Grow Your Business Through Acquisition
Be Smart About Selling Your Business
Essential Skills For New Managers
Corrections or additions?
This article by Kathleen McGinn Spring was prepared for the July 17, 2002 edition of U.S. 1 Newspaper. All rights reserved.
Getting Green For Building Green
Business is run by traditionalists and won by innovators.
Tradition tells us that our energy needs can be met only by raping
more wilderness and damming more streams. But innovation now is making
it abundantly clear that by directing a little bit of human brain
power toward conservation we can spare the ravaging of our resources
— and our corporate pocketbooks to boot. So says Smart Start Buildings,
an energy-efficiency consortium of the Garden State’s utilities.
Smart Start’s massive energy saving incentive program is explained
in a detailed workshop “Building Energy Efficient Buildings”
on Thursday, July 25, at 4 p.m. at PSE&G’s Edison Training and Development
Center in Edison. Several representatives of PSE&G’s Smart Start outline
the available financial, technical consulting, and equipment incentives,
as well as long term cost-saving paybacks. A thorough preview of the
program can be found on the organization’s website: www.njsmartstartbuildings.com
This event is sponsored by the New Jersey Technology Council.
It is no secret that New Jersey’s power providers have been unable
to meet growing demands for over two decades — a deficit they
only see growing in the future. At the same time, conservation incentives,
specifically and prudently applied, have already made major dents
in energy demands. A series of programs that stagger peak usage in
summer and winter has cut the Garden State power drain by as much
as 18 percent.
Now New Jersey utilities are going directly to the source: the structures
that draw all this energy. The Smart Start Buildings Program consists
of Jersey Central Power and Light, Connective Power Delivery, PSE&G,
New Jersey Natural Gas, Rockland Electric and Gas, Elizabethtown Gas,
and South Jersey Gas, all in a single conservation alliance. For new
builders, Smart Start aids in the configuration of energy-wise plans
and encourages the adoption of higher efficiency equipment. For existing
plants, cost-effective, energy-saving retrofit methods are available.
A three-pronged approach of direct incentives, planning assistance,
and reduced payback time allows Smart Start to individualize each
program to customer needs.
Basic design assistance. Each customer applying to theSmart Start Program receives up to eight hours of technical assistancein design planning — more if the consultant authorizes. The consultantwill walk through your plant and come up with a list of energy savingitems. He may work with your architect to produce a more efficientlayout or building configuration. Lighting selection and placement— typically a source of great savings — will be analyzed.All power equipment, including chillers, motors, HVAC, gas boilers,heaters, and varied frequency units will be examined with an eye foroverall cost. Various renovation and remodeling options will be discussed.Initially, Smart Start consultants meet with your firm’s engineersand architects for a brainstorming session. A design simulation isthen created and checked over. Finally a thorough analysis of allenergy efficient measures is made both in existing and new parts ofthe structure.Buildings of over 50,000 square feet qualify for a three-step comprehensivesupport program each with its own cash incentive.Financial incentives. Despite simple math, which pointsto the benefits of energy efficient construction, many firms are justifiablyhesitant. High-efficiency equipment frequently costs more. And evena quick three-year payback can seem awfully far down the road to astartup firm desperate to pinch every dollar until the eagle yells.In answer, Smart offers upfront cash incentives and discount purchasesfor most pieces of power-driven equipment. Electric chillers (airor water), geothermal units, motors, air and water pumps, naturalgas water heaters, and prescriptive lighting all carry rebates. Inaddition, the program will link you with low cost suppliers and installers.Those seeking alternative power sources also are eligible for rebates.Beyond these basics, the Multiple Measures Bonus, applied to firmsemploying two or more conservation efforts on a single project, addsanother 10 percent to the incentive package. Larger builders, enteringthe Comprehensive Design Program, can claim a $1,000 incentive onthe brainstorming stage, $5,000 for the design simulation, and another$5,000 for the final analysis stage.Even for the small business, the incentives alone become considerable.For a building under 50,000 square feet, Smart Start customers aretypically receiving $5,000 in incentive funds before any energy paybackcomes in. Such savings range from the $50 incentive for installinga 0.6 energy factor gas water heater; to the $300 for the 92 percentAFUE gas furnace; to the $3,400 rebate for more efficient and better-placedlamps.Payback time. The larger the project, the more evidentthe energy payback. The FAA’s William J. Hughes Training Facility,located just outside Atlantic City, plunged into Smart Start in l999,and is already saving thousands of kilowatts and bucks. Ahmad Hazaveh,the plant’s engineer, joined architect Barry Hinkle with ConnectivePower Delivery’s program manager Jim Cinelli to make their expandedfacility as low-energy as possible.In the expanded section of the Hughes facility, they made a $21,000investment in lighting modifications, with an admittedly paltry $1,267upfront incentive. The result? 49,896 kilowatt hours saved annually.In retrofit, the $178,000 investment in new lighting (mitigated bya Smart Start $50,000 incentive) saves the FAA 1 million kilowatthours annually of your tax dollars.Many businesses still labor under the ancient misconception that forbusiness to rise, our environment must fall. Recycling, which is a$22 billion industry in the Garden State, is silly in their view.Conservation, they assure themselves, is a costly frill. If theseare the rumblings coming out of your accounting department, call SmartStart (800-854-4444) and have the experts come out for a quick audit.You may just find that investing in a little efficiency now can crunchout to a lot of savings by the end of fiscal year.Top Of PageGrow Your Business Through AcquisitionOne of the best ways to get star employees may be tobuy them. The same is true for customers. Acquiring a competitor netsyou both, and this is an unusually good time to look into doing justthat. Beware, though, a business marriage is not without risks.John Harmon, founder of West Chester, Pennsylvania-based Knoxbridge,an education and consulting company, speaks on “How to Make Moneyby Acquiring Companies Right” on Wednesday, July 31, at 8 a.m.at the Princeton Hyatt. Cost: $149. Call 866-836-5669.Harmon attended the University of Maryland (Class of 1993) on “the10 year plan,” working as he studied. He holds an M.B.A. fromFlorida State and has extensive experience in acquiring companies,in integrating them into larger companies, and in reversing the processthrough the sale of business units. His first experience was in thelatter field. As controller of retailer Georgetown Leather Designin 1993, a period he recalls as “the last recession,” he wasresponsible for selling that business out.He took that experience and went to work for Encompass, a publiclytraded company that buys businesses in the construction services field— plumbing concerns, janitorial services, HVAC companies, andthe like — and combines them into larger companies. Doing thiswork, he observed that large public companies like Encompass did notalways get a good price for their acquisitions.”The goal of business is to make money,” Harmon says, “butthe goal of a public company is not as much to make money as to reportmaking money.” There has been ample evidence of this preoccupationof late, and it is one of the reasons Harmon thinks the little guycan home in on acquisitions better than his behemoth business brethren.His concern should center solely on whether a particular acquisitionwill up his profits. He has no need waste sleep worrying about whereto put it on his books so that it has maximum appeal to shareholdersor analysts.Besides, says Harmon, acquisition “is not rocket science.”His five years at Encompass taught him how to spot a good acquisitiontarget, and how to bag it at a good price. His company specializesin passing along this wisdom to others.Why this is prime acquisition time. It is no secret thatall but the most hapless public companies saw their value skyrocketin the late 1990s. Neither is it a secret that the rocket has fallento earth. In some cases, it has even nosed right into the turf. Smallbusiness went through the same cycle, albeit more quietly, says Harmon.In building services, for example, he says that companies that hadtraditionally fetched two-and-a-half to three times earnings werepulling in six times earnings at sale. Now, the multiple has fallenback to three, or less. Through last year, sellers clung to hope,and tried to fetch more for their companies, but, says Harmon, mostare now more realistic.At the same time, the cost of capital is hovering at historic lows.Banks may be cautious, he says, but they do have money, and are willingto lend it. Low-cost money combined with sellers who finally believethe ’90s are over equals the possibility of acquisition bargains.How to spot the best targets. Look for the 60 to 65-year-oldbusiness owner who has made his money, but has no relative or managerready to take on his company, and you may find the ideal seller. Theless time this business owner has spent preparing an exit strategy,the better. Getting out from under his responsibilities — ratherthan reaping the best possible price — may be his top priority.Whether to use a broker. Brokers save you time by doingthe leg work, but, obviously, they charge for their services. Hartsays a broker may not be necessary if you have an acquisition target— perhaps a longtime competitor — in your scopes. If, however,you see acquisition is the right way to grow your business, but haveno idea what complementary companies are out there, a broker couldbe an invaluable asset. If you do choose to use a broker, Harmon says,”make him earn his money.”How to retain your target’s customers. There are two mainreasons to acquire a company: to get its best employees and to reelin its customers. Do not assume that every customer will automaticallygo with your company, says Harmon. Find out what your target is chargingcustomers and what kind of service he is giving them. Are your pricesand service offerings as good — or better? If not, the customersmay not stick around long.How to integrate your target’s employees. You may notwant to keep every employee, but are bound to find at least one ortwo “diamonds” among them. These people exist in every smallbusiness. “If they didn’t,” says Harmon, “the businesswould have failed.” Making these key people happy, while at thesame time keeping your existing employees and customers happy, canbe a balancing act. Never underestimate the force of company culture,he advises.Gaining employees through acquisition is different from gaining employeesthrough hiring, he says. Employees generally are hired one at a timeand are fully aware that they are expected to adapt to their employer’sculture. The same may not be true for employees who arrive en massefrom a newly-purchased company. They may tend to hang together, andto cling to their former employer’s way of doing things.The best way to prevent this mindset, says Harmon, is to let the newcomersknow that they are, in fact, new hires, and are expected to conformto their new company’s culture.How long to keep the owner around. In most successfulacquisitions, says Harmon, the owner of the newly-purchased companydoes not stick around long. If he is involved in operations, his formeremployees are likely to cling to him, making their integration intotheir new company more difficult.But while the former owner may hamper operations, his short-term presencecan be invaluable in sales, and especially in binding his customersto the company.These customers are one of the main reasons for the acquisition,and the former owner is in a unique position to retain them. Whilehis salary may be a drain, it can be a trifle compared with the costof winning new customers any other way. “Think what it takes toattract a new customer,” says Harmon. And think what it takesto find a star employee. An acquisition can deliver both, and thetime to grow a company through one has rarely been better.Top Of PageBe Smart About Selling Your BusinessLots of times, owners of small businesses think theonly exit strategy is to liquidate assets and turn off the lights,says John Harmon. After he finishes speaking to business owners consideringmaking acquisitions (see above), he turns to the other side of theequation and offers advice to business owners considering a sale.On Wednesday, July 31, at 1 p.m. at the Princeton Hyatt Harmon speakson “How to Make Money When You Exit Your Business.” Cost:$149. Call 866-836-5669.”There is no reason to sell dirt cheap,” he says. But neitheris getting a good price a no brainer, especially in this economy.The businesses that fetch the best prices are those whose owners havespent something on the order of five years preparing an exit strategy.But even without that lead time, there are steps that make it morelikely that the owner can negotiate a fair price.Put in less time. Ironically, the very element that grewyour business into a success is the element that devalues it mostat the time of a sale. And that element would be you — the owner.Buyers, says Harmon, are purchasing future sales. They want assurancesthat those sales will be there. If it is obvious that the companycan not function without the presence of its owner, there is a goodchance that future sales will decline.Assemble a competent management team. Let potential buyerssee that operations are under the control of managers who know thebusiness.Create a strong sales team. Buyers look for a constant,continuous sales effort that does not depend on you. It is very commonfor the owner to be the top manager and the top salesman, too. Dropthose roles well before putting your company on the market, says Harmon.Look at all options. An outside sale may be the way togo, and attracting the interest of a publicly-traded company may netthe best price, but there are other options. It is possible, for example,that an employee, or a group of employees, might be interested inbuying the company.Connect with downsized executives. Business owners withmore than 100 employees are better able to create a company that canfunction well without them. Below that level, it is hard for the ownerto extricate himself completely from day-to-day operations. Wherethat is the case, says Harmon, a sale to “a downsized executivelooking for his next adventure” may be the answer. If this isthe scenario, the owner can expect to stay around for a while traininghis replacement.Be flexible with payment arrangements. If the sale ismade to an individual — whether an insider or a recently laid-offexecutive — there is a good chance that the owner will have tohold a note for at least part of the sale price.Entering into this type of sale is not unlike getting hitched,says Harmon. It is essential to take the measure of the buyer’s integrityand personality. “There is quite a bit of drama,” says Harmon.But that is better than the alternative — just shutting off thelights and walking away.Top Of PageEssential Skills For New ManagersNew managers who lack experience can get themselvesinto financial and administrative difficulties, says ChristopherJ. Lahoda of GrowthQuest Management Training LLC. “That’s whyit’s important that new — and prospective — managers learnessential skills early in their careers.” He quotes statisticsthat 42 percent of today’s managers have fewer than three years experienceand that fewer than one-fourth of new managers receive any trainingin basic management techniques and responsibilities.Lahoda’s company has landed a contract to offer sales management andofficer development training to 253 banks in the network of AtlanticCentral Bankers Bank. One of 18 “bankers banks” nationwide,Atlantic Central provides comprehensive banking services to communitybanks in Pennsylvania, New Jersey, Maryland, Delaware, and New York.Its clients include Hopewell Valley Community Bank and Grand Bank.One set of courses is for those who have recently entered the managementranks, and another for newly-appointed sales managers who need tobuild, motivate, and coach sales teams. The training will be conductedat Atlantic Central’s Camp Hill training facility near Harrisburg,Pennsylvania, in September and October.Lahoda majored in accounting at Northeastern University, Class of1982, and has an MBA in finance from New York University. A certifiedcash manager, he has done training for the American Institute of Bankingand held positions at American Express and Summit Bank. At SummitBank, as senior vice president and director of Treasury Services,he ran the commercial cash management division. He founded his firmin July, 2001. He offers these pointers for new managers:Communicate up, down, and sideways. Continuously ask youremployees for input and advice while reserving the right to make criticaldecisions.Accept the fact that you are part of management and thatyour employees view you as such. You can be cordial with your formerpeers but you shouldn’t maintain personal friendships with them. Todo so will affect your ability to make objective decisions.Recognize that everything you don’t do sends a message.If you don’t communicate, don’t delegate, don’t administer discipline,or don’t provide coaching, you’re sending the message that these thingsaren’t important. Your employees will react accordingly.Understand that as part of management you have an obligationto promote your organization’s strategy and to help make it work.To do otherwise causes your employees distress.Learn how to coach. Managing means getting things donethrough other people, and it only works if you spend time developingyour employees.GrowthQuest Management Training LLC, PMB 242, CN5256, Princeton 08540-5256. Christopher J. Lahoda, president. 609-844-9883;fax, 609-844-9886. Www.growthquesttraining.comTop Of PageCorporate Angelsd>Yardville National Bank is the first major sponsorof Mercer County Community College’s $9 million corporate conferencecenter, which is supposed to be finished by November. The lobby willcarry the bank’s name. A room at the center will be named for JamilE. Faridy, an architect who has been a longtime supporter. His firm,Faridy Veisk Fraytak, joins GBQC of Philadelphia as architects forthe project.”Yardville National Bank may be scheduling a future shareholder’smeeting there,” says Patrick M. Ryan, the bank’s president andCEO. “We view this facility as providing us with new opportunitiesto interact with MCCC and its student body.”The 9th Annual RE/MAX Tri County Golf Tournament raised $92,000for Children’s Miracle Network and attracted more than 130 golfersand professionals to held at Olde York Country Club in Chesterfield.Don Tollefson, Fox Philadelphia sports anchorman and Phil Neuman ofKYW Newsradio were the live auction MCs. RE/MAX Tri County ranksas the second largest CMN contributor among more than 4,200 otheroffices. Contributions will be made to Children’s Hospital of Philadelphiaand Bristol-Myers Squibb Children’s Hospital at Robert Wood JohnsonUniversity Hospital in New Brunswick.Top Of PageDonate PleaseThe state chapter of the National Association ofIndustrial & Office Properties is planning its third annual communityservice project — developing a playground for the residents ofPerth Amboy. The 350 member firms of NJ-NAIOP will partner with theNew Jersey Department of Community Affairs Adopt-A-Neighborhood Program,government agencies, and businesses in developing this year’s playground.Build Day is scheduled for Wednesday, October 16. Individuals interestedin volunteering time, providing financial support and/or suppliesshould contact Susan Lipton, chapter administrator, at 732-729-9900.The Mercer County Bar Foundation seeks program book advertisementsfor its fourth annual gala, set for Saturday, October 26, at the LafayetteYard Marriott in Trenton. Entitled “Laisse rouler les bon temps,”the evening will include the presentations of the Michael J. Niozolekawards to Sahbra Smook Jacobs of Brotman Graziano & Hubert. The countyprosecutor’s office will get the Community Partner Award.Ads cost from $125 for a business card add to $500 or $600 for a fullpage. Sponsorships are available from $100 (for a flower centerpiecefor one table) to $5,000, which includes tickets for 10 people. Fundsgenerated from the program book will go to Kids Instructed in Tolerancethrough Education and Support (KITES), a foundation charity that educateschildren and their parents about conflict resolution and violenceprevention. Call 609-586-6200.Top Of PageReal Estate StatsGet statistics on the northern and central New Jerseyoffice market from the June edition of “Office Market Trends NewJersey,” published by commercial realtors Grubb & Ellis. Vacancyrates in the first quarter of this year, says Doug Petrozzini,have increased to close to 20 percent. “This represents a levelthat has not been seen for seven years.” Sublease space continuesto rise and represents 40 percent of total space available. For acopy of this report call Stephen Jenco (E-mail: stephen.jenco@grubb-ellis.com)or call 973-786-2538.Top Of PagePharma TrainingOnline training programs that were formerly availableonly to Food and Drug administration investigators are now being offeredto corporations, says Janice McFarland, executive vice presidentof Eduneering on Campus Drive.”The Basics of Investigation” curriculum has 10 modules, andthe Food Drug & Cosmetic Law curriculum has five modules. For information,call McFarland at 609-627-5300.Previous StoryNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
