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Small Is the New Big
 

Like a lot of entrepreneurs, Jay Goltz couldn't imagine doing anything but building his company as big and as fast as possible--until it almost destroyed him.
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Life got bad for Jay Goltz in the spring of 1997. It wasn't any one thing--it was everything: the huge cost overruns on the building he was renovating, the new business he was launching in an industry he didn't understand, the credit line he'd already maxed out, the suppliers he was stringing along because he couldn't pay them. In the midst of all this, he'd had to fire his second CFO in two years. And then there were the problems his son was having in school, which raised questions in Goltz's mind about his own shortcomings as a parent.

It was, he says, the worst period of his life. He remembers lying in bed, tossing and turning, unable to sleep more than three hours a night. "I just had this horrible, dark feeling," he says, sitting in his office on North Clybourn Avenue in Chicago. "I can't really describe it. It was circuit overload. I had so many things to worry about. Yes, my first start-up had been stressful, but this was different. This was self-imposed. I didn't have to buy that building and go into a business I knew nothing about. Was I out of my mind?"

Goltz survived the experience, and today the store he launched that year, Jayson Home & Garden, is thriving, as are the other three businesses that make up the Goltz Group: Chicago Art Source, an art gallery for corporate and residential customers; Bella Moulding, an importer and wholesaler of picture frame moldings; and Artists' Frame Service, the largest--and, some say, the best--custom frame shop in the country. Goltz says he gets more satisfaction out of his ventures than ever before. And that, oddly enough, has been one of the long-term consequences of the ordeal he went through in the spring of '97. It was the beginning of a major change in his perspective on business, he says, forcing him to start thinking about fundamental issues he'd never considered before--such as, how big is big enough? And even, what is success?

In 1997, Goltz's peers would have been surprised to learn that he had doubts about these matters. In fact, he was widely viewed as the most successful independent retailer of custom-made picture frames in the country. Although scarcely 40 years old, he'd already had a profound impact on the industry, having demonstrated that it was possible to do framing of the highest quality and make money in the process.

That was something few people believed when Goltz started Artists' Frame Service in 1978. He remembers hearing a speech by the former president of the industry's trade association, who said he'd been in the business for 30 years and had never met anybody who made money in framing. "We do it because we love it," the guy said, and his listeners nodded their heads in agreement. Goltz was dumbfounded. He, too, loved the art of framing, but he also loved business, and he saw no reason the two couldn't coexist. The industry's real problem, he believed, was its failure to implement sound business practices.

Take service, for example. At the time, the typical wait for a custom frame was three to six weeks. Goltz thought that was ridiculous. From day one, he promised customers that their framed pictures would be ready in a week and organized his company accordingly. Meanwhile, he scoured the market for the best moldings and mats, attending three or four trade shows a year, even traveling to Europe to import materials. A fanatic about quality, he hired someone to check each order before it was sent out, making sure that it met his standards. Was the art perfectly straight? Were there unexpected color variations in the frame? Had the wire been put on properly? When he began hiring salespeople--he called them consultants--he chose those who had backgrounds in art and gave them continual and extensive training. Their primary duty, he told them, was to help customers pick out materials that would display their art to its greatest advantage.

But his most noteworthy innovations were in the production area. He had a knack for inventing systems that would maximize efficiency and minimize errors. In other framing companies, for example, an employee would typically handle a framing job from start to finish. To Goltz, that made no sense since different people obviously have different strengths. One person might be great at cutting frames, but not so great at cutting mats. Someone else might be an excellent mat-cutter but too slow when it came to assembling the final product and adding the wire.

Goltz divided the framing process into discrete tasks and set up teams to handle each one. New hires would try their hand at the various tasks before settling into whichever job played most to their strengths. It was an assembly line of sorts, though without the conveyor belt and without the problems that arise when employees are so far removed from the final product they can't see how they contribute to it. In one fell swoop, Goltz improved both productivity and quality, leading the Chicago Tribune to label him the Henry Ford of framing.

By 1990, his reputation was established. He was a finalist for Chicago's Entrepreneur of the Year that year and was later inducted into the city's Entrepreneurship Hall of Fame. Within the industry, he was known as one of the strongest retailers around. When Bruce Gherman decided to launch a new industry publication, Picture Framing Magazine, he made a point of seeking out Goltz. "I was looking for key people in the industry," says Gherman, who signed up Goltz to do a monthly column about business.

It was by no means clear, however, that the magazine's audience wanted such a column. Readers were far more interested in the craft than the business. But Goltz was determined to change that, and in his articles and speeches, he drove home the point that, as he put it, "you're not picture framers. You're business owners who do picture framing." And his message got through. Deborah Salmon, vice president of PFM Seminars, recalls that, when she was deciding what to include in the educational portion of the magazine's annual trade shows, people told her not to bother with business classes: Frame shop owners were interested only in framing techniques. Nevertheless, she went ahead and booked Goltz to do a couple of sessions, and they quickly became the most popular classes at the conference. Many of those attendees would seek him out at subsequent trade shows to thank him for saving their businesses.

Goltz was revered in the industry. He had thousands of happy customers and dozens of happy employees, not to mention a lot of happy neighbors who were grateful for the role he played in the community. When he'd started his company, it had been a rundown neighborhood of decrepit buildings and empty lots. There was so little happening along North Clybourn Avenue that local hot-rodders could hold drag races on Friday and Saturday nights. "If you saw a guy running down the street back then, he was probably carrying someone's television set," says Goltz. "Now he's just another jogger." Indeed, by the late 1990s, North Clybourn had become a bustling center of commerce, lined with upscale stores and restaurants, and local people credited Goltz with sparking the change.

From any conventional standpoint, Goltz was wildly successful in 1997. But like many hard-driving entrepreneurs, he suffered from a major disability, namely his own blindness to what he had accomplished. In his mind, he was perhaps not exactly a failure but not much of a success either. He had a nagging sense of inadequacy, of not measuring up. In the wider world of business, his company--with $7 million in sales and about 75 employees--was "dinky," as he put it. He would look at the Forbes 400 list and think, I'm chopped liver. He would read about a Michael Dell or a Richard Branson and think, Is this guy really that much smarter than I am? He was so focused on his shortcomings that he couldn't see--or give himself credit for--the real contributions he had made to his community and the positive impact he had had on the people around him.

In a sense, he was a victim of the entrepreneurial renaissance that had occurred during the 19 years he'd been in business. There had been a time, after all, when "entrepreneur" was not a term of approbation. "In 1978, if you started a business, you weren't called an entrepreneur--you were called a loser," Goltz recalls. "Saying someone was 'a real entrepreneur' was an insult. You know, 'Cousin Benny. He's a real entrepreneur.' Like you had watches up your arm."

Within a few years, however, the image of the entrepreneur had changed. Suddenly the word conjured up Steve Jobs, Bill Gates, and Fred Smith. Entrepreneurship was cool. "Real entrepreneurs" were heroes, and Jay Goltz--at the age of 30--was one of them. After receiving an award from an organization called the Association of Collegiate Entrepreneurs, he was featured in a 1987 Forbes article about hot young company-builders the magazine labeled "bizkids." For the next 10 years, he played the part of a rising mogul, building Artists' Frame Service as fast as he could and launching half a dozen other businesses along the way. He wanted his company to get as big as possible, as fast as possible. He investigated the possibility of franchising. He considered becoming involved in a roll-up of framing shops around the country. He even thought about going public. Although he didn't take any of those routes, he didn't rule them out either. "I was haunted by opportunity," he says. "I was haunted by the idea that I wasn't doing as well as I could or should be doing."

Not until the harrowing spring of 1997 did it dawn on Goltz that there might be something wrong with his endless need to do more. "Successful entrepreneurs have a demon they have to get rid of," he says. "For me, it was having to do as much as I could. I always worried, 'Am I missing an opportunity? Am I leaving money on the table?' How do you turn that off? How do you keep the success bug from turning into the success disease?"

It was one of his employees, an older woman, who helped him begin to see his business in a different light. Her name was Lily Booker. She and another woman, Willie Hardwick, were retiring from Artists' Frame Service after eight years with the company. At their retirement party, Lily got up to say a few words. She talked about her introduction to Artists' Frame Service. She'd been with another custom frame company for 10 years before being laid off. "I was in my fifties," she told Goltz. "When you hired me, I never thought I'd get another job. I just want to thank you for giving me a chance."

Maybe it was the timing. Goltz himself was turning 40 that year and beginning to sense his mortality. In any case, her statement jolted him. "When you're growing your company, all you think about is the people you've failed with," he said. "At the time, I was licking my wounds from all the failures: managers I'd had to fire, poor kids I was going to save who kept screwing up and getting into trouble, longtime employees who'd been caught stealing. From Lily's comment, I realized it wasn't all failure. I looked around and saw a lot of people who appreciated their jobs."

He remembered a story he'd heard about a girl throwing starfish into the ocean. "An old man comes along and says to her, 'Don't bother. You can't save them. What you're doing won't make a difference.' She looks at the starfish in her hand and says, 'It makes a difference to this one.' And she throws it into the ocean. Lily was one of my starfish."

Afterward, he began to notice others. There was the framer who looked for every opportunity to work overtime. It turned out he was sending the money home to his family in Tibet. And there was Luan Le, who had been a captain in the South Vietnamese navy. After the fall of Saigon, he was arrested and sent to prison for more than eight years, moving from one camp to another until his release in 1983. A year later, he took 100 people in a motor boat from Vietnam to Malaysia, a three-day journey, surviving an attack by pirates from Thailand en route. He eventually made his way to the Philippines, where he learned English, and then to Chicago, where Artists' Frame Service hired him through an agency that places Vietnamese and Cambodian refugees. "He's a champion framer," Goltz says, "and he's one of my starfish."

But it still took another few years and a major failure to make Goltz see his real problem. In 2001, he launched an Internet business called FramerSelect. The concept was simple: The company would advertise to people looking for custom framing, who would then go to its website and get a referral. In theory, the business would make money by charging the framers a monthly fee for the service. But signing up framers proved to be much more expensive than Goltz had imagined, and many of those he did sign up dropped out after a few months. By the time he pulled the plug in early 2004, he had squandered several hundred thousand dollars and been forced to face an uncomfortable reality. "I realized I'd been delusional," he says. "I'd been reckless with the money, and I didn't need to be. My other businesses were slowly but surely coming along and doing just fine. I thought, You know what? Having calm, controlled growth is good. I would never have said that before. Never. I'd actually heard someone say it when I was in my twenties, and I'd thought, You're a wimp."

The FramerSelect debacle turned out to be a watershed. "I'd always thought that, for me to be happy, I had to have phenomenal growth and turn this into a giant company. It didn't occur to me that there are a lot of really happy people with very nice $10 million companies making good profits, and that those guys are often way happier than guys with companies 10 times their size. That's what it comes down to. Happiness is not who's got the biggest company. Happiness is a whole lot of other things."

For Goltz, that was a revelation. His biggest problem, he realized, was in his head. There was nothing about entrepreneurship, or success, that required him to build his business as fast as he could. He had created a great company, rooted in its community, that was the best at what it did, with excellent service, grateful customers, and employees who looked forward to coming to work each day. That was an accomplishment. Getting as big as possible, as fast as possible simply wasn't a necessity.

He had a choice.

It has been about two and a half years since his epiphany, and Jay Goltz says he's happier than ever. His company's annual sales have grown to about $13 million, but he's not pushing it. "I'm a recovering entrepreneuraholic," he says.

Certain things haven't changed. He is still as intense as ever. He still talks fast. He still has more ideas than he knows what to do with. You can find them everywhere you look in the framing facility, located about a mile from his stores on North Clybourn. The building is part of an old sheep-shearing plant. He bought a 30,000-square-foot piece of it in 2002, when he realized he couldn't stay in the former furniture factory where he'd been leasing space.

As you walk through the place, you can't help noticing all of the signs on the walls. They read like ersatz fortune cookies: "One who sails by on excuses will drown in a sea of mediocrity." "We're only as good as our last frame job." "A happy customer is the best job security you can get." The sayings are from Goltz. "I'm telling people about business," he says. "I think it's a big failure of management, not getting people to understand what they're doing here. I suppose you could say what I do is a kind of indoctrination. Every couple of months I get new employees together and tell them the history of the company, why we're here, what to do if a problem arises. I say, 'Call me on it if I'm full of it, if anything turns out to be different from what I'm telling you."

He picks up a completed frame and points to a blue screw on the back. "Everyone has his or her own color," he says. "It creates pride of ownership. When the wire on a frame falls off and it comes back, we know who did it. The quality improved significantly when we started doing it."

Just off the shop floor is the lunch room, called the Webster Café, where Goltz and his production manager, Dale Zeimen, hold weekly meetings with the entire staff. "Small businesses don't have enough meetings," says Goltz. "I believe everyone in the company should meet at least once a week. You need that direct contact." There's a stack of eight microwave ovens against one wall, alongside three refrigerators and several vending machines. "That's one of my things. If you only have one or two microwaves, people have to sit and wait for their turn. By the time they eat, their break is over. Why do that? Appliances are so cheap now there's no reason not to get enough."

A buzzer goes off in the area where the fitters are working on high benches. A supervisor steps over to a timer and resets it, then starts writing numbers on a whiteboard as people call them out from their workstations: "three Monday"; "one Saturday, one Monday"; "four Saturday"; "one Monday."

"It's how we keep track of daily production," Goltz explains. "They do it every hour. They say how many they've done and for what day"--that is, the day the customer is expecting the finished product. "Our goal is to do 100 a day. This allows people to see how they're doing. It gives them a sense of accomplishment and nips problems in the bud. If a customer needs a frame job by 1 o'clock, and a meeting runs late, or someone forgot, we catch it right away."

"There are three stages to every business," says Goltz, "the start-up phase, the throw-up phase, and the grow-up phase."

The company wasn't always so tightly managed. Goltz is the first to admit how much he has learned over the years and how hard it was to learn it. "I tell people there are three stages to every business," he says. "The start-up phase, the throw-up phase, and the grow-up phase. I went through 10 years of being overwhelmed until I got things under control. I finally figured out that managing isn't just about learning how to motivate people. It's also about learning how not to demotivate them."

Education aside, Goltz says he has matured as a boss. "I'm proud that when we moved to this facility, I didn't do much," he says. "I was barely here, because we were moving three companies at the same time. We have a new truck that we bought for the move. One of our employees, Armando, and his wife were backing it up over there." He points toward an indoor loading dock. "He hit a beam, and it came down and crushed the roof of the truck. When I arrived, Armando was beside himself. He said, 'I'm so sorry. I'll pay for it.' His wife was freaked out, crying. All I can say is, I'm glad I'm older now. I knew I had to come right out and say it was okay. They'd been putting in 14-hour days and now this. You can imagine what they were thinking: 'Omigod, we totaled the boss's new truck.' Before, I wouldn't have yelled, but I would have looked disgusted. I've learned that one of my biggest responsibilities is letting people off the hook in situations like that. I told both of them, 'Don't worry. I could have done it myself.'

"That has a big impact. There were a lot of other employees standing there. They see how you behave. You could be doing bonus plans, holding rallies, having parties to build morale. Then you scream at someone and throw it all away. Did I scream when I was younger? Yes. I didn't understand the role of the boss. I had to learn the difference between a mistake, which I can live with, and haphazard conduct. Backing into a pole is a mistake. A crooked label is careless."

Goltz's role in the company has changed dramatically in the past two and a half years. He speaks with a certain incredulity about his success in making the transition. "I've gone from being 75% entrepreneur and 25% manager to 75% manager and 25% entrepreneur," he says. "Now I recognize, which I never did when I was starting all these businesses and new things, that my major job is hiring and training managers. Before, I never had the time to do it, and my head wasn't into it. The idea of management would just bore me to tears. But I'm feeling very good about building depth in my organization. I have found it very satisfying."

Goltz's employees have noticed the change. "He's definitely more content with the size of the company," says Renoir Battle, the company's operations manager. "He's not trying to take over the world anymore."

"It just seems a much more gratifying place," says Jeff Grabowski, vice president of marketing for the Goltz Group. "I always loved coming to work for the exciting, fast-paced, creative energy part of it, but now it's...it's... I'm shying away from saying the word family, because it's not really a family, but there's just this greater community sense that we are all on the same mission together."

Goltz, too, is feeling good about the changes. "Somebody said to me last week, 'Oh, so you're having a midlife crisis.' I said, 'No. My whole business life has been a crisis. Now I'm having midlife contentment.'

"I look around the company, and I get tremendous satisfaction out of the fact that I have wonderful people working for me, and they're doing great things and making customers happy. I realize that I've got it big enough that I'm doing just fine. I'm making enough income now that I can live a very nice life. I don't need to be off starting new businesses. I just want my business to run itself to a degree, so that I can be free to go out and do speeches or whatever. That's happiness. For me, happiness is not about building a $100 million company."

Adapted from Small Giants by Bo Burlingham by arrangement with Portfolio, a member of Penguin Group (USA), © 2005.

Last updated: Feb 1, 2006

BO BURLINGHAM: Burlingham joined Inc. in 1983. An editor at large, he is the author of Small Giants. Burlingham is also the co-author with Norm Brodsky of The Knack; and the co-author with Jack Stack of The Great Game of Business.
@boburlingham




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