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STRATEGY

Building the Mommy Track

What's a small company to do when a key employee gets pregnant? Plus: Renegotiating your lease
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I've been writing a new employee handbook for our company, a 25-person Internet service provider. One of our employees recently found out she was pregnant, so everyone is anxious to see a good maternity policy in place. We'd like to be generous, offering more than the Family Medical Leave Act mandates. But how can such a small company afford paid leave?
Autumn Smigill
Frognet.com, Athens, Ohio

Talk about "labor" pains -- that's what small companies get when valued employees go off to become parents. The FMLA requires companies with 50 or more employees to provide up to 12 weeks of unpaid leave -- which you, of course, don't have to do. You do have to obey state law, but Ohio's is awfully vague: "Childbearing must be considered...a justification for leave of absence for female employees for a reasonable period of time." In other words, you're on your own.

Necessity, of course, is itself a mother, and Kathryn Dodge, a consultant with HR Answers, based in Portland, Oreg., suggests waxing creative. You could, for example, treat some of the time off as vacation or sick leave so that at least a portion will be paid. Providing more unpaid leave also is an option. Image Labs International, an imaging equipment business in Bozeman, Mont., managed to be both benevolent and businesslike when one of its 20 employees, an engineering manager, gave birth. The new mom got 12 unpaid weeks off and the option to work part-time when she returned. Image Labs also paid 100% of her health insurance during her leave, instead of the 90% it normally covers. "It made the employees happy, and it didn't cost us a lot," says controller Robbie Hardesty.

I run a $16 million engineering company and am interested in growing through acquisitions. What are some of the pitfalls I need to be concerned with as we proceed down this path? What are some of the best financing options?
James W. Askew
Diversitech Inc., Cincinnati

Valuations tend to drop during downturns, which makes this a good time for acquiring minds. It also means you can afford to be choosy. Concentrate on companies that generate at least $5 million in revenue and have multiple levels of management, advises Gary Moon of Pharus Advisors, a San Francisco investment bank. That way you know you're looking at a viable business that won't go poof when the founder or CEO exits.

Do plenty of due diligence. But even then, expect that things will not go as planned. Ernie Riling, chairman of Riling Enterprises, a Franklin, Ohio, holding company that runs several industrial supply businesses, has made three acquisitions in the past three years, and the first and third went smoothly. The second, though, has "been a nightmare," he says. Riling spent 10 months on the deal, only to find himself stuck with a fraudulent death claim that he's still hashing out with the state of Ohio. "There was no way to foresee that," he says.

For a company your size, the best financing bet is probably a long-term bank loan. But be patient. Riling talked to scores of bankers before finding a few who understood his business and would part with $4 million. You can also ask the seller to help finance part of the deal, which gives you leverage even after it closes. It's nice for the seller, too, who gets to spread out capital gains over a longer period.

I'm in the fourth month of a 15-month commercial lease. We probably didn't negotiate a low enough rent in the first place and now need to lower our costs. Is it unreasonable to ask the owner to renegotiate so soon?
Ken McDermed
Weekend Market & Bazaar, Tulsa

Maybe your landlord is a really swell person, but we're willing to bet that he won't jump at the idea of slashing your rent as a personal favor. So sweeten the pot: Offer to extend your lease in return for a discount. With interest rates at an all-time low, many property owners are trying to refinance their mortgages, and that's easier to do when they can show steady income from tenants over the next, say, five or 10 years. Or find someone to assume some of the burden. Commercial real estate isn't exactly flying off the shelves these days. You might find a landlord hungry enough to pay the difference on the rest of your lease in exchange for relocating.

Whatever you do, focus on what you can do for the landlord and never cry bankruptcy, says Christine McKay, founder of McKay Partners, a negotiation firm in Ashland, Mass. "Most landlords have figured out ways to protect themselves from tenant bankruptcies," she says. "In the end, such threats carry very little weight and sound desperate."

Looking for answers? Stumped by a thorny business problem? Let Inc. help. Send your questions to AskInc@inc.com. We'll consult with experienced entrepreneurs and savvy advisers, folks who've been where you are and figured out what works and what doesn't. If you don't like what we have to say -- well, you can tell us that, too.

Last updated: Sep 1, 2003




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