At 36 years old, Clevelander Matt Ghaffari, the reigning Olympic silver medalist in Greco-Roman wrestling, can look back on a spectacular wrestling career. There's been just one insurmountable snag: reigning gold medalist Alexander Karelin.
Their matches tend to be the close and hard-fought battles of titans. But like Sisyphus of Greek mythology-condemned to roll a boulder up a mountain only to watch it roll back down as he neared the summit-Ghaffari has never defeated his rival. The Russian has held off Ghaffari 20 times, most recently pinning him at the World Championships in late August. Ghaffari is already talking about their next meeting.
With that in mind, it's easy to imagine Ghaffari's first rejection by a business prospect early this year didn't slow him down very much. To him, such disappointments are the basis for the next goal, whether it's in wrestling or his fledgling career in financial planning.
"I don't consider anything a failure or a loss," says Ghaffari. "There's nothing bad about losing. If you don't make mistakes, you can't fix them. When I make a mistake in wrestling ... I either took an opponent too lightly or didn't hit a move hard enough.
"In business ... (it) means that after a hard week you have nothing to show to the boss. But with every client I could have closed and didn't, I learned some valuable lesson that will help me close the next one. That's priceless."
Call him the master of positive mental attitude. But if that's all Ghaffari brings to the world of business, he figures he's already ahead of most competitors.
In fact, he's bringing other disciplines that translate easily from the gym to his role as an associate at Cleveland-based Brennan Financial Group, and a registered representative of New England Financial.
What can you learn from a guy who's been in business for only the better part of a year?
Eighteen years competing against the world's best wrestlers ought to be good for something; Ghaffari is certain his athletic career has prepared him to compete in the pin-or-be-pinned world of business.
Rejection isn't defeat
Financial planning isn't a career for the weak-of-spirit; it's a competitive business of hard handshaking, relationship development and continuous product training. Most prospects already own the products Ghaffari sells (life insurance, annuities and mutual funds), and they're contacted by Ghaffari's competitors every day.
As the wrestler aptly describes it: "I am in the rejection business."
But every day, Ghaffari reinforces in his own mind that each 'no' brings him a step closer to the next 'yes.'
He repeats a simple mantra that has characterized his wrestling career: "Never give up."
Born in Iran, Ghaffari moved to the United States in 1977. As a seven-time U.S. national wrestling champion, he developed his resolute attitude while struggling at the highest international levels of an ancient and primal game.
"That's the lesson in the sport," he says. "With the Russian (Karelin), I lost to him 20 times. But I can live with that. In my business life, never give up means staying after clients and telling myself that I'm going to make this big company my client. I might have to work on it for two years and move slow, but I'm going to do it."
Perhaps more important is the lesson he learned from the media attention he received after his silver medal performance at the 1996 Olympics in Atlanta: The winner isn't always the guy everyone wants to meet.
"Sometimes it's the guy who never gives up and comes back again, only to try harder."
Big successes are the sum of a series of small ones
At 6'4'' and 300 pounds, Ghaffari is an imposing figure in a suit and tie. But his warmth and sincerity must make him seem like a gentle giant to prospects.
Right now, he's trying not to think about the big deal that might move him up the corporate ladder; he's concentrating on the fundamentals-building a career one sale at a time.
"It doesn't matter how big or small a client is; once you close a deal and get a check, even if it's a dollar, it feels good," he says. "Small sales build confidence."
This is a lesson he has already learned. At his first Olympic trials in 1980, Ghaffari didn't make the U.S. team. Same with his second and third tries. In his fourth attempt, in 1992, he finally earned a spot on the team. But he didn't win a medal.
The Atlanta Olympics was his fifth try. He won the silver after losing 1-0 in a marathon, extra-rounds match against Karelin.
"The sixth one's going to be a charm," he predicts. "Building confidence with each step gives you the courage to go out there and stick your neck out to get chopped off. Every day you test yourself ... and it's always a new test."
Everyone needs a coach
Ghaffari draws parallels between his wrestling coach, Anatoly Petrosyan, and his boss/mentor, Dan Brennan-owner of Brennan Financial Group. "Get a coach who wants to teach you," says Ghaffari. "Then listen to whatever he says."
And, according to both mentors, Ghaffari isn't just talking.
"So far, in the past seven years, Matt's my best student," boasts Petrosyan. "Anything I say to him, he does."
Brennan adds that Ghaffari's wrestling background seems to have helped him identify and tune in to the people who are best able to help him.
"He's very coachable," says Brennan. "If we say to him, 'this is what you need to learn, this is what you need to do,' he doesn't question it. He has confidence that we're coaching him properly, and then he works to develop and strengthen that skill."
Like that annoying kid on the high-school football team who enjoyed wind sprints, Ghaffari says he looks forward to Wednesday training classes at Brennan Financial. "That's where we go over mistakes we make," he says, "and learn how to improve on them for the next time."
Never treat anyone as a lightweight
Not long ago, Ghaffari met with a woman who had just been through a difficult divorce. She had no money and made it clear that she thought the process of developing a financial plan was a waste of time.
"She said, I'm not a doctor. Can poorer people have financial planners too?"
Ghaffari spent time to help design an appropriate plan. It's the kind of thing young financial planners do. So perhaps Ghaffari is just being young and idealistic when he says: "It's great to help people with millions of dollars, but you also have to help people accumulate wealth over 20 years. Just because they're not rich doesn't mean they shouldn't have the same opportunities."
But the lessons he's learned on the mat may, in fact, have instilled the discipline to take even the small challenges seriously.
"If I can beat a guy really easily there's no challenge to it," explains Ghaffari. "But if you beat the guy you're not supposed to beat, that's a great victory. I hadn't wrestled in two years, since Atlanta. But I stepped onto a mat August 31 (at the World Champion-ship), and beat the guy who took second last year. Everybody thought he would beat me. They figured that I wasn't ready. But I found I'm still the best challenger."
If you can't improve on the last performance, at least improve the effort
Even when Ghaffari closes a deal, his training as a wrestler doesn't allow him to sit back and enjoy it for very long.
He and his partner, Jonathan DeMell, set weekly goals and push each other to meet them.
"We can't go home for the week unless we do it. It's real easy to say we tried our best and go home on Friday at 5 p.m., but there are always ways to improve."
His goal this year is to greatly surpass the level of revenue needed to make his company's Hall of Fame-a major feat for a first-year associate.
"If I fall short, I'll be the best this company has," says Ghaffari."
Brennan says Ghaffari is "a better than average" representative. "Matt has a passion," he says. "I think people recognize that and see that he's there for the right reasons when he talks to them."
It's the same work ethic that impresses Petrosyan, who considers Ghaffari the most disciplined student he's ever coached.
"Actually, he's not very talented (as a wrestler)," Petrosyan says. "But, he has a very strong heart and is a very hard worker. That's why he's so successful. It's because of his discipline."
"I'm very hard on myself," Ghaffari explains. "It comes from wanting to be better than the best. If I win the Olympics I want to dominate my opponent and pin him. Winning ... is not good enough anymore. I want everything. That's what drives me. Twelve-hour work days are normal because I want my business to be successful."
How to reach: Matt Ghaffari and Brennan Financial Group, (216) 621-6000
Andy Russell, who sports two Super Bowl rings from his stint as a center linebacker for the legendary Pittsburgh Steelers of the 1960s and 1970s, has a long track record in business, a career he started in the off seasons as a partner in Russell, Rea and Zapalla.
For the past decade, Russell has teamed with partner Don Rea and managing director Jeff Kendall to access capital for their own growth and acquisition projects. The trio's merchant bank company, Laurel Mountain Partners, continues to foster a growing string of success stories every year.
Russell points to Liberty Waste Services, a landfill and solid waste company he, Rea and Kendall took from a single landfill with $3 million in revenue in 1996, to 28 acquisitions later, more than $50 million in revenue and more than $12.5 million in free cash flow.
Russell, in typical self-effacing manner, attributes Laurel's achievements to good luck and a good choice of compatible partners. He describes Rea's role as that of idea man, Kendall's as executor of good ideas, and his own, perhaps ironically, as that of a cheerleader. Time and time again, Russell's eternally optimistic philosophies of "if at first you don't succeed, try 600 more times," and "of course we can do it," emerge from his own tales of triumph through perseverance.
Kendall and Rea concur that informed innocence and not knowing it can't be done have played a part in Russell's success.
"I would say that if we knew going in to each of the deals that we've done-what the problems were that were going to come up, we may not have done any," Rea says. "But once we were into it, we had to solve them. So we solved them and survived."
Recently, Russell published his memoirs, a tale packed with football and business war stories. "A Steeler Odyssey" tells how his credo, "Get the bat off your shoulder," took him around the globe and to the top of the business world. In this SBN interview, Russell talks about his book and what it took to make that successful leap from football to business.
In your book, you describe how you and your partner at the time, Sam Zacharias, turned tours around the world to talk about football into business trips-more like business odysseys. Most people wouldn't have thought to turn a sports-oriented tour of Japan into a business trip.
Don't misunderstand; those were a lot of fun. I love those clinics for children and giving speeches and telling humorous stories to audiences. They seemed to enjoy those stories regardless of what their ethnic background was. But in the daytime, during the hours away from that, I was able to make presentations to investors, and that was ultimately a very successful strategy.
Sam Zacharias and I were simplistic thinkers. We thought, "Well, we're in investor products, there are moneyed investors all over the world, and why not?" The first trip, we went to the Middle East, Saudi Arabia. At that time, they were making a million dollars a day, the government [in oil production].
First of all, I did have an interest in seeing the world, for the pure joy of understanding other cultures and seeing other places. But for me, to take that kind of time without working-it might take us a month to go around the world, and we did five [trips in five] years. The shortest trip was two weeks. So for me to take that much time, I had to justify it in my mind, see if I could develop the business and expand a little. We made thousands, literally thousands of presentations, to everything from private Swiss banks to Saudi sheiks out in the desert sitting on oriental carpets drinking goat's milk and goat's blood, to Indian caste members of the Zoroaster religion, to Japanese industrialists like Sony-it was very exciting.
How did you find the right people to talk to?
We approached some of the corporations in Pittsburgh which had businesses in these countries and asked for referrals. We had no contacts. We started exactly at zero.
I think you just have to do it. You can be scared to death, but just do it. Nike's right. Get the bat off your shoulder and do it-I'm a big believer in that. Everybody worries. I had people telling me my whole life, "You can't do that! Who do you think you are?" You know, you can do things. I've always had partners who think really big. I think sports does help one in the sense that you are used to rejection. In this case, you're used to defeat, and you know about coming back, never giving up, all those trite things-but they work in business.
How many times did you get rejected in that first year?
Hundreds, hundreds of people said no. Only a few said yes. The first trip, I was telling dumb football stories-I thought I was there to make a presentation about tax-sheltered investments to these American employees of RAMCO, and Gulf Oil had told me, "Andy, take the Super Bowl highlight films." I said, "What for? I'm not going there to spread NFL goodwill." They said, "Don't be stupid." So I took them.
But I knew we were in good shape when, the first year, we made a presentation in the RAMCO headquarters in Dhahran, the oil-producing entity in Saudi Arabia. I gave a presentation to almost entirely Saudis, all sitting in their white robes and headdresses. There must have been a couple hundred of them, and afterwards, one of the officials of RAMCO asked me if I would come back the next year and do this again.
I said, frankly, "I couldn't afford to do that, that I'm a businessman. I'm here trying to sell my investment products." He said, "You Americans are so impatient. You need to learn patience. We need to get to know you, become friends first, and trust. Why don't you come next year, and...could you teach our children how to run and jump?" I said, "I think I could do that." He said, "We'll send our plane for you." I said "You'll send a RAMCO plane to Pittsburgh and pick us up?" He said, "Absolutely." That was a light bulb going off.
We ended up with our first deal overseas. We built a warehouse which was a tennis bubble for RAMCO. They used it as a warehouse in the desert. That took us months, after we made the initial contact. That was the second trip.
So it took two visits before any deals even got started?
Oh, yeah. We went around five years in a row. Really, the biggest connection we made was the final presentation in the fifth year, to a Swiss investor. I wrote that in the book, called the Sauna.
Having gone around the world five years in a row, making presentations in every city, Tokyo, Osaka, Hong Kong, Bangkok, Singapore, Bombay, Jedda, Dhahran, London and Frankfurt, and finally, after literally hundreds of presentations, and literally hundreds of rejections, we found an investor that ultimately proceeded to do a lot of business with us, millions of dollars worth of business. So there was a lot of perseverance in that. A lot of people thought we were foolish-if we had had a financial adviser, he probably would have said, "Stay home and take care of business right here-you don't need to be flying around the world."
Do you still do business with any of those people?
Yes, we still see those people, and we're still doing international business. In fact, I'm leaving tomorrow for Amsterdam to negotiate the acquisition of two cable television systems.
What was one of the craziest things you've done about which others have told you it's never, ever going to work?
Probably the craziest thing I ever did was finance a movie about Rocky Blier, a documentary, and I paid for a camera crew to go to Green Bay, Wis., follow him around his hometown, and then we played the Green Bay Packers. And Rocky, who was just barely a starter at that time, had this wonderful game. He had like 137 yards rushing; he had the game of his lifetime. And I had this camera crew there. I'm standing there on the sideline thinking, "You're so smart." And it was just perfect. Then NFL Films wouldn't allow us to use it. They had the rights to the films, so we couldn't use that in the movie, and that was a loser. We certainly didn't bat 1,000.
What about a crazy one that turned out to be a winner?
Some of these were just unbelievable. We bought a landfill in Houston, Texas, right underneath the noses of BFI, Sanifill. All the major players were in Houston. I asked Jeff [Kendall], "How can we possibly buy a landfill from under their seats? What are we, the experts? They don't know about this?" I said, "Let's go ask them if they'll go joint venture with us." So we went to BFI and Sanifill and told them about it. They said, "Why don't you sell it to us? We'll double your money." We said, "No, that's not what it's worth, but we'll take this much." They said, "Forget it. You guys will never get this done. It's got too many problems, politics." They just didn't believe we could get it done.
So we did. We spent the money and time to go through all the legal, and get the permitting, and host community agreement, and all that kind of stuff, get some lawsuits settled, and we were about to open it, had X amount of dollars in it, and Sanifill came in and said, a week later, "We'll pay you two times X." I said, "We offered it to you three months ago for half that price." And they said, "But we gotta have it." So it's just beyond belief. We sold it.
That sounds too easy.
Well, all of it's not easy. Because the problems... like, we bought a hauler in Chicago from an old Dutchman who had been there for 55, 60 years. And Waste Management had been trying to buy him for 40 of those years, never could buy him. And Jeff Kendall bought that company. He said it was easy.
Well, he called the owner every day for a year. Talked to him every day for a year. He became like a son. I mean, the guy loved him. That's what it took to get that deal done. He thinks that's easy. I said, "People don't do that, Jeff. They get worn out."
On one hand, you want to do deals that are not completely off the wall, but on the other hand, it seems like you're doing deals that big people say are crazy. Why?
I could give you a list of deals that I didn't do that I should have done. I've turned down deals that have turned out to be huge. I meant to put a list down some time, everything from a steel manufacturing company that ended up being one of KKR's first deals, Kolberg, Kravitz and Roberts-one of the biggest leveraged buyout groups in America. Back when we were starting out, I got offered one of their deals, turned them down, and they did it-and made huge bucks, everything from that to being asked to raise money to search for a ship that sunk off the coast of North Carolina back in the 1800s with gold bullion on it, a treasure hunt.
I said, "What are you, crazy? I'm going to get involved in a treasure hunt?" And I showed it to one investor, a friend in South Africa, and he said no way, so I said no.
They found the boat, and it's worth zillions. It's called the Central America. I bet I've got 20 stories like that, deals that I just thought were crazy. I'm a serious businessman; I can't do that deal. And yet it turns out to be just unbelievable.
Do you think that being a little more risk-averse is a good place to be now, or if not, how are you going to stay fresh?
That's a good question. I think there is a certain degree of cynicism that gets into large companies. They go ahead and become bureaucratic and become less and less of a risk taker, whereas a younger person or a newer person into the arena might be less cynical and more hopeful, and more optimistic, and maybe more na?ve. But sometimes, guess what happens? By getting the bat off your shoulder and just trying, it turns out to be successful. Your point's well taken; maybe as Don and I get older, maybe we'll get a little more cautious.
My guess is we're not afraid of risk, never have been, and we will do our homework. If the risk-reward ratio is in balance, we'll do it. It's a corny thing to say, but that's probably what it'll come down to.
Maggie Bennett is a Pittsburgh-based freelance writer.
SBN has become a platinum sponsor of the Premier FastTrac II Entrepreneurial Program conducted by the University of Akron Center for Small Business.
The program, open to businesses of all sizes, begins Feb. 24, with enrollment running through Feb. 8.
The program is an 11-session, 45-hour program designed by and for existing business owners to help them evaluate all aspects of their business operation and generate a vision and a means for achieving greater growth.
"We think the program blends perfectly with the information provided on the pages of our magazine," says SBN Editor Bob Rosenbaum. "The goal is to help entrepreneurs build their companies by learning about new tools for growth and then putting those tools to work."
The program, which is offered in a number of cities across the nation, appears to have done just that. Since January 1986, the FastTrac program has graduated more than 20,000 entrepreneurs. The program is broken into two curricula. FastTrac I, which is not currently offered in Akron, is for start-up entrepreneurs. FastTrac II targets owners of existing businesses.
Between 10 and 25 percent of FastTrac II graduates have more than doubled their company's sales within a year of graduation and 40 to 55 percent did so within two years of completing the program. More than 90 percent were still in operation five years after graduation.
Program topics include market research, financial management, cash flow analysis, market penetration, management building and planning an exit strategy. Participants are expected to leave the program with a viable business plan for achieving growth.
The cost of the program is $549 per person; discounts are available for multiple participants from the same organization. Each session has three parts: small group workshop, dinner/networking, and topic presentation by experts. Each class is limited to 25-28 participants.
For more information about the Premier FastTrac program, visit the Web site at www.fasttrac.org or the University of Akron program, through which applications can be filled out, at www.uakron.edu/cba/entre/index.html or call the Fitzgerald Institute for Entrepreneurial Studies at (330) 972-7038.
It was a great opportunity for the company inasmuch as Schmidt's was focused on the restaurant business and the catering business and not really promoting the Bahama Mama outside of their little world there. I thought we could improve on what was done outside with retailers, with restaurants, with other institutional feeders, and we have. Our sales in the state of Ohio of the Schmidt's Bahama Mama for January through August 1998 have improved by 64 percent versus January through August of 1997-a period of time we didn't have ownership last year.
How did the purchase come about?
Schmidt's actually approached us and said, 'We have an interest in selling the trademark.' It happened probably in a period of five to six weeks, from day one to closing on the deal. The trademark allows us to use the name Schmidt's, the name Schmidt's Bahama Mama and the name Bahama Mama.
There's limitations because within what we bought was this (pre-existing) licensing agreement, and our licensee, Hot N' Spicey, has exclusive rights to market the product outside the state of Ohio. That leaves us with the state of Ohio to develop and do what we need to do to make this a good deal for us.
Was timing an issue?
When you start negotiating, I think one thing that enters your mind is, 'What other players might have an interest in this?' Let's fish or cut bait. For instance, we didn't know if they had somebody else they'd go to and say, 'We've got an offer.' We didn't want to get in any bidding wars. We knew what we could pay and I think we paid as much as we could pay for the trademark and licensing agreement.
What's involved in purchasing a trademark?
You rely heavily on the legal system. You get your lawyers involved, make sure you're buying what you think you're buying . . . You want to make certain that (the trademark) is registered and there is some value that is protected . . . Once that's cleared, it's just a business deal. And certainly it's something that has to be run by the board of directors, and before that process, you want to make sure management is in agreement with what you're doing.
How much did the trademark cost?
On the advice of our attorneys, we can't disclose the selling price. When we look for an investment such as this, we look for something that there is no more than a four-year return of your money. In other words, we feel we paid maybe four times the earnings for this deal.
What benefits did you expect to gain by using the Bahama Mama trademark?
Exposure. It's a fun name. It's a good product. It's a quality product that has a good reputation in Central Ohio. What we need to do is build upon that and take it outside of Central Ohio. Product identity is so important in the marketplace today. We've been in business for 90 years and we truly do not have a recognizable trademark. Schmidt's Bahama Mama is probably our first recognizable trademark.
How are you marketing the Bahama Mama name in Ohio now?
I don't think we're doing a whole lot different than Schmidt's did, but this is our business-manufacturing and distribution. Schmidt's business is restaurants and special events. So we're much more focused, I believe, than Schmidt's could ever be because this is what we're best at.
What advice do you have for others considering buying a trademark?
Get a good lawyer . . . but don't overdo that. In making business decisions, people tend to rely too much on a lawyer or on an accountant, and that's good, but boy, you've got to know what you're doing yourself.
What prompted you to start requiring these tests?
Turnover is extremely high in this industry with employment being as low as it is. We realize that one of the biggest assets are our employees.
Our primary focus is continuous education and to find more of a motivation for the employees to continually strive to bring their own level of understanding to a higher level. There is always room for improvement. Our motivation is not to penalize anyone; we expect everybody to pass. If youre always trying to improve ... you can better serve the customer.
What were your expectations for these tests?
One, the goal was primarily to expand on the [employees] knowledge. Two, and more important, is what it takes to improve. Its more knowing how to research and how to resolve the issue in the most time effective manner. Its a vast industry and you cannot be trained in a one-week time period. Its so vast that there is no way you can expect one individual to know everything. Three, one of the unexpected benefits is that you do see a little more camaraderie within the office.
What kind of questions do you ask on these tests?
[The test covers] our procedures and guidelines as far as our licensing requirements, federal guidelines and real estate settlement procedures acts. The individuals must really understand what Innova Fundings obligations are so that they understand why they are doing the items that we request.
How many questions do you usually ask on the test?
We ask five questions and one bonus. Some of those questions may have as many as 30 parts. Our final question is to name one thing you can do to improve Innova Funding.
How is the test administered?
It is transmitted electronically. It goes through our server and everybody receives it at the same time. They have 30 minutes to respond to it after they read it. People have to e-mail their response back and then I usually print them out and make comments. Then we will all sit down together and go over them as far as what the expectations were.
Have you seen improvement in employees overall work?
I see people taking the initiative to do some reading on next months topic and people are coming to me saying, Hey, I didnt know that. Whats happening is now that the people are taking time to read and research, they are getting excited because it makes them more of an asset. They can do their job better and we can provide a higher level of service to our customers. All levels of employees are taking it very seriously. They do exceptionally well. Everyone has passed to this point on it.
How and when do employees prepare for the tests?
Studying here is fine but I would expect that people are also taking the material home to get more familiar with it. People are starting to prepare four or five weeks ahead of time. In this environment we can ask people to do reading and studying but its one of those things that is never going to take priority because of the amount of work to do. We really needed to find a motivation for them to take time away from their other priorities or adjust their schedule so they could continue to study everything.
What advice would you give other business owners for motivating and educating employees?
It is something that should never be overlooked and it should be very important. It ranks up there with business planning. We spend a lot of time training and keeping [employees] knowledgeable. Were not throwing them out there in the cold. We really try to give them the tools to be successful.
In several conversations about his company CompSource, and about online retailing in general, Dean Bellone has several observations about this emerging sector. Here's a sampling.
- On Amazon.com founder Jeff Bezos: "It's amazing what he's done; he's created a brand recognition like Coca Cola's in a couple of years."
- On what he regards as his chief competitor, CompUSA: "I tell people to shop there and buy here."
- On why CompSource avoids auctions, which are increasingly popular on the Web: "There's always that possibility that you'll sell it below cost. We're already close enough as it is."
- On the pressure for corporate purchasing people to become Web-literate: "I don't want to say they're being forced to, but I think they're realizing there are some benefits. One is price."
- On CompSource's ultimately successful three-month lobbying campaign to get Amex to lower its rates from 3 to 2 percent of each transaction: "That was a grueling battle to get that down. We'll try again (to get it lower still)."
When Jeffrey Chernoff learned he had been selected a Consumers' Choice Award winner, he knew of the program's prestigious reputation, but was hesitant all the same. After all, the program required him to pay a fee for the right to advertise his win.
"I was skeptical," says Chernoff, who at the time owned a veterinary practice with retail pet stores in Canada. "So I met with the principals, met with the agent for the survey company, asked intelligent questions and got honest answers."
He was impressed. The fact that the award put his business in a league with AT&T Canada and the Hoover Co. didn't hurt, either.
"That was another proof for me," says Chernoff, who won the award five times before selling his business and becoming involved in marketing the Consumers' Choice Awards.
Not everyone warms up to the Consumers' Choice Award program as wholeheartedly as Chernoff, though. When the program was introduced in Columbus last spring, only about half the winners were willing to fork over mandatory participation fees. Fees originally ranged from $950 to $4,300, Chernoff says, but have been lowered to $300 to $3,900.
Although organizers lost money because of the participation rate, it wasn't totally unexpected, Chernoff says. It was the first time the awards had been presented in the United States and, given his own initial skepticism, Chernoff probably knew what questions might be running through business owners's heads. Clearly he had a sell job to do here, one that will continue this year as the program gears up for its second survey this spring, followed by an awards program in June.
That sell job may have been made harder last year when apparent inconsistencies surfaced in conjunction with the Consumers' Choice Award. In April, media were given a list of "top award recipients"-which included the Hyatt on Capital Square, Wendy's, Cord Camera and Three-C Body Shop-at an introductory breakfast explaining the program.
In June, when the paid program participants were announced, Cord and Three-C were not listed, even though the April release said "all winners" would be officially announced that month at a gala award presentation. Chernoff says the April list was a sampling of recipients, not a reflection of any ranking, and that those who did not pay for the program were still considered winners, although they would not be recognized as such publicly.
That's a new approach for local business owners used to programs such as Ernst & Young's Entrepreneur of the Year Awards, the U.S. Small Business Administration's Small Business Awards and the Better Business Bureau's Business Integrity Awards, which do not charge winners a fee to publicize their honors.
To clear up confusion surrounding the Consumers' Choice Award program, SBN contacted area business owners and program organizers for additional information. Here's what we learned.
Why do business owners have to pay to publicize their awards?
"It's important for people to understand the two components: the [award] survey and the promotional program," Chernoff says. "They're kept independent to maintain the legitimacy and the authenticity of the program."
Business owners can participate in the promotional program-which does not alter the ranking established by the award survey, he says-on various levels.
For example, business owners can pay the base price of $300 to obtain only the sociodemographic results of the survey used to determine the winners, but that doesn't allow them to publicly promote their win. For publicity rights, the business owner must spend at least $950. The full promotional package costs $3,900 and includes survey results as well as media advertising, inclusion in a paid television broadcast coordinated by Consumers' Choice, award decals for the winner's use, lapel pins for sales staff, invitations to networking breakfasts after the event, promotion on the Consumers' Choice Award Web site and invitations to the awards gala.
Those who opt not to buy the promotional packages, however, cannot use the Consumers' Choice Awards name or logo in their advertising efforts.
Refectory owner Kamal Boulos, whose business was named the gold Consumers' Choice Award recipient in the "Fine Continental Cuisine" category, sees the program as part of his regular marketing and promotion. He would not disclose how much he paid to participate, but said he did not purchase the full promotional package.
"We opted to participate on a level that made us feel comfortable with at least just acknowledging the fact we had been selected and at the same time extending them some courtesy for their efforts," he says.
What happens if an award recipient chooses not to participate in the promotional program?
Chernoff says the ranking of the recipient will not change. For example, if the gold winner in a category opted not to participate and the silver winner did, Chernoff says, the silver winner still would receive the silver award.
That happened in the "Carpet and Rug Cleaners" category, in which Master Clean, the silver winner, participated in the promotional program but the gold winner, Stanley Steemer, did not. Nevertheless, a print advertisement for Master Clean included in a coupon circular last year carried a gold-trimmed Consumers' Choice Award logo with no indication that the company was not the top award winner. Chernoff says such designations are not necessary and that although participants receive promotional materials, such as stickers, in colors corresponding to the award level they won, color print advertising could include the generic Consumers' Choice logo, which has a gold-toned border.
Other categories, such as "American Family Restaurant," in which the top three winners-Bob Evans Farms, Max & Erma's and Cooker-did not participate, were dropped from the promotional program.
Chernoff says that in coming years, he will send to all recipients, regardless of program participation, a certificate denoting their ranking in the survey results.
How are businesses selected for the Consumers' Choice Award?
The organization hires an independent polling company to conduct a two-part telephone survey.
First, approximately 15 percent of the 1,550 respondents were asked to name a favorite business in some of the 241 categories such as fine continental cuisine and pharmacy, says Steve Valigosky, associate director of services/sales for Opinion Research Corp. International, the Maumee-based firm used for the Columbus survey.
Calls were made to consumers, executives of small and medium-sized businesses and executives from construction and automotive businesses, with certain category questions presented to each, Chernoff says. Jewelry, for example, was a consumer category, while duct cleaning was a construction category.
The most mentioned companies in each category were then compiled into a list and presented to the remaining 85 percent of the sample in the form of closed-ended questions.
The number of businesses from which respondents could choose during the closed-ended questioning varied from three to 10, depending on the category, Valigosky says.
How were award winners ranked?
Using a formula to compare percentages of responses, Opinion Research provided to Consumers' Choice the results of the survey, with businesses ranked first, second or third, says Scott Chambers, Opinion Research project manager.
Chambers explains that even though one business might receive more votes than another, a tie would be called if the results may not have enough of a "significant difference" theoretically and statistically.
That happened in Columbus in the jewelry category, in which International Diamond & Gold's 15.9 percent share of the vote was not significantly different enough from J.B. Robinson Jewelers's 13.3 percent to make either individual winners. Both, Chernoff says, were awarded gold rankings, while Diamond Cellar, which garnered 11.4 percent of the vote, received a silver ranking. Chernoff says business owners were notified if there was a ranking and/or a tie in their category, and that it would be noted on the business's contract should they enter the promotional program with Consumers' Choice Awards.
Despite this, International Diamond & Gold-which opted to participate in the promotional program, while the others did not-ran radio spots advertising itself as coming in first and the others as second and third. Chernoff says he was unaware of the ads and would clarify the rankings with International Diamond & Gold.
Business owners who were unaware of the ranking process and promotional program policies were left with a negative impression of the program.
"They had come to us and said, 'Gee whiz, you won. You were the Consumer's Choice for the jewelry category. If you spend so much money on these packages, you can publicize that,'" says R. Andrew Johnson, president of the Diamond Cellar, whose company was initially listed on the "top award recipients" list under the jewelry category in the April media release.
"We asked for more credibility, ratings and rankings because we didn't want to get involved in anything that wasn't 100 percent ethical," he continues. "They were a little bit reticent to get into that, and we said basically we can't get involved in that because it didn't meet our qualifications for ethics and things."
Chernoff says the final rankings showed that International Diamond & Gold received the top number of votes, and the selection of the Diamond Cellar for the company listed on the first release was arbitrary-a situation he called "unfortunate."
"For the sake of clarity, I probably should not have released it as early as I did, but we wanted to get as much publicity as possible," he says. "Next year there will only be an announcement after the final tabulations are made and we know everyone's ranking."
In addition, Chernoff says he will not release winners names in the future, only the promotional program participants.
IDG president Uziel Haimoff says he also was skeptical of the program at first, but he participated at the highest level after talking with Chernoff, seeing the statistical rankings and learning that Consumers' Choice invested in excess of $50,000 in the independent survey.
"The concept is good for the consumer. It doesn't say the other people are no good. It highlights people the consumer felt were the best," Haimoff says. "Most people come to buy jewelry in a place they trust. In our case, it has been very positive along those lines. It gives people confirmation that they're in the right place."
How did the Consumers' Choice Award program fare financially last year?
Chernoff says the 1998 participation did not cover the $250,000 it cost to get the program started in Columbus, but declined to say how short of the break-even point revenues fell.
Chernoff says he was pleased, however, with the participation rate of nearly 50 percent.
"Typically the program sees a dramatic increase in participation as the community at large becomes more aware of the nature of the program," he says, noting that in Canada's major markets, participation is 70 percent or better.
In Columbus, Chernoff says, a 75 percent participation rate would pass the break-even mark for the program, which was supported financially here by business sponsor Eddy Rajczyk, president and co-owner of Columbus-based Lighting Unlimited Inc.
Rajczyk became involved in the program after he saw it in Canada and was impressed that the results were backed by a survey.
"The legitimacy aspect of that got me very excited about the program," he says. "It gives the clout and advertising power to go out and say, 'We're No. 1.'"
This is a true story about a guy named Frank who was struggling to build his business. Aw heck, he was struggling just to pay the rent while a whole lot of other bills werent getting paid at all. He was just months from going under, though he didnt know it at the time.
All he did know was that his mentors, advisers, friends and business associates kept telling him: Frank, if you want to grow, you cant do everything yourself. You need to give your employees a chance to grow too, and if you take a break from the daily details, youll be amazed at what your employees can accomplish on your behalf.
So last winter, when the company needed a new delivery driver, Frank saw it as a chance to delegate. He handed off the task to his trusted warehouse manager. Lets call him Roger.
Roger had never hired an employee before and didnt know much about the processwhat questions he should and couldnt ask, what qualifications he should seek among the candidates.
Roger had a friend who had recently been laid off. Figuring anybody could drive a light delivery truck, Roger interviewed and hired his friend, Les.
Now you know the cast of characters:
- Frank, the earnest but struggling owner;
- Roger, the able and trusted manager;
- Les, the new driver.
Theres a fourth charactera nameless insurance agent who Frank contacted as soon as Les was on the job. What the insurance agent found when he tried to add the new drivers name to Franks business policy is that Les had a less-than-sterling driving record. In fact, it was so tarnished, he was uninsurable.
The insurance company made Frank sign a document stating that Les would never be allowed to drive any company vehicles.
It was quite a lesson in delegation; the first time he actually hands off an important job, it gets botched up.
I should have done a pre-employment screening on the driver, Frank says in hindsight. When we found out about his driving record, I should have taken care of the problem fast and not tried to be the nice guy. The minute I learned he was uninsurable, I should have let him go. I guess I learned you cant be a nice guy to everyone. I hired him as a driver, but I couldnt use him as a driver.
Instead, Les went to work on the loading dock and in the warehouse, while Rogerthe guy who hired himstarted making deliveries.
It might have all worked, but Les started to feel guilty; he had taken over the job of the guy who hired him and caused the struggling owner a whole new set of headaches.
Thats why Les was always looking to do more. Which brings us to the day Les found himself alone on the loading dock with one truck idle in the bay and another waiting to load up.
Les hopped behind the wheel of the idle truck and moved it out of the way. Somewhere in the three minutes the whole transaction required, Les managed to bump intoand damagethe corner of another companys truck.
The accident gave Frank a reason to get Les off the payroll immediatelyan act that was probably a relief to everyone involved.
But Franks problems continued. He couldnt turn in the claim to his insurance company, so he asked an acquaintance in the auto body repair business to look at the damaged truck.
The body shop gave the guy an estimate of $947, Frank says. Not a lot of money for a commercial fender bender perhaps, but more than Franks little business could absorb in its weak financial condition.
I wrote out the check to the body shop, Frank continues. But when the owner of the truck came to pick up the check, he refused it because it wasnt made out to him personally.
Now feeling like he was being hustled, Frank called his attorney. That 12 minutes cost me some bucks, Frank says. The guy [who owned the vehicle] made it clear he was using the money to go on vacation. My attorney told me there was nothing we could do about it.
The truck never did get fixed.
It burned me, seeing that truck every day ... knowing how badly we needed that money, Frank says. That $947 may as well have been $9,000.
In retrospect, Frank says, Its a matter of principle and business ethics. That situation helped me learn more about [me] than anything, and I ask myself, Why am I like this?
Today, his company is closed and liquidated, and Frank is relieved to be on somebody elses payroll. Roger found a new job quickly enough too, and we dont know what Les is doingthough were reasonably sure it wouldnt involve mileage reimbursement.
For what its worth, Frank learned some important lessons about the responsibilities that come with delegation, and about the owners careful balancing act between concern for the employees and the business.
If this were really a fable, you would now get the moral of the story. And it might go something like this: The best way to look out for your employees is to look out for the business first.
But since this is a true story, and fables, by definition, are not, all thats left to say is that Franks painfully learned lessons have probably helped him become an ideal employee for some lucky owner.
Editors note: The names in this article have been changed as a condition of telling this story. The facts, however, are true, and occurred between late 1997 and early 1998.
What if you could get your packaging and assembly needs met expeditiously, get quality work for a competitive price, and provide work opportunities for people with disabilities all at the same time?
It may seem like an easy question, but the fact is, Windfall Industries is providing just that, and executive director Jeff Johnson is finding its not such an easy sell.
Windfall Industries mission is to find employment for those enrolled in the Adult Services Program of the Medina County Board of Mental Retardation and Development Disabilities.
Johnson says competition from for-profit contract packagers who perform the same jobs makes it tough for nonprofit agencies like Windfall.
In these business times, were just viewed as an alternative source, he says. We dont see any preferential treatment because of who our employees are. Businesses are bottom line conscious, and if we cant do jobs at a competitive price, theyll go somewhere else.
That in combination with Windfalls charge to be a self-sustaining nonprofit separate from the MRDB makes the agencys administration more bottom line focused. Johnson and his staff are not employed by Medina County, but by Windfall itself, which reports to a board of directors. Windfall, incorporated in 1963, is a holder of the Department of Labors Commensurate Wage Certificate, which empowers it to serve as an employer for workers with disabilities.
All those challenges and realities drive Johnson to worry about where Windfalls next customer will come from.
Were always trying to develop core customers, where its not just a one-time job theyre giving us, Johnson says. We realize that to be self-sustaining, we have to do whatever it takes to offer quality services, or there will be no opportunity to employ those individuals.
By taking whatever steps are necessary to produce quality work at competitive prices, Windfall has earned preferred supplier awards Diebold Inc., for one. Still, Johnson frets and aggressively targets packaging and assembly contracts to ensure the nonprofits growth.
Some of those contracts include packaging parts and repair kits for automated teller machines manufactured by Diebold, fitting o-ring parts on automobile headlight parts for Par Industries Inc. and assembling more than a million tea-lights a year for A.I. Root Co.
Jobs of this sort are brought into the Windfall workshop a 10,000-square-foot facility where package and assembly kits are split into steps that can be accomplished by individuals with varying degrees of disability. Windfalls nondisabled supervisory staff teaches the workers how to accomplish the tasks, and implements assisted or adaptive technology to help them complete the jobs faster or better.
When it comes to cost, Windfall prices a job much like any other packager. Product samples are acquired, then a task analysis and time study are completed to set a direct labor rate for each of the separate steps. The combined piece rates are tabulated for total direct labor. Overhead is also included in the formal quotation when, like any other business, Windfall must purchase special equipment for specific jobs.
Were normally competitive in price, and the only time it gets difficult for us is when its a very large volume job and our competitors have equipment that allows them to automate a portion of it, like a poly-bagging machine. They can get their price down a little lower, Johnson admits.
Windfall must also determine whether the contract is long-term and if other job orders from that customer are likely. That question came up when Plastipak Packaging Inc.s research and development department approached Windfall about a project in which 2,000 bottles would need to be sprayed lightly with a low-tack adhesive to prevent the glass from getting scratched in transit. Special transport boxes also had to be constructed.
We had to look at the possibility that, if this was a one-time-only job where we jumped through hoops to meet their needs, we must add some overhead to that, Johnson says. If it was going to be a job that would lead into more work, that was a different story.
After Windfalls bid was accepted, Plastipak boosted the order to 24,000 bottles, which had to be completed in the same time frame as the 2,000 bottle order. To meet the customers volume and deadline requirements, members of Windfalls sales staff rolled up their sleeves and got involved to help get the job done.
We bid on jobs, big or small. If they can be done 100 percent by individuals with disabilities, great thats the bonus. If we need to step it up and bring in nondisabled workers, weve done that, too, Johnson says. We may split a job, with 50 percent disabled workers doing some of the steps and nondisabled doing the other 50 percent. If we didnt accept that job because we dont want to bring in nondisabled workers, the people with disabilities wouldnt have that opportunity to do the other 50 percent of that job.
Most of Windfalls contract packaging assembly is done in house. Some companies require that Windfall comply with their individual Quality Standards and ISO 9000 standards, but such certification can be too costly an endeavor for a nonprofit. So, Windfall hosts period audits where customers can come into Windfalls facility to quality inspect work being expedited on site.
How to reach: Windfall Industries (330) 764-8988, Ext. 253
As 1998 wound to a close amid an apparent flood of private-company sales in this region, one could sense a kind of end-of-an-era feeling in the air. At Chagrin Valley Country Club, a group of two dozen or more regulars are said to play golf for $150 a game. Their affinity? All the participants have sold their companies. Meanwhile, when executive recruiter Mike Gerbasi of Garfield Hts.-based Sager Co. was informed of the sale of yet another Cleveland-area company late last year, he was moved to wonder aloud, Am I going to be the only guy working next year?
What was it about 1998? Did the raging bull market and its paper riches, along with plentiful credit from banks and burgeoning private equity groups, combine to make 98 the peak of the company selling season? Or are we witnessing the ushering in of a different era, one in which the brisk trade in the sale of private companies is a standard, continuing feature of business in Northeastern Ohio?
Long-time M&A specialist Russell Warren expects its the latter.
In this area, there are just so many companies, its like an evergreen crop, says Warren, former chairman of the mergers & acquisition committee for Ernst & Whinney (now Ernst & Young LLP), and subsequently founder of The Transaction Group, Cleveland-based consultants in M&A transactions. I think of it much more in the forestry model. Every week, we learn about people who want to do things such as sell their company.
Warren expects no let-up in the pace of deal activity in the region. Almost weekly, we are called by players in New York and other distant places, because they know this is a good, fertile crescent for good companies, he says.
While the flood of private equity capital sloshing around the economy (see box) unquestionably fuels much of that activity, the heightened pace of mergers also seems to be tied to a different generational psychology than an earlier breed of company founders who worked till they dropped. In their place have sprung a different kind of owner, one more likely to sell his or her company off well before retirement age before going on to other pursuits. Owners are turning companies over faster, says Frank Novak, a partner in The Transaction Group.
Behind much of the faster cycling, Warren suspects, is the relentlessness of technology. We call it the technology poker game youd better ante up, or the games over for stand-alone companies, he says. The only thing thats constant [with the technology curve] is acceleration. And the only thing that money buys you is a shorter lead time before you have to do it all over again.
The man who keeps track
If youre engaged in the business of buying or selling companies in Northeastern Ohio, sooner or later youll probably have occasion to call Ed Crawford, chairman and CEO of Park-Ohio Co. And when you do, hes keeping track.
I sat there one day and said, Every time I turn around, Ive got somebody else competing with me in the buyout business. As representatives of various groups contacted him about this or that proposed deal, he kept a list. I started adding them up, he says. He stopped counting when he got to 36 private equity groups. Ten years ago, there were about six, he says.
Despite the crowded field, Crawfords not complaining. I get a lot of deal flow from that.