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Archive for February, 2011

Feb 22

Back on the Radar: Neat-Oh! International


The following is a re-post of my January 28, 2011 column for Crain’s Chicago Business’ Enterprise City blog.

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You have to see their product to get it. At first glance, it’s a cool-looking toy box. But then you remove the cover, unzip the corners (yes, unzip) and — voila!I — it’s a playmat.

Driven by the frustration of picking up their son’s Legos, Wayne Rothschild and his wife, Marilyn, conceived of the ZipBin product in 2002. Along with Kellogg B-school friend and business partner, Dee Farrell, Wayne launched the aptly named Neat-Oh! International in 2005 with more than $2 million in outside capital. With Wayne’s background in product development and manufacturing, and Dee’s expertise in strategic alignment at a fast-growing firm, they wanted Neat-Oh! to be known for innovation, quality, integrity and partnership.

Today, the company has 15 employees, double that of two years ago. Its growth has been spurred by “really good product, perseverance and tenacity, and four different revenue streams,” Wayne said.

That diversification, which includes partnerships with big toy companies like Mattel and Hasbro, resulted from Dee’s background in strategic alliances. In addition to OEM for such companies, Northfield-based Neat-Oh! sells branded ZipBins, is a licensor of its patented technology to other manufacturers, and is a licensee of brands like Hot Wheels and Barbie.

Not only do they sell to four customer segments with four different strategies, Neat-Oh! does business in 50 countries. To make that happen, Wayne and Dee are on the road 40% of the time visiting customers, exhibiting at toy shows and working with manufacturers overseas.

In surviving the recession, Wayne said, “we doubled-down to lower costs in our supply chain and with our overhead. Our gross margin increased over 50%,” which is indeed remarkable for a young manufacturing firm.

The company expects its double-digit revenue growth to continue over the long haul, and the founders know it won’t be easy. Neat-Oh! is trying to build a worldwide consumer brand with a limited marketing budget, become a core toy aisle item (which requires significant distribution) and develop new products while generating re-orders (the company’s most vital performance metric).

Such ambitions for a manufacturing firm require money. The Neat-Oh! team has already experienced the challenges of managing cash flows while growing faster than expected the last two years. Now they have to also wrestle with acquiring the resources to support ambitious growth.

Wayne admits that their “business is so complicated. Our board tells us every meeting; ‘Simplify your business, simplify your business.’ But we think we’re hedging our bets (by diversifying).” Indeed, each of the four streams has led the company’s revenues in each of the last four years.

Dee and Wayne have proven they’re innovative, have marketing and sales capabilities and can manage costs — a fairly impressive combination. And they’ve done it with a “complicated” business that requires the key executives to spread their time, presence and attention across four different lines of business and several continents.

Here’s my perspective on the challenges ahead for Neat-Oh!:

I wonder if Wayne and Dee are biting off more than they can chew. Should a company that designs and manufactures its own products, demands high precision in doing so, has a growing workforce and does business worldwide have more hands-on management? Should it simplify its business model? And how can they gain control of this speeding train so that it doesn’t fall off the tracks?

In speaking with Dee and Wayne, I sensed their acute awareness of these issues. They wouldn’t be where they are today if they weren’t smart and capable. And they’re certainly driven, describing their company’s culture as “intense and detail-oriented,” and forgoing promising careers in pursuit of the entrepreneurial dream.

But in my experience, fast-growing companies often require the founders to work a lot of magic. They must transition the company from being entrepreneurially managed to being professionally managed. They must move from simply hiring people to hiring and retaining people. And without question, they must have ample cash to make all of that happen, either organically or through outside funding.

So I wonder if Wayne and Dee should bring in seasoned professionals to help take the company to the proverbial “next level.” I’m curious if the company can grow at its desired rate by focusing on a niche in the market. I find myself asking what other companies in similar situations have done.

I’d love to hear what you think Wayne and Dee should do. Please share your suggestions, experiences, and thoughts below.

Feb 22

Back on the Radar: AKIRA


The following is a re-post of my January 21, 2011 column for Crain’s Chicago Business’ Enterprise City blog.

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I recently sat down with Eric Hsueh, who along with partners Erikka Wang and Jon Cotax, founded AKIRA, the high-fashion retail chain, in 2002.

Then in their mid-20s, the three friends from the University of Illinois at Urbana-Champaign were inspired by Erikka’s vision for a women’s clothing boutique. With no outside capital and their collective life savings on the line, Eric remembers that, “My biggest fear was disgrace: can we pay our bills and not embarrass ourselves? I knew we would not fail but at the same time, I didn’t know.”

It was that open-eyed ignorance and blind ambition that drove them to open the first store in Bucktown, on Chicago’s Northwest Side. For six months, it was just the three of them with no additional employees. By 2008, they had six stores. In 2009, they added three more and a robust online presence. Last year, four additional Akira locations opened, including their first suburban ones at Woodfield Mall in Schaumburg and Old Orchard Mall in Skokie.

Seven new stores amidst the “Great Recession”? With no access to outside capital? To fuel that growth, Akira relied on strong inventory turnover and a loyal customer base for ever-important cash flows, and also benefited from a soft real estate market.

“Two [stores] were planned and two were low-risk, good real estate deals. In terms of expansion, you have to be prepared but also opportunistic. We leveraged our reputation which we worked hard to build, positioning ourselves as a desired tenant, Our reputation is important with customers, but it’s also important on the vendor side: we keep our promises and pay bills on time.”

Today, the 13 brick-and-mortar stores, the online store, and its corporate headquarters support 224 employees, 95 of which are full-time. In eight years, Akira has put its stamp on Chicago’s fashion scene and become a force in the retail apparel marketplace.

Eric believes that the company’s success has been driven by a combination of its unrelenting focus on sales (“selling, selling, selling, selling…and then more selling”), a dedication to customer service, a talent to manage cash flows, and its unusual culture.

He says he can’t go to bed at night unless every store manager texts him and business partner, Jon, with that day’s sales. Store managers are encouraged to communicate with customers via text and Facebook messages to build long-term relationships and take orders when customers aren’t in the store.

When the recession hit, “we didn’t just wake up and cut costs; [we have been] looking for ways to reduce expenses since day one. And in retail, your biggest risk is inventory so you have to be able to turn it fast.”

Eric describes Akira’s culture as “nuts, disorganized, fanatical. But we have an insanely high level of trust among all of us, a lot of passion, a lot of creativity, a lot of customer-centric stuff. It works and it works well.”

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Akira’s suburban expansion was the subject of a Crain’s story and news video earlier this week. Check them out for even more insights on the challenges ahead for this fashion-forward company:

Feb 22

Back on the Radar: Lyons Consulting Group


The following is a re-post of my January 14, 2011 column for Crain’s Chicago Business’ Enterprise City blog.

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Lyons Consulting Group (LyonsCG) was bootstrapped in 2003 by Rich Lyons and Dave Barr, with a focus on information technology consulting. The firm doubled in 2010, with revenue approaching $10 million as it completed a shift toward e-commerce development. It expects to double again this year, aggressively hiring IT and sales talent for its Chicago headquarters and a new office in Rockford. 

Rich Lyons, president, has attributes common to many successful entrepreneurs: focus, tenacity, opportunity recognition and goal-orientation.

His hero is Eric Liddell, the runner in the movie “Chariots of Fire.” Like Liddell, who was knocked down in a race but still won, Rich believes in having the “determination to get up after being knocked down, using your God-given talents to maximize your potential. No one can stop us to reach our limits except ourselves. I love that challenge as a business owner and employer.”

It’s that determination that helped LyonsCG survive the recession, during which it experienced a typical story – from steady growth to a sudden need for cuts. “To let someone go strictly because of market conditions – not because of their performance – is among the worst things I’ve had to do,” Rich explains.

As a typical IT consulting firm that was project-based, LyonsCG “never had any recurring revenue,” Rich said. “We were on the expense side, and our kinds of projects got cut” in late 2008 and 2009.

To survive and become more resilient, the company re-invented its business model to focus on e-commerce development. “We saw a burgeoning market with brands that weren’t being sold online. We saw an opportunity to shift to the revenue side of the conversation where the CEO or director of marketing is saying, ‘I need to generate revenue and I need to do it now.’” Today, the company builds e-commerce technology for clients like Warner Bros., Maui Jim sunglasses and Oneida.

Because of the recurring revenue stream, “this is the first year with over $1 million of revenue we know we’ll book,” says Rich. Add to that the trend of firms increasingly investing in digital commerce, and the company sees tremendous promise. “The paradigm is shifting and broadening. Companies want to do pop-up stores, allow customers to find products on phones and use their e-commerce platform as their point-of-sale system.”

The company’s goal is to reach $50 million in sales by 2016 through organic growth, acquisitions and new market expansion. Rich knows that such growth brings challenges – scaling delivery to keep up with sales, finding experienced people and maintaining the firm’s culture, which he describes as “collaborative, collegial and customer-focused.”

In addition to changing its business model, the company has become totally focused on customers, putting its money where its proverbial mouth is. “We unconditionally guarantee our work. If our customer isn’t satisfied, we give them their money back.”

To lower the likelihood of that happening, LyonsCG looks for “people who are committed to the customer experience (and) the long-term relationships we build with customers,” says Rich, explaining a major driver behind the recurring revenue model, as well as a major driver of his own joy.

“I love the fact that we have a collaborative culture where we might argue vehemently but leave with an agreement of what is best for the customer.”

Feb 22

Back on the Radar: Chicago’s second-stage companies


The following is a re-post of my first column for Crain’s Chicago Business’ Enterprise City blog on January 7, 2011.

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What happens to startups after the start-up stage? Why don’t we hear much about them? How and why do they fall off the radar?

Those are questions I found myself asking in my role at DePaul University’s Coleman Entrepreneurship Center. We recently started offering continuing education programs to owners of “second-stage” companies and, as I got to know them and their firms, I found myself fascinated with their stories.

As someone whose career has revolved around entrepreneurship, most of my work focused on start-up, or “first-stage,” companies. Furthermore, I realized that students, the media and the general public get entranced by new firms.

After all, startups are cool, innovative and dynamic. Their products and services often make our lives better. They create hope for our economy. Their David vs. Goliath stories capture our imagination. And they inspire new entrepreneurs from all walks of life.

But for all the excitement and intrigue, the reality is that only seven in 10 new firms survive beyond two years and only five in 10 make it past five, according to the U.S. Small Business Administration. So for those that make it, why do they drop off the radar screen? What becomes of those companies and their stories?

Well, I plan to tell you through this blog, which will focus on second-stage firms. According to the Edward Lowe Foundation, these companies typically have $1 million to $50 million in revenue and 10 to 100 employees, “have grown past the start-up stage but have not grown to maturity,” and differ from small businesses (or “lifestyle” businesses) in their growth orientation.

Author Doug Tatum describes this stage as when businesses are “too big to be small but too small to be big.” In other words, they used to be startups or small businesses, but their ambition and market opportunity have driven their growth. And as they grow, they create jobs.

According to YourEconomy.org, the Lowe Foundation’s business census tool, in 2008 second-stage firms made up 9% of all companies in the Chicago metropolitan area but accounted for 24% of all jobs. Contrast that with first-stage companies (two to nine employees), which were 51% of all companies yet represented just 18% of all jobs in the Chicago area. So while we often hear that entrepreneurship is the engine of our economy, it’s evident that second-stage firms are the motor in that engine.

On a weekly basis, I’ll share stories of such firms that were once darlings of their industries and the media, get pushed off the radar screen by startups and corporate giants and are the real drivers of America’s economy. I’ll share their challenges, successes, growth trajectories, innovations and value creation.

And as we explore these companies and their stories, I welcome your questions and comments. Furthermore, if you have your own second-stage story, let me know in the comments section.

Feb 7

Startup mentoring
5 Comments

Everyone Should Be a Mentor


Updated December 10, 2012

I’m really lucky. My world is filled with mentoring and mentors.

I have my own, am around many of them through my job in my day-to-day routine, am part of a large mentoring program, am building my new venture on the concept of deep mentoring, and do a lot of informal mentoring on a daily basis. It also comes with the territory of being a father and teacher.

Many successful people will tell you that not only do they count mentors among their most valued relationships, but that they invest a lot of time in mentoring others. It’s deeply fulfilling, humbling, and eye-opening. Like teachers, great mentors will tell you they get more from their “work” than the proteges might.

I believe that everyone – no matter age, profession, or background – should be a mentor. And not just for one person but for as many as possible. It doesn’t have to be formal, it doesn’t have to take a lot of time, and it doesn’t require a certain skill level.

Each of us has something to share, whether it’s knowledge, experience, opinions, contacts or, most importantly, the ability to listen.

If you don’t find people coming to you for mentoring, then go find them.

  • Contact your local school or university
  • Reach out to colleagues, customers, suppliers, and service providers
  • Find a non-profit that has a mission which resonates with you
  • Ask friends, family, and neighbors how you can help them
  • Get involved in trade associations or organizations to which you belong

From my experience, mentoring is one of the most effective ways to have an impact and grow as a person. And it takes nothing more than desire and time.

Go do it.

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