Dolev Rafaeli stayed on course to define the new, post-merger normal at PhotoMedex by sticking his neck out

Dolev Rafaeli, CEO, PhotoMedex Inc.

Dolev Rafaeli, CEO, PhotoMedex Inc.

It took three tries over the span of five years to make the merger of Radiancy and PhotoMedex a reality. So when the merger was finalized in 2011, Dolev Rafaeli was determined to make all aspects of it a success.

Rafaeli had been the CEO of Radiancy and was assuming the CEO’s position in the combined company — a manufacturer of medical treatments for skin conditions and other skin-related consumer products, which would carry the PhotoMedex Inc. name.

In terms of their history and DNA, the two companies had starkly different backgrounds. Radiancy, the larger of the two companies, was privately held, focused on consumer sales and had developed a presence in the international marketplace.

PhotoMedex was a public company, sold mostly to other businesses and was heavily focused on domestic sales.

From 30,000 feet, the companies were complementary parts, bringing different areas of strength to the table. The merger was a puzzle-piece fit. But at ground level, things were a little more complicated for Rafaeli and his management team.

“The biggest challenge, and the reason it took us five years to make it happen, was what you would call an HR challenge,” Rafaeli says. “Usually, when you look at mergers and acquisitions, everybody can understand the very objective analysis of numbers and the very subjective analysis of how things might look if we merge the two companies. The biggest challenge was, how do you get two teams engaged when at least part of the two teams thinks they don’t have a future in the company?”

Rafaeli had to combine two cultures from two different backgrounds, and once he had everybody on board, he had to set the stage for the company’s continued success or any momentum gained during the merger process would be lost.

Create alignment

In any large-scale change, alignment starts at the top. Nobody in the company will adopt the changes if he or she sees any type of negative or mixed reaction from those in charge. To that end, the management teams at Radiancy and PhotoMedex began the process of finding points of consensus nearly five years before the merger took place.

“We actually had known each other since 2007, so there wasn’t too much change in the transition for the management teams,” Rafaeli says. “We put together a project team that was running the two companies as if we were merged, about eight months before the merger happened. We were making decisions and considering things together, and we built our plan to make changes both before and after the merger.”

As the larger company, Radiancy had the majority of the resources that would be needed during the merger process, but since the combined company would be publicly traded and carry the PhotoMedex name, PhotoMedex served as the basic template by which the new company would be constructed. It was a matter, in many cases, of the combined leadership team creating operational alignment by building more efficiencies into the previously existing PhotoMedex processes.

“A lot of it happened before the merger was even consummated, so for example, we took apart all of the logistics philosophies in the old PhotoMedex but reassembled them based on the old PhotoMedex while using Radiancy’s resources,” Rafaeli says. “Since Radiancy was bigger, we had better costing to do things, resulting in a savings post-merger. We did the same thing with our insurance platforms, payment processing platforms, and with our PR and advertising companies.”

With an aligned leadership team creating aligned strategies, systems and processes, it became much easier for Rafaeli to bring the rest of the company’s workforce on board with the merger. An important first step was letting the company at-large know that no layoffs were planned as part of the merger.

“The scale and geographic diversity really required that nobody leave,” Rafaeli says. “We needed to keep all the finance teams that both companies had pre-merger. Each side had to learn what the other was doing and develop a way to combine the systems. We had to become SOX-compliant and handle a very coherent reporting system.”

In some areas of the company, the best solution was a combined one, implementing practices from both pre-merger companies. But in other areas, Rafaeli and his team decided to take an either/or approach to implementing best practices, aligning the company with one standard or the other.

“The operations team in both previous companies had two complementary sets of knowledge, and we had to merge the two of them in a way that took advantage of all the areas of strength,” Rafaeli says. “What happened was, we had the quality manager of the old PhotoMedex oversee the quality system of the combined company. The supply chain manager of Radiancy took over material supply for the whole company, because Radiancy was doing it more efficiently.”

It is crucial that you paint an accurate and complete picture of your vision for the post-merger company and that you do it early in the process. If you are going to create buy-in and subsequently create complete alignment throughout all levels of your organization, everyone has to know where they fit and what will be asked of them.

“We have very talented and experienced people, and we wanted all of them to stay and be engaged in the process of the merger and remain engaged post-merger,” Rafaeli says. “The important part there is keeping them engaged throughout the process of the merger.”

Announce your arrival

Even if you’re keeping the identity and product lines from both companies, as the relaunched PhotoMedex did, it won’t be business as usual for your customers. They’ll see a new company with a future in flux, which is why you need to connect with your customers and paint the same clear, accurate and candid picture that you did for your employees.

One of the ways Rafaeli and his team sought to announce the arrival of the new PhotoMedex and affirm the company’s identity to outsiders was through its marketing efforts.

“It was a very interesting process,” he says. “We took two companies — one that has the knowledge of how to advertise, and the other with knowledge of the business. One of our main business lines is in the area of psoriasis treatment, and the PhotoMedex people knew a lot about psoriasis and psoriasis treatment. They knew about the view in the market, the conditions of the marketplace, how physicians view it and the market’s view of that.

Through a unified effort leveraging the areas of expertise that now existed in the combined PhotoMedex, the company’s advertising specialists developed an advertising strategy based on the selling points of the company’s products.

“We had work sessions where we drilled down on the information,” Rafaeli says. “Because of what we sell, we deal with a lot of FDA regulations, so we have to be very regulatory-conscious in the way we advertise. Our quality and regulatory affairs manager oversees a lot of that.”

Advertising — especially in a time of change — is a risky proposition. You really don’t know how the market is going to receive the change until you see some reaction. You don’t really know what is going to appeal to customers. If you had a high trust factor between consumers and your product or service, you have no real way of knowing if that trust factor will survive a transformational change like a merger.

It’s a fact of business life that has been in the front of Rafaeli’s mind as he has watched PhotoMedex roll out its new advertising campaigns over the past year-plus. All you can do as a business leader is stick your neck out, observe the results, gather data and make adjustments.

“Because we’re so involved in advertising, we get questions about advertising from other businesspeople on almost a weekly basis,” Rafaeli says. “We tell them that they have to be very careful and diligent, because advertising can be a very, very risky business. You can go out and spend money, get no results and have no idea why you didn’t get results. You don’t know if it’s because you failed to choose the right targets or the right price point or some other factor.”

Early in the process, Rafaeli and his team decided to focus on a straightforward and positive approach to advertising. PhotoMedex ads can vary greatly in how the message is conveyed, depending on media and geography, but the clarity regarding the product and the company behind it are constant themes.

It’s an approach that has helped galvanize PhotoMedex’s marketing strategy and has helped to make the merger an overall success. The company generated $110 million in sales for the first half of 2012, with full-year projections of more than $230 million.

“Consumers can be exposed to hundreds of different types of ads every day, and many of them are either negative or misleading. They can try to tear down what the competition does, or promise results that they can’t deliver.

“But what I think is truly effective in an ad campaign is a straightforward approach that doesn’t create unrealistic expectations. And what an effective ad campaign really means is that when the need arises, you will trust our company. You will pick up the phone or go on the computer, and you will look for us.”

How to reach: PhotoMedex Inc., (215) 619-3600 or www.photomedex.com

The Rafaeli file

Dolev Rafaeli, CEO, PhotoMedex Inc.

Born: Haifa, Israel

Education: Bachelor’s degree in industrial engineering and master’s degree in operations management, the Technion — Israel Institute of Technology; Ph.D. in business management, Century University

More from Rafaeli on the advertising strategy of PhotoMedex: Our advertisements might look a little different, perhaps even awkward, to some people. We have an advertisement in a number of magazines where we show a woman shaving her face with a blade.

The reason we do that is, one of the products we sell is called no!no! hair removal, and we saw that one of the key drives for buying the product was female facial hair. There is not really any other solution to that besides a hair removal product. A woman isn’t going to put a razor blade to her face. And when we were testing this, we knew the reason we had bought and sold over 3 million units. We knew why people needed it, but we didn’t know how to convey the message.

We went about doing this very carefully, having clinical ads and physicians talking about it, and it didn’t work. So we decided to try something that might be perceived as awkward, having a woman shave her face. We put that on, and six months later, in a number of major magazines, you see our ad.

When it came to psoriasis, the key discussion also became, ‘What do we show? Do we show people with psoriasis? Or do we go to the other extreme, like ads for erectile dysfunction medications in the U.S.?’ Obviously, they’re not going to show anything like that in a literal sense. They show couples on the beach having fun and so forth.

We tested it in certain ways, and we ended up not showing the psoriasis treatment at all. People who have psoriasis know what they have. They don’t need to see it. People who don’t have and who will never have psoriasis don’t care to see damaged skin.

Takeaways

Align your management team.

Roll it out to the rest of the company.

Advertise with a direct message.

 

Turning it up: Jerry Azarkman cranks up communication and service to help Curacao expansion plan thrive

As Jerry Azarkman watched new stores open in Phoenix and Tucson, Ariz., he felt proud that Curacao, the company he launched at the age of 24 with a mere $20 in his pocket, was beginning to expand beyond its Los Angeles roots.

But he was also concerned about the sales volume at these new stores. They just weren’t doing as well as the stores located closer to Curacao’s Southern California headquarters.

“The L.A. store’s volume is much higher,” says Azarkman, co-founder, co-owner and chief marketing officer for the Latino-oriented retailer that’s corporate name is Adir International.

“The number of credit applications approved at the Phoenix store is much lower than the stores closer to headquarters. Why is it smaller the further you go? All these things gave me a thought about the implementation of direction. The further you go, the communication kind of slows down, and it doesn’t get there.”

Azarkman wanted to turn that around and ensure that wherever he opened a store, whether it was next door to his office or 1,000 miles away, it would offer the same quality of product and service to Curacao customers.

“The biggest challenge is as you grow, your structure grows and there are more layers of management and communication,” Azarkman says. “That communication has to be the same from level to level all the way down to the front lines. The challenge is when the communication doesn’t get to the level you want it to get to.”

It’s a common problem for growing businesses and Azarkman wasn’t casting blame about it. He just knew that his 2,600-employee company needed to adapt and rethink its communication channels to ensure that everybody was on board with what was happening.

“I’m involved in the philosophy of the company, which is keeping employees motivated so they can do their jobs at a top level,” Azarkman says. “They really want to do that. They’re not doing it out of fear. They are doing it because they believe in it.”

That attitude would be the key to helping Curacao achieve continued growth.

Demonstrate your commitment

One of the biggest changes Azarkman made with Curacao was to change the company’s name. It may not sound that meaningful to the internal operations of a company to change the name from “La Curacao” to Curacao and redesign the company logo, but it provided Azarkman with a vehicle to demonstrate the company’s commitment to digging deep and looking for ways to provide even better service to its customers.

To get things rolling with this process, Azarkman brought in an outside consultant to make an honest assessment of what needed to change.

“We hired a company from the outside because you cannot believe in your own judgment,” Azarkman says. “You’ll create an impression that you’re much better than you actually are. It’s better for somebody from the outside to look at you than for you to look at yourself.”

The firm came in and set up focus groups in the communities where Curacao did business.

“They did focus groups with our customers, with customers that left us three years ago, with people who had never been in our stores and in communities that had never heard our name,” Azarkman says. “Out of that, we learned a lot about what the community thinks of us, what changes they are expecting us to do and what changes we have to do.”

The groups provided a great deal of feedback, including the suggestion that ultimately led to a new name and logo. It was a good foundation to begin transforming the business. But the key to providing what your customers are looking for is asking the question with the knowledge that you’ll need to keep asking it again and again.

“Expectations change with time,” Azarkman says. “You create an expectation, a standard, and then the next day, you have to go and create a much higher standard and create a ‘wow’ in the minds of customers that walk in the store. When they leave the store, you want them thinking, ‘Wow, I never thought I was going to get that value or that experience.’ To get to that point is a constant struggle.”

Earn employee support

Azarkman needed his employees to buy in to the pursuit of superior customer service without feeling as though they were being punished or forced into something that didn’t fit their skill sets.

“If they’re not buying in to it and they are going to be forced into doing something that they don’t believe in, it’s not going to happen,” Azarkman says.

There needs to be something out there, a reason to work harder and exceed customer expectation.

“What’s it in it for them?” Azarkman says. “What are they going to gain out of it? A better career path, higher income, more security, better stability for the company? You put all those things together, and you’re going to create a team that is really going to be motivated and dedicated and really cares about the company because they are part of the company. They are working there because they belong there. They are part of it.”

A comprehensive training program at Curacao, known as the University of Curacao, bolsters employee engagement. It helps promote an environment of learning and growing that Azarkman says is one of the keys to achieving growth.

“You need to know how to motivate people and get them to perform better,” Azarkman says. “You have to provide the tools that they need. Managers are tool creators. They create tools for their associates to perform. If they are creating the right tools and then people are using the tools that have been created for them, the success is going to be there.”

Azarkman refers to the sale of a television as an example of the outcome he seeks in training his managers and employees.

“Let’s take a Sony television,” Azarkman says. “You can buy it anywhere in town. You can go on the Internet and find 10,000 places to buy it. The difference is what is coming with that television. What value am I giving to that customer with that TV? What is the additional value?”

If everybody is thinking about ways to please the customer and is able to bring up those ideas without fear of reprisal, the result is a strong culture and a strong company that consistently exceeds expectation.

“It’s not that you create a ‘wow’ in the minds of customers and that stays,” Azarkman says. “Today, you’re meeting expectations. Tomorrow, it might not be enough.”

Don’t lead with fear

The effort to drive home that message to stores near and far away from Los Angeles and ensure that everyone is pushing toward those goals on a consistent basis has to begin with you.

“You have to make sure that all your executives are really buying in to it,” Azarkman says. “If anybody has a doubt or has something they don’t agree with, let’s put it on the table, fix it and make sure we all agree. Get one direction you can all agree on and go from there.”

If you want to learn what needs to be fixed in your business, you’ve got to be willing to accept criticism.

“The minute there is fear, all the communication channels are shut off and they are not going to be willing to open their mouths and discuss issues or concerns that they have,” Azarkman says. “If the leader is creating fear and the people have to work with that fear, it’s not going to last too long.”

Companies that insist on coming up with reasons why a problem doesn’t really exist are only setting themselves up for a bigger failure down the road.

“The communication will determine the success or failure of the company,” Azarkman says. “If there are real problems that need to be addressed and you don’t put them on the table, they will accumulate until there’s an explosion because people were afraid to bring it up.”

One of the solutions to the problem of lower sales volume in the Arizona stores was to enact rotating management teams between the more established stores closer to Los Angeles and the newer, less experienced stores in Arizona.

It’s a step that can help you better assess your team and weed out the people who aren’t going to be a part of your future.

“You need to check performance and evaluate each person,” Azarkman says. “You always have to create a bucket of people that are performing. Unfortunately, some do not perform no matter how much you try to educate and help them. So you have to let them go so you can keep your company healthy.”

Fortunately, Azarkman has more talented people on his team than underperformers who have to be let go. Curacao has more than 2 million credit applications on file and continues to expand. Azarkman says it all comes back to the philosophy of customer service.

“If the customer gets service above expectation, it means you’ve done something to maintain and keep that customer,” Azarkman says. “It’s small advice, but it’s big if you keep it in mind.”

How to reach: Curacao, (866) 410-1611 or
www.icuracao.net

The Azarkman File

Name: Jerry Azarkman
Title: Co-founder and co-owner
Company: Curacao

Born: Tehran, Iran. I moved to Israel at the age of 6 and grew up in Israel. I came to United States at the age of 21. There was a good community of Jewish people living in Iran before the fall of the Shah. There were probably about 1.2 million Jews there. My parents felt that it was going to extreme Islam already in those days. And in 1961, they decided it was not going to be a stable country to stay in, so we moved to Israel.

Education: I did three years of computer language study at Bar-Ilan University, Ramat Gan, Israel. It’s a university. I took some evening courses while I was in the military service.

Who has been the biggest influence on your life?

My father, Oscar. Any time I’m in a problem, I go back to things that he told me. The things I’m passing to other associates in the company, it’s come from the first lessons of motivation that my father passed to me and my brother.

What one person would you like to be able to meet and why?

Albert Einstein. First, I would like to see his philosophy about life, religion, God and how science is connected to religion. What did he really see? Maybe the guy is so extremely smart that he had to bring himself hundreds of levels down to talk our language so we could understand him. I would like to know what level he is.

Takeaways:

  • Don’t be afraid to seek outside input.
  • Work with employees on new initiatives.
  • Don’t lead with fear.

How Oleg Firer built America’s fastest growing company through acquisitions

Oleg Firer, co-founder and executive chairman, Unified Payments LLC

On paper, Oleg Firer literally embodies the American dream. Moving to Brooklyn, N.Y., from the Soviet Union at the age of 12, he entered into business without a college degree and rose quickly to become the VP of a publicly traded company by his late 20s.

In 2002, Firer taught himself the payment-processing business — which would become his career — from the ground up and eventually partnered with private equity group Star Capital to start his own payments business in 2007.

With the help of his partners, Firer executed a roll-up strategy that included eight acquisitions between 2008 and 2010, combining the entities into a one payment-processing company — Unified Payments LLC. Today, Unified Payments has grown to approximately 50 employees and $59.5 million in revenue. And with a three-year growth rate of 23,646.3 percent, it soon shot to No. 1 on the 2012 Inc. 500 list of the fastest-growing companies.

“M&A is my background,” says Firer, co-founder and executive chairman, Unified Payments, which now processes about $10 billion worth of transactions for 100,000 merchants a year. “I like to find the diamonds in the rough and make them into diamonds. And that’s what we’ve done.”

Firer’s leadership has been critical in helping the company overcome challenges of integrating eight companies while managing fast growth and staying innovative in a competitive industry.

Smart Business spoke with the Firer to find out the keys to his M&A success and keeping Unified Payments on top.

SB: How did you choose which companies to target as part of the acquisition and roll-up strategy?

OF: The companies that we acquired had something unique about them. Being established is one thing — but they all had some sort of issues. We did a lot of distressed equity buys where they were either overleveraged or they were growing too fast and they couldn’t keep up with it or they had shareholder feuds or so on. Obviously, we looked at dozens of companies and we identified the eight companies that we liked the most, and we executed.

We also invested in human capital. Each one of these eight companies — besides having potential to grow and having a sales engine — had human capital behind them that we believed in. We don’t have eight different divisional presidents. We consolidated, and there were three people that I believed were the strong sales leaders to take this business to the next level. We bet on them. So it was not just acquiring for the core assets and growth opportunity; it was also acquiring them for human capital that knows this industry.

SB: What was your timeline for the acquisition strategy?

OF: The first acquisition that we did was the most expensive and the biggest. We executed the first acquisition in 2008 as a platform buy to do the add-ons that we did at later points. When we did the platform buy, it had a lot of human capital already behind it. Most of it needed to be restructured.

We bet on the sales leadership, but operationally, we had to break down a lot of departments in order to make this a success. That took awhile. And obviously, from the add-ons that we did, we moved some people around, and we hired some new people.

SB: When did you start integrating the businesses?

OF: We didn’t wait for the eight to complete. From the first platform buy, we started right away working on operations, restructuring the operations and making the operations stable. No matter what size of payment-processing provider that you are, you still need a core engine. For us, it was building an engine that’s scalable and having the outsourced pieces that we need in place to have 24/7 support and so on. It took a year to really build proper structure, and then when we started executing on acquisitions, it was about integrating them in the structure.

SB: When you are completing multiple acquisitions, how do you integrate them into your company in a way that doesn’t overwhelm your business infrastructure?

OF: It was easier with the add-ons because when you have an add-on, you strip away (general and administrative expenses) G&A and you integrate the asset into the engine if you see any new human capital that is an asset to the company. Then the rest we would strip down.

So the core support functions like customer support and technical support we would keep in the core engine. If tomorrow I’m presented with an opportunity to buy a payment-processing provider, I would let all the customer support and technical support resources go because I already have them in my core.

It’s like a puzzle. You see the missing pieces and you want to fill those pieces. Identifying the missing pieces and bringing those pieces in became easier after the first acquisition because we see that we’re lacking in a niche vertical. So now we know that the next acquisition that we do is going to be a new vertical. It has to have something special.

SB: How has the recession impacted the growth of your business?

OF: After we acquired the eight different companies, we consolidated, created this engine and decided to keep them in an organic growth strategy. We have been growing for the past two years organically from redoing these engines that we acquired.

This industry is very competitive. And with the recession the biggest thing that keeps me awake at night is that there are more businesses that go out of business. So it’s losing merchants and keeping up with attrition and the churn and providing outstanding service to the merchants that process with you — and providing them with innovative products so that they don’t go to the competition.

SB: How can you manage risk when you have customers who are struggling?

OF: It’s pretty much keeping your ear to the ground and working with partnerships. … When MasterCard launched a PayPass program, which is a ‘contactless’ card, we were the first organization to launch it for them in New York because we understand what it takes to roll out technologies. By working with the industry’s innovative associations, such as Visa, MasterCard and Discover, and working with technological partners that we have, it makes us stand up to the competition.

SB: How do you make sure that you’re not growing too quickly?

OF: You want to have gradual growth. Pulling in the reins on a monthly basis and slowing down the growth is really the most challenging. Once you let marketing loose, it’s hard to pull in some marketing areas. Growing too fast can permanently damage the company. So it’s about growing methodically, managing within the budget.

With us, there is an acquisition cost to every merchant that we bring in. So if I want to pull in the reins, I just shrink the budget for that month. It’s growing at the pace where the business can afford to fund marketing and then fund G&A.

SB: Any lessons learned the hard way?

OF: If you’re a business leader and you’re an operator, choose the right capital partner that believes in you and that will give you an ability to take this to the next level. I had to go to a few capital partners, and it was challenging to find a capital partner midtransaction. Adding another capital partner during a transaction was even more challenging. So the challenge I had was going through several capital partners; when you’re already committed, you can’t go back.

Get a firm commitment and make sure that the partner that you choose believes in the overall picture and not just a piece of it. Believing in just a piece of it could cause you to run into to problems later in the game.

SB: What are the main lessons have you learned from your M&A experience?

OF: Everything takes longer and it costs more. So you need to be very conservative in your estimates and be very conservative in your projections. Be very cognizant of time. Underpromise and overdeliver — that’s my model.

SB: What advice would you have for another business executing an acquisition?

OF: I had to go through a lot of companies to really believe in the eight that we did. And I mostly believed in them because of the people. It all starts at the top. If you have the right people at the top, if you have the right business leaders, it becomes very easy to do a transaction. If you don’t have the right leadership and business leaders that you rely on, everything else can crumble.

And then, obviously, it’s always challenging to find good people for any business. But if you find somebody that you believe in and that has the track record, don’t let the person go. ●

How to reach: Unified Payments LLC, (877) 621-9110 or www.unifiedpayments.com

The Firer File
Oleg Firer
Co-founder and executive chairman
Unified Payments LLC

Born: Soviet Union

Education: New York Technical College

Management style: There are two styles to me. First of all, I have an open door policy. I speak to every employee in the company and everybody has direct access to me. I meet with my employees all the time. And I don’t consider them employees; I consider them partners because we have a common goal, and we need to work toward it. And I think outside the box. There’s no strategy that I would not look at. There’s no opportunity that I would not look at.

What you do for fun?

Jet skiing, boating

Who have you never met but would you like to have dinner with?

Warren Buffet, to get an insight on what it takes to be the most successful investor of the 20th century and understand what it takes to spot the hidden jewel in the companies he invests in.

What would you be doing if not your current job?

I would be a politician.

How do you regroup on a tough day?

I spend time with my kids.

What destination would you still like to visit?

Israel

What’s next for Unified Payments?

Every month and every day we raise the bar because of the fact we have to grow, and I’m not satisfied with the growth that we have. So we still want to grow a bit more. We still have some internal restructuring that I’m working on, and as I execute a little bit more organic growth and do a little bit more acquisition, one day who knows? I might exit. So it’s making the business big enough to be palatable to somebody smarter than I am.

 

How Don Lowe has adapted to serve a changing market at Franchise Services Inc.

Don Lowe

Don Lowe, CEO, Franchise Services Inc.

Don Lowe used to run a simple business.

“We had a small offset machine, we printed black ink on white paper, and sometimes we would bind it for our customers,” he says. “It was that way for many years.”

Franchise Services Inc., which operates printing and marketing services franchises such as Sir Speedy, Signal Graphics and PIP, did one thing and did it well. For decades, it was enough to grow and remain profitable.

But as the 1990s advanced and gave way to the new century, technology started to evolve at an increasingly rapid pace, and Franchise Services quickly found itself at a crossroads: adapt or risk the long-term welfare of the business.

“The digital world changed our world completely,” says Lowe, the CEO of Franchise Services. “Our role is now to look at new technology and ask ourselves if it’s a threat or an opportunity. If it’s a threat, we decide what to do with it. If it’s an opportunity, we exploit it. It keeps us very busy, but it’s also very good for us.”

Lowe has needed to add new technology and new services to fill the expanding needs of his franchisees’ customer base — which comprises primarily companies with fewer than 50 employees. Facing their own battles for survival in an economic climate where nothing is a sure thing, the businesses in Lowe’s customer base need services beyond printing. They also need full-service marketing support with a heavy emphasis on creating and maintaining a strong Internet presence.

“That is why, over the recent years, we have moved from a print-centric model to one that focuses on both print and marketing services,” Lowe says. “We’ve needed to expand the products and services we offer to our customers. If you think about small business owners, they’re always pressed for time; they often can’t even spend time on building the business because they’re already wrapped up in managing what already exists. So they need help on multiple fronts, and our job is to provide that help.”

Providing that help has required Lowe and his team to listen to franchisees and their customers, and gain an accurate read on the best ways to serve customers in a challenging and ever-changing climate.

Know the game

The biggest game-changer for Franchise Services came in the proliferation of Internet-based communication throughout the ’90s. In the span of about a decade, the primary conveyance for the written word migrated from paper stock to computer screens. Items that were normally sent through the mail over the span of days could now arrive in your email inbox in a matter of seconds. Internally, filing cabinets gave way to servers as a means of storing data.

“A number of the products we were producing for customers moved to the Web,” Lowe says. “Customers could use the Internet to distribute price lists on a daily basis, and even some training manuals migrated to the Internet.

“If you think about it, even business cards, letterhead and envelopes, all that business declined from where it was in the ’80s and into the ’90s, because we don’t send letters anymore, we send emails. That was the first indicator that we needed to start finding some products and services to backfill some of the products and services that were losing traction.”

But to find new areas of growth, Lowe and his corporate leadership team had to get plugged in to what their customers needed in a print and marketing services company. For Lowe, that meant studying trends, and frequent conversations with franchise owners across Franchise Services’ spectrum of brands.

“You have to understand specifically what the customers’ needs and wants are,” Lowe says. “Everything starts with the customer. If you don’t understand the customer requirements, you won’t be able to fulfill them. So you need to listen twice as intently as you speak, so you can determine what those needs and wants are.”

You can look to macro-level observations in industry publications to get a read on the next big technology that could affect your industry. But to understand how your business is changing on a granular level, you have to make trips to the front lines. Sometimes, the change that satisfies the most customers in the shortest amount of time is decidedly low-tech and relatively inexpensive to implement.

When Lowe and his team speak with franchisees, they aim to find ways to better connect their services to customers, with an overall goal of improving the customer experience.

“For example, today we provide mailing services at most of our locations, and that is a direct result of understanding that 65 or 70 percent of what we print ultimately ends up in the mail,” Lowe says.

“So why don’t we go that last mile, provide mailing services to our customers, and even take the printed pieces in the envelopes and take them to the post office? That is an example of why you spend a lot of time figuring out what is happening in the market.”

In addition to frequent dialogue with franchisees, Lowe and his team also gather information from customer focus groups designed to provide feedback regarding whether Franchise Services is meeting their needs, and in turn, the needs of the market in general.

“The thing we always try to remember is we don’t produce anything at the corporate level,” Lowe says. “All of our services are delivered at the franchise-network level. So we have to maintain consistent contact with everyone involved in those relationships, both the franchisees and the customers. There cannot be an ivory tower anymore. If you’re not staying in touch with the customer, you’re not staying in touch with the business.”

Become a change agent

To change with the evolving needs of the market, you need to first construct an organization that is capable of visualizing change and realizing the need for change. At Franchise Services, Lowe developed a change-focused organization by hiring people who aren’t afraid of venturing into unknown territory while at the same time being creative enough to devise new solutions to meet ever-changing customer needs.

“It’s a big reason why you hire first for cultural fit, then worry about the skill set needed to complete the job,” Lowe says. “If the person you hired can’t fit the organization, or if the chemistry just isn’t right, it’s not going to work.

“You might be able to make it work for a short period of time, but you can’t build a company with that type of hiring policy. A lot of people know that Jim Collins wrote the book ‘Good to Great,’ where he talks about the need to have the right people in the right seats on the bus, and it’s true. It’s not necessarily just about having good people. It’s also about having the right mix of people, otherwise the organization is going to fail in the long run.”

If you can find employees who are open to and willing to facilitate change, it then falls on you as the leader of the company to provide an environment where they feel the freedom and flexibility to try new ideas and implement new innovations.

Lowe facilitates an environment that embraces change by developing a strong sense of trust throughout the corporate ranks and extending to the company’s more than 500 franchised locations. He develops and reinforces the trust factor by ensuring that communication remains transparent throughout the organization.

You and your people need high ethical and moral standards, which set the basis for the amount of trust that you can develop between management and employees,” Lowe says. “It’s also important that everyone understands what the goals are. We don’t have a large staff, so it is important that everyone is aligned with the goals, both on a corporate and franchise level.

“So we talk to our franchisees about their goals and aspirations for their business, and their results, and through that, we develop a team spirit. That helps to drive enthusiasm and gets people ready to show up for work and get busy doing what you get paid to do.”

Lowe’s willingness to change and adapt, and find people willing to do the same, has helped maintain Franchise Services as a strong presence in its industry. The company’s franchised locations generated $448 million in sales during 2011.

“There are certain skills that are required in this business, but beyond that, it quite frankly comes down to attitude,” he says. “The people that work well in our environment take instruction, but they certainly also understand the importance of dealing with and satisfying the customers. A lot of what we do comes down to how you adapt to customers and serve their needs, as is the case in just about every industry. A smiling face and a soft voice goes a long way in our business, every bit as much as the professional skills they need to have in order to get their job done at a high level.”

How to reach: Franchise Services Inc., (800) 854-3321 or www.franserv.com

 

The Lowe file

Don Lowe

CEO

Franchise Services Inc.

Born: Shelbyville, Tenn. I grew up in Hopkinsville, Ky.

History: I’ve been in business since I was 12 years old, when I was a paperboy. I’m 71 now, so I’ve been in business for almost 60 years. I’ve been a shareholder of this company for the last 40 years.

What is the best business lesson you’ve learned?

Hire good people, keep them informed and trust them. Beyond that, set the bar high for achievement, and make sure they understand your culture and promote it.

What traits or skills are essential for a business leader?

Vision would certainly be high on the list. You also need integrity, because people need to follow your lead, and it is very difficult to follow someone you don’t respect. And if your organization doesn’t agree with your vision, you won’t have a fair chance to be successful. Also, working hard is still a great trait in this country. If you work hard, it will put you in good places.

What is your definition of success?

It’s the opportunity to do what I want to do, when I want to do it and with the people who are important to me, and to get our franchise people to do important, meaningful things to help them sustain their businesses.

Tony Arnold: How to stay poised for opportunity in a tough economy

Tony Arnold, Founder and Principal, Upfront Management

We are barraged each day with opinions on the economy, jobs, health care costs and a host of other topics that can affect consumer confidence. Information is plentiful, but it is often contradictory, leaving people to decide who and what to believe.

As business leaders, you must face not only the realities of the business environment in which you operate but also the mindsets of employees and customers.

As the economy shows signs of improving, they look to see if you’ll react. But leaders often rely on others, and being fearful of making the wrong move, they wait for the percentages to improve and for more certainty to prevail. Even the optimists are finding it challenging to break out of the pack and do something bold.

Emergence depends on factors

The reality is that not every sector will enter or emerge from a recession at the same time. It is important that you understand your market and where your business is in the cycle. If you don’t already have a list of leading indicators, then you need to develop one.

Demand the best information from which to make decisions regarding your business. Rely on facts, trends and data to help make better and timelier decisions. Act quick, be decisive, and don’t be a naysayer. Focus on what can be done versus what can’t. Motivate and energize your organization and set goals to break out and show what can be accomplished.

Being an early mover can give your business a substantial competitive advantage. When you see signs of enduring strength, you need to lead changes in your organization to improve the mood and atmosphere, to build confidence that things are going to improve, and to implement the plans you have developed.

Time to take action

Here are some steps you can take:

● Leverage your competitive advantage

● Take price increases in key segments while locking in cost in others.

● Get aggressive in marketing and selling efforts

● Expand into new markets or launch new products

● Invest in training staff and hire high-quality people

● Make acquisitions of products or businesses

● Invest in incremental capacity to enable growth

● Create a contagious atmosphere where people can prosper and customers can enjoy themselves

These actions within a company become contagious and can foster creativity and risk-taking. When done effectively, these actions will position your business for success.

Setting the tone

The way you think and talk about your business, the market and the situation you face will set the tone for the organization. Your actions and words can be the difference between breaking out or being a laggard.

Do you focus on the problem or the solution?

Do you think about the opportunities to grow share or focus only on retaining customers?

Have you ever noticed that, during tough times, the sales gap between the A and B/C players widens? Their attitudes shift and you start hearing excuses from B and C players as to why they “can’t” get sales.

Even when things start to recover, the A players will distance themselves even more from the others. When you go on sales calls with the A players, they acknowledge the circumstance with the customer but will quickly focus on what should be done to make the best out of the situation.

As leaders, we can set this expectation across the organization. It’s a mindset and an attitude. Do your part to create an environment where people can be creative, develop plans and execute with passion so they can win.

 

Tony Arnold is founder and principal of Upfront Management, a St. Louis-based management and executive consulting firm. He can be reached at (314) 825-9525 or [email protected]

How Robin Sheldon’s evolution as a leader kept Soft Surroundings poised for success

Robin Sheldon, founder and president, Soft Surroundings

Robin Sheldon had reached a critical point in the life of her business.

Through her strong will and determination, she had built Soft Surroundings from a small business that produced a single catalog for women’s clothing in 1999 to one that has seasonal catalogs, a chain of retail stores and an e-commerce website.

She didn’t do it entirely on her own, but Sheldon was definitely the driving force behind the company’s growth. However, she was beginning to realize that if she wanted the company to continue to expand, she was going to need some help.

“When you are part of a creative process as well as the traditional business side of the business, it’s very hard to let go of getting your fingers into absolutely everything,” says Sheldon, the company’s president and founder. “But there comes a point when you realize that you’re putting your business in jeopardy by doing this.”

Sheldon needed to get more people involved in the management of the 530-employee company. She also had to find a way to prioritize the really important things that needed to be done and separate those from the tasks that either could wait or didn’t need the same amount of effort to complete.

“So what that led to was the assessment of the type of people we needed to be hiring with what particular skill sets,” Sheldon says. “For myself, it was a matter of setting up my goals with parameters and guidelines that would get me to the point where I could let go.”

The challenge for Sheldon would be setting up that structure so she could get more comfortable with delegating tasks.

Know your priorities

Part of the problem Sheldon has when it comes to delegating is the high level of confidence she has in herself.

“I have an expectation of myself that is probably way too perfect and hard for anybody else to achieve,” she says. “I’m going to expect more from myself than I am from anybody.”

The result is that Sheldon believes she can do it all. And she saw no reason why it couldn’t be done to the absolute best of her abilities. But she finally started to understand that perfection isn’t always necessary.

“I realized I have to be satisfied with ‘good enough,’” Sheldon says. “I have to identify the few areas where it had to be great.”

There are certain tasks in any business that don’t have anything to do with the customer and have a negligible effect on the bottom line. These are tasks that just need to be done.

“You’re not going to drive yourself over the edge of the cliff trying to make it perfect,” Sheldon says. “You can get it ‘good enough,’ and that’s going to be good enough.”

Then there are things such as the photography that appears in her seasonal catalogs.

“We spend a great deal of money and time on our photography to give the customer an aspirational experience that is emotional so she forms a connection with the product,” Sheldon says. “She understands we are trying to do more for her than just sell her stuff. That’s a place we don’t give. You don’t want to settle on things that are integral to your brand.”

The solution for Sheldon to determine what requires maximum effort and what just needs to get done is a formula known as good, better, best.

“When people come to me and say, ‘I have 10 things that I’m supposed to have done in 48 hours,’” Sheldon says. “I’m being told that all of them are equally important. I ask them to go back and discuss it and come back and tell me if it’s a good, better or best. That helps people a great deal. Sometimes you have to talk to other people involved to see if you’re headed in the right direction.”

It was a lesson Sheldon wanted to impart on her team, but one she also needed to try to follow herself.

Have a plan for delegating

The next step for Sheldon was to accept that within those priority tasks that need to be done right every time, it would be OK to delegate.

“It’s a process,” Sheldon says. “You have to put some good planning behind it. But in order to do that, you have to have the right people. You have to have a very clear understanding of what motivates each individual person. They are not the same. You can’t treat them the same.

“You have to learn each person and figure out how you’re going to make them happy in what they are doing, productive and wanting to do more.”

One of the biggest mistakes you can make in business is assuming that with a few brief words in your office, an individual can take a task and run with it.

“You can ruin a perfectly good career if you take somebody who is a super performer for you and you elevate them into a management position and don’t give them any management training,” Sheldon says. “Before you know it, you have a perfectly good person who has such good skills, but now is floundering in the job because you didn’t give him or her any management training.”

Develop a plan for the person you want to give responsibility to and then share your plan with that person. Take the time to see how the person feels about it and go over areas that you’ll need to work on with the person.

“I have high hopes for being able to give you some new responsibility and I know you’re up to it,” Sheldon says. “I’m thinking this is the area that we will work with and here’s the goal. Let’s sit down together and come up with how we’re going to do this.”

A key barometer that helps Sheldon know if she’s done her job training or if she needs to do more, or perhaps has chosen the wrong person, is whether she hears her name invoked as tasks are being worked on.

“‘Robin says,’” Sheldon says, repeating the phrase she doesn’t want to hear. “If I’m hearing that too much, it means people aren’t taking responsibility for their own work and they aren’t becoming their own experts. They are having to rely on my name to get their jobs done.”

Sheldon’s goal is to make sure the person has all the knowledge and skills to make it happen on their own.

“They don’t need to use my name,” Sheldon says. “They will build their reputation and their confidence by saying, ‘This is what we need to do, and I believe this is the way for us to do it.’”

Help your people

If you run into a situation where you have a leader who isn’t invoking your name but is struggling with the role of leadership, you need to step in and give them some support. Sheldon recalls a manager he was training who wasn’t getting respect from the people she was trying to lead.

“She had to follow up on projects and things that needed to be taken care of regularly,” Sheldon says. “She just couldn’t get their respect. We worked on that for six months together.”

What Sheldon found was that this new leader was struggling with the language she used to engage people in tasks.

“One of the areas we dug into was, ‘How do you get your point across in a pleasant way? How do you get people to want to help you and want to do what you need them to do?’” Sheldon says. “There’s a whole psychology there, and we studied it. Now she is a power negotiator, and she’s still here.”

The act of delegating has to be about more than just you saying to your employees, ‘Hey, you need to do this now.’ It’s a process that you have to be actively engaged in if it’s going to be successful.

“For me, things get tested,” Sheldon says. “It could be our clothing design. It could be our creative print design. It could be copy. It could be many things. As soon as I can get to a comfort level where I’ve seen it go the way I’d like it to go three or four times in a row, then I back off. I only check every now and then.”

When you do check in on how your people are doing, don’t just look for problems.

“None of us probably give positive feedback as often as we should,” Sheldon says. “If your business is moving fast, chances are you might be leaving that out and that’s so important. Along with positive feedback is making time to care about these people.”

The numbers show Sheldon is making the right moves with her business as the company hit $120.8 million in 2011 revenue. Two new stores were announced in Boston in September, and Sheldon feels good about the future. She says keeping it fun will be a big key.

“If you don’t allow people to feel they are having some fun in their job, you may lose them sooner than if you give them a little relief now and then,” Sheldon says. ●

How to reach: Soft Surroundings, (800) 240-7076 or www.softsurroundings.com

 

The Sheldon File

Robin Sheldon

president and founder

Soft Surroundings

 

Born: New York

 

Education: University of Denver. I was actually working on an English lit degree, which had nothing to do with what’s happened the rest of my life. I wanted to write, but not in journalism. I was not a business person or thinking about business much at that time. It’s an unusual situation, not one that most women would find themselves in today. It’s interesting how somehow the business finds you.

 

What was your first job?

I was a research assistant to a newspaper in Long Island, N.Y. I started to fall in love with the written word. I have a book that I’m working on and I do it when I get a moment to breathe. Maybe I will get to finish it someday. It’s a mystery, certainly fiction.

 

What is the best advice anyone ever gave you?

In the world of business, it’s, ‘Know your customer.’ I guess that came from Dennis Pence, who is president and chairman of Coldwater Creek. If you can put yourself in your customer’s shoes and see what you’re doing from their perspective, it will change the way you do things and it will make you more successful. We all get lost in our own little world and think we know why we’re doing things. Sometimes we’re doing things that the people we’re trying to do them for don’t want.

 

 

Takeaways:

 

Know what tasks require maximum effort.

Help your people achieve their potential.

Make sure you praise a job well done.

How Robert Pasin dug deep to help Radio Flyer evolve its brand and its products

It was a bitter pill for Robert Pasin to swallow.

Radio Flyer Inc. had spent decades producing millions of its iconic red steel wagons for children across the United States. The children who grew up with them had bought them for their children and those kids bought them for their kids. It was a tradition that could go on forever, or at least that’s what the company had let itself believe.

But as the 1990s began, a new wagon, one made out of plastic, had begun appearing in stores and was an instant hit with consumers.

The part that was most painful to accept for those who worked at Radio Flyer was that they had not made this new plastic wagon. Even worse, as they looked at the way their company was set up, they weren’t even capable of competing by making a plastic wagon of their own.

“We were a manufacturer, a steel stamper, and that’s what we were really good at,” Pasin says. “The way we were running the business was we were looking at what we could make in our factory and then figuring out if we could sell it.”

This mindset led the company to start a line of wheelbarrows and garden carts in the 1950s to go along with its wagons, all of which were made out of steel.

“We weren’t in touch with the external environment as much as we needed to be or should have been,” Pasin says. “So we weren’t talking to consumers. We weren’t asking moms what they wanted in a new wagon. That’s why we were really caught off guard.

“If we had been doing those things, we would have known that this is something that consumers wanted.”

This was the challenge that faced Pasin, grandson of company founder, Antonio Pasin, less than a year after taking over the company as its CEO.

“There was justifiable fear,” Pasin says. “We were scared that we weren’t going to stay in business.”

Accept the challenge

The fear was palpable around the offices of Radio Flyer. Complacency had played a role in where the company now found itself, but Pasin and his team had to find a way to get past that. They needed to act quickly if they were going to save this company that had become such a symbol of 20th century Americana.

“We had to come out with a plastic wagon if we were going to stay in business because this was where the market was going,” Pasin says. “The challenge was that we really never had sourced a product before. Everything we had ever done, we made it ourselves. We didn’t have anybody in our company who knew anything about plastic, and we didn’t really have a product development team.”

Pasin didn’t try to sugarcoat the daunting challenge that Radio Flyer faced.

“We were just really honest, and we said, ‘Here are the facts, here’s what we’re going to do, and we’re going to keep treating people here as well as we possibly can,’” Pasin says.

It was an urgent time, no doubt about it. But Pasin didn’t feel it was time to panic, and he wanted to make sure his people didn’t feel it either. Plastic wagons were on everyone’s mind, but Pasin was also thinking about mission, vision and values. These things would play a big part in the company’s approach to making plastic wagons.

“We went through a process that included everyone in the company,” Pasin says. “The best way to achieve change is to involve everyone in the change as much as possible. In our case, we were changing the culture, and we asked everyone a lot of questions over the course of a year.

“We had a companywide discussion and it started with, ‘What was the company like on the first day you started?’ We got vastly different answers from people who had been here for 40 years and people who had been here for months. But while the answers were different, there were these recurring themes that kept coming out.”

Those themes were integrity, passion and excellence. Radio Flyer had indeed dropped the ball by not staying in touch with its customers as their needs and desires changed. But the products the company was making were as well-made and strong as they ever had been. And that was something to build upon.

“It just became very evident that we had this great bedrock of a culture to build on, and it was really powerful,” Pasin says. “No matter what, there’s got to be some gem in a business or hopefully more than one gem. Otherwise, you’d be out of business. There’s got to be something good in there. The task of the leader is to find that gem. Figure out what’s unique or different about it and then build on it.”

Pasin saw how strong his team was and the talent that each person brought to the table. He just needed to figure out how to take all of those pluses and use them to build a process to make plastic wagons and then stay in touch with consumers to be more proactive and less reactive about the next big thing.

“If the leaders can go through in a very methodical and thorough way and unearth all that information, it becomes very clear what needs to be done,” Pasin says. “It doesn’t mean what needs to be done is easy. It’s very difficult or it already would have been done.”

Set clear goals

Pasin wanted goals to be much more structured and clearly stated at Radio Flyer. It would help the company make a great plastic wagon, and it would ensure that, decades later, the company would not find itself in a similar situation of being out of touch with its consumers.

“Everybody in the company has five goals,” Pasin says. “Those five goals line up with the team goals and the team goals line up with the company goals. So there’s tremendous line of sight and alignment throughout the company for what we’re working on. ‘Here’s what I’m working on and here’s how it’s impacting the success of the business.’”

As a business, when you set goals, it’s critical that they align and that they be meaningful. Otherwise, what’s the point?

“They have to meet the SMART criteria,” Pasin says. “S is for specific. M is for measurable. A is for achievable. R is for return on investment. T is for time-bound. We work really hard to make sure everybody’s goals are smart in that way.”

There were some people in the company who provided evidence that they weren’t a good fit for what needed to be done going forward.

“I had a couple of guys say, ‘OK, now that we’re going to have these goals, how much more am I going to get paid?’” Pasin says. “I said nothing. These goals are not above and beyond. They are not extra. This is the most important stuff you’re supposed to be doing in your job. Those people aren’t in the company anymore.”

Make tough decisions

As the company got into the details of making plastic wagons, Pasin gradually began to realize that a big change was going to have to be made: Radio Flyer was no longer going to be a manufacturer.

It happened over a period of years, but it was clear if the company was going to make plastic wagons and branch out into tricycles and scooters too, something had to go.

“There is no way a company our size can be great at all those things,” Pasin says. “One of the questions we asked ourselves to help us get clarity was if we weren’t doing this today, would we start doing it? And the answer was so clearly no.”

Pasin wanted to build relationships with design firms and have product development teams that would have their fingers on the pulse of consumers. In order to do that the right way, manufacturing would have to be cut.

“What are we passionate about?” Pasin says. “What can we be best in the world at? What drives our economic engine? Those three questions are huge questions. We decided that what drives our economic engine is profit per product. Not profit per product line. We had a lot of products we were losing money on.

“We decided we’re not going to do that anymore. We’re going to be much more rigorous on making sure that here’s a revolutionary idea for the business. We’re going to make money on everything we sell.”

Twenty years after the company faced its demise, Radio Flyer is flying high. Sales that were only $20 million in 1992 now top $100 million and the 70-employee company’s debt is minimal.

Pasin credits the success to a methodical approach that has the company positioned better than it’s ever been to continue growing.

“I would just sit down and list out on paper what I thought all the biggest problems in the company were and then I would do a ranking of what are the biggest problems,” Pasin says in offering advice to other leaders who find themselves in a tough spot. “Usually the biggest problems relate to the biggest opportunities. Then I would go to my team and say, ‘Hey guys, here’s what I think are our biggest problems and how we can make them opportunities.’” ●

 

 

The Pasin File

Name: Robert Pasin
Title: CEO
Company: Radio Flyer

Born: Chicago

Education: Bachelor’s degree in history, University of Notre Dame, MBA, Kellogg Graduate School of Management, Northwestern University.

What was your very first job? My first job was working on the packing line in the factory. I was 18.

Did you see yourself becoming the CEO? I would say no. I was starting to get very interested in the business, and I saw myself working in the business, but not necessarily as CEO.

What one person would you like to have met in the world and why? The first person that comes to mind would be my grandfather — I could have lunch with him and talk to him about what’s happening in the business and ask him questions about his early experiences. I never got a chance to do that while he was alive. I think it would be fascinating at this stage of my life to be able to do that.

Pasin on building a good team: The most important thing is are the people committed to where the company is going and are they highly committed to doing a great job. If I were ever to go into a turnaround situation, that’s the first thing I would do. For the ones who aren’t, move them out of the company as fast as possible. It’s the best thing for the company and it’s the best thing for those people. If they are not committed and into their jobs, they are just dying a slow death of meaningless work. I’d much rather have them do that somewhere else or find meaningful work that will make them happy.

How Doug Dunn has speedily converted Alliance Bus Group into a national player

Doug Dunn, Chairman and CEO, Alliance Bus Group Inc.

About six years ago, Doug Dunn and some his peers at other bus dealerships around the country began to sense that their industry was undergoing a significant shift. So a group of them sat down to take stock and talk things over. They concluded that while their market was quickly maturing, their branch of it — the dealership sector — wasn’t keeping pace.

“I had gotten into this business back in the 1980s when it was just getting started,” says Dunn, CEO of Atlanta-based Alliance Bus Group, a company that today operates seven dealerships in the southern and eastern United States and generates annual revenue of $120 million. “Transportation needs were starting to explode in a lot of cities, and most people bought buses that were converted school buses or they just ran 15-passenger vans. Transit budgets were starting to really catch some wind, and the commercial needs around airports were exploding. It was a good business to be in.”

By 2007, however, the bus industry was starting to grow up. Most of it was, anyway.

“We started seeing some consolidation on the manufacturers’ part,” Dunn says. “And the customers started getting a lot more mature too. They started knowing a lot more about buses than they did before. As a dealership, you needed a lot of infrastructure to keep up with these changes.

“One of my favorite sayings has always been ‘Volume speaks volumes.’ You need a lot of volume and a lot of product to catch the attention of manufacturers, from the areas of support and pricing. It wasn’t easy operating as independent, single dealerships.”

It was time to get bigger or get out.

Unite the colonies

Dunn’s company at that time was simply called Bus Group. It operated dealerships in Atlanta, New Orleans and Jackson, Miss. Those dealers operated almost as if they were separate companies, with outdated software systems, too much overhead, inadequate service facilities and no centralization of business functions to achieve efficiencies.

Getting bigger wasn’t going to be easy. While several other dealers had shown an interest in joining forces with Bus Group, the company saw that it would need to integrate these outposts into a more smoothly functioning unit first.

“We began to see that we wanted to make the transformation from a locally owned and managed dealership into one more national in scope, with all of the benefits that come from that,” Dunn says. “The synergies would make a lot of sense: being able to consolidate inventories, to have better training programs for our salespeople, to achieve the economies of scale of insurance consolidation and things such as that. All of this made a lot of sense, so we decided we wanted to pursue it. But, first, we would have to lay the groundwork and get organized.”

The key elements to achieving this expansion plan were centralizing the company’s operations by creating a corporate office in Atlanta, investing in a dealer management software system, expanding and upgrading the dealerships’ service facilities, and then, after all of that groundwork was laid, leveraging buying power by expanding and acquiring new dealerships.

“We designated Atlanta to be the corporate office for functions such as accounting, finance analysis, HR and legal,” Dunn says. “We reached out and used some different sources to add an assistant controller, some other accounting people, an HR manager and some financial people to help us run the business as an ongoing, larger organization.

“Getting the right people on the bus — pardon the pun — was a major focus for us.”

The task of centralizing the company’s operations and making the outposts operate more uniformly forced Dunn to change his management style.

“This is one of the things that has been a challenge for me,” he says. “I had to almost completely change the way I operate. I had always been very hands-on with my dealerships: everything from parts inventory all the way up to dealing with the largest fleet customers. As you start getting larger, though, you need to start assembling a different kind of team.”

One of the toughest challenges Dunn faced was taking the dealer principals he had been working with — “the lone rangers,” as he calls them — and showing them how to work within the framework of a large corporate entity.

“It was a difficult transition, and it took time to get it working smoothly,” Dunn says. “To go from basically running your own shop for many years to becoming part of a team running an integrated auto distribution business in a more corporate environment, with all of the associated checks and balances in place, has been a challenge for all of us. But these guys have been wonderful to work with. All along, they’ve had the right attitude to make this happen. And I’m very proud of where we are right now.”

Consolidate data

The dealer management software system proved to be a challenge to install and get running smoothly. The system, which centralizes all of Alliance Bus Group’s data and operations and is accessible 24/7 from any computer with Internet access, enables Alliance’s personnel to address customer service questions immediately with reference to any of the company’s departments.

“We launched the software system in 2010,” Dunn says. “It’s a complete dealership management system, similar to what automobile dealers use. It drives our entire process.”

The software system has a wealth of features. It has a contract manager for Alliance’s sales force. It interfaces with the company’s website so that as employees add and delete inventory items, the information is immediately uploaded to the site.

On the parts and service side, the system handles all of the company’s shop tickets and parts orders. It also manages Alliance’s service work orders and its accounting functions.

“One the best things about it is that it’s all in the cloud,” Dunn says. “The information is on the software company’s server, and we can connect to it through the Internet from anywhere. It has completely changed the way we do business.”

In the two years since Alliance centralized its corporate operations and installed the dealer management software, the company has acquired dealerships in Lewisville, Texas, Carlstadt, N.J., and Orlando, Fla. These acquisitions bring Alliance’s total number of business locations to seven.

Blending the new dealerships into Alliance’s corporate system, especially with regard to the dealer management software system, has been problematic, but it is growing less so as the company gets accustomed to the process.

“The integration of the new dealerships is getting less difficult as we do each one,” Dunn says. “With the first one, you know, you almost want to kill yourself, the second one, you just get real sick, and the third one, you sort of catch it in stride. That’s the way the process has gone for us.”

Dunn says conviction, clear communication and decisiveness have been keys to Alliance’s ability to successfully integrate the new dealerships into the company’s corporate structure.

“You can’t lose the faith,” he says. “It can be lonely at the top, and it’s easy to get discouraged, but I’ve learned that when you start feeling a little uncertain, you need to start communicating more. Get out and really research the situation, and then go at it with everything you’ve got.

“Gather as much data as possible, analyze it quickly, decide what’s important, follow up expeditiously, and then make the best decision you can. And once you make a decision, go for it. Don’t back off.”

That last point — not pulling back from decisions once they’re made — was especially important to Alliance as it moved through the process of acquiring the dealerships and assimilating those organizations into the company.

“If you make a decision and then you back off from it, everybody will start to question all your decisions,” Dunn says. “It can make it difficult to pursue an effective course going forward when people … you know, they may not necessarily lose confidence in you, but they may start to think you’re not as committed to something as you should be.”

With seven locations in six states spanning from Texas to New Jersey, Alliance Bus Group has expanded its reach from what was once a group of small, loosely connected “lone ranger” dealerships to a large regional bus distribution network. The greatest advantage Alliance has gained as a result of this expansion is its ability to offer more interesting and potentially lucrative opportunities to its employees.

“This is a different game now,” Dunn says. “I have the ability to take a good sales manager in Texas and promote him to be the general manager in New Orleans or Orlando. I’ve never had that opportunity before, and when you start talking about a company and the opportunities for people inside it, you know, that’s pretty special.

“As I’ve gotten older and seen things, what gives me the greatest pleasure is to see people that have come on board in the organization, worked hard and developed, and then benefited from it, for themselves and their families. That’s what gets me fired up most nowadays.”

How to reach: Alliance Bus Group Inc., (866) 287-4768 or www.alliancebusgroup.com

 

THE DUNN FILE

Doug Dunn

Chairman and CEO

Alliance Bus Group Inc.

Born: Atlanta

Education: Mercer University, bachelor’s degree in political science; Vanderbilt University, MBA

What was your first job, and what business leadership lessons did you learn from it?

I was an intern for a natural gas company my second year at Vanderbilt, and the senior vice president made me an offer to stay and fill a hole, which was director of personnel for a 600-employee utility. One of the first things I had to do was negotiate a contract with a pipefitters’ union. So I went from the academic world down to the front line about as fast as you possibly could go. I got instant management experience, immediate personnel experience, and more legal stuff than I cared to know about. That worked out well for me. It was a great springboard into what I’ve done since.

Do you have a central business philosophy that you use to guide you?

I try to rally the troops constantly by staying in communication with them, and I strive for clarity to make sure people understand what I want. Also, I’ve always been a data hound. I try to stay on top of as much relevant data as I can get.

What trait do you think is most important for an executive to have in order to be a successful leader?

I think it’s perseverance. Staying with it; staying on top of the important things. Deciding what’s important and what’s not. You don’t want a dollar chasing a dime.

What’s the best advice anyone ever gave you?

That would be from my father, who has passed away. He was an executive for 48 years with Delta Airlines. His advice to me was, ‘Decide what you want to do, do what you like and never worry about the money, because it will always come.’ That has always worked for me.

Corey Leff: The entrepreneurial rules of thumb

Corey Leff, CEO of spendLO

There’s no better teacher than experience. That’s especially true when it comes to starting a successful business. Having built one profitable business from the ground up doesn’t guarantee success in your next venture. However, it does provide for some valuable lessons that can be applied to most any business as it grows.

Excitement about the possibilities is a natural part of any new venture. In fact, you should have a passion for your business. But that enthusiasm cuts both ways, and it can cloud judgment and hamper you in making sound business decisions.

So keep that in mind and make decisions with a clear head as much as possible. Turn to your advisers and trusted confidants to keep your zeal in check so it doesn’t run your business into the ground.

One of the main lessons you learn when running a new business is fiscal restraint. Your most precious commodity is the money you have on hand to invest in your business, especially during the start-up phase. Minimize your overhead. Don’t overspend. A good rule of thumb is to have enough capital on hand to get you through at least one year.

The last thing you want to do is end up underfunded, where you have enough cash to get you 90 percent there, but then it runs out just before you get to the finish line. If that happens, you will end up spending the majority of your time looking for new investors — and not on growing your business.

Don’t let perfection be the enemy. You will always be focused on perfecting your product or service — or at least, you should be. For sure, your competition will be, and they will leave you in the dust if you’re not constantly improving. However, it’s critical to get out to market as soon as you can — even if you recognize the need for improvements. Otherwise, you will miss opportunities and give your competition an opening.

Once your business is up and running, you can secure valuable feedback from paying customers and clients that can be used to continually improve.

That leads to another tenet entrepreneurs learn early from their first start-up. Once your business is operating, you must focus on the user or customer experience. In the Web-based companies we have built, that meant making sure that the websites are easy to use and that all client and potential clients understand their value. The same principle holds true whether you sell widgets, insurance, cars or a Web-based service.

As you focus on customer experience, you will find that it is probably very different from your own perceptions. Remember, your audience is not you. It’s paying customers. And you must make sure that they have the best experience possible to keep them coming back and, with hope, referring others to you.

My partners and I learned in building our first Web-based company, an online document management service called Document Nation, that we’re not building a site for hard-core users or “techies.” To succeed, all of our customers — from the entry-level employees to a company’s CEO — must be able to not only use the site but recognize how it makes their lives easier.

We’re applying the same principal to spendLO.com, a website that matches consumers’ service needs with reliable neighborhood companies. Document Nation and spendLO are two very different companies, but they’re the same in the sense that a user who has a basic understanding of the Web can use both.

The same holds true for any product or service. If your customer doesn’t understand how your business will help them, the prospect of success becomes dim.

Finally, a common challenge many entrepreneurs must overcome with their first start-up is finding partners and employees who complement their skills, rather than duplicate them. If you are strong in marketing, you need to find people with the skills to help in finance. If you’re the technical guru, you need to find a top sales executive.

That’s how you build a team that will take your company to the next level, whether it’s your next start-up or current venture. <<

Corey Leff is founder and CEO of spendLO, an innovative Web-based company that allows consumers to shop for local services at the lowest prices. Leff also serves as managing partner and director of business development for Document Nation where he has helped oversee the company’s dramatic growth from a start-up to one of the top small businesses in Florida. Reach him at [email protected]

How Gary Rabine uses his passion to exceed customer expectations at Rabine Group

Gary Rabine, CEO, Rabine Group

Gary Rabine has been trying to please people ever since his father questioned whether he was smart enough to go to college.

“He’s always been kind of envious of the college education or threatened by it,” Rabine says of his father. “He didn’t believe in it. The reason I started my business back in 1981 was the fact that I wanted to earn enough money to put myself through college.”

Rabine didn’t make it to college, but it wasn’t due to a lack of intelligence. He had that along with the drive and determination to succeed. Instead of going to school, he ultimately decided to focus on building his business paving driveways, along with the landscaping he did for his father and the patio work he did for a concrete guy he knew.

“I did whatever I could to make a buck,” Rabine says.

As time went on, Rabine’s business kept growing. There were moments when things didn’t go so well too, but Rabine persevered and his company, Rabine Group, began to earn a solid reputation for its paving skills.

“As you make mistakes and experience failure, it’s not a bad thing as long as you learn from those mistakes,” Rabine says. “Early on, I held grudges with my dad. But it’s a waste of time and energy to be teed off for more than a few minutes. It’s a waste to have envy.

“I had friends of mine that always envied the rich guy. Those friends of mine still envy the rich guy and they are not as good of friends with me anymore.”

Rabine didn’t worry about the past and he didn’t dwell on what he didn’t have. The positive attitude helped him take a company that he started with his own blood, sweat and tears and turn it into a $184 million business with about 350 employees.

But it was that idea of trying to please everyone that proved to be one of the biggest hurdles he had to overcome in order to achieve such a high level of success.

Focus your efforts

It was right around 2003 when Rabine took an honest look at his customer base and didn’t like what he was seeing. This was one of those low points for his company, and he wanted to figure out what had caused his business to drop off.

“The rewarding customers were those who owned property that had to maintain it on an annual basis,” Rabine says. “The non-rewarding customers, the ones I was losing money with, were the one-time shots. These were the general contractors who were doing a building in your market for the first time and the last time ever. Or the developers who were trying to nickel and dime you and at the end, only pay you 60 or 70 percent of the job because they didn’t care about the long-term relationship.”

What Rabine began to understand was that not all business was good business. Not all customers were good customers. The reward he got from all his effort wasn’t worth it with customers who didn’t value his strong work ethic and commitment to do the job right.

“Up until that point, I thought I had to work for everybody and anybody as long as they were breathing. I thought I had to do business with them,” Rabine says. “But I began to understand how to fire bad customers and service the heck out of the best customers.”

He gives a lot of credit for this revelation to Victoria Knudson, a facilities manager for a property management company he had done business with in Chicago called Trammel Crow Co.

“She was very tough to work with because she was very demanding,” Rabine says. “But she was very fair. She looks at every property like it’s her own and she cares about them a lot.”

It’s easy to look at a demanding client and see the headaches and stress that often arise in dealing with them. But look beyond that and you’ll probably find a customer who really values your service and is just pushing you to provide the best product or service you can.

When you return that passion, you’re likely to build a relationship that will benefit both you and your client for a long time.

“My thing was to rise to the occasion,” Rabine says. “If I can please this company and this person and I can market for that person with the programs and solutions we develop to make ourselves better for that person, now we can go after the pickiest, choosiest customers there are where there is going to be less competition.”

Knudson changed Rabine’s outlook on achieving success. Working hard had never been a problem. But now he realized that his best plan of action was to find customers who valued his hard work and desired a great result just as much as he did.

“I had to figure out ways to differentiate my business,” Rabine says. “We came up with the slogan, ‘Discover the Difference.’ It pushes our customers to ask the question, ‘What does that mean?’ Here’s how we differentiate with value-added solutions that you won’t find from anyone else.”

Step up your game

The slogan was just a start for Rabine. Now he had to go after those customers who value commitment and hard work and prove that it was more than just talk.

He decided one way he could do that was by guaranteeing not only the end product but the work that went into it.

“We’re the only company we know of in the country that not only warranties the product, the labor and the materials, but we also warranty the engineering specifications on the job at no extra cost,” Rabine says. “If there is a problem with engineering specifications, it’s on our back.”

Rabine hired engineers that had specific expertise in paving. He believes it gives him a crucial edge on his competition. The mindset of being the best and doing whatever it takes to satisfy customers and solve their problems is one that begins with him and has to become contagious to his workforce.

“My conversation with everybody on our team is we don’t accept complacency,” Rabine says. “We want you to challenge everybody around you. We want you to challenge yourself and challenge everybody around you to get better. If you care about the people and care about the company, you’re going to care about challenging old ways. You’re going to care about making a difference and being part of an improved business model.”

It was a dual process of selling his team on the idea of hard work and going after the customers who wanted a company that would apply that hard work toward their needs.

“Most often 20 percent of your customers deliver 80 percent of your revenue and your business,” Rabine says. “So you look at that 20 percent. Who are they? What are their expectations? Why do they like us? How come we are serving them? What do they look at? What do they read every day? How do we become their experts?”

Whatever industry you do business in, you can always do more to connect with your customers. Maybe it’s joining an industry association or becoming more active in one of which you are a member. Make an effort to get to trade shows and keep up with what’s happening out in the field.

“Give back to them and serve them and they are going to serve you,” Rabine says.

As for the customers who do more harm than good, that has a way of working itself out as you spend more time with your valuable customers.

“If you just say, ‘I have to raise my prices to serve this group,’ you’re going to lose a big chunk of those guys just by raising prices because they’re going to be price-driven and not relationship-driven,” Rabine says. “You’ve spun your wheels with these customers that you’re not making a profit with anyway. Take that same energy and use it to market to that target market that appreciates you. I believe that’s when we became much more successful.”

The results of Rabine’s commitment to excellence were crystallized when a friend who happened to see a patch job Rabine’s company was doing in the Chicago area told him about it. The friend didn’t know that Rabine’s company was doing the work, but once he found out, he had to tell Rabine about what he had seen.

“He called me all excited one day,” Rabine says. “One guy had left some pebbles in the curb and gutter. The other guy said, ‘Come on, that’s not world class.’ The first guy said, ‘The rain will wash it away.’ And the other guy said, ‘That’s not world class. Clean it up.’ And sure enough, they cleaned it up and left the job in impeccable shape.

“It’s fun when you get everybody on board and passionate enough to care. If that message doesn’t carry all the way through, we can’t be the same company we are.”

Rabine is realistic and doesn’t expect his employees to completely buy in to the ideals that he preaches every day.

“But if you have 75 to 90 percent buy-in across the board compared to one leader or a couple of leaders saying, ‘This is where we’re going,’ it’s a lot easier,” Rabine says. “Our growth in the last nine years has been about clarity of vision and hiring awesome people who will carry out that vision.”

He says the goal of continuous improvement and of finding a better way to serve those great customers that do business with you is one that should always be a target for you, your team and your business.

“We have strategic planning that goes on for a couple of weeks at the beginning of every year,” Rabine says. “We get feedback from everyone who has new ideas. We love when we have people on our team come up with, ‘Hey, you know what, this works, but this could work better. This really doesn’t work worth a darn. This could really work well if we do it.’

“Those are the people in our business who will continually grow in our company. They are the ones who are consistently thinking outside the box and the ones who are pushing the envelope to change things. That’s who we look for.”

When you find those people and bring them in on what your plan is, your odds of success become so much better.

“If you can get every employee to understand a good day from a bad day, you’re going to be successful because 98 percent of the population wants to go to work and they want to have a good day,” Rabine says. “They want to be successful and they want to create profits for the company they work for.” <<

 

How to reach: Rabine Group, (888) 722-4633 or
www.rabinegroup.com

 

Gary Rabine, CEO, Rabine Group

The Rabine File

Born: North Chicago, Ill.

Rabine on the importance of metrics: Measurements are the key to success. The year I lost money, it was because I didn’t pay attention. When I first started my business and I did a driveway a day and four or five driveways a day, I knew every day, every job within minutes if I was profitable or not, if it was a good job or a bad job, a good day or a bad day.

As I grew, I got complacent. I kind of lost track. I wasn’t keeping track as well as I did early on. Instead of understanding in a couple hours of doing a job if I was successful or not, I wasn’t paying attention. So at the end of an 8-month season, I thought I made money and I lost money. I didn’t have the measurements in place and the dashboards in place that I had early on.

If I had continued to operate like that, today I’d be out of business. If you don’t have clear measurements and dashboards that everybody understands, you’re setting yourself up for failure.

Rabine on challenging his people: You’re going to get some people who like being part of it and others who think it’s too much of a challenge. They want to be in a more relaxed environment. You create clarity in the vision and the people who are excited to be on board are passionate and excited and they know what’s coming. It’s a lot better than the alternative where you don’t know the direction, you don’t know what your job is or what your opportunity is and you lack direction.

Takeaways:

Focus on people who want to help you.

Never stop looking at how you can exceed expectations.

Bring your employees in on your plan.