she says). Products include specially designed board games, a book called 101 Ways to Give Children Business Cents, activity workbooks, a guide complete with audio and video tapes for family business owners, a Bizbee the Business Puppet toy for kids, entire prepackaged curricula for schools, and even weekly summer camps for kids. And shes working on the creation of a syndicated TV show around the same theme, which she plans to make the foundation of her business.
Her message, though, remains a simple one, and its the subject of this special cover story interview: If you want your family business to survive generation after generation, start teaching your kids early about business, values, honesty and sacrifice.
SBN: Why did your parents start so early in teaching you about the family business and entrepreneurship in general?
Dr. Cindy: Growing up in my fathers business was more out of necessity than out of any planned training program. My mother says the reason we were in the business with them was because they couldnt afford baby sitters. And when you look back on those times and those entrepreneurs who started businesses after World War II and into the 50s, that was pretty much how the children grew up, because they had to pull together all their resources to start the business.
I can remember as early as 4 years old riding on the dry-cleaning trucks and wandering around the dry-cleaning machines. They used to have spray guns that worked on spots. I can remember squirting that spray gun all over, and other fun things putting your foot on the conveyors and letting the clothes go round and round. And the comical thing is that now, when I take my 4-year-old son to the plant, he goes exactly for the same things.
My father came over from Italy speaking no English and began working for another dry cleaner at night. After he graduated from high school, the other dry cleaner wouldnt promote him to manager, so he had saved up $500, and he rented a storeroom in Bridgeville. He had no money for dry-cleaning machines or anything, so he just set up a counter to take up the clothes during the day. At night, he contracted with one of his friends to do the dry cleaning. Hed go there and dry clean all night and come back and have the clothes ready the next day.
When you were a kid, what did you think about all of that?
That was kind of before my time, but I heard those stories later, and they were very inspirational to me, because thats where I began my first lessons in how to be creative in getting those businesses going and how to use your ingenuity a little bit and every resource you have to get them started.
With our children, were trying to recount those stories to them. Of course, theyre living now 30-some years later where the business has grown, and now all of those little jobs and those experiences I had just because they couldnt afford baby sitters those are all gone because now we can afford baby sitters. And this is what happens in every successful business. There actually become fewer opportunities for the kids to be exposed.
Given where you are today, how important were those experiences in your own entrepreneurial endeavors?
I never thought anything of it I never even thought of going into business at all until I got to pharmacy school, where one of my professors said to me, Cin, you have an uncanny business sense. But I was still only 19 years old and never thought of going into business because my dad wanted us to become professionals.
It wasnt that he didnt want us going into this, but he never had a chance to get an education, so, No. 1, get an education because youre going to have an opportunity that I didnt. And maybe an education would lead to an easier life because all those professionals his customers were all professionals he saw them having an easier life.
So he didnt see himself as an entrepreneur?
He didnt even know that word. I think he saw himself as self-employed. It wasnt savvy. I can remember being embarrassed, putting down in school, when they asked what your father did, being self-employed, because all my classmates dads worked at U.S. Steel and Gulf Oil and these big companies, and they had expens e accounts and four weeks of vacation. In grade school, [being self-employed] wasnt in vogue.
Obviously, thats what youre looking to change. But what does that mentality do for the region, especially since we seem to be way behind in this whole entrepreneurial view?
The reason I think were so behind is that there was so much emphasis placed on the large corporations, and so in my age of children growing up, most of them were in larger corporate homes, so they didnt have that hands-on entrepreneurial experience.
So thats what made you embarrassed?
Yeah, way back then. And that didnt change until I got into college.
But you still didnt, at that point, have an entrepreneurial excitement that made you want to go into business just like your dad?
Not early on. He passed away, actually, when I was in pharmacy school, so that was a turning point where I had to make a decision about what I was going to do and how I was going to focus. I was 20 then. I was accepted at Pitt to do my MBA and I was accepted at American University in Washington, D.C. I was considering doing the program in D.C., and Ill never forget one of the executives down there told me, Cin, you have an option here and you certainly could excel. But if I were you, I would stay home and do my MBA and take over the family business.
And how did you feel about this, weighing the pharmacy, med school or dry cleaners options?
I know at that time I made the decision because of my feelings for my family and my sense of responsibility, needing to be with my family to do this, versus a personal career choice. So I made the decision to come to Pitt, work in the family business during the day and go to Pitt at night. We had about eight stores at the time.
My father was sick, and we were trying to manage all of this. We were just thinking about how to pay the bills and how to keep it all going. It was very scary because we really didnt know the back operations of the dry cleaners. My father had taught my brother he would tell my brother what to do over the phone. Here was this 16, 17-year-old kid now trying to fix these machines and deal with suppliers. My dad used to say, when he was sick, My head and your hands.
And my mother was trying to keep the office going and deal with a sick husband. People ask how we got through it, and I look back and think, if we didnt have a strong family bond, that family foundation, we would have never survived it.
Thats probably why Im a family business consultant today, because I lived through such horrors which I dont want anyone else to have to go through, and back then there were no family business consultants.
Family business wasnt something people
looked up to then anyhow, was it?
In the early 80s, thats just when entrepreneurship started to flourish, and everyone advised us to sell the business. In fact, Ill never forget those salesmen who said to my mother, You should do this, youre a woman in business. Youre never going to make it because there are no women in dry cleaning. In fact, you should sell it to us.
My mother says she would have gone down the tubes, but we werent going to sell to those guys. I credit them with giving us the strength because we were going to do anything she was going to show those guys. You could just see the steam coming out of her. But my mother showed them, because she eventually became the first woman president of the state dry-cleaners association.
I also want to say that, if it wasnt for the family business we used the family business as an incubator for this new company. I tell my students that, even though they may not like the industry that their family business is in, its what they can learn from that business almost anything is possible to leverage from that business. And business owners dont seize that opportunity.
At what age are children old enough to understand and appreciate the family business?
We start with them at age 3, and weve found through our research that age 3 is when they begin remembering things about the family business. Also, thats when they have a firm knowledge of money because they know it takes money to buy those toys. And theyre all interested in how to get more money at age 3. Our thought is to give them a foundation of how they can be a producer because they learn very early how to be a consumer.
At age 3, what kinds of things can and should family business owners teach their kids?
The first stage is the exposure stage. That runs from ages 3 through 9. Thats the age to expose them. Some great opportunities are to take them to the warehouse. A lot of people used to do this naturally when mothers were home all week, and Saturdays were the day when it was the dads turn and the mothers wanted them out of the house. It was a great opportunity because then, the kids got to go to the office on Saturday and run around the warehouse or ride around on the trucks or just check on things. But these days, a lot of business owners dont do that. They have day care during the week, and Saturdays are a different day now.
Do you think family business owners kids are neglected today?
Theyre not so much neglected, but they dont get the same opportunities in the business unless the parents are consciously giving them to them.
Why should business owners even worry about their 3 year olds, especially at such an early age?
Your business is like a classroom. Your child will have so many more life skills that most people arent teaching in the classroom. Even at the college level, theres still controversy as to whether you can teach entrepreneurship because, by the time somebody is 18 or 19 years old, in my estimate, youve bypassed the prized opportunity.
When theyre young pre-aged 12 theyre ripe in terms of their development. I personally believe children are born entrepreneurial. I believe its a human trait, and what we do through our system is we slowly take it out of them by structure all the way through the MBA program, which I think is the most anti-entrepreneurial thing you could ever do. Really. Im a professor I can say that.
What weve found is that growing up in a family business absolutely is the best way to pass on entrepreneurial traits. Those kids have the best chance of being our next entrepreneurs. Think of how much further we could be as a nation with more enterprising young people.
In your experience working with family businesses, what do you typically see, relative to how they deal with their kids? Are they missing the opportunity?
There are a couple of different stages. In the very early stage, when people are just starting businesses, if the spouse is involved, theres normally a better chance the kids will at least get exposed. Its back to that baby-sitting theory. They dont have the resources, so they all have to help out. But when those businesses grow, what I find in second- and third-generation family businesses is that there are less and less opportunities.
For instance, in our dry cleaners, I used to sweep the floors. Now we have janitors. I used to make the signs. Now we have a professional sign company. I used to wash the trucks. Now we have a car wash service. As we grew, all of those jobs I did to really help out are filled.
So what are you suggesting for the future for business owners?
Business owners should just follow this method. For those between ages 3 and 9, they should actually make a plan. We actually work with the families to work as a team. So what can the kids do between ages 3 and 4? In our business, we bring them in to do little jobs and grandma supe rvises. If you can give them at least an hour a week, its the best method, at least for the little ones. They go with my mother to the bank. They pass out honey at trade shows. They help put together our newsletters.
At that age, its exposure; its not work. Its more work to expose them, and thats why many parents dont do it. But this is a great opportunity for maybe grandparents or a spouse who isnt in the business. Someone has to be in charge of the process.
At age 5 or 6, they can move on to more things for, say, two hours. They really want to work. In my company, I pay them [Dr. Cindys own son and the four young daughters of her brother] a penny a piece for every newsletter they put together.
They keep track of the pennies and then add up how many they have. Its amazing, even at that age, how they put two and two together that, the more they work, the more pennies they get. And then we take them to the bank, and they have little bank accounts to start keeping track of what they earn.
As a group, we have them all working together because we already have some properties in trust for them. We want them to be able to function as a team. None of them may want anything to do with our particular businesses, but we know that if they work here, theyll have a great business sense that will help them in any career they choose.
Our family philosophy is to be stewards for the next generation. Were trying to build this for them and hopefully theyll build it for their kids. When you look at successful family businesses in Europe and Asia, youre in, like, the 12th or 13th generation. Thats the philosophy that this isnt ours, were just stewards for the next generation.
So when new tenants move into one of our buildings, I have all five wash the windows. Now they make more mess washing the windows, but its the idea that theyre all there helping and the feeling they get doing it.
Do they like doing it? Dont any of them say, I hate this, Id rather be out riding my bike?
Pre-8, you usually dont get that. What I do get is, I dont want to be a team. I want to do it all myself. You get that nonsharing attitude. We keep reinforcing that youve got to be a team, that this is your building and youve got to work together.
The other problem I see a lot in very successful businesses is when the owners make enough money where they say, We have the resources, so why should my kids have to do anything? So the children have no identity and no sense of what they can accomplish because their mothers are saying they basically dont have to accomplish anything. These are the same children who, if they had creativity or they had innovation, they could do something great. Otherwise, the money can actually destroy their lives.
So what do you say to those business owners?
You try to explain to them that theyre robbing their children of the joy of accomplishment.
Whats the most important thing family business owners need to teach their kids?
I want my kids to know what the word sacrifice means. You can never build a company without knowing what that word means. Thats a hard concept if youve never learned it before the age of 12. When you study all of these successful entrepreneurs, most of them became successful because of early sacrifices in their lives.
Why is sacrifice so important?
If youre going to build a business, it takes sacrifice. It takes hours, it takes resources, it takes giving up something today for something bigger tomorrow. I had a business owner call me recently and ask me to come in a try to teach his 27-year-old son the same business values he has. I told him this: You should have called me when he was 7.
John Colangelo has ambitious growth plans for Infoworld Enterprise Solutions, a technology reseller and solutions implementer.
From almost $19 million in 1996, Colangelo, CEO of IES, expects the company to surpass the $200 million mark by the end of next year. With its track record, the company just might make it. IES had net sales of just over $56 million in 1998, and Colangelo anticipates topping $80 million this year. The company was named a finalist in the Ernst and Young Entrepreneur Of The Year competition.
“I just think it’s quite an honor to be nominated for this type of award with such prestigious organizations that are running the event and also the associate companies that have been nominated,” Colangelo says. “To us, we feel it’s a recognition of our spirit and our energy to drive and run our business.”
Infoworld began in 1975 when Chairman Leo A. Higley began offering IT and consulting and technical services. Higley was asked to develop a customized application for a Hewlett Packard computer and was so impressed with the system, the company became an HP reseller in 1979.
According to Colangelo, the company’s success is built on four basic principles.
“One of our first virtues is being customer-centric,” he says. “We still service those same clients that the founder of the organization served 25 years ago. We believe in retaining a client for life.
“The second premise is we believe very strongly in employee participation and development. In return, we expect participation; we expect them to make us better by looking at ways of driving the business and changing the business.
“The third element is partnerships,” Colangelo says. “In our industry, we realize we can’t be everything to everybody. But we also believe very strongly in establishing partnerships, and we don’t mean that by just putting a plaque on the wall saying ‘We’re an alliance partner with a company.’ We work very diligently with the organization that we partner with to find effective ways to either go market or effective ways to increase the efficiency in the operations of our organizations.
“And then the fourth, we’re a very highly ethical company,” he says. “We don’t engage in bad business. And we treat our partners and our employers with the highest degree of ethics.
“I think those founding premises, those founding virtues, really do assist us as we move forward in these changing times,” Colangelo says. “We stay true to those virtues.”
Louis Perry, 29, has special reason to be proud of his nomination for the Entrepreneur of the Year award. Last year, his father, Louis Perry Sr., won the award for the region.
Louis Perry Jr. broke off the construction management side of his father’s architecture and engineering firm Louis Perry & Associates in 1997, and has run it as an independent business since. While he fights to maintain a separate identity for himself and his company, he can’t deny his father’s influence on his success.
“Some of his success has rubbed off on me,” Perry says. “It’s a tribute to him, to his mentoring.”
By the end of its first year, The Perry Group brought in revenues of $4 million. That doubled last year, and Perry expects it to double again in 1999.
While The Perry Group does use Louis Perry & Associates’ architectural services for many of its projects, Perry didn’t spend long riding on his father’s coattails. He says that by his second year in business, less than 5 percent of his sales overlapped with his father’s firm.
The Perry Group has completed projects for Matrix Essentials, St. Judes Catholic Church, Precision Metalforming Association and Children’s Hospital, and the company is now building three new schools for the city of Wadsworth.
In 1997, The Perry Group acquired the systems division of Mettler-Toledo. The acquisition gave The Perry Group rights to the designs of four types of scales used in rubber and plastics manufacturing. The innovative purchase allows the company to provide equipment needs at the same time it handles new facility construction.
Perry has built his business in a short period of time by offering one-stop shopping for planning, design, construction and equipment installation, and by maintaining quality-control measures, such as the ISO-9001 certification his company received this year.
“Anything that has to do with our business is monitored and audited,” Perry says of the certification, which he believes will soon become a standard in the industry.
Perry has been able to build a work force to keep up with the company’s growth by recruiting local college graduates and maintaining a co-op program for students, who work at the company for course credit.
“I try to supplement key people with younger people, so in the end I have a good, strong organization,” he says.
Perry’s management strategy revolves around staying flexible and ahead of the curve. “I’m constantly trying to keep a pulse on what’s out there,” he says. “The bottom line is that you’ve got to be competitive.”
Peter J.C. Young gave up a promising position directing the international business affairs of a global glass manufacturer to make candy for a living.
With a master’s degree from the London School of Economics and a law degree from the University of Michigan, Young took his career in an entirely different direction when he married into the family that owns Harry London Candies Inc., and became its third-generation leader in 1994.
Then he took the company in entirely new directions.
Under Young’s leadership the past several years, Harry London has enjoyed compounded annual growth of about 25 percent, says Young, although he won’t disclose actual revenue figures. After moving into a new 90,000-square-foot manufacturing facility in 1995, Harry London quickly outgrew the space. An addition to the plant, expected to open in July, will more than double the original floor space.
“This will be the first year that we won’t be quite as capacity constrained,” says Young.
Indeed, capacity has been the company’s only obstacle to growth over the past several years. With the expanded capability, Young expects Harry London revenues for the current fiscal year, which runs through April 2000, to jump about 70 percent.
Young credits a number of factors with the company’s enviable growth record:
- Broad product line Aside from the industry’s “big three” producers Hershey, Nestle and Mars most other chocolate makers have limited product lines focused on narrow product categories, says Young. Harry London makes some 2,000 different products in several categories and does so with an unusual measure of efficiency for the industry.
- Broad distribution channels The company’s six specialty retail stores in Ohio sell only a fraction of Harry London’s output, Young says. A well-developed wholesale business ships candy all over the world, which also is unusual in the chocolate business, where smaller producers tend to be more regional, he says.
- Balanced customer base In an industry that often struggles with seasonal variations, Harry London has evened out the speed bumps with a booming contract business that accounts for about one-third of all production. Disney, for example, contracts with Harry London to produce Disney-brand specialty chocolates for sale at resorts, retail stores and by catalog. In addition, the elimination of seasonal fluctuations enables the company to employ a more stable, professional work force instead of relying on temporary help around the holidays.
- Solid management team Harry London has lured top executives away from Disney and Riser Foods to form the core management team that has fueled much of the growth, says Young. “Our success has been a companywide effort, and I don’t mean for that to sound cliche,” he said. “I could never have achieved this kind of growth alone.”
Figuring out how to make their company grow hasn’t been a problem for James Hickey, president, and Scott Keglovic, executive vice president, of The Arras Group. Their struggle, and their achievement, has been to manage yearly growth without compromising quality.
For their accomplishment, the pair was recognized as finalists in Ernst & Young LLP’s Entrepreneur Of The Year program for the second year in a row.
“Our stated objective is to grow 15 percent a year, to double every five years,” says Hickey. “That’s for us very manageable growth. In a service business like ours, in particular, it’s really critically important that none of our existing clients feel a pinch as we are growing. That creates challenges. We’ve grown every year we’ve been in business, thankfully. It’s tough to maintain the same levels of service. It’s tough not to be a little distracted.”
The Arras Group, an integrated marketing communications company, was established in 1991 in the basement of the Keglovic home. Its big break came when it was brought on to revamp the faltering Stearns & Foster line of mattresses for the Sealy Corp. The company grew 13 percent with $9.1 million in gross revenue during fiscal year 1998, Hickey says.
One way it has been able to focus on clients is with a new, proprietary software called RADAR Remote Access Delivery and Response. “(It’s) technology that we’ve created for ourselves that allows us to put files on our Web site and our clients can come and access them,” Hickey says. “If there are six people who are contacts for a particular project, they can all come to our site. The can review the work; they can make comments. It’s a really great e-business application.”
Hickey cites the company’s low turnover as a key to maintaining the level of commitment to clients. The past year has seen the implementation of a 401(k) matching funds program, a stock appreciation recognition program and the highest profit sharing distribution ever.
Retention is “always a compensation issue,” he says. “But sometimes it’s emotional compensation and sometimes it’s financial compensation. (We try to) give them enough challenges, enough opportunity to progress and take on more responsibility and compensate them fairly financially, so that they’ll stay around.”