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Straight Answers: How Can You Survive the Regulators?

Five CEOs from different industries take issue with various governmental regulations and how they impact on business.

Whine, whine, whine. We keep hearing about overzealous regulators bearing down on small businesses, but some smart CEOs have found ways to hurdle red tape. Here's how

If the Regulation Stinks, Work Around It
Robert Long, Co-owner
Long Vineyards

St. Helena, Calif.

Just under $1 million in revenues

3 employees

The legislation repealing Prohibition gave the federal government authority over the manufacture of alcoholic beverages and the states the right to regulate their sale and distribution. So the wine business deals with all kinds of regulations, and among the most frustrating is that many states we sell to -- outside California -- require us to register with them and comply with regulations prohibiting us from selling directly to consumers, wine shops, restaurants, or hotels. We have to sell through a distributor.

For small wineries like ours, it's hard to do marketing and public-relations work and sell to the consumers, because the distributor gets in the way. Distributors make money by representing large wineries and selling high volume. Our chardonnay is fairly well known, so a lot of distributors feel it's a feather in their cap to have such a wine to offer. But wineries that haven't yet developed their reputation get lost in the shuffle.

The states argue that they must issue licenses in order to tax and to regulate the flow of alcoholic beverages. But the revenue represented by small-winery sales is infinitesimal -- not enough to justify all their paperwork. So we avoid those states where it's onerous. I sell 75% of our wines here in California, where I can sell directly, and in New York and New Jersey, which have no licensing fees. In effect we've decided to be regional -- on opposite coasts.

Wine shops and restaurants that are willing to sort of circumvent the regulations buy from us. If they're willing to do it, we're willing to do it. They order the wines. We ship by common carrier or by airfreight. I presume they're in states where only distributors and not retailers have a reporting requirement. So it's really a flaw in their states' laws.

The states are being shortsighted. If we could sell directly to consumers and wine shops, we'd have to visit the states more and invest more time, energy, and sales dollars. It would benefit those states by generating more revenues.

It sounds extremely reasonable, doesn't it? It is reasonable. But it's so bureaucratically complicated. It's like pushing the rock all the way up the mountain.

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Work with Regulators
S Greg Klochkoff, CEO
Advanced International Technologies

North Kingstown, R.I.

10 employees

You have to understand the compliance issues that affect your business and then ask the regulators for help around the pitfalls. We've found that if we explain our problems, most regulators are willing to work with us. They're enforcers, but they're human.

If you can, you should visit in person, explain who you are, and try to put faces with names. Tell them what you're doing, what you're importing, or what you're trying to create.

We're a systems integrator for sophisticated electronics products and electro-optical products. We've got to meet a host of safety and customs requirements. So we're always lining up needles and putting a thread through each one. We're affected by the Food and Drug Administration, the Center for Radiological Health, and Underwriters Laboratories, as well as U.S. Customs, which enforces laws for 40 or 50 agencies.

We make products in several Russian factories and bring the pieces over here to integrate into binoculars, scopes, low-level laser devices, thermal-imaging tools, and infrared night-vision products. In addition to U.S. regulatory agencies, we deal with Russian regulatory agencies. It makes it easier that I speak fluent Russian, but Russian regulations can change suddenly for no apparent reason. Or the interpretation of a ruling on certain regulations may vary day by day and from place to place. We've found the U.S. regulatory environment is friendlier. If we get a ruling from U.S. Customs in New York, it applies everywhere else we import. We can rely on the consistency of enforcement.

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Change Your Product Strategy
Tom Weldon, CEO
Novoste Corp.

Norcross, Ga.

Close to $1 million in revenues

15 employees

In a heavily regulated industry, it's impossible for one company to have a meaningful impact. The rules are derived from legislation passed by members of Congress in the best interest of their constituency. So you may point your finger and say the regulators are bad guys, but that's not really true. They're bureaucrats trying to follow the laws.

There's no point in being antagonistic. Many agencies have a hard time with morale. Congress is often at odds with them for not being aggressive enough in enforcing the law but rarely appropriates adequate budgets for them.

Read more:

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