Case Study: When the Bank Called In a Loan, Larry Cohen Had to Act Fast to Save the Family Business

The Decision

In early January 2004, Cohen called Kamins into his office and gave him 90 days to prove that he could save the business. If not, family or no family, he would be replaced. Cohen disliked threatening his own nephew, but, he says, "it was the only thing I had left to motivate him" to make big changes.

Rather than feeling ambushed, Kamins was relieved. He had spent the previous year expecting to be fired, so the 90-day trial felt like a vote of confidence. With the help of a new consultant, Irwin Friedman, who replaced the turnaround firm recommended by the bank, Kamins moved quickly to assert himself as Accurate's leader. He called a meeting of his top five executives and announced across-the-board salary cuts of as much as 50 percent. Kamins took a 50 percent pay cut, and Cohen agreed to work unpaid. "We had to move from being a family business to a more corporate one," Kamins says.

Kamins warned his executives that they were likely to be fired if things didn't improve quickly. But the person most in need of improvement, Kamins realized, was himself. In the spring of 2004, he enrolled in an executive education course at Chicago's Loyola University. "It was inspirational," he says. "The most valuable thing was being in a room with people and getting outside input on how things are done." Kamins also began working closely with Friedman, who helped him develop a strategy for the business, as well as for his personal life. Thanks, in part, to Friedman's mentoring, Kamins lost 80 pounds in one year.

Kamins's business classes prompted him to embrace many of the changes Zarnott and Beck had been advocating for years. Friedman leveraged his connections, and Accurate's revamped business plan, to help the company land a line of credit from Bank One, now part of JP Morgan Chase. In March, Kamins used the line of credit to pay off Accurate's loan from Cole Taylor (which declined to comment for this story). Next, Kamins invested in new computer systems, high-tech machinery, and training for factory workers. He hired 20 part-time salespeople and increased Accurate's marketing budget to $200,000 a year. Zarnott hired a Chicago marketing firm called Symmetri to develop a new website and glossy brochure that emphasized the beauty of Accurate's products, rather than low prices. Symmetri changed Accurate's slogan from "Quality workmanship makes us Accurate" to "We teach light to dance." The new focus, Zarnott says, has helped attract architects and other high-end clients. "American catalogs were all geared to technical aspects," he says. "We thought, here's a way we can set ourselves apart."

The marketing push represented "the rebirth of the company," says Kamins. Accurate's architectural sales soared from $300,000 in 2004 to $2.5 million last year, boosting overall profit margins to 16 percent. In 2005, Accurate's revenue increased 70 percent, to $25.5 million, 40 percent of which was generated by sales of fabricated metal. On the commodity side, improved efficiency, an expanded sales force, and demand from China increased sales and bumped up profit margins to 5 percent.

Back in 2004, Cohen allowed the 90-day deadline to come and go, confident that his nephew was up to the task. Kamins officially became Accurate's president early last year. Though the company is back on track, Kamins has sworn not to let himself--or his employees--revert to the just-collecting-a-paycheck mentality. "The memory of where we were a very short time ago pushes me to move this place further," Kamins says. "I'm still not satisfied."

The Experts Weigh In

The right move

As the third generation in a family-owned business that has faced many of the same issues, I think Cohen was right to offer his nephew the 90-day ultimatum. Growing up in the shadow of the guy who starts the business is debilitating, and I don't think Kamins felt that he had a mandate until that point. However, it was a bad mistake for him to ignore Mike Zarnott and Mike Beck. If he had taken their advice, Accurate could have had a gradual reinvention.

Steve Wiel
Vice president
Rockmount Ranch Wear Mfg. Denver

Succession plan needed

Kamins wasn't prepared to take over Accurate. Sometimes a family member will have a real belief in what's being created, which can help lead a company through hard times, but that person must also have good business skills. Years before handing over control of the company, Cohen should have considered who was most qualified to be the next leader, regardless of family. At that point, he should have begun to develop that person professionally with formal training. Succession should be a nonevent.

Ann Kinkade
Director
Family Business Center
University of Wisconsin
Madison, Wisconsin

A risky step

Cohen did the right thing when he looked internally to find the right person to lead Accurate's turnaround, but he should not have selected his nephew. Kamins's record didn't demonstrate that he was ready for bold actions. That said, Accurate's problems started way before Kamins took the reins. The company should have updated its business model long ago. It sounds as if Accurate was trying to be the last manufacturer of the buggy whip. It is exceptional that Kamins was able to reinvent the company and himself at the same time.

Ron Castor
Partner
JC Jones & Associates
Rochester, New York

What do you think? Did Aaron Kamins deserve one last chance to save the company? Sound off at casestudy@inc.com.