Hand's On

Mentors for hire

You want to start a business, but you lack the expertise. Why not buy it?
By Shane Mclaughlin

Want to learn all you can about starting the business of your dreams but don't have a lot of time? You can do what Iris Shur and Jean Sifleet did: pay experienced business owners to show you the ropes.

Five years ago, Shur and Sifleet set out to open a shop selling furniture and home accessories on consignment. But having no experience, they had to do some homework--fast. From the moment they drove up to the doors of the Stock Exchange, a consignment store in Barrington, R.I., they knew they had stumbled on a fount of knowledge. "It was pouring rain on a Monday, and people were lined up down the street to get in," recalls Shur. "We knew we could learn from them."

So the two rookies approached Stock Exchange co-owners Jan Hess and Sarah Powers, who had launched their business nearly 15 years earlier with no experience. They agreed to spend a day teaching Shur and Sifleet, in exchange for a $1,500 fee and an agreement not to set up shop within 50 miles of their store. It was a pure business decision, explains Hess--just another way to make money.

A few days after the initial meeting, the four met over breakfast at Powers's home to talk about the business. Shur and Sifleet learned how to choose an ideal location, how to identify good workers, and where to advertise. They got lessons in merchandise appraisal, bookkeeping, and store layout--as well as in the idiosyncrasies of the consignment business.

In the afternoon they went to the Stock Exchange. While their mentors worked, Shur and Sifleet had free run of the store, including accounting books and customer files. Although they learned many practical lessons, the customer-friendly atmosphere was most memorable for them. Employees made every effort not to discourage consignors who brought in worthless items, like a cracked vase or a ripped chair. You never know--they might be back with something more valuable next time. "They never looked down on people," says Sifleet. "They'd say, 'This is a very nice item, but we just couldn't sell it in our market."

In parting, Hess and Powers told their students they could call anytime for more advice, which they did over the next several months. Now, five years later, Shur and Sifleet still go back to their notes for advice, although their own consignment business, Tables to Teapots, in Acton, Mass., has grown to $600,000 in revenues. And the two have been hired to mentor a few fledgling entrepreneurs themselves. "If we didn't learn from somebody else, it would have taken us a hell of a lot longer to get to where we are now," says Shur.

Hot Tips
Getting start-up assistance from a bank has never been easy. To make a better case for their temporary-staffing company, Tom and Cherry Householder, the founders of $10-million Staffing Resources, based in Matteson, Ill., submitted to their bank more than 15 letters of reference from various professional colleagues--police chiefs, politicians, competitors--when they opened their first office, in 1993. The results? Staffing Resources secured a $135,000 line of credit. --Ilan Mochari

For the price of a few stickers, Martine Redman, president of Briarpatch, in Millburn, N.J., passes out praise with the paychecks. For the salesperson: a sticker of Dorothy's red shoes accompanied by a note saying, "Click three times to reach your sales goal." For the marketing coordinator: a pig stamp on the envelope and inside, the inscription "This little piggy went to marketing." Redman says the stickers are "a great opportunity to express appreciation on a regular basis." When they stopped for a week while she was on vacation, the staff expressed their disappointment. --Nicholas Colletta

Getting in on the ground floor
The last thing Matt Phelan ever wanted to do was to run a storefront operation. But last year Phelan gave up his fancy office on the second floor of the Atlanta Financial Center and moved his company--Phelan Annual Reports, a $2-million design firm--into a former lunch-counter space in the building's lobby. Surprisingly, the new space has actually helped grow his business.

It all began with Atlanta's often-miserable downtown traffic. Last year Phelan decided to free his employees from commuting hell by letting them work from home. That meant he didn't need as much space, but he still wanted to keep a presence at the tony Financial Center.

So Phelan asked the building's management about moving to a smaller office. The only option: the old lunch counter, a storefront sandwiched in with a newsstand, a dry cleaner, and a barbershop. Phelan was miffed at first. Then he realized that a lobby location might have an advantage: exposure. Every day, thousands of corporate tenants walked through that lobby. A well-presented "storefront" could attract new clients.

So Phelan moved in, installed a large sign, and set up a flashy window display. In the first two months, the company brought in two new clients who otherwise never would have known it existed. "We spent nine years in that second-floor suite," Phelan says. "No one ever knocked on our door." --S.M.

Speeding up government collections
Michael churchman has found himself hamstrung by bureaucracy before. Churchman, who used to work for NASA, owns Rocky Mountain Radar, a $5.8-million electronics company based in El Paso. Of course, getting the government to pay up is never easy. But Churchman has learned to finesse the system. While his first government invoice took three months to collect, Churchman says he now "gets paid in 15 days and makes more money in the process." Herman Holtz, a self-employed writer, and John Hopkins, sole proprietor of Optimal Software Solutions LLC, based in Farmington Hills, Mich., have also mastered government collections. They offer these tips:

1. Personalize collections. Churchman likes to ask the person who OKs the deal for the name and phone number of the accounts-payable person responsible for cutting the check.

2. Raise prices by 11% to cover the potential cost of factoring, which Churchman has resorted to in the past. (Churchman says that his prices were still "an order of magnitude lower than the competition's.")

3. Ship the final product by Federal Express or a similar service that can provide you with a copy of the signature receipt.

4. Mail the invoice with a copy of the receipt. Don't use the telephone, Churchman says. You want to create a physical document.

5. Fax a copy of the invoice to the buyer of your goods or services, and also to the accounts-payable person who's handling your account. "Keep everybody in the loop," he says.

6. Offer a 5% discount for payment within 15 days. In Churchman's case, the government has taken him up on his offer. The cash-flow benefits of speedy payment more than make up for the marginal discount.

7. Follow the money, advises Holtz, who has learned to cruise the hallowed halls of government buildings, invoice in hand. "Always learn what the invoice-processing steps of the agency are," he says. When possible, he'll even carry his bill from one office to the next and ask the appropriate staff to approve it while he waits.

8.Speak up. Frustrated, Hopkins asked to meet with his county government clients--who accounted for half of his $100,000 annual revenues--to discuss his angst. The result: the county proposed a one-year contract. Instead of receiving per diem payments that could get held up awaiting board approval, Hopkins now gets immediate approval on invoices of less than $10,000. "Before, I sometimes waited as long as 85 days for payment," Hopkins says. "My last invoice was paid in less than 30 days." -- Mike Hofman

Sign of the cross-training times
When companies are in a start-up frenzy, early-stage staffers tend to wear so many different hats that many entrepreneurial companies forgo job descriptions entirely. Later, as companies grow, employees tend to specialize. But some CEOs argue that it's important for employees to retain a good dose of that start-up flexibility. The better everyone knows everyone else's job, the thinking goes, the better your company runs.

To formalize that flexibility, more companies are cross-training, instructing employees in the essential elements of as many different job functions within the organization as possible--regardless of whether they are likely to be called upon to actually perform those job functions. The tangible benefits of such training, proponents say, are numerous.

Better employee morale, for one. Kurt Bleicken, CEO of Greenpages, an $81-million computer reseller in Kittery, Maine, puts each new employee through two months of intensive training in all the job functions at his company. So customer-support people get sales training, and salespeople learn about purchasing and credit services. That, according to Bleicken, promotes mutual understanding. "When people are familiar with what the rest of the company is doing," he says, "it breaks down the typical 'us versus them' attitude."

Cross-training helps companies ensure that--

  • Every employee can help a customer. At the Chip, a $4-million computer technical-support and repair company based in Valencia, Calif., everyone is trained in computer repair--even the receptionist--so that whoever answers the phone is able to address technical problems. According to president Chip Meyer, that way the company phones act as a de facto help desk for clients.
  • Every employee knows how to sell. For Nick Nicholson, CEO of the Ecology Group, a $40-million recycling and waste-management company in Columbus, Ohio, it's important that each of his employees understands the sales process. So all of his staff members receive sales training, including classes on good questioning and listening skills. Once, a member of his accounting staff was on the phone with a client who had a huge overbilling problem. In the process of clarifying the problem, the staff member identified an opportunity to extend the Ecology Group's agreement with the client, involving more locations and more business. "I don't think he could have done that if he hadn't had sales training," says Nicholson.
  • No employee is indispensable. Kurt Bleicken of Greenpages also uses cross-training to counteract short- and long-term leaves of absence, in particular maternity leaves. So he has two highly cross-trained individuals he calls "Greenpages runners" who can fill just about any position in the company: sales, purchasing, credit services, or accounting. And they can sub for almost any length of time, covering everything from sick days to vacations to extended sabbaticals. Of course, since the runners are by definition generalists, they're not always as effective as the real thing. But especially when you're talking about keeping the sales flow relatively even, says Bleicken, "it's better than starting over from square one." --Christopher Caggiano

My Biggest Mistake
Manuel Fernandez
Chairman and CEO
Gartner Group

Like everybody else, I have made a lot of mistakes. But we all learn from our mistakes--sometimes even more than we do from our successes. I made my biggest mistake when I was starting my first computer company, Gavilan, in the early 1980s. I didn't understand how important it was to have cash--and I learned, the hard way, to regret that.

With Gavilan we had a brilliant business opportunity on our hands. By 1982 we had developed the first true battery-powered laptop computer--years ahead of its time. We received lots of acclaim when we introduced our product, and we were sure of our success.

I hadn't counted on one crucial thing: cash-flow problems. To start Gavilan we had raised $30 million in capital. We had the opportunity to raise as much as $60 million, but my cofounders and I were intent on trying to hold on to the equity of the company. So we stopped at $30 million. Unfortunately, we didn't anticipate how much cash we'd need as we were developing our new product. Things can and do go wrong. For example, the manufacturer of the disk drives for our laptops went out of business. There had been only one company equipped to manufacture the disk drives, so we had to delay production until we could find a second manufacturer. Then, once we did, we had to spend another few months redesigning the disk drive so that the manufacturer could make it.

We literally ran out of money. By April 1983 we were in Chapter 11.

Cash flow isn't an area that many entrepreneurs are thinking about when they start companies. We're obsessed with revenues and profits and trying to hold on to the equity. But since then, I have always insisted that our company be debt free--and that we have prudent cash flow. Now we look at it every single day.

Manuel Fernandez is the chairman and CEO of the Gartner Group, based in Stamford, Conn., a high-tech consulting firm that generated $511 million in revenues last year.

The Quotable Entrepreneur

'I've done between 400 and 500 acquisitions in my career, so I know a lot about entrepreneurs. Entrepreneurs don't march left, right, left. They march left, left, right, right, left, hop, skip.'

--Paul M. Verrochi, chairman and CEO of Provant, a $78-million provider of business-training services, based in Boston

Published on: Dec 1, 1998