Place of birth: Southampton, England
Education: Two bachelor’s degrees, California State University, San Bernardino; master’s degree, business administration, University of California, Riverside
First job: Salesman with IBM
Whom do you admire most in business and why?
Ted Smith, founder of FileNet. He’s an innovator, an entrepreneur, and because of the view he has of giving back to the community. Tom Watson Sr. and Tom Watson Jr., both CEOs of IBM who basically invented a new industry. Steve Jobs, because of his innovation and his ability to come back to Apple and reinvent the company.
What is the most important business lesson you’ve learned?
Never give up. You’ve got to have the courage of your convictions.
What is your favorite business book?
“The Art of War,” by Sun Tzu
What three characteristics are most valuable for a CEO?
Strategic thinking, the ability to build a great team and communications skills. You can be really smart, but if you can’t articulate it, you’re in trouble, and if you can’t build the right team, you won’t succeed.
How would you describe your leadership style?
I’d like to think that I’m somewhat consensus-driven, but also a little autocratic. In the world we live in, the ability to make a rapid decision and execute those decisions maniacally is very important, but it’s also important to do those things to get people to buy in and join you.
Even the most altruistic employees want to be a part of their employers’ success when the profits begin to roll in, says Mingo Lee.
“It’s easier said than done when you’re the owner to say, ‘Don’t worry, we’re debt-free. We’re putting everything back into the company so we can keep growing healthy,’” says Lee, co-founder and CEO of Wahoo’s Fish Taco. “You need to realize the difference between your sweat equity and the things you are gaining from this as an owner, and the guy who doesn’t have any shares in the company. You’ve got to gain an appreciation for where they are.”
So Lee began to look at debt financing as another option for expansion. At the same time, he enhanced compensation packages, offered more health insurance and began to offer profit-sharing plans.
Now, with more than 600 employees at more than 40 locations, the chain of restaurants which offers a mix of Mexican/Brazilian/Asian cuisine has grown from $34.6 million in 2004 to more than $40 million in 2006.
Smart Business spoke with Lee about the importance of relying on instinct in successfully growing a business.
Q: What skills must a good CEO have?
Be compassionate and an understanding leader, somebody who has grown up in the business who has touched every part of the business and really understands and values each one of the employees.
Be decisive. Once you start waffling at the top, I think that really confuses not only your management team, but it just trickles down.
From week to week or month to month, if the direction of the company is changing or even simple operational things are changing, I think that sends a gray message to your crew. All that our good employees want to do is to know what the expectations are and then execute. If you can’t set those expectations and you’re always changing them, it leaves everybody in a state of confusion.
Our management style is very hands-on. It’s to show, demonstrate, teach and re-teach. From top to bottom, there is no wearing a suit and tie at Wahoo’s. You’re getting in the fire right alongside your teammates and employees.
Q: How can a lack of direction hinder growth?
It is the quickest way to have everybody wandering about aimlessly. If you’re not able to follow up on the projects that you delegate, you might as well not even delegate them to begin with. Nobody will have a measuring stick to see that they have arrived and achieved what the expectations were.
Ultimately, they will get to the end of the project and move on to the next, and conceivably, they’ve not even done that right. But they’ve kept on going because nobody has done the follow-up.
We’re always here and we do care about our company and we want to be available to everyone. It’s probably not the most crucial aspect of our management style, but I do believe that keeps our staff engaged.
Q: How do you deal with mistakes?
It’s like seeing your child gain greater and greater independence and feeling that yes, you’ve given them all the tools to succeed, and now you’ve got to step back and let them make some mistakes.
You can’t be there for every decision, nor do you want to be there for every decision. I try to communicate that to my staff.
Before, you might have asked me for the answer; now, I want you to come to me with a couple of different solutions in mind and let’s work through how you came up with those. If you make a mistake and it’s serious enough, we’ll figure a way out of it.
Ultimately, if we make a couple of mistakes along the way, we’re going to learn from them, and next time, you’ll be making decisions. I’m not saying I always make the right decisions, but you’ll be making decisions in the future in the same style or direction that I would have made them, and we’ll all feel better.
Q: How do you earn loyalty from your employees?
You can create an equity program, but shy of creating some type of ownership program for your people, you need to appreciate that they need to take care of their families and their needs.
There is a cap that you will be able to pay everybody. But you should realize that some of the things you feel good about in being debt-free and plowing everything into the company are not necessarily satisfying the emotional needs of your management team in making them feel that they’ve got some future security here.
You can sit and go for a longer-term view and build equity, hoping maybe for some sort of exit strategy somewhere down the road. That same situation does not exist for your management team unless you go the way of creating some type of ownership.
HOW TO REACH: Wahoo’s Fish Taco, (949) 222-0670 or www.wahoos.com
The best decision a company can make is to pursue activities that generate income, and then delegate auxiliary responsibilities to specialists with learned efficiencies in those areas.
“Today, many companies are finding that partnerships with staffing providers keep the bottom line moving in the right direction,” says Jenny McCambridge, staffing consultant for Principal Technical Services. “There are many features to consider when selecting a firm that will be used to help provide supplemental staffing.”
Smart Business spoke with McCambridge about how companies can be competitive in today’s marketplace for human capital and what to consider when looking for a firm that can give your company an advantage.
What should a company look for in a staffing provider?
Staffing is not a commodity. There is a wide range of service offerings and specific industry experience among staffing providers.
Look for an agency that has experience and a proven track record within your industry. Agency personnel should have an extensive network, including contact with organizations and societies whose membership consists of qualified potential employees. These types of connections enable the staffing provider to efficiently access the most sought-after talent with the specific skill sets needed to augment your current workforce.
It’s also helpful to choose a staffing provider with a high employee-retention rate. The last thing you want is to have a worker assigned to your company and then have him lured away a month later by a more attractive job offer.
What encourages workers to stay with a particular staffing provider?
There is a direct correlation between the level of employee benefits offered and the staffing provider’s ability to attract and retain highly qualified workers. It is important to make sure that the staffing provider offers its worksite employees a comprehensive benefits package comparable to one that your core staff members might receive. Employee benefits most desired by workers include health and dental insurance with employer contribution, 401(k) investment program, direct deposit and paid time off (PTO) for vacations and holidays.
While some staffing providers offer immediate eligibility (i.e., no waiting periods), others withhold benefits for up to a year. An agency that offers immediate benefits is more likely to attract and retain high quality talent.
Staffing providers also differ widely in the types of benefits, such as health plans they choose to offer their employees. Like immediate eligibility, a more comprehensive health plan attracts higher-caliber individuals and reduces turnover.
The worksite employees are also more likely to stay with a staffing provider that consistently pays a market-rate wage.
Who determines the supplemental staff employee’s wage rate?
Traditionally, it’s been the staffing provider but it really should be the customer. The supplemental staff employee’s skill sets and experiences will be comparable to those of a company’s in-house staff only if he receives a comparable wage rate. The client should determine what the wage rate should be and then look for a staffing provider that will offer a competitive bill rate corresponding to that wage rate. Keep in mind that the lowest bill rate is not always the best choice. A quality benefits package will increase the bill rate, but will pay for itself by attracting talented employees and decreasing turnover.
What is the relationship between the wage rate and the bill rate?
The relationship between the wage rate paid to a supplemental staff employee and the bill rate charged to a company is referred to as the multiplier. The multiplier is affected by the wage rate, employer tax requirements, costs of employee benefits and markup for the staffing firm. The lower the multiplier, the greater percentage of the bill rate goes directly to the worksite employees of the staffing company and the lower the profit margin to the staffing provider.
Historically, staffing providers has been reluctant to disclose multiplier information, but in order to know what the wage rate paid to the worker is and how it relates to the bill rate, ask to see a copy of the staffing provider’s published rate schedule. This should outline the cost of each component of the multiplier.
JENNY MCCAMBRIDGE is an account manager and staffing consultant for Principal Technical Services. Reach her at (888) 787-3711, ext. 32, or jmccambridge@PTSstaffing.com.
As businesses grow and seek additional space to house their expanding operations, a question they must frequently consider is whether to buy a building and enjoy the benefits of a rising real estate market or lease a structure and leave the chore of maintenance to someone else.
Business owners often make a default assumption that leasing is the best alternative, says Kenneth Dill, vice president at Cresa Partners Orange County, a corporate real estate advisory firm. But purchasing a building could be a wiser choice, and only a thorough financial analysis can reveal the risks and benefits of ownership.
“Most executives know the ins and outs of their business line extremely well, but are less skilled at making conclusions about the real estate market and developing strategies that help them get the best deal on a property,” Dill says.
Smart Business spoke to Dill about how companies should approach the decision of owning versus leasing commercial property.Why would someone want to lease a property instead of purchasing it?
Basically, leasing seems attractive because you can execute a lease with no money down, you have no responsibility for the management of the building, and you often have the right to find a sub-tenant to absorb unused space. Also, there are some tax benefits to leasing, and the monthly payment even with escalation clauses is predictable.
However, more and more leases are created with increases of 3 percent to 4 percent a year, regardless of where inflation stands. Even under such a scenario, for someone who needs a new building right away, the whole approach just appears less cumbersome. In fact, a business owner who would never consider renting an apartment for his personal use will often consider leasing a building.
What are the benefits of ownership?
In some ways, it’s no different from you or me deciding to buy a house. But often the value is not readily apparent to a business. Among the most obvious benefits are that you can make renovations to the structure; the operating hours are flexible; the problem of complaining neighbors is eliminated; and the costs are better defined and static because your payments stay the same while the mortgage interest is tax deductible. Additionally, you can enjoy the benefits of depreciation, even if it is spread out over decades. And you never have to worry about the landlord not renewing your lease, an especially common problem in markets with strong demand. Remember that there might be someone who will be willing to pay more for your space.
If you believe that the market for real estate will increase, and you can project your company’s space needs for the next five to 10 years, it’s to your benefit to buy.
What are some of the barriers to buying?
The biggest hurdle is securing a down payment while the next-biggest challenge is managing the building. The first issue could be overcome with Small Business Administration loans and other financing mechanisms. However, the key determinant in the decision to buy or lease is the ability of a business to keep generating a good cash flow. What we do is make projections over a 10-year horizon based on market conditions and a firm’s cash flow to determine which option is the best.
How do you do that?
We look at a number of factors such as maintenance costs, the cost of servicing a loan versus a lease, and the net present value of future cash flows. In other words, by understanding all the risk parameters that we can, we’re able to break out in a spreadsheet the costs associated with each option.
Then, there’s the matter of ‘kicking the tires.’ After we personally identify a series of properties, we preview these alternatives to arrive at a short list. The next step is to send out an RFP to select building owners that asks a series of questions about the possible uses and condition of their building. This is valuable because we always want to have something in writing from them in which they assess the quality of their structure. Based on their answers to our questions, we narrow down the facilities to consider. We will tour the building jointly with our client, allowing him to ask the owner questions such as how to re-configure the building to house his operations while we then pinpoint the various real estate issues that could arise from the deal. We also get experts to evaluate the integrity of the buildings under consideration. In the process, we hope to identify areas of concern to a buyer, such as the state of the HVAC units or the electrical wiring.
KENNETH DILL is vice president at the Newport Beach offices of Cresa Partners Orange County. Reach him at (949) 706-6630 or KDill@cresapartners.com.
At any time, CEOs and corporate employees may find themselves in need of a trauma center. On an annual basis, the three trauma centers in Orange County treat between 4,000 to 5,000 patients, mostly as a result of blunt traumas such as car accidents or falls.
The difference between life and death following a trauma is time. Survival often rests on how quickly the patient can be seen by a physician and receives the necessary specialized help. Enter the role of the trauma center, which differs greatly from the standard emergency room.
“You can’t go to just any hospital following an accident,” says Frank Nastanski, M.D., associate director of trauma at Western Medical Center Santa Ana. “Its general surgeon might need to be summoned from home, and an hour may be too long to wait for a patient with a bleeding spleen.”
“We are part of a community safety net, and we save lives,” says Humberto Sauri, M.D., medical director of trauma at Western Medical Center Santa Ana.
Smart Business spoke with Nastanski and Sauri about why access to a trauma center is vital and how it saves lives.
What makes a trauma center different from a standard emergency room?
Trauma centers have operating rooms that are set-up for immediate use. They are staffed with operating room teams, including an anesthesiologist and a trauma surgeon who are on duty 24 hours a day seven days a week. We also have specialists on call who can handle any type of emergency situation. These include plastic surgeons, neurosurgeons, replant specialists, pediatricians, urologists and pulmonary cardiologists. Our nursing staff is also certified for trauma, and we have the equipment and the necessary supplies available to treat for trauma, such as blood for transfusions.
In addition to trauma certification, as the professional staff treats more patients, they gain experience and the outcomes are better. Trauma centers have that experience because they are fully dedicated to trauma; they don’t dabble in it. In addition, they are required to take extra educational units every year in trauma treatment.
How are trauma centers certified?
Orange County was one of the first places in the country to have an organized trauma system. The accrediting body, the American College of Surgeons, which conducts an annual two-day site review, has certified Western Medical Center in Santa Ana as a Level II trauma center.
How can CEOs benefit from the trauma center?
The presence of a trauma center is great security for employees. Because we are centrally located in Santa Ana, we rarely need to airlift anyone to the trauma center, which saves time, money and lives.
Most paramedics treat patients and triage them at the scene, but they need to have somewhere to take them. We have a better than accepted survival rate, and prospective employees will take the presence of a trauma center into consideration when deciding to relocate to Orange County.
Recently, we treated a construction worker who had fallen 40 feet while working on a new supermarket. We were able to save his life. If that same accident had happened somewhere else in the country where the resources of a trauma center were not available, the outcome might not have been as positive. Workers who are injured on the job are also brought into the trauma center, and that contributes to great piece of mind for CEOs.
Even though trauma centers see critically injured people, we are able to save lives because we are trained and staffed to handle any type of injury. You never know when it could be you, a family member or an employee that requires the services of a trauma center.
FRANK NASTANSKI, M.D., is associate medical director of trauma at Western Medical Center Santa Ana.
HUMBERTO SAURI, M.D., is medical director of trauma at Western Medical Center Santa Ana. For more information visit www.westernmedicalcenter.com/HospitalServices/DesignatedTraumaCenter.
As executives plan for their retirements and ways to secure their families’ futures, they have traditionally set up wills and trusts to pass along wealth to their children and to mitigate tax consequences.
These types of estate-planning documents can provide peace of mind for executives, along with financial security.
A relatively new way to pass along a sense of ethics and values that helped to create the family wealth is the Family Incentive Trust (FIT). The FIT provides more than just a vehicle to distribute assets; it establishes a framework that correlates to the beliefs of the grantor and helps reduce the worry that heirs will make errors or life choices that are not reversible.
Executives and CEOs who have worked hard and put a great deal of effort into building their wealth don’t want a child to become a less-than-productive member of society because of a significant inheritance, says Kerry-Michael Finn, vice president of financial planning for the Western Market of Comerica Bank.
Smart Business spoke with Finn about how FITs can help high-net-worth individuals assure the future for their families.
What is an FIT?
An FIT is a trust that passes along assets to the next generation, while trying to minimize potential negative effects. For example, the trust may specify that the inheritance be passed along through income matching or it can be distributed based upon clauses that require the heirs to achieve specific education levels or contribute community service time.
Income matching can be very valuable, because it may allow an heir to pursue a career in teaching or philanthropy that might not otherwise be an affordable option. It is also possible to tie monetary rewards to other achievements, such as refraining from drug or alcohol abuse or raising a family. Monetary awards can also provide the capital to make a down payment on a home or start a business.
How can CEOs benefit from having an FIT?
If the family business is privately held, it may be possible to pass along the ownership through the trust and preserve the same values that built the business. Even if the wealth has been built through a career in public companies, the concept of transferring values as well as cash can still be achieved.
How can I make certain that an FIT is a positive motivation for my heirs?
This can be accomplished by making certain that the document is flexible enough to accommodate a variety of circumstances while allowing each heir to become successful in his or her own way. For example, placing a requirement of obtaining a four-year university degree might not be achievable for everyone, but receiving a certificate through a trade or technical college as a substitute might be the type of incentive that will transfer the value without placing an unreasonable restriction on the heir.
If I currently have an existing trust, can it be amended to include an FIT?
In some cases, yes. Incentive language can be added or incorporated into an existing trust document. It may be best to review the existing trust as some tax laws may have changed since it was originally drafted, so it might be more efficient to draft a new document.
What measures can I take to make certain the FIT is flexible enough to handle unforeseen circumstances?
When an FIT is created as an irrevocable trust, it has a safety net built in, because the assets in the trust are not considered as assets of the beneficiary and generally cannot be attached by creditors or subject to division through a divorce decree.
The standard provisions of an FIT allow for additional distributions based upon the need for health, education or maintenance and support by the heirs. In addition, the FIT allows for additional distributions at the discretion of the trustee.
I normally recommend that the trustee be a family friend, attorney or accountant along with an institution. In these cases, having a family friend and an institution serving as co-trustees can be beneficial, because the institution will outlive the individual trustee. It is always good to start the process well in advance, so that the staff at the institution can get to know you and your values and thus make decisions and interpretations that they believe are in line with your core beliefs. I also recommend that grantors draft a letter or statement that very specifically states their beliefs and wishes for this trust.
KERRY-MICHAEL FINN is vice president of financial planning for Comerica Bank. Reach him at email@example.com or (714) 424-3823.
University of Colorado, bachelor’s degree, economics; Indiana University, law degree
Worked in the family concession business as a popcorn vendor at age 12
Whom do you admire most in
business and why?
Larry Bossidy [chairman and CEO of Honeywell] for his pragmatic orientation toward execution and his emphasis on the importance of human capital.
What’s the most important business lesson you’ve learned?
I worked for an entrepreneur at a small computer book publishing company. He taught me that employees who are imperfectly and passionately pursuing an objective will accomplish more than that same person executing what they’ve been told to do.
What’s been your toughest business challenge?
Cultural change at Columbia House. [Flanders was CEO there before coming to Freedom Communications.] The entrenched management team had developed a point of view and concluded that the online business model could never be profitable.
How would you describe your leadership style?
I believe that business is two things: It’s people and it’s numbers. You have to quantify everything that you do, but at the same time, you have to be soft on people and hard on the issues.
Dan Shea, managing director of W.Y. Campbell & Co., a subsidiary of Comerica Inc., says that banks have also played a role in the active market, given their willingness to fund deals.
Smart Business spoke with Shea about the current climate for selling businesses, the types of buyers who are driving the market and how valuations should be handled.
What’s the current environment like for selling a business?
It’s one of the best markets since the late ‘90s. Buyers are aggressive because they have cash and feel good about the economy, while banks are helping by providing acquisition debt. At the same time, sellers see what a good time it is to sell, given the activity levels of buyers and historically high prices. It’s a liquid market, which isn’t always the case.
Toward the end of 2005 and on into 2006, it appears that the growth in the number of deals has started to level off. We don’t believe that transaction volumes are going to go down, we just see them leveling.
What types of buyers are driving the market?
The strategic buyer has been more active in recent periods and is looking to benefit from the synergies that can accompany a purchase, such as with a target’s customers, products, channels and geographic locations. Both public and private acquirers are aggressively seeking growth through acquisition to complement internal growth initiatives.
There are also private equity firms that go out and raise capital for the purpose of buying and holding companies. They look to grow sales and profits before selling anywhere from one to seven years down the road for a nice return. According to Private Equity Intelligence, through September of 2005, private equity capital fundraising surpassed the level achieved in all of 2004, so there is a tremendous amount of capital waiting to be invested.
When contemplating selling or acquiring a business, what should a CEO or business owner consider?
If they’re a seller, they need to be mindful of making a market for their business. Most middle-market companies are privately held so the process is not as easy as selling stock on the open market. With private companies, there is no established market for the business; you have to make the market.
Hire someone who can prepare and provide the appropriate information in a compelling manner under confidentiality agreements to qualified prospective buyers and then assist in establishing a price, a structure, and terms and conditions acceptable to both parties. A seller wants multiple buyers bidding for their business to ensure they can drive a good deal too many lose value (and time) by engaging in what we call one-off transactions.
Buyers, both strategic and financial, need to make sure the perceived benefits of the acquisition are for real. Strategic buyers in particular need to have a realistic integration plan and a realistic forecast of expectations for the combined entity, because studies show that the majority of transactions fail to meet objectives. The way to fix this problem is to set realistic objectives and then don’t overpay you can pay at most for the value the acquisition creates and, ideally, less would be better.
How should the valuation be handled?
The market will decide the eventual price but it behooves sellers to have a good idea of the likely outcome before initiating the sale process. Realistic expectations are critical or else a lot of time and money will be wasted.
Sellers should have their investment banker develop an estimate prior to engagement. This estimate should triangulate the results of a variety of valuation techniques including guideline public company and recent transaction analyses.
We rely on discounted cash flow analysis as well because this technique provides for more granularity. It is where you take a look at the expected future cash flows of the business and value the business based on what those cash flows are worth today.
People talk about multiples of various accounting measures such as sales or earnings to arrive at initial value estimates or as rules of thumb, but discounted cash flow analysis is the predominant technique employed for estimating value at a more thoughtful level.
Daniel S. Shea is a managing director of W. Y. Campbell & Co., a subsidiary of Comerica Inc., and head of the firm’s Los Angeles Office. His responsibilities include relationship management and client representation in sell-side, buy-side and private placement transactions. Reach Shea at firstname.lastname@example.org or (310) 297.2894.
Forming a strategic alliance with a few well-chosen vendors means having someone in your corner when you need it the most.
“When you plan to have multiple transactions with a company, signing a contract is a good place to start, but to really benefit from an association with that company, you should consider forming a strategic alliance,” says June Stein, president of Principal Technical Services. “When you sign a contract, you make an agreement; but when you form a strategic alliance, you build a relationship.”
Smart Business spoke with Stein about the benefits of forming strategic alliances and what to look for in a strategic alliance partner.
What’s the difference between a contract and a strategic alliance?
A contract or Master Service Agreement (MSA) is just a piece of paper that outlines terms and conditions under which a vendor sells something to a customer. A strategic alliance is so much more than that. It’s a living, breathing relationship that evolves over time as companies in the alliance work together for mutual benefit. A strategic alliance partner isn’t just interested in selling you something; a true ally is interested in understanding your business and helping you to achieve your business goals.
Not all business connections need to be strategic alliances. If you need a new copier, you simply call your vendor and order a copier at an agreed-upon price. But when you’re shopping for professional services, it’s not as simple as looking up a model number and placing an order. You’re in the market for people with specific qualifications who will be essential to the smooth operation of your company. A strategic alliance partner has a vested interest in your success and will make it a priority to provide exactly the type of personnel you need.
What are the key elements of a strategic alliance?
A truly beneficial strategic alliance requires communication and trust. You need to be willing to disclose specific information about your company to your strategic alliance partner, and to do that you need to be able to trust that the information you disclose will not be shared with your competitors.
You should invite your strategic alliance partners to your shareholder meetings and holiday parties. You should schedule regular meetings with upper management. The more information you communicate to them, the better they’ll be able to anticipate your needs and provide the right services in a timely fashion.
What should companies look for in a strategic alliance partner?
I’ll tell you what not to look for the lowest price. I’m not saying that price isn’t important, but the lowest bidder isn’t necessarily going to get you the best products and services.
What you do want to look for are qualifications such as years of experience in your business niche, number of clients in your business niche and favorable recommendations from those clients. You want a partner who’s a real player in the industry one with a history of providing a large volume of exactly the type of services you’re looking for.
When choosing a strategic alliance partner, you also need to consider qualifications that aren’t so easy to measure. Strong ethics are a must, since your partner will be entrusted with sensitive information. Also, think about the personnel you’ll be dealing with at the vendor. Will you talk to the same person all the time, or will your needs be handled by several individuals, each with only a partial understanding of your situation? Continuity is key.
What are the advantages of forming a strategic alliance?
The advantage of having a partner that can understand and even anticipate your needs is huge. Some strategic alliance partners may even be able to help you better define your needs. They often work in your industry on a broader scale and have useful (nonproprietary) information to share. You also need to remember that a strategic alliance is a relationship not just between companies but between people working for those companies. Someone you have a relationship with is more likely to work hard on your behalf and put your needs on the top of his to-do list.
JUNE STEIN is president of Principal Technical Services in Irvine. Reach her at jstein@PTSstaffing.com or (888) 787-3711, ext. 21.
California’s wealth of top research institutions and the talent they attract have given rise to scores of companies whose names have morphed into household words in just a few years.
In the life sciences and biotech industries, upstarts of a decade ago are now industry leaders, having cracked through a once-lofty barrier through product innovation, strong management skills and the backing of venture capitalists.
Unlike tech firms that moved from basement bedrooms and garages into high-rises, these scientific firms have less flexibility housing their operations. Zoning ordinances, community sentiment, plumbing, electrical and other infrastructure issues all influence where they can establish business. Because of their unique needs and the occasional obstructions that towns and cities may place in their paths, setting up shop can be harder for them. Needed are the skills of a seasoned commercial real estate pro if firms in these sectors are to take their business concepts and turn them into reality.
Smart Business spoke with Jonti Bacharach, vice president at CRESA Partners Orange County, a real estate advisory firm that represents tenants and space users, about the value that professionals bring to the “house-hunting” process for life sciences and biotech companies.
Why can’t life sciences and biotech companies just move into a high-rise or other available office space?
At the most basic level, life sciences companies do not consider high rises an option because their occupancy costs are so high. Also, because these are rather traditional office environments, a landlord likely will not allow them because of unique space needs to operate there.
Life sciences and biotech firms almost always require a significant build-out of raw space. Their biggest cost arises in constructing labs within an existing space. Here we need to adequately manage significant reconfiguration of standard building construction systems to accommodate the demands, unique to biotech/lab operations. Service or consulting firms, which typically occupy high rises, almost never face these challenges.
Because biotech companies work with material that area residents could feel would have an adverse effect on the environment, they must be housed in a community that accepts the nature of their work. Landlords, other tenants and civic leaders must be supportive of their business.
A good adviser can also point out the many benefits these firms bring to the community, including higher tax rolls and the prestige they have garnered as they sit on the cutting edge of their industries. A skilled real estate adviser and systems specialist can provide insight and leadership that will result in many hundreds of thousands of dollars in savings to the organization.
How do you find life sciences companies the structure they need?
It’s very rare for a life sciences company to move into a building without making some modifications. Generally, we’re looking at a ‘box,’ such as a warehouse or a flex building, which is a structure designed to accommodate businesses as disparate as light manufacturing companies and wet labs.
Several factors must be taken into consideration when determining the optimum facility solution, including geographical parameters of the requirement. Does the company need to be close to airports, research institutions or hospitals? Cost is always a consideration, as well as zoning restrictions and waste disposal, among myriad other issues.
How can life sciences companies reconfigure raw space?
First by asking the right questions, illuminating unforeseen cost considerations, and then creating a strategic plan designed to effectively address each issue. Most such companies have unique operational requirements that must be addressed in the context of their specific business. Our approach is to provide a broad base of highly specialized senior level specialists who will oversee and manage this process in order to reduce facility and operational-related expenses, while also ensuring that maximum efficiencies are realized. This also ensures that the project will come in on time and, often, under budget.
JONTI BACHARACH is vice president in the Newport Beach offices of CRESA Partners. Reach him at (949) 706-6600 or at email@example.com.