Bankruptcy:

Shuttling to Buffalo

Family Business:

Business on the ‘Net

Choosing Childcare

Corrections or additions?

Ideas are Golden

These articles were published in U.S. 1 Newspaper

on January 13, 1999. All rights reserved. For a complete list of business meetings, go to the events database at

http://www.princetoninfo.com/us1evts.html.

Paper and pen records reign supreme over computer files

in at least one area: intellectual property law. Scientists are supposed

to make journal-like notations in ink in bound notebooks, with numbered

pages, so no pages can be torn out. If a scientist tries to steal

trade secrets, these notebooks provide the almost infallible record

of "who did what when." If those same records were only on

computer files, they could be manipulated six ways and would not hold

up in court.

Rick Pinto, a partner with Smith, Stratton, Wise, Heher & Brennan,

will discuss recordkeeping and other intellectual property strategies

on Thursday, January 14, at 6:45 p.m. at New Jersey Entrepreneurs

Forum at McAteers in Somerset. In a workshop entitled "Protecting

Your Intellectual Property: inventions, new technology processes,

computer software, and Internet-related issues," he will be joined

attorneys from his own firm and A. Jared Silverman Esq. Cost:

$45. Call 908-789-3424.

An alumnus of Yale, Class of ’75, Pinto went to University of Virginia

law school and has spent 20 years at Smith Stratton, where he heads

the business and finance practice. "What I like doing is helping

companies get big, whether taking them public or doing joint venture

deals," says Pinto. If intellectual property is the foundation

upon which you place your company, says Pinto, you need a table with

all four legs secure:

Insure the work product that belongs to the company. Have

appropriate systems and agreements to make sure the product and the

agreements belong to the company, that what your employees invent

actually belongs to you, and that your consultants don’t own what

they do jointly with you.

Confidentiality is the key here. Know how your scientist keep their

lab notebooks, where everything that is done is documented at the

time. "If there is a question as to who did what and when, you

can point to where you have documented things in a secure system on

a daily basis," says Pinto. In addition to biotech and pharmaceutical

scientists, lab notebooks are also kept in such industries as computer

software, and electronics R&D.

Protect the intellectual property with patents, copyrights,

trademarks, or secrecy (trade secrets). The Coca Cola formula, for

instance, is kept as a trade secret. Yahoo, on the other hand, has

technology known worldwide, but it has a trademark for its service.

Secure your business relationships. "Negotiate and

use confidential disclosure agreements with business prospects,"

says Pinto. "Make sure you don’t talk about things that they then

just don’t go off and take. In certain contexts, trust is indeed the

best method," he says. "In others a confidentiality agreement

can be put together so as to be presented as not silly or threatening

to the recipient."

"Once a prospect becomes a business partner, have detailed licensing

agreements so you know who owns what and what they will pay for."

The most fatal mistake you can make, says Pinto, is to try to draft

your own joint venture agreements. "They appear simple to a nonspecialist,

but if the nonwary do not insert adequate protections about when payments

are to be made, and what alternate activities are open to a licensee,

you could spend thousands of dollars on a software product and find

that someone is selling it and paying you very little."

Practice vigilance. Police former employees leaving the

companies and trying to use trade secrets. "If they do, they are

no longer trade secrets," says Pinto.

Particularly look for and police possible misappropriation by competitors.

"A trademark loses its value or legal force unless the owner seeks

to protect it," says Pinto, referring to a case that was in the

news a few years back, where Gimbels Brothers store in Manhattan sued

Gimbels General Store in Maine. "It posed no threat to Gimbels

in New York, but under trademark law, if they had not policed the

trademark they would have lost the right to police it later."

The Entrepreneur University focuses on helping entrepreneurs

to develop skill sets to succeed, says Pinto, who serves on the organization’s

board. He expects 40 or 50 people to attend. " As a result of

a delightful turn of events in our economy, there has been a definite

shift from large companies to small companies. A few are entrepreneurs

by default, but my experience is that most of those people cannot

be successful. As a lawyer who represents emerging businesses in New

Jersey, nothing pleases me more than to help foster the creation of

new ones."

— Barbara Fox

Top Of Page
Bankruptcy:

Nasty Medicine

Bankruptcy is nasty medicine, but small business owners

in particular need to think about the possibility of bankruptcy from

the moment they get started. This is not so obvious, considering that

few people want to think about losing it all amid the excitement of

a new venture.

Downer maybe, but it’s nowhere near as depressing as when you’re staring

bankruptcy in the eye, says attorney David Raven of Business

Alliance Capital Corporation on Alexander Road. He will speak on "When

There Are Stars in Your Eyes, Why Prepare for Chapter 11?" with

Ted Koppa, also of Business Alliance Capital, and Fred Rice

of Nauset Business Evaluation, on Tuesday, January 19, at 11:30 a.m.

at the Venture Association of New Jersey meeting at the Westin in

Morristown. Cost: $55. Call 973-631-5680.

It’s essential to realize the sobering truth that a large number of

new businesses will fail, claims Raven. According to a yearly survey

by the American Insurance Group, he says, 86,500 businesses failed

in 1997, resulting in 316 shareholder suits. An average of $5.2 million

was paid per lawsuit.

With such high legal costs, it’s not surprising that bankruptcy is

often a luxury that small businesses can’t afford. "Chapter 11

bankruptcy is rather expensive. It’s a question of whether it’s economically

worthwhile. The cure can kill you. Paying lawyers and accountants

can cost from $300,000 to $500,000 — and the creditors haven’t

seen a button yet," says Raven.

After graduating with a BS from the University of Tennessee in 1949,

Raven earned his law degree from Rutgers University. He has been practicing

law for 47 years, 37 of them predominantly in creditor and debtor

work.

"These days, there may be fewer business Chapter 11s filed than

in the rah-rah days in 1989 and ’90," Raven says. The existing

suits have a bigger impact on the economy, but, because of costs,

most people are relying on other options.

One possibility is to see an asset-based lender like Koppa. At the

VANJ meeting, Koppa will explain his criteria for making loans, which

include ensuring that "for every $10, he makes sure there’s at

least $20 to $25 of equipment to back it up and a personal guarantee,"

says Raven.

Or a concerned business owner can speak with Fred Rice, turnaround

business workout consultant. He will evaluate a business’s alternatives

and steer it in the right direction. He attempts out-of-court solutions

and deals with creditors, helping his clients refinance their debts,

working on lesser payments or longer payment time, or persuading businesses

to sell excess inventory to pay off creditors — something owners

are often loathe to do.

"People want to hold on to inventory, but it’s best to sell and

use the money to pay the creditors," advises Rice.

While panicked responses may be short-sighted, they are easy to understand.

No one wants to let go of their dream, and often they will try anything

to keep it alive. One trap that Rice sees many small business people

falling into is "robbing Peter to pay Paul." Small businesses

often find cash by not paying withholding taxes, he says, "which

has immense consequences, since the government considers you a trustee

for other people’s money."

It can end up with some near-tragic situations. After borrowing from

everyone they know, people come into a financing office demoralized

and devastated. "You’re doing triage — dealing with people

who are under tremendous strain," says Raven. One client was so

agitated that Raven had to literally dance the man around the office

until he could stand between the client and a suddenly sinister open

window.

Thankfully, there are compromises between letting the dream go and

holding on when you shouldn’t, and Raven wants you to consider those

before you even get started. Consider, too, if you should be in business

in the first place: Speak with a business counselor or lawyer. Raven

suggests asking yourself these critical questions from the first:

Take stock in yourself. Do you have what it takes to be

in business? A dreamer, inventor, or a lucky person who comes up with

a fantastic idea while walking the dog may not know what is really

involved in going into business. Can you write a business plan, and

one that banks will understand? A bank will ask you to write a projection

— are you able to do that?

Research the market "to see whether there’s a crying

need for your product," says Raven. "Your product may be a

good one, but there are other ways to clean windows." Will it

take too much R&D before the product even materializes?

Evaluate your bank account. You may simply not have enough

money. If you have a viable idea but not enough capital, Raven cautions

against taking money out of relationships with people, from your credit

cards, or from the bank. "What happens when you get in trouble?

There are so many terribles."

Such soul-searching may lead you to decide to license the idea

out instead. You may only get a quarter of the profits, but you won’t

have bet the farm.

Rice agrees with Raven that the best medicine is preventative. "There

are all kinds of Band-Aid remedies. Business people tend to procrastinate

and hope things work out, but hope isn’t good enough."

He suggests knowing and looking for the symptoms of trouble, such

as cash-flow problems (a classic sign), loan defaults, or inability

to supply customers because of low inventory. Small businesses can

look for the same signs banks do to keep an eye on their progress:

current ratios, working capital, equity, and losses. Swallowing some

preventative medicine is better than facing down bankruptcy any day.

— Vickie Schlegel

Top Of Page
Shuttling to Buffalo

Shuttle America, the Connecticut-based airline, begins

operations at Trenton-Mercer Airport on Wednesday, February 10. The

airline will be offering three flights daily from Trenton to Buffalo,

New York, at 7:20 a.m., 10:55 a.m., and 5:05 p.m. The flights from

Buffalo to Trenton are scheduled for 9:10 a.m., 3:15 p.m., and 7:05

p.m. To make reservations, call 888-999-FARE. With a 14-day advance

reservation the cost one-way is $39, $69 with a seven-day advance

reservation, and $99 for walk-ups.

"What we like are small cities that are between two mega-markets,"

says Mark Cestari, Shuttle America’s vice president for marketing

communication. "Trenton is a perfect place for us because it is

between New York, Newark, and Philadelphia. There are a lot of people

who don’t want to have to drive to either of these airports."

The airline is focusing on business travelers.

Shuttle America, which started flying in November, is adding one new

destination a month and plans to offer more destinations from Trenton.

Currently the only airline from Trenton-Mercer airport, Eastwind Airlines,

offers jet services to Boston, Greensboro, and Orlando.

Top Of Page
Family Business:

Endangered Species?

Family businesses today face challenges such as globalization

and a complexity that were largely unknown a generation ago. Learn

about these and other threats to family business from Bill Trainer,

who has led a six-generation family-owned business through a changing

competitive environment. He speaks at the Rutgers Family Business

Forum on Friday, January 15, from 8:30 to 11 a.m. Cost: $45. Call

732-445-7504.

"A family business is designed to fail because it has more going

against it than any other type of business," says Trainer. "Any

business has to struggle to survive today, and smaller businesses

have a double struggle because of globalization; they don’t have access

to international sources of supply or funding, and they lack resiliency

in a downturn." Family businesses, Trainer feels, have a special

set of problems stemming from what he terms the "gene pool"

and the "in breeding of ideas:"

Finding competent management talent is a challenge for any business,

and imposing on the candidate the requirement of having the same last

name puts another hurdle on the pathway to success. "You’ve just

almost eliminated the possibility of consistently finding good mangers,"

says Trainer.

One solution is to have the family own the business, but have someone

else run it.

Keeping a company current is a key ingredient for small

family business success. Trainer refers to "Future Shock"

by Alvin Toffler. Among the tenets is the notion that the key to understanding

the world of the future is that more changes are coming through society

today than ever before, and they are coming through in a rapidly increasing

rate.

Trainer cites the example in the book of a grandfather, a father and

a grandson sitting on the 15th century equivalent to the back porch.

"All of them could talk about anything and they could all understand

each other. The problems the grandson would run into would be the

ones the grandfather had run into. Society changed so little,"

says Trainer. "Consider today where your 17-year old daughter

can’t understand what her 13-year-old sister is up to."

Avoiding complacency. Trainer feels strongly about the

value of ongoing professional training. Too many people land jobs

only to coast through their careers with no real thought about professional

development. "Would you take your tax work to a CPA who has not

kept up to speed on the tax laws in the last 20 years or visit a doctor

who hasn’t opened a medical journal in the past 15 years," Trainer

asks.

Inbreeding of bad ideas is another problem area particular

to small family businesses. Since there is little turnover in most

family businesses, there is little infusion of new ideas. Fathers

who teach their offspring what they learned may be unwittingly setting

the stage for failure. "What made sense for Daddy back in the

’50s is disaster today," says Trainer.

The Trainer family business, now national in scope, originally

started as a group of bars in Philadelphia. It was founded in 1863

by Edward Trainer, who went to sea at age 13 as a cabin boy and returned

with enough money at age 22 to open a bar and stake some of his relatives

to bars. The next step was a distillery to supply the bars. By the

time Edward Trainer was nearing the end of his life in 1914, Prohibition

was drawing near, and Edward’s son Joseph diversified the company

by buying pharmacies, non-alcoholic beverages, dairy products and

machining companies. All these enterprises were turnaround ventures;

the family would buy rundown businesses and build them up.

The advent of the Depression saw all the Trainer businesses fail,

except the dairy, which later became part of the Foremost McKesson

Corporation, and the machine business, which became the main family

business. The Roller Bearing Company of America had been purchased

by Bill Trainer’s grandfather and moved from Newark to the old Mercer

Automobile factory near the present location of the Amtrak station

in Trenton.

"Then a miracle happened," says Trainer, "called Pearl

Harbor." The outbreak of war was a boon to the business since

bearings were part of the bedrock of the war industry. "The Navy

walked into the plant and said, `You still own the plant, but from

here on in we’re running it’," says Trainer. In 1952 Trainer’s father

and uncles relocated the plant to its present location, adjacent to

the SEPTA Regional Rail Line West Trenton Station. The dawning of

the ’80s brought an end to the small ($25-$30 million) family owned

bearing business. During this time the bearing business was consolidating

into what Trainer terms "bearing behemoths, multi-billion dollar

a year, multi-national global firms."

The family elected to sell the business in 1987. During the ’80s the

family had been developing side businesses in industrial distribution

such as fluid power (hydraulics), pneumatics, and light manufacturing.

The Trainer family’s current parent corporation, General Sullivan

Group Inc., is owned by the family, but most of the family members

do not participate in the business.

During the past four years, when Bill Trainer was president of the

firm, he changed the focus of the company to "value-added industrial

distribution." Trainer defines this as, "buying a product

from someone else and then doing something to it: assemble it, fabricate

it, design it, machine it. We add value before we redistribute that

product."

Trainer brings a unique perspective since over 30 years of his professional

experience was with publicly held firms. At 59 he has two grown children,

recently retired from the business, and lives with his wife in New

Hope. Trainer has one brother and four sisters; they are not involved

in the family business.

— Jeff Lippincott

Top Of Page
Business on the ‘Net

It will become evident in 1999, says Charlie Levin

of the Pathfinder Consulting Group LLC, that the Internet has been

underhyped all along. "Business opportunities will exceed one’s

imagination."

Levin gives two half-day workshops, starting with an introduction,

"Doing Business on the Internet," on Tuesday, February 19,

at 8:30 a.m. at the New Jersey Technology Council headquarters at

500 College Road. Part I will cover what works and what doesn’t in

selling products and services over the Internet. The second session,

with a "how-to" emphasis and involving panelists telling success

stories, can be taken separately, and is Tuesday, February 2. Cost:

$175 or $300 for both sessions. Call 609-452-1010.

Levin teaches this class in a five-session format at Fairleigh Dickinson’s

Rothman Institute for Entrepreneurial Studies starting Thursday, March

4, at 6:30 p.m. in Madison. Call 973-443-8842.

Levin majored in philosophy and Greek at the University of Rochester,

Class of ’73, and has 20 years as president of a retail and commercial

business, president. His six-person consulting firm, founded in Annandale

in 1994, includes two web designers and two programmers (E-mail:

clevin@outofchaos.com.).

He suggests that web users are surfing less and choosing favorite

sites. "People are finding a few sites that are important to them,

whether it is a travel site, a news site, or a stock transaction site."

Things that Levin says don’t work:

Using your current materials and porting them over to

the Internet. "The paper models of product catalogs and brochures

do not translate well to the Internet." Take advantage of the

technology to provide something — information or an interactive

presentation — that visitors can’t get anywhere else.

"Amazon and Yahoo recognized a different business paradigm and

built a business approach around that. Those with a traditional mindset

must figure out what could make their business exciting and new,"

says Levin

Too much text. Make it easy to read.

Big, fat, slow-loading graphics. Make it easy to browse.

"Unless you engage people immediately, deliver your message, and

allow them to act in some way — to give you a lead or give you

a sale — you won’t succeed."

Levin will demonstrate with examples of good and bad websites,

and for the latter he refers to http://www.webpagesthatsuck.com.

Bad web sites are not necessarily the cheap ones. Says Levin: "There

are multimillion dollar bad web sites."

Top Of Page
Choosing Childcare

When choosing a child care center or care provider,

look for one that does not insist that children share, says Connie

Danser, director of the University-N.O.W. Day Nursery at 171 Broadmead

in Princeton.

Though the "no forced-sharing" rule may surprise parents who

cope daily with sibling fights, it is well grounded in early childhood

education theory. "Sharing doesn’t mean that if another child

wants it, you give it to them," says Danser. "You can find

something else for the other child to play with, or negotiate with

the first child on when he or she will be ready to give it up."

Just as Governor Christie Whitman is insisting on full-day opportunities

for preschoolers in some school districts, Danser will discuss child

care alternatives on a panel for the Princeton Business & Professional

Women on Monday, January 18, at 6 p.m. at the Holiday Inn. Also speaking

are Sandy Feldman of the state Division of Youth & Family Services

and Kathy Challendes, a family-centered child-care provider

and former school teacher. Cost: $28. Call 908-359-2034 or E-mail:

charoj@msn.com

The University-N.O.W. Day Nursery will also have a parents’ open house

on Saturday, January 23, from 10 to 12 a.m. Call 609-924-4214. The

full-day nursery, founded in 1970, is supported by Princeton University

(the space is rent-free). With a staff of 23 (and ratios higher than

the state requires) it cares for 81 children, from infants to pre-kindergarten.

Special subjects include tumbling, movement, science, story-telling,

and nature. Preschool tuition is $800 per month, and for infants,

$1,100. Also sharing the Broadmead building is the University League

Nursery School, a half-day and full-day cooperative nursery school.

More widely known than the sharing philosophy is the non-sexist stereotyping

philosophy upon which Danser’s school was founded. The founders were,

after all, women from N.O.W. and Princeton University. "We are

bias-free in all ways," says Danser, a graduate of Rutgers’ Douglass

College, Class of 1959, who has certification in elementary education

and early childhood from College of New Jersey.

"We encourage lots of freedom and autonomy for both children and

staff members," says Danser. "Children are supposed to have

experiences through play that expose them to books and letters and

numbers and on their own they develop school readiness. We don’t drill

them on anything. We encourage their thinking skills and innate creativity

by open-ended questioning and allowing them to work out things on

their own."

Since Whitman wants to improve the cognitive skills of children in

the poorest school districts, you might think she would emphasize

drills, but no. Whitman says that three and four-year-olds should

be playing, not cramming for kindergarten: "What children need

most at this age is nurturing, stimulating, creative adults who interact

with them in an age-appropriate way. They’ll do educational and developmental

activities, but a large part of that is play."

Danser gives these tips for parents trying to choose:

"Spend time in the environment and get a feel for the

center ," she says. "See if the adults are respecting each

other and the children. Is there a sense of warmth and joy?"

Ask What if? questions. What if the child sheds tears?

Teachers should not say "That doesn’t hurt, don’t cry about that,"

but acknowledge their feelings: "You were upset about that, weren’t

you?"

Look for better than the state ratio of teachers to children,

"so the teachers don’t get stressed out and over tired."

Ask how the staff is treated. Low turnover is a tell-tale

sign of excellence. "You want stability for the children,"

she says. Because her school operates rent free, she can pay salaries

comparable to the norm, but offer more benefits than usual, including

liberal break time and vacation time. "But," says Danser,

"no one is in this field for the money."

The watchword used to be "She who takes the child by the hand

takes the mother by the heart." For the non-sexist standard, that

needs to be translated: "Those who take the children by the hand

take the parents by the heart."

— Barbara Fox


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