Monday, 22 July 2002 09:40

Team mentality

CRESCO Real Estate was founded nine years ago on a strong basis of teamwork.

Where other traditional brokerage organizations are composed of independent contractors with different goals, CRESCO sought to create a company that worked together and shared both the good and the bad.

In the past five years, CRESCO has grown by 50 percent and is a respected player in the industrial real estate market it serves. Company President Armand Aghajanian believes the company’s success rests on its mix of industry experience, quality customer service and a strong team mentality.

“I’m an active guy,” says Aghajanian. “I’m not just sitting back listening. I’m out on the street with the rookies and I know what’s going on within our company and within our marketplace because I’m still active in the business, as opposed to sitting back as an administrator and having people come to you with problems.”

Typically, there is little teamwork among people associated with a particular brokerage, and the sharing of commission is out of the question. CRESCO’s team concept allows workers to provide a more complete, one-stop company to its clients and creates a more desirable work environment for staff members.

“None of the partners step on each other,” says Aghajanian. “The bottom line is, it’s all coming back to us.”

This kinder, gentler workplace concept has worked well for the company. Since it was founded in 1991, there has been very low turnover. In fact, the staff members who have left did so for personal reasons rather than because they were hired away by a competing firm. And although the work is shared inside the firm, so are the rewards. Bonuses are awarded to everyone at every level of CRESCO, based on the company’s overall performance.

This success sharing, explains Aghajanian, is one of the main reasons the company’s teamwork concept has worked so well for so long: If one person loses, everyone does.

Aghajanian, along with Fred W. Christie and Joseph V. Barna, all former employees of Grubb & Ellis, are the primary account team. Together, the trio has built a strong reputation for themselves in the industrial real estate market. Locally, CRESCO has a number of significant accomplishments, including identifying and securing 15 distribution centers for the Plain Dealer, securing a 10-year lease for GTE on a 78,000-square-foot regional office and selling space downtown for the new Stonebridge condominiums, apartments and retail developments.

As far as being recognized as one of Northeast Ohio’s leading entrepreneurs, Aghajanian deflects credit for the company’s success to everyone who has worked to make it what it is today.

“Not only me, but everybody here feels we’re extremely honored,” he says. “We’re a small company and we have a small niche in our marketplace, although we do a lot of work. Those in our field know who we are and we’re well thought of.

“That’s the way we do our business.” How to reach: CRESCO Real Estate, (216) 520-1200

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

Published in Akron/Canton
Monday, 22 July 2002 09:39

When stubbornness leads to success

Peter Miragliotta has a stubborn streak. Against the recommendations of friends and professional advisors, the owner of Tenable Protective Services refused to declare bankruptcy even after learning that his partner was diverting cash away from the business and that the company was enormous debt, including about $300,000 owed to the IRS.

“We hit a turning point approximately six years ago,” Miragliotta says. “Everything’s been up since then. I had a partner that I had trusted the financial excellence and the administrative responsibilities to. Operationally, we were sound. But he was diverting the cash into another entity and he was using that cash himself. When were finally able to leverage him out, we were approximately $1 million in debt.”

Bankruptcy seemed the most appropriate option. “A lot of people said you need to declare bankruptcy,” he recalls. “But that meant I couldn’t have used the name Tenable, which my clients recognized. I felt I was kind of screwed either way. I knew I had to work hard to come out of it or be destined to be a nobody. I reorganized my staff, thought about what we did, what the problem was. We started to rock and roll. We put a business plan together, a financial plan. We called all of our clients. I went out personally and put all my cards on the table to all my clients at the time and told them exactly what I was up against and said if they stuck with me that I would continue to provide the service and continue to upgrade it.”

And then Miragliotta analyzed his personal situation closely. “We sat down and we all said, ‘well, how much can we live on.’ And that’s when we started to pay ourselves just what we needed to live on. We put in as many billable hours as we could,” he says.

The tactic worked. Only one customer left — to move with his former partner who opened a competing business. Within three years, Tenable was out of debt.

Since then, Miragliotta has been able to rebuild the business and has even opened Tenable Entertainment and Event Management, a sister operation that provides ancillary services for events all around Northeast Ohio. The company now has a staff or 30 and Miragliotta expects gross sales to exceed $10 million this year.

His efforts have been recognized outside the industry. Miragliotta was named a finalist in the Ernst & Young Entrepreneur Of The Year program. “I’m pretty excited,” he says. “It’s great for me. If I had followed all the traditional books that I read on business practices I’d be out of business. I had no other choice but to continue to roll the dice, and sometimes I still do. We’re in a much loftier position than we’ve ever been in.”

Miragliotta credits his employees for the company’s success. “They truly are the ones that deserve it,” he says of the recognition. “They’re the ones out on the front lines anymore doing this stuff. I’m tickled because it’s my industry. How many times have you every heard of a security agency being considered for this type of a nomination? It goes to the perfumed generals out there. Where are you going to find another company where my bottom line worker is scrimping and saving to take care of his family? It validates them. They can say ‘I work for Tenable.’”

And keeping that name was important to Miragliotta. “The name was picked because while I was in the Marine Corps I was in a reconnaissance unit. I had been kind of military history buff, especially about Viet Nam. When President Kennedy first sent his advisors over to Viet Nam, he sent over as the special forces A team. A lot of them worked in 10-man teams and when they would sign off the radio the would sign off as ‘ten-able.’ And that was a derivative of tenable. Tenable is Latin word that means a force to protect and defend. Everybody had recognized that name.”

As a 19-year-old marine, Miragliotta dreamed one day of owning his own company, one with a name that would command respect. “I just didn’t want to abandon those principles.”

How to reach: Tenable Protective Services, (216) 361-0002.

Daniel G. Jacobs (djacobs@sbnnet.com) is senior editor of SBN.

Published in Cleveland
Monday, 22 July 2002 09:39

The judges

Daniel Austin

Vice chairman

McDonald Investments Inc.

Carol Latham

President and CEO

Thermagon Inc. (former winner)

Thomas McKee

Partner

Calfee, Halter & Griswold LLC

Larry Roth

Cleveland chapter president

Young President’s Organization

Loyal Wilson

Managing director

Primus Venture Partners

Published in Cleveland
Monday, 22 July 2002 09:39

Industry innovator

The past year has been a wild ride for Joseph Keithley.

His company, Solon-based Keithley Instruments, finally began reaping the rewards of sweeping internal changes made within the organization over the past several years. The results have been impressive, with strong revenue figures, a skyrocketing stock price and an impressive resume that includes the likes of Motorola and Nokia.

Keithley took over as CEO of the 54-year-old company in 1993, after his father, Joseph F. Keithley, stepped down. Over the next several years, the younger Keithley reorganized and rejuvenated the high-tech measuring device manufacturer, concentrating on high growth markets like telecommunications and the semiconductor industry and selling off unprofitable parts of the business. The results speak for themselves.

Keithley Instruments has consistently reached more than $100 million in revenue the past several years. Meanwhile, sales are up 50 percent over what they were 12 months ago, a fact Keithley attributes to the company’s ability to keep up with the incredible growth rate of the technology industry.

“The industries we focus on are the ones that are growing fast and companies that are growing fast in those industries,” he says. “And, I don’t see other companies organizing themselves to do that and then modifying their new product process, their new manufacturing process to enable that to occur.”

Add to that recognition by Ernst & Young LLP as Entrepreneur Of The Year in the Technology category, and Keithley’s success has not been overshadowed by much.

Although Keithley Instruments may be thought of primarily as a manufacturing firm, its research and development arm is what, in Keithley’s eyes, has been the driver of his company’s success.

“We’ve taken a fundamental measuring capability, and instead of doing a product push, we’ve been really creative at the market,” he explains.

That means being able to react quickly to customer demand, especially in a world in which cellular phones and laptop computers shrink in size with every passing day, requiring new, more precise measuring devices to test them. Being able to deliver quickly on those customer needs is what Keithley sees as his firm’s edge.

“They are rich with new product ideas for us, and every new product idea we get back from them, we feed back to them through the product,” he explains. “It is rewarding because we are solving problems, and these are guys who are going nuts because of the demand for their product. I think that’s just generated enthusiasm, energy and a lot of more goodwill in working with the customers.”

For Keithley, that has meant implementing a fast-track product development program not only to meet customer demand, but also to beat the competition to the punch. In the past five years, Keithley Instruments has introduced several new products designed specifically for certain target audiences. It has required a substantial investment in new technical staff and equipment, but Keithley says being an industry innovator is one of the most satisfying parts of his job.

“I really enjoy working with the young people and sorting out the customer problems and profiling the opportunities,” he says. “I really enjoy making the customer visits and seeing how our products are used and how application support is used. So, those are two aspects of what gives me great pleasure.”

Keithley’s work over the past several years has not been lost on Wall Street. During the past year, shares of Keithley Instruments reached a 52-week high in mid-March of $74 a share, a stellar rise from its 52-week low of less than $7 a share. As far as the company’s recent rise to being regarded as one of Northeast Ohio’s most high-profile companies, Keithley admits it is the first time since he took the helm of the company that he’s felt comfortable being recognized as one of the region’s leading entrepreneurs.

“The work that we’ve been doing the last several years is finally at a point where someone else would take notice,” he says. “Before that, I wouldn’t have had the temerity to stand up and say, ‘Hey, look at me.’” How to reach: Keithley Instruments, (440) 248-0400

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

Published in Cleveland
Monday, 22 July 2002 09:39

Dialing in on success

Being an Entrepreneur Of The Year finalist is nothing new to Thomas Tyler.

Tyler, president and CEO of Xtrasource, was not only a finalist, but also a winner in the 1993 competition as head of Universal Electronic Inc.

“It’s quite flattering,” Tyler says of the experience. “You get a chance to meet a lot of very interesting people with similar problems and ideas.”

It was that experience with UEI that led to his current venture. Tyler took UEI, a producer of universal remote control products, to $100 million and led it through a public offering in 1993.

“As with all high flying companies, we had our ups and we had our downs,” he says. “In 1995, I decided I’d had enough there.”

At UEI, Tyler learned the art of customer service. It began with a couple of people answering questions and ballooned to a help desk operation in which 450 people responded to 250,000 calls a month. When he left UEI, Tyler investigated and found that teleservices was a $90 billion market, and the help desk portion accounted for $15 billion.

“It was a much bigger business than I was competing in with Universal,” he says. “And I felt that we had the experience of operating a help desk and that we know how to market and support on a global basis. That’s why we started Xtrasource, and that’s how we made the transition.”

His company now outsources customer service via telephone, e-mail and the Internet. There are about 600 companies that offer the services Xtrasource provides, but most are entirely located within the United States. Xtrasource is one of five or six companies that provides help desk services on a global scale.

It’s a very fragmented market. Tyler has opened offices in the Netherlands and France and has a partner in Asia, in addition to facilities in Kent and Raleigh, N.C. The company has plans to open an office in Sao Palo, Brazil, in the third quarter of this year.

Xtrasource has about 900 employees who answer about 50,000 calls a day about some 500 products.

The company offers support in 25 languages in more than 40 countries, through the use of sophisticated software that tracks where calls come from and sends them to the appropriate operator.

“It’s unlikely that we can dominate this market, but we should be able to command a reasonable share after a period of time,” Tyler says. “We’re the smallest, but we’re the newest, too.”

In its four years of existence, Tyler says the company has doubled its revenue each year.

“Our goal in life is to be a global player, which we are already,” he says.

Fueling some of that global growth is the Internet. About 10 percent of the “calls” Xtrasource operators answer come through the Web, in the form of e-mail or Internet chat. In the next five years, as technology integrates telephones, computers and the Internet, Tyler expects that number to increase to 80 percent. How to reach: Xtrasource, (330) 673-3316

Daniel G. Jacobs (djacobs@sbnnet.com) is senior editor of SBN Cleveland.

Published in Cleveland
Monday, 22 July 2002 09:39

Built to last

Family Heritage Life Insurance Co. of America got its start when Howard Lewis left his high-paying corporate position to work on fulfilling his long-time dream of owning a business.

He was not alone, either, having convinced a few others to join him on his quest to find the financial resources necessary to make his vision a reality.

“We sort of jumped out of the airplane,” says Lewis, company president. “We went from a senior corporate executive position with all the perks that go with that sort of career, and suddenly we were paying the bills, and if it got done, we had to do it.”

Lewis and a handful of other managers banded together to build the new business. The biggest factors in his decision to invest his time and resources in a start-up were his desire to have an equity position in a company and his desire to provide that same opportunity for all of his employees.

“We were at a company where we didn’t have an equity position,” explains Lewis. “We were building the business and we were well paid, but we didn’t have an equity position. Our dream was to create a business where everybody would have an opportunity to own stock in the company and be part of what they were building.”

The Southwestern Co. supplied Lewis with $3 million and extended a line of credit of $14 million to get Family Heritage off the ground. However, that show of support did not come before more than 18 months of due diligence on the part of Southwestern. Ten years later, Family Heritage boasts assets approaching $75 million and cumulative net profits in excess of $21 million.

Lewis recalls the company’s early days, which often entailed 100 hour work weeks, an entrepreneur’s basic training, of sorts.

“It’s kind of like, you wouldn’t take a million for the experience, but they couldn’t give you a million dollars to do it again,” jokes Lewis. “You’re looking at a lot of 100 hour weeks, but the joy of the business is the opportunity it offers for the people who affiliate with us.”

Lewis believes the main driver of the company’s success has been his ability to give ordinary people the responsibility and stake in the company that push them to create extraordinary results. He says it is one of his favorite things about being an entrepreneur.

“We believe we are a company where a person’s true potential will rise to the top and they can be everything that they can be. Man, woman, without regard to religion, race or creed,” says Lewis.

“When you see people come in here who were making $20,000 to $25,000 a year, who are now making in excess of $100,000 a year and have a significant shareholder stake — there is a joy and an excitement in that.” How to reach: Family heritage Life Insurance Co. of America, (216) 520-2800

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

Published in Cleveland
Monday, 22 July 2002 09:38

Belle of the ball

The story of Embedded Planet reads like a Hollywood fairy tale. After just three years in existence, the company is set to live happily ever after.

“We’ve had so many nice things happen,” says Alayne Reitman, president of the technology-based operation. “It’s just fun. Somebody came up to me at Innovest (an annual venture capital conference held this year in Columbus in May) and said, ‘How does it feel to be the belle of the ball?’”

It has taken a lot of hard work for the owners of Embedded Planet to make it to the dance. Delivering the crowning touch, Ernst & Young named the company’s management trio Entrepreneurs Of The Year in the Emerging Entrepreneur category. Honored with Reitman were Robert Applebaum, vice president, and Ramon Molnar. But there is still a lot of work to do.

“The nicest thing about it right now,” Reitman says, “or at least for me personally, it’s local Cleveland recognition. It’s Northeast Ohio recognition. It’s promoting the work we’re doing so that other people see that it’s happening.

“We are still really just coming out of a true start-up phase. We have been going for now two years. And we’ve been designing product and working with our engineering team. It’s really now just six months since we’ve had any kind of sales and marketing.”

She says the company expects its sales to pick up briskly in the next year, “and we’re going to end up hiring a lot of people over the next 12 months. It’s past that initial stage of ‘Do we have the right concept?’”

Embedded Planet is looking to raise $30 million and clearly has a concept that has caught people’s attention. So what is it exactly that it does?

“We are simplifying the way technology is implemented, so it allows people to build products more quickly, have the adoption of technology reach the masses much less expensively,” Reitman says. “One practical application of the company’s technology is telemedicine. This is where a nurse can visit a remote area, perform a few medical tests, and have a physician half way across the country review the data and make recommendations.”

It’s the type of technological revolution that’s in the right place at the right time. Many people walk around with cell phones, pagers, laptop computers and Palm Pilots, and as Reitman says, the complexity has gone up with each new device designed to make our lives easier.

“The next phase of this evolution is the ability of all these devices to communicate with one another, actually flow from one to the other reasonably seamlessly. And that’s really where I think we’re all going to see an impact,” Reitman says.

To get to that point, to be the company that leads the way, Embedded Planet is looking for venture capital financing.

“It will really allow us to move full force on the marketing and sales initiatives and to continue to address and grow our engineering resources,” Reitman says. “We’ve been trying to run a little bit of a balancing act — a little bit here, a little bit there. When we raise the $30 million, we think we can generate a significant amount of marketing and sales activity, which ought to then accelerate our revenue growth. That’s the next step.”

Like many young companies, Embedded Planet has yet to turn a profit. But the plans are in place. The company should bring in $9 million in revenue this year, and within three to four years, Reitman projects revenue of $300 million.

“The secret to our success is our skill in creating and motivating teams. We employ the imagery of the Army Rangers or the Navy Seals to motivate our teams to the challenges ahead,” Reitman says. “Our staff believes they are able to tackle these challenges better than anyone else and knows that their efforts will impact lives around the world. We hire the brightest, most talented individuals we can find, wherever they live, and we encourage confidence in the individual and the team.

“An individual’s personal goals and ability to work within our culture is as important their technical ability.”

The amount of work can prove difficult at times, she says.

“We work very hard, and the hours are long, and we don’t always get great feedback. In these long days, and sometimes long nights, of working to get this business up and running, it’s really nice to get this kind of recognition.

“I feel a little bit like the belle of the ball.” How to reach: Embedded Planet LLC, (440) 646-0077

Daniel G. Jacobs (djacobs@sbnnet.com) is senior editor of SBN Cleveland.

Published in Cleveland
Monday, 22 July 2002 09:38

Growing pains

Tom Rice admits that one of the more difficult things he's done in his life is to name a successor for Rice's Nursery, a retail garden center, gift shop and design/build/landscape concern located on 35 acres in North Canton.

It wasn't that he balked at the idea of turning the day-to-day operations over to someone else. The 58-year-old CEO was perfectly happy to be out of the office and running one of the nursery's three Stark County farms, a 90-acre spread he bought four years ago to produce shade and ornamental trees. Furthermore, he realized it was high time sons Bryan, a 34-year-old horticulturist, and Kevin, a 33-year-old state-registered landscape architect, learn how to manage the business and its 120 employees.

"I found out a long time ago that as long as you're doing it, everybody will stand back and watch you do it," Tom says in a matter-of-fact tone.

The hard part was choosing one of his sons, both hard-working Ohio State University graduates, to head the family business.

"Making Bryan president was tough because the boys are just a year and five days apart," Tom says. "They're so close in age. But Bryan's really a leader. Kevin's a little more quiet, a little more laid back."

Tough is a word Bryan also uses, in his case to describe the role he assumed in January after working at the nursery for 10 years.

"The changing of the guard, if you will, has not been as easy as I thought it was going to be," he confesses.

The spring and summer of 2000, for one thing, have proved to be incredibly soggy. Bryan recently sent letters to customers explaining that major rainfalls have put the nursery behind schedule in completing landscaping jobs.

"Working with Mother Nature is very, very challenging in itself," he says. "Mix in the family part of it, and that just adds a whole other realm of problems."

Bryan is candid in describing just what those problems are. He believes his father may not have been as ready to hand over the day-to-day operations of the nursery as he professed to be.

"There's a level of trust, but ... this was his baby," Bryan explains. "He still wants to be somewhat involved."

The result was that neither Bryan nor the nursery employees knew exactly who was in charge of what. The new president says that people went over his head to his father with problems and concerns instead of bringing them to him. The problem was remedied to some extent when Tom explained Bryan's role in a letter to employees and asked them to support him in his position.

But Bryan says he needs to do it verbally, too, and calls that clear definition of roles "one of the biggest things with a family business that needs to be done."

Bryan's new title has gotten him involved in landscape sales and production, which has resulted in "a little bit of a power struggle/ego thing" with his brother, who designs and sells landscape jobs for the business to install. Bryan describes Kevin as a tremendously gifted landscape architect who, like many artists, doesn't possess all the management skills needed in his position as vice president.

"A lot of artists won't recognize that or can't recognize that," Bryan says. "That's one of the issues that we're dealing with right now."

His solution is to pitch in and help.

"I'm hoping and praying he's receptive," Bryan says.

Kevin, for his part, says he's had no trouble working with his brother or his father since he left a Columbus landscape design firm and began working with them seven years ago.

"The dynamics of the business are unique," he says of the family firm. "But we tend to work well together, and we understand our chain of command."

Tom says he has relatively little experience with his sons' predicaments. By the time he purchased his father's small landscape business, J.D. Rice & Sons, when his father retired in 1970, his own brother was no longer involved. But he says his sons have their own areas of responsibility -- Bryan the "green-good buying" and garden center, Kevin the landscape business -- and work hard to resolve any differences they have.

"We've had our moments, believe me, but for the most part it's been very enjoyable," he says.

His advice to Bryan?

"I told him to just take it easy, and things will happen," Tom says. "He needs to gain everybody's respect."

The problems Bryan relates are not uncommon, according to Dennis Zaverl of Zaverl & Associates, a Peninsula-based consultant who has worked with family businesses for 30 years. He's not surprised to hear that Tom might have problems handing over the reins of the nursery. The fact that employees seek him out for answers to questions and problems is "a form of being needed, a form of flattery."

Zaverl does say, however, that Tom has done the most important thing he can do in facilitating his sons' success in their new roles -- physically remove himself from the nursery. The next step is to refer those employees who continue to come to him to the appropriate offspring.

"It's a very difficult thing to break that dependency," he acknowledges. "But he has to say to the people who are doing that, 'Look, I like you. We've had a good relationship over the years. But I can't answer that, and I can't get involved in that. That's not the succession plan.'"

Zaverl agrees with Bryan that it might be helpful for Tom to have a succession talk with nursery employees. He says it's normal for some employees not to take the new arrangements set forth on paper seriously, especially in what Zaverl calls "a family atmosphere with nonfamily employees."

"You know how families are -- nobody pays attention to mom or whoever is beating on them all the time," he says with a chuckle.

The succession talk doesn't have to be an elaborate speech. Something simple will suffice, such as "Johnny's taken over the company. From this point on, all decisions in these particular areas will be made by him. Furthermore, these are the only activities that I will be dealing with."

To ease any tension between Bryan and Kevin, Zaverl suggests Tom put the emphasis on each man's respective responsibilities instead of on their titles, both when dealing with them individually and when presenting them to employees in the succession talk. Doing so, he explains, reduces the potential for breeding resentment.

"You go back to the division (of labor), a little bit like the Japanese culture," he says. "So the guy's the president. Big deal. He's just another worker."

Putting the emphasis on responsibility rather than titles, Zaverl adds, makes it easier to hold each son accountable for his actions.

"You let the accountability surface, whether it's at a weekly meeting or somewhere else," he says. "If one is responsible for certain things and they're not working, it's a topic for discussion."

Having Tom present during these meetings as a mediator might be a good idea until Bryan and Kevin work through any issues they may have.

Bryan believes the challenges of recent months may not be bad for the company in the long run.

"I might look back at this at age 40 or 50 and say, 'That really made me strong, to deal with the issues to get us where we're at today.' Truthfully, it should make us a stronger business, to go through this."Lynne Thompson is a free-lance writer for SBN.

Published in Akron/Canton
Monday, 22 July 2002 09:38

Outside interests

SBN Columbus asked local business experts to analyze the plans for Chocolate Works. Using the company's two-page executive summary given to investors, David Bittner, president of Growth Management Solutions Inc. and chairman of the Columbus Investment Interest Group, and Beatrice Wolper, partner with Chester, Willcox & Saxbe LLP and board member for the Family Business Center of Central Ohio, took the time to provide some feedback.

By David Bittner

Something that immediately caught my attention about Chocolate Works is the owners' willingness, and even desire, to place equity with directors and partners.

Partnering with Gerald Stevens seems like a smart move. Chocolate Works will gain wide distribution while aligning with a complementary product having a parallel brand image.

Borrowing from the real estate adage, most folks in the venture community agree the three most important factors affecting the success of a new venture are: 1) management, 2) management, 3) management. A strength of Chocolate Works is that Barry and his team have been there, done that. As their venture unfolds, they'll know which opportunities to pursue and where the pitfalls lie.

Chocolate Works appears to have researched its market thoroughly and has a well-thought-out marketing strategy. The varied arsenal of distribution weapons is powerful so long as the company can steer clear of channel conflict.

One clear weakness is that the company has no proprietary products or technologies, resulting in low barriers to competitive entry and downward pressure on margins.

In addition, new ventures in vogue with investors today are business-to-business plays. Chocolate Works, on the other hand, is a business-to-consumer play. Consumers are less attractive customers because of the expense of locating and keeping them and the limited purchasing power they have.

Another fashionable business concept is dot-com. However, Chocolate Works is not com. Though the company does intend to use the Web as a promotional tool, sales of impulse, sensory-driven food products aren't likely to benefit as much from the e-commerce wave as planned, nonfood products like books or collectibles.

Be that as it may, Chocolate Works may be able to take advantage of its low-tech nature by appealing to investors who have experience in traditional businesses and are wary of the volatility and the reality of all things "e."

All companies ought to espouse a certain method of producing a return for their founders and investors. If not, they risk never achieving their financial objectives. They should pursue an exit strategy for which there is industry precedent for attractive returns. I suspect the return to the owners of Chocolate Works might most readily and productively occur as a result of a sale to a strategic buyer like Godiva or a channel partner like Gerald Stevens.

The company might do well to consider adopting a more specific intent for its use of capital. More thorough financial planning up front leads to more effective deployment of resources later.

I suspect there are a number of companies in this market that offer similar products. If not now, there will be more competition when and if Chocolate Works is successful. The owners should differentiate their product from competitors' as much as possible while they're in the formative stages so the distinction is clear when the stakes are higher.

Many investors shy away from family-run businesses due to the domestic pressures that compound the professional challenges. Barry and his team may have to convince investors that he can turn this into an advantage.

Rapid growth of more than 300 percent between 2000 and 2001 is quite steep. There's the obvious issue of generating enough volume to accomplish that goal, but there's also danger that the management and fulfillment infrastructure may not be able to keep pace.

By Beatrice E. Wolper

Chocolate Works' plan incorporates both a solid history and the chance for exciting growth.

When going to the market, it may be beneficial for Chocolate Works to emphasize that several members of the family work at the company; therefore, it is a "family-owned business" -- which translates into strong values, ethics and loyalty. Family-owned businesses have done well in the marketplace.

In order to reach the desired growth outlined in the summary, the company may wish to focus on how to strengthen the family business relationships by having a family business plan. This should assist the company in expanding on the national level, since the plan should incorporate the concepts derived from scenario planning, which is often necessary for such growth.

What will the company be like in three years, five years, 10 years and 25 years? Will people still be eating chocolate? (I will!) Will the family be involved? Cousins? Grandchildren? Will people only be buying through the Internet? The scenarios would analyze the company's strengths, weaknesses, opportunities and threats for each alternative.

It appears that to grow to the national level expressed in the summary, a clearer definition of who the customer is needs to be established. The list of corporate customers is extremely impressive. After stating all the great name customers of the company, it is surprising to read that the target customer is a female purchasing from a retail store.

It appears that the main customers for the corporate sales department should be similar to those listed, and the target customer for the retail sales department would be such a female. There needs to be two distinct marketing strategies -- selling different concepts to different entities.

Development of why the chocolates are unique may facilitate the desired national growth. What makes the company's products unique? Why are these chocolates and private label gourmet boxes different than those of competitors?

Teaming with a national partner is a positive move toward aggressive growth. The company's financials should be detailed enough to account for many outcomes: worst and best case. Since Gerald Stevens is new to the market, the financials need to reflect what happens if it takes longer than planned for the Gerald Stevens expansion. All in all, a tremendous opportunity, but one that needs to consider various timetables.

In conclusion, the company sounds very solid, with excellent growth opportunities. And, who wouldn't like chocolate?

Published in Columbus
Monday, 22 July 2002 09:37

Thinking big

An enormous white fish glides out from between two rocks inside the gargantuan aquarium that reaches from floor to ceiling and divides Robert Fortney's office in half.

The 6'9" president of Fortney & Weygandt Inc. is seated in a nearby chair, watching the fish make its looping orbits around the glass tank as he tries to find the right words to explain why his construction firm has grown so quickly during the past decade.

Fortney is quick to point out that his North Olmsted-based general contracting firm is a business in the field of construction, not the other way around. Ironically, he has never set foot upon a bulldozer. And, despite his towering frame and a deep booming voice that makes him seem like he could make a serious go at a professional wrestling career, the success of F&W is fueled more by brains than brawn.

"My strength is systems and organization," explains Fortney, who bought out his former partner, Bob Weygandt, in 1982, four years after the firm was founded. "I'm the guy who can fit those two extra glasses in the dishwasher and the extra suitcase in the back of the car."

More important, Fortney's embarked on a never-ending search to improve upon existing methods of doing business. And while that is at the core of F&W's business philosophy, it's Fortney's ability to deliver on his vision that drives the company's fortunes.

In an industry in which most large construction companies work on perhaps a dozen projects a year, F&W is an anomaly. Nearly 75 percent of the firm's annual revenue is derived from more than 100 unique projects. Combined with rollout work the firm does on a consistent basis for companies including Kmart Corp. and Applebee's, the number of projects per year tops 1,000.

This ability to handle such incredible volume is another part of Fortney's blueprint. But he has also spurred growth at his 250-employee company by integrating new technology into an industry in which mountains of paper and handwritten reports from the field are the longstanding norm.

By harnessing the Internet to reduce loads of time-consuming, unwieldy internal paperwork and improve communication with his base of subcontractors, Fortney has set himself apart from his competitors. In fact, he just may be one of the first digital-age construction firms in the nation.

But Fortney doesn't want to keep all this innovation to himself. He says it's something others in the industry need to embrace as well. Toward that goal, he's launched a business to business e-commerce site that will, for a fee, let anyone shrink the nightmarish paper shuffling that has long been viewed as a necessary evil of the bidding process.

And for those old-school naysayers who chuckle at the thought of laptops at a construction site, Fortney intends to have the last laugh. Microsoft Corp. recently tabbed F&W for a case study, an honor the software giant usually reserves for high-profile Fortune 500 companies.

"We got tired of running with the pack and doing what the industry does," explains Fortney. "We basically said, 'Screw it, let's not worry about it.'"

This path-less-trodden mentality appears to be the difference between Fortney and his competitors. Today, F&W is closing in on revenue of $100 million a year. Fortney is sold on the belief that technology will help it grow even more. While other industries charge full force toward the electronic age, the construction industry seems mired in its traditional past.

But like every other step of the journeys he's traveled, Fortney intends to buck tradition here as well. If there is one person well positioned enough to help the construction industry's transition to the electronic age, it just may be the no-nonsense, tell-it-like-it-is Fortney. Here's why.Ten years ago, Fortney looked around his industry and realized the traditional general contracting business model no longer appealed to him.

At the time, most firms survived off a handful of high-ticket projects, which made competition for landing prized contracts a high-pressure challenge. Rather than fall in with his competitors, Fortney says he believed he could increase revenue by creating a higher quality organization from the inside out.

"We took the corporation and divided it into 200 different parts," he says. "Our goal became to take each and every one of those parts and improve it on a continuous basis. With every step we take, a secondary byproduct of that is more volume. A tertiary byproduct is more profitability on that volume."

Creating a culture dependent on constant improvement did not mean that workers were charged with bettering only the facets of business for which they were responsible. Any aspect of the company was fair game for improvement. But that led to another problem.

Fortney discovered that American workers were not especially fond of making suggestions to management. That's in distinct contrast with foreign competitors. For example, the average Japanese worker turns in 30 to 40 workplace suggestions a year. Fortney says studies show American workers are lucky if they turn in three or four comment cards over the course of an entire lifetime.

The solution: Fortney's Opportunities For Improvement program -- or OFI for short. When a worker makes a viable suggestion, he or she is entered into a quarterly drawing for $1,000. The incentive-laden program helps build employee confidence in making suggestions. Fortney now collects about 500 comment cards a year.

"I believe very strongly that cognizance of a problem eliminates 60 to 70 percent of the problem," he says. "Just being aware that there is a situation comes very close to eliminating it. We work hard to get our people to suggest opportunities for improvement.

"It doesn't need to be a $3 million cost saver. It does not need to save 500 hours a year. It can be something extremely simple."

The walls in the lobby of F&W's headquarters are decorated with framed pictures and letters of thanks from people with whom the firm has worked over the years.

The photograph collection of churches, restaurants and hotels serves as evidence of the importance and power that relationships hold in the business world. Fortney says these relationships are much too rare in the construction industry.

"If you have a legal problem, you work on relationships," he says. "It becomes obvious that the person you have the relationship with has your interests at heart and is not trying to make his $100 or $200 an hour. Construction should be the same way."

F&W forged a long-term relationship with Radio Shack more than a decade ago. Today, Fortney has 50 employees exclusively assigned to the rollout arm of the firm, which makes up a significant portion of the company's annual revenue.

Rollout, explains Fortney, is the term used to describe a job that's the same each time, such as building a photo lab in a Kmart. No matter where the store is located, the photo lab is in the same place within the store with the same specifications every time.

This strategy has helped F&W establish long-lasting relationships with Kmart Corp., Applebee's, CVS, Petland and a number of other high-profile chains, which continuously feed business to F&W.

"The niche that we position ourselves in is that of rollout work where there is a pre-established learning curve," Fortney says. "Once you learn the curve, you're immediately more competitive than anybody who doesn't know it. That way, you can make higher profits."

And though he declines to talk specifics, Fortney says F&W's profit margins are "substantially better" than the slim 1 to 2 percent considered standard for the industry. Moreover, the rollout program has helped Fortney forge longstanding business relationships that are not solely dependent upon submitting the lowest bid.

"General contracting is a service industry," he says. "You won't change this overnight, but the entire bid process is confrontational. We believe that you work on a negotiated basis. When you do taxes on April 15, you don't ask three accountants to give you bids."

Technology has had a major impact on Fortney's business. His ability to embrace it has aided in the re-engineering of his long-range vision.

But when Fortney asked his base of subcontractors a little more than a year ago to get comfortable with the idea of bidding on F&W projects via a corporate extranet, he was surprised by the response. It seemed that many of them didn't want to wait a year or two for the technology to be developed.

"We were inundated by people saying, 'Why do I have to wait when I'm ready now?'" he says. "We were shocked. It was the masses telling Big Brother, 'Hey, you're behind. We want it now.'"

The reaction spurred plans for www.fwprojects.com, a password-protected extranet launched last August. The plans and specifications for every F&W project are included on the site. So far, it has been a success, with more than 1,000 registered users and 20,000 hits a week.

Fortney reached the conclusion that such an idea was "way too good" to keep to himself and began work on www.constructionbidding.com, a business-to-business e-commerce initiative that takes the premise of FW Projects and offers it to the industry as a whole. The site, which is in beta testing, has only been around for few months but already receives a few thousand hits a week.

Other start-up Web companies are trying to cash in on the same e-commerce model, but Fortney's is the only one that is not a purely subscription-based service. In fact, Fortney has borrowed a page from Amazon.com in his jump to the Web, applying for a business method patent on the idea.

"Time is money, and if I can do it faster and cheaper than you can, then I want you to use the same system you've always used because I can't be right," he says with a sarcastic lilt in his voice. "You must be right and I must be wrong. I don't mind that."

The Internet strategies are only a piece of Fortney's overall plan to use technology to evolve F&W into a more efficient company. The development of a single-entry data system, which is about 70 percent complete, and the use of the firm's Superview 2000 program are two of the other applications Fortney sees as key components. The latter, a system that instantly e-mails every superintendent memo and report from the field to the proper files at F&W's North Olmsted headquarters, is the one that spurred Microsoft's interest in documenting Fortney's system in action.

"My goal is within five years to have my project managers go out to a work site with a laptop, hold a meeting, and before the meeting is over, have a copy of the minutes in the owner's file," he says. "It will be all voice recognition and technology along those lines. That will increase our efficiency to a multiple that most of the industry doesn't exist on right now."

There's little debate about the vast financial opportunities that exist within the construction field. With billions of dollars on the table each year, it's no wonder the industry is so highly fragmented.

There are no big-time national players, and even the biggest of the big control no more than one-half of 1 percent of market share. Compared with nearly any other industry, construction has yet to meet an age of heavy consolidation.

"Construction is the last vestige of the American economy that is still controlled by the moms and pops," Fortney says. "Every other company, from medical insurance to automobiles to restaurants to lodging to everything else, has gone to the nationals. The construction industry on the contracting side has not done that, but I see that starting to happen."

As evidence, he points to First Energy's recent purchase of several small HVAC firms in anticipation of energy deregulation. But major consolidation is still years away. If and when the industry reaches that bridge, firms will need to work out the logistics of such a huge undertaking.

Fortney believes it is the efficiencies created by the Internet and new software applications like the ones he is currently using that will allow construction companies to become national players.

"If you can actually market and establish some guidelines and procedures, take your technology and use your buying power, you could be an extreme force," he says.

Even after building F&W from a tiny company pulling in a few million dollars each year to one speeding toward the $100 million milestone, Fortney is not tipping his hand when it comes to whether he expects his firm to play a role in this future. "When, where, why and how we participate in that is not yet determined," he says, though he jokingly admits that bit of information and 50 cents will get you a cup of coffee. "I think it definitely requires to be looked at and I think that's really the important part, realizing it's there to look at in the first place." How to reach: Fortney & Weygandt, Inc., (440) 716-4000, www.fw.projects.com

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

Published in Cleveland