Undeterred, Hession came up with a hybrid system, built around one radical notion: the prospective entrepreneurs would put up no money. Hession would loan them working capital and they would be responsible for their 49% share of debts should the company collapse. Assuming his bank would allow it -- and he had some trouble finding a bank that would loan him money against out-of-state receivables -- Hession would run an extension cord out from his own line of credit. It sounded bizarre: why entrust so much to someone who has risked nothing?
Hession believed that the entrepreneurs would earn the stock they were given through their sweat. Their measly pay consisted of a 6% commission on any sales, plus whatever money they picked up working shifts as a nurse. That forced them to empty bedpans -- as he had -- while trying to build a business. "I didn't want any spoiled brats," says Hession firmly. Later on, Hession softened up a bit and set up a salary-advancement system. If affiliate managers needed time for marketing to hospitals and nurses, and couldn't work their shifts, Hession would loan them money to live on. "In every case I used it, it has pretty much been abused," he reports. The option no longer exists.
Since he was not out to hire numbers whizzes, Hession decided to graft one aspect of franchising onto his plan. For 7% of an affiliate's sales, Hession's office, the original Key Nursing, would handle such functions as receivables, payroll, staff coordination, and financial reporting. Hession would not only save them money, but he'd buy himself more security. The fewer details his affiliate managers learned, the less equipped they would be to run off and start a competing business. Once they were ready to take over those functions, they would have built enough equity to make bolting self-destructive.
Hession's role, as described to Borne, was to stay out of the way. He would informally train Borne -- he has since worked up a formal curriculum that includes true-false tests and fill-in-the-blank quizzes -- in such areas as aging schedules and cash-flow statements.
For the first six months or so, he would look at daily financial data. After that, monthly reports would do. Borne could structure his company however he wanted, hire whomever he saw fit, make all his own decisions. "As long as somebody is not ruining my reputation or losing tons of money, I'll stay out of it," vows Hession.
In truth, the more successful affiliate entrepreneurs wouldn't have joined up otherwise. Gilbert, who runs the affiliate in North Carolina, says she would have enlisted other investors to put her into business if Hession had demanded a hands-on role. And Borne probably wouldn't have agreed to that, either. "It was in my blood that I might eventually go into business on my own someday," he says. "But this way, I was much more knowledgeable." By the end of three months, AME's revenues were up to $14,000 a month. "We took off," brags Borne.
* SUPPORTING THEM
Being There But Not Dominating
Like a good parent, Hession is not only careful about what he says, but also sensitive to any underlying message he is conveying to his affiliate entrepreneurs. "My function is not to make life easy for them," he says.
It's a delicate balance; he has to push them, without pushing them over the edge. "It's a judgment call," Hession says. "If I feel they are confused and over their heads, I want to give them knowledge." One affiliate, for instance, called him sounding very distressed. A client says it'll drop me if I can't come up with three more ICU nurses by the end of the week. What should I do? Tell them they'll have to go to another agency, Hession advises. "If you don't do anything, your client is going to be ticked off," he continues. "If you say you can produce and then you don't, it will be worse. Recommend they try somebody else, and they will respect you."
As the affiliate entrepreneurs mature, Hession offers fewer answers, even if it means the manager will suffer. Or lose money. "I'll stop them from suicide, but not from making a mistake," says Hession. "I'm trying to develop someone who is going to make good decisions, who is going to learn that when you make a decision, if you are wrong, you pay for it. There's money to be lost."
For example, Hession says that he made working-capital loans of about $75,000 to Key of North Carolina over its first year and a half. Then, in mid-1987, Gilbert signed up with a factoring company -- a temporary move, Hession figured, until she built up enough equity to approach a bank. But another year passed, and Gilbert was still borrowing against receivables. Every once in a while, Hession brought it up. Sandy, he warned, if one of your clients delays payment, or if competition slows things down, those interest points are going to kick in. Gilbert agreed -- but still no bank. Then, last fall, a major client started dragging its payments out. Hession spotted it on Gilbert's monthly statement: her interest bill had tripled. He reached for the phone. I know what you are going to say, Gilbert said when she heard his voice, and I've taken care of it. "I could have come in and said, 'Sandy, stop bullshitting around and do it,' " says Hession. "But I had to accept -- and this is the hardest thing I've had to do -- that as long as I can control my downside risk, and I am not losing everything, it's important for me not to exert control. If I do, they will resent it."
He sometimes chooses not to rescue them for their own good. Three months after starting out, Borne lost all of his business in one day, when his one hospital client dropped him. Borne called Hession, ready to quit. I don't even have enough money to go out and market, Borne complained. Hession offered him just $500, enough so he could take one week off from his own shifts. "I could have given him more money," Hession admits. "But let him feel that he's backed into a corner, and he'll do it. I know him." When a similar but more desperate situation arose with Key-Cardio Respiratory Services Inc. -- its major client had piled up debts of $16,000 -- Hession stepped in to handle it. "There's no way I could have afforded to have someone go out and collect that," says Terry Lirette, the affiliate president.
