When Bad Economies Happen to Good Companies

But in April of that year, the Nasdaq crashed, and though Turner's consulting company had only a few dot-com clients, he was gripped with a familiar sense of foreboding. That same month Turner opened a $250,000 line of credit with a local bank, just in case. Though his accounts receivable remained strong, Turner felt worried as one of his clients saw its business sour. In late summer 2000, he shifted several of his programmers to internal projects, including upgrading his company's Web site. Turner also stopped paying himself, which was especially tough, since he had just bought his first house. He also asked his parents to let him temporarily suspend paying rent for his office space, even though they were charging him just $27 a square foot, compared with the going rate of $35 to $40. By the fall of 2000, Turner had almost completely tapped his line of credit yet was still short on cash. With 34 employees on staff at that point, he says, "it crossed my mind that we might not be able to continue."

Indeed, in mid-November, Turner made a list of all his employees who were not working on client projects; they numbered 17 people. He then gave those employees two options: either they could remain on the payroll (they wouldn't get paid for any work, but he would continue to cover their health-insurance premiums) or they could sever all ties with him and fend for themselves. Only one person immediately chose not to go back to Turner. One left in January 2001, and one was let go by Turner. The rest of Turner's employees stuck with him, and he has repaid them. In the past six months Turner has hired back all 14 loyalists.

"With the technology industry here and all the stock options flying around -- things we could not offer -- good labor was tough to find. We had to bring in some B and C players."

This time around, Turner is focusing on diversifying his client base even further. He is also working on getting a new line of credit, though it's proving difficult, even though he paid off his previous $250,000 loan earlier this year. If he can't get the credit, Turner says, he will go to a factoring company, which has promised him $400,000 on a moment's notice. Factors collect on a company's receivables, taking anywhere from 2% to 8% of the invoice as their cut.

If all else fails, a few of Turner's employees have said they would invest in the business themselves. During the past six years Turner has believed in his staff, and the feeling is apparently mutual. "I have very special employees," he says. And they seem convinced that they have a special employer.

Show Time

Richard Calcaterra is thanking his lucky stars that his company never relied on dot-com business. In fact, he's taking advantage of the dot-com bust to hire new staff.

It could have been different. Calcaterra co-owns Enterprise Events Group Inc. (#289), a $10-million event-management company in San Rafael, Calif., just across the bay from San Francisco and the heart of the E-commerce industry. He started the company in 1995 and has mainstream high-tech clients that include Oracle and Cisco. Then came the dot-coms. Though they threw around an awful lot of dollars on their spectacular launch parties and other events, Calcaterra and partner Matt Gillam weren't buying. "We never went after that business," Calcaterra says. "We had our hands full with the Fortune 100 companies down in the Valley."

In fact, with 75 to 80 events a year, business was so abundant that Calcaterra's biggest challenge was a constant need to hire good people. "With the technology industry here and all the stock options flying around -- things we couldn't offer -- good labor was tough to find," he says. "We had to bring in some B and C players."

According to General Electric's ubermanager Jack Welch, who popularized the terminology, and others, B and C players are not as focused on quality as A players are. And in a service-oriented business like Enterprise Events, a lack of customer focus can be deadly. "Some people are made for the hospitality business, and some are not," says Calcaterra. "People who are A players exceed customer expectations each and every day."

As the economy began to slide in mid-2000, Calcaterra saw an opportunity to pick up superior people who had been displaced by the dot-bomb. "Great people are all over the place," he says. He hired some of them and fired some of his employees that he considered Cs. He now has nearly 130 employees in all.

Of course, Calcaterra's own business is feeling the crunch, too. His high-tech clients are cutting back on their events, so Calcaterra expects revenues will grow more slowly this year than they have for the past five. "This is the first time in five years we've been able to catch our breath," he says optimistically.

Also, Calcaterra believes his current roster of employees will be sufficient for now, and he doesn't plan to add staff this year. But that hasn't stopped him from continuing to look for the best people. "We will always make room for A players," he says.

Lauren Gibbons Paul is a freelance writer in Boston.

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