57 Lessons Featured

9:58am EDT July 22, 2002

We’ve probably seen it all when it comes to Pittsburgh business. Since our launch in April 1994, we’ve seen small high-tech start-ups transform almost overnight into 1,000-employee companies with half a billion dollars in revenue. We’ve seen exciting growth companies collapse from financial disarray, market shortcomings, death, fraud and even arrogance.

And we’ve seen just as many companies that should have died a slow and painful death come back to life in the hands of energetic, resourceful entrepreneurs who reach for the stars even when their arms are too short.

Over the years, we’ve positioned those stories in a way not just to entertain you or feed your prurient curiosities, but to educate you and bring you what we call smart ideas for growing companies.

To celebrate the fifth anniversary of SBN, we’d like to bring you many of those ideas, philosophies and words of advice. Call it wisdom, wit or whatever, the advice in this special issue is valuable and timeless, even if those who convey the wisdom may have changed jobs or careers suffered entrepreneurial failure or died.

In the following pages, we bring you that advice, attributed to those who shared their stories and their pain over the past five years. But keep one thing in mind: In this form, it’s only advice. What you do with it will determine whether it becomes wisdom. Or just wit. You decide.


Marketing

Don’t focus on your product; focus on how you can help your customers.

So says Donald Speakman, among the top-selling financial planners at Allmerica Financial. He considers himself a stalwart dodger of the hard sell.

“I’m not selling something, I’m helping people,” he says of his sales philosophy. “The mistake sales people have made today is they’ve gone over to manipulative selling. We tend to do things with our clients very, very slowly.”

Offer something of value that has no immediate cost.

Bill Versaw, president of Versamatic Pump Corp., saw that his competitors in the commercial pump business had two glaring weaknesses: lagging service and shoddy quality. Versaw promised quick delivery and, confident that he had a better product, a no-questions-asked part replacement policy. It cost him nothing up front but bought him more than one loyal customer.

Show enthusiasm for your business.

People will be more likely to go out of their way to do business with you if you follow two guidelines, says Jeff Tobe of Coloring Outside the Lines. “The first is simply to look at what you do from a different, more creative perspective. The second, and more important, is that people want to do business with others who seem to enjoy what they do for a living.”

Encourage your customer prospects to say no.

Here’s how to do it, says Larry Lewis, president of sales training and coaching firm Total Development Inc.: “Tell your prospects up front that it’s okay to say no and then push for it. In pushing for a yes, the traditional sales person makes prospects feel like they are being sold, and they naturally resist. What you don’t want are think-it-overs. Eliminate the think-it-overs, and you’ll blow through quotas faster than a Jerry Rice punt return.”

Don’t create an image that paints you into a corner.

Tom Joseph created Bookminders, a service that uses home-based bookkeepers to complete bookkeeping tasks for businesses and, for a time, capitalized on the novelty of the concept.

“We became a victim of our own PR, meaning that people put limitations on what they thought a home-based work force could do,” says Joseph.

The company is reversing that perception by emphasizing the kind of technology-based solutions it provides rather than how it provides them.

A Web page is no money machine.

Bev Bachri, who with her husband, Syam, operates an Internet site that offers hard-to-get Indonesian food products, says that having a Web site far from ensures success without the same hard work that any business requires.

As Bachri puts it, “You can’t just put up a page and expect to make a ton of money.”

Stick to your knitting when it comes to e-commerce.

David Radin, creator and host of “Internet Insider with David Radin,” suggests you stay clear of launching an Internet business outside your area of expertise.

“You’ll have a much better chance of success if you launch your e-commerce operation in a business area in which you’re already an expert,” says Radin.

Listen closely to the professionals.

When ad executive Al Dudreck suggested that restaurateur Hartley King star in his own television ads, King’s response was, “Who the hell wants to see a fat guy on TV?” The subsequent campaigns proved bigger than King himself, boosting the restaurant chain’s image and making King an enduring Pittsburgh icon.

Give your clients a business experience.

“Never give them the same menu when they ask you to wait on them,” says Jeff Tobe, a Monroeville-based creativity consultant and speaker who calls himself the “primary colorer” at his firm, Coloring Outside the Lines. “Never serve their solutions on the same plate or in the same glass.

“Why fight it?” he asks. “Small business is an enigma, and we should all be proud to demonstrate the mystery every time our client calls.”


Human Resources

Think ahead in hiring.

Human resource consultant Christine Posti, president of Posti & Associates, offers these tips to make sure you keep your employee ranks filled:

  • Anticipate your hiring needs so you won’t be pressured to make rash decisions.

  • Network actively so you’ll always have a wide net of contacts and candidates upon which to draw.

  • Make your job and workplace appealing by offering such amenities as telecommuting options, flexible schedules, rewards and recognition and development opportunities.

Encourage feedback — all of the time.

Holly Maurer-Klein, president of HMK Associates, suggests making employee evaluation an ongoing process, not just an exercise at review time. She also say there should be opportunities for employees to provide feedback to management on what could be done to make their jobs easier.

Use the carrot-stick approach.

”To motivate people, you have to give them a piece of the action,” says William Krewin, founder of Safeguard Interactive Inc., a company that provides computer files backup over the Internet. “My goal is to create at least seven millionaires in this company.”

Glen Chatfield, among the region’s high-tech entrepreneurial pioneers, agrees. He notes that substantive ownership should serve as a reward/incentive for employees who should be self-motivated, competent, good team players — and who are willing to develop their leadership capabilities.

“Almost all people are far more capable than most business allows them to be,” Chatfield says.”

Build confidence in your employees.

McKees Rocks Forgings Co. found that a literacy training program has paid off beyond simple skills enhancements.

“The more they know, the more comfortable they are and the more confident they are,” says Justin Modic, the company’s general manager.

Tap internal resources for training.

Your employees may be the most effective pool of training talent available to your company, says Michele Roach, training coordinator at CDS Technologies Inc. “These people know the programs inside and out,” Roach says. “These developers are truly experts, so who better to teach it?”

Share information with your employees.

Delorese Ambrose, hum an resources consultant and author, thinks companies should be much more open with information about the company than they tend to be. “I think managers err on the side of withholding too much information,” says Ambrose.

Jeff Krakoff, president of Krakoff Communications Inc., adds that you should communicate openly with employees beyond breaking bad news, pitching your 401(k) plan or announcing your next company picnic.

“Don’t just tell employees what’s changing,” Krakoff says. “Tell them why. Educate them in your business, and give them business reasons for the changes. They’ll understand. Really.”

Identify key competencies when hiring employees.

Kevin Klinvex, director of North American operations of Select International, says employers often fail to take the time to break down a position into the multiple skills necessary to do the job, then rate candidates equally on those specific qualities. Those skill sets, he says, must serve as a means to predict success on the job.

“This is probably the most prevalent mistake that start-ups and all businesses make,” says Klinvex.


Leadership/Management

Have the guts to walk away from a deal at any moment.

That’s the main advice of Buchanan Ingersoll president and CEO William Newlin, an attorney who is considered one of Pittsburgh’s premiere entrepreneurial dealmakers of the past 20 years.

Otherwise, he says, you’re not a good negotiator.

“You can’t bluff,” Newlin says. “You have to be willing to put everything on the table. If I don’t get the deal I want, I’ll walk away. Most of the time, you’d better be willing to back that up.”

Among his other dealmaking advice:

  • Creative strategy is just as important as the legal and financial aspects of a deal.

  • Really know the facts of the deal.

  • Make sure all personalities mesh well. “Any kind of deal where it effectively means people have to work together after a transaction demands that both parties can relate well together,” he insists.

Don’t mistake the simple for the easy.

Jim Fox, president and founder of Fox’s Pizza Den, a successful restaurant franchiser, makes the important distinction between the simple and the easy: “It’s a very simple operation to run, as long as you do it right. But it’s taken us about 25 years to get it right.”

Follow your gut.

Pittsburgh business maven James Roddey says former boss Ted Turner of Turner Broadcasting often followed his gut, even when Roddey advised against it. This is what he says Turner later told him: “Did you know I’m now worth about $500 million? I made $400 million of it doing things you told me not to do.”

Good leadership requires a strong sense of vision and purpose.

Management consultant William Armstrong says he believes many companies have lost their vision and sense of purpose — two factors needed to grow.

“With all of the emphasis on downsizing, rightsizing, and improving the value for the shareholders, our business leaders seem to have lost sight of the fact that the purpose of organizations is to grow — not just to improve the short-term picture by a few percentage points,” he says.

Delegate, delegate, trust and delegate.

The Baney brothers learned the hard way the importance of delegation when they took over their father’s decades-old company after he died in 1987.

Their father had built North Side-based Ad Graphic Inc. into a banner screen-printing boutique — but one that relied on him for everything. The result: a company that grew only as fast as he could produce the work himself.

“I could do everything here, but my dad did everything,” says Neil Baney, who, with brother David, now runs the company.

When their father died, they decided to grow the company and began to delegate many of the functions to their 22 employees at the time.

Says David Baney: “You can’t grow 20 percent and do everything yourself.”

Jeff Pepper, president and CEO of ServiceWare Inc., of Oakmont, likewise understands that an entrepreneur has to be able to delegate responsibility to his employees. He also knows it’s easier said than done.

“It’s very hard for an entrepreneur to practice that,” he says. “Everyone talks about empowerment; that’s an overused word. But what it boils down to is you really have to trust your people to execute your overall objectives.”

Women: Expect to wear many hats.

Says Eleanor Schano Feeney of WQED Pittsburgh: “Look like a woman, act like a lady, think like a man, and work like a dog.”

Commit yourself to high performance.

When AEC Inc. put together its board, it didn’t invite any pushovers to sit at the table.

“We’ve kind of strapped ourselves into some difficult-to-please managers, but it’s the right thing to do to go and make sure everything grows the way it ought to,” says Tim Deis, the company’s president.


Finances

Know the numbers.

John Budavich was once afraid to answer the telephone at his company, E.J.B. Industries, a Baden dry cleaning service.

While the company was doing about $1 million in annual revenue, poor cash management allowed short-term payables to hover around the $200,000 mark, prompting pressure from creditors and blocking the company from obtaining an adequate line of credit.

Learning what the numbers mean and which offer the clearest picture of how an individual business is doing allowed Budavich to get a grip on his finances and get his company on track.

“For me, it was a matter of good accounting procedures and what they meant,” Budavich says.

Budavich got religion when he met with lawyer and accountant James Lange, of James Lange & Associates, when he was considering hiring a new accountant. Lange realized that Budavich really didn’t understand the numbers and, as a consequence, didn’t know what they meant to his business.

Lange taught Budovich how to clean up the company balance sheet, handle his payroll to avoid penalties and understand how the numbers reflected E.J.B.’s performance.

Better financial management has meant that, although the company’s revenue is about half of what it once was, it has reduced its payables and makes more money.

“Today, we’re not millionaires,” says Budavich, “but we’re also not afraid to answer the phone.”

Make sure yours is a great deal.

If you’re trying to raise capital from an angel investor, keep in mind that your deal likely is among dozens seeking an audience from such an investor. Make sure you not only have a good idea and a strong business plan, but a strong management team in place and a viable exit strategy for the investor.

As Mel Pirchesky, president of Eagle Ventures, a private-equity dealmaker, says, “There are a lot more good deals out there than money. But there is a lot more money out there than great deals.”

Start-ups: Leave your egos at the door

Says Frederick Beste III, president of NEPA Venture Funds, a Bethlehem-based venture capital firm: “Show me a start-up in fancy space with lots of glass and chrome, all new furniture and equipment, and a management team drawing salaries at least equal to their old ones, and I will show you a prescription for failure.”

When you’re heading into financial trouble, make sure your banker knows early.

Let lenders, vendors, and, if necessary, customers, know up front when you’re facing financial difficulties that will require a serious turnaround.

“Early in the process, they tend to be very cooperative because they, too, want to preserve their relationships with you,” says Debra Kuptz, a spokeswoman for the Chicago-based Turnaround Management Association. “But you have to have a very open and honest level of dialogue with them.”

Such advice worked for building supply distributor Jones & Brown Co. on the North Side, which faced a gut-wrenching turnaround in the early 1990s.

“It’s hard to admit, but I think being put into workout with the bank was probably the best thing for us,” says company president and owner Barry Snyder. Adds his CFO, John Nelson: “It was a wakeup call. We got back to the basics, found our disciplines, and the rest is history.”

Consider a personal guarantee.

You’ve made the sale, but will you be able to collect the money?

Joseph Bernstein, a principal of law firm Bernstein & Bernstein, says getting a written guarantee or security in the form of unencumbered property as collateral might be advisable with some customers.

“An individual will try harder when his own world is at risk,” says Bernstein, whose law firm specializes in bankruptcy and related business law.

Do much of the accounting work yourself.

Accountant David Wilke says business owners should do as much of their routine accounting work as possible themselves and save their resources to have their accountants provide them help in planning and projecting future growth.

“My philosophy with small business is that we’re trying to get them to do as much in-house as possible so we can do more big picture things.”

Carefully consider warranties.

Taking a few simple steps can protect you when you purchase a business or property, says Stuart Caplan, a lawyer with Eckert Seamans Cherin & Mellott.

Sellers should consider every representation as something they are willing to personally guarantee, he says. The buyer then should make sure the seller:

  • Owns all the assets for sale and has the right to sell them;

  • Has paid all creditors in a timely way;

  • Has no lingering creditors with collateral rights to the assets for sale;

  • Has paid all taxes; and

  • Maintains current regulatory permits or licenses critical to the business.

And watch out for this one, Caplan says: “If the seller is reluctant to make certain standard representations, it could be a tip-off to the buyer that something is not as it should be.”

Develop relationships first.

John Curry of Curry Communications Inc. wondered why the company’s phone wasn’t ringing off the hook when it expanded its offerings beyond its core product of regional toll service. He concluded that he’s better off sticking with one service in the initial sales effort and developing customer relationships before trying to sell them a whole menu of services.

Look for strategic partners.

When Bill Bajcz, president of AMS Electronics Inc., needed to improve his cash flow to take advantage of a new business opportunity, he asked his banker to extend his line of credit, his vendors to give him a little more time to pay, and offered his customers a sweetener to pay their bills sooner. Those combined efforts are helping Bajcz generate at least an additional $150,000 in sales for 1999.

Selling more is not necessarily the answer.

While sales at Strobel Machine Inc. had fallen off in the 1990s, consultant Robert Chastain concluded a lack of business wasn’t the machine shop’s central problem.

“The underlying equipment problems would not have allowed me to go out and get a lot of new business,” Chastain says. “We would have bombarded them with new customers and then lost them.”

The immediate solution for Strobel Machine turned out to be better financial management and more efficient use of its resources, rather than taking on more work.


Technology

Do your software housekeeping.

Keeping track of your software assets isn’t going to get easier if you ignore it, says Larry Shoup.

“You might as well get started, because it’s not like you’re buying less of this stuff as time goes on,” says Shoup, president of Janus Technologies Inc., which has developed a software package designed to manage what software your company does have.

Don’t underestimate the role of the Internet in your business.

Said James Cullen, president of Bell Atlantic Corp., at a speaking engagement in Pittsburgh in the fall of 1994: “In many ways, I am surprised that a discussion of the information superhighway is still able to draw a crowd. Critics continue to report that the term is dead, its death overdue, and its replacement, ‘information superhypeway,’ already is suffering from overuse.”

Look before you leap into technology

While technology can help you do things faster, smarter and with better quality, it’s not necessarily the best answer to every problem. David Mercer, responsible for engineering at Community Playthings, a manufacturer in Farmington, Fayette County, found the solution in a simple method of reorganizing the work flow.

Says Mercer: “If you don’t have the expertise and the discipline to do it in a simplified, conventional fashion, you don’t have it to do it with computers.”


Operations

Create good processes before turning to technology.

Eric Wright, a shareholder in Pittsburgh accounting firm Schneider Downs & Co., warns businesses not to fall into the trap of believing that simply buying new equipment will solve your problems.

“I don’t think automation ever makes anything better if the process behind it isn’t any good,” says Wright. “If your processes are bad, it will just speed that up.”

Stay focused.

Before Rock Ferrone began to manufacture $150,000 in-line book-trimming machines for the printing industry, he had an auto repair service, phone system installation service, awning manufacturing business, commercial printing company and even a community newspaper. Then he invented those machines.

That’s when he decided maybe it was time to rein in his youthful, frenetic, entrepreneurial spirit and get down to some serious business. That’s also when his new company, Rock-Built, finally took root and began to make money.

Says Ferrone: “At $150,000-plus a machine, I got focused.”

Eric Cooper, one of the founders of the hugely successful Fore Systems Inc., says focus also is important when you have to persist as a start-up in the face of critics and others with little foresight.

“We had the right idea at the right time, so I guess we had some luck in that,” says Cooper, who ran the company with three co-founders even after they took the company public. “We stuck to an idea even when it wasn’t yet popular, knowing it was inevitable that it would become popular. We just focused on keeping our eyes to the ground.”

Don’t underestimate the value of a good customer database.

Former upscale clothier Katherine Barchetti knew fashion, but that’s not what allowed her Oxford Centre clothing boutiques to thrive for more than 25 years, she says. It was her customer database.

“I have this philosophy,” she says. “Math leads to rational, logical thought, which then leads to philosophy. So I am a numbers and data freak.”

So much so, in fact, that she used to demand that her staff collect at least 95 percent of the names and addresses of all customers on a given day, along with detailed information about their purchases. Those who didn’t eventually would lose their jobs.

Says Barchetti: “I can’t teach someone to be smart. We sell through information.”

Not so fast, partner

Andrea Fitting, a partner in marketing communications firm Fitting Kolbrener, tells how she and her partner carefully laid a foundation for a successful working relationship.

“We shared the same values and business ethics. But we didn’t trust our own instincts completely. We protected ourselves and one another with a well-planned and carefully executed partnership agreement — including a clearly defined exit strategy, thanks to our attorney. Our accountant helped us put good financial systems in place.”

Make a change to make change easier.

”We all want life or work to improve, but we don’t necessarily want to change,” says Patricia DiVecchio, president of Life-Work International, a Pittsburgh-based consulting firm.

DiVecchio suggests we use the word ‘improve’ when proposing or considering a change.

Overcome obstacles with grace.

As an African-American in broadcasting, a business traditionally with a dearth of minorities, Eddie Edwards, who heads Glencairn Ltd., has seen his share of racism. Not the least of the insults was an effort to keep him off the membership rolls of a posh country club. Edwards, however, refuses to show bitterness.

“I’ve seen some ugly things throughout my career, but as I’ve told my son, rise above them,” he philosophizes. “Sooner or later you’ll run into the right people who will help you get where you’re going.”

Recognize your limitations.

Phil Schaltenbrand, owner of Westerwald Pottery, could run himself and his staff ragged creating customized designs. Instead, the Washington County potter limits his line to about 20 designs that can be ordered in several variations.

“If you start dancing to other people’s tunes, you’ll get in trouble.”


Opportunity

Look at every problem as an opportunity for a profitable solution.

Michael Jones, founder and president of Wastebusters, a program that enlists all of the interested parties in recycling while building an identifiable brand for his company, saw opportunity where others saw only a mandatory government policy.

“Municipal recycling programs have filled the pipeline with supply and done nothing with the demand side,” says Jones. “It’s not my problem that there isn’t enough demand for these materials, but the fact that they’re out there, the fact that they’re being forced into the marketplace, that’s an opportunity to pull it through.”

Look for opportunities in economic booms and downturns.

Gemini Holdings has acquired and improved several companies since its founding in 1997, all of them during a time of relative economic prosperity. But the company’s president, Tom Certo, believes that any economic situation will offer opportunity for the company.

“I think it will increase the deal flow and give us more realistic pricing on deals,” says Certo.

Plan your moves in advance.

Jack Roseman, a successful entrepreneur in the 1970s and now an adjunct professor at Carnegie Mellon’s Donald Jones Center for Entrepreneurship, stresses the value of looking at the future.

“In general, business is a chess game,” he says. “So when you’re playing, you better be concentrating on moves two, three, four and five steps ahead. You better take into consideration that, if you produce this in the marketplace, how do you maintain it six to 12 months ahead?”


Family matters

Plan for succession.

”A funeral home or hospital room are not places to finalize the estate plan,” advises Dan Grealish, president of insurance brokerage Henderson Brothers Inc.

Despite losing both parents and two key producers in the company within a year, the company survived, and Grealish and brother Tom were able to keep the business going. The brothers credit their father’s prescience and thoroughness in putting together a detailed succession plan — ahead of time.

Keep the lines of communication open in a family business.

Sloppy handling of personal and business estate matters can leave successive generations with a mess on their hands, as Phil Young found when his father died without an estate plan. The situation left him owing hundreds of thousands of dollars in inheritance taxes, which almost forced a liquidation of Morris Young Co., the business his grandfather started in the 1920s.

Advisers like Jim Dugan, managing partner of accounting firm Markovitz Dugan & Associates, say the situation is all too common.

“It often becomes one of those things that the family doesn’t talk about, or when it is brought up, the son or daughter gets shut down,” says Dugan.

Contrast that with the actions of the Henne family, owners of Henne Jewelers. When it became clear that two of the Henne children were intent on staying in the family business and seeing it through its fourth generation, the family quickly sought out a professional to help them wade through the myriad business and personal issues involved. Jim Kwaiser, the Henne’s consultant, made sure that the entire family got involved in the process.

“In a family business,” says Kwaiser, “you have to blend together the family and the business. You can’t separate them.”

Kids need a full-grown view of the family busines