Mastering the Art Of Sales PAGE 20
HOW TO WRITE A BETTER MISSION STATEMENT PAGE 27
January/February 2011
A Look Into Manufacturing In Hampton Roads What resources are available, and what management and growth look like for 2011. PAGE 28
Better Every Day xTuple brings together the worlds of open-source software and manufacturing to provide business solutions. The result: “collective brainpower,” says CEO Ned Lilly. PAGE 38
INSIDE How to Leverage IT Talent PAGE 16
The Business Exit Game Plan
PAGE 18
Best Friends, Perfect Partnership
PAGE 44
SBI 900 Commonwealth Place, Ste. 212 Virginia Beach, VA 23464
PRESORTED STANDARD US POSTAGE PAID RICHMOND VA PERMIT 930
2 Small Business Insight | January/February 2011
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3
Manufacturing Seminar
Feb. 2 • Chesapeake Conference Center 8 — 10 a.m.
Calendar of Events
Join SBI and Wall, Einhorn & Chernitzer for a complimentary breakfast and networking event, specifically geared toward manufacturers. Robert Bredbenner, logistics manager from Unilever, will be the featured speaker. RSVP: rsvp@wec-cpa.com
From Courier to Inc. 5000... Come hear Eric Brown, CEO of Mobile One Courier & Logistics, speak about his growth as an entrepreneur, beginning as a courier of a law firm, to managing a rapidly growing courier and fulfillment business.
January 26, 2010 8:30-10 a.m.
April 6 • Holiday Inn, Newtown Road 11:30 a.m. — 1 p.m. Honoring leading women business owners in Hampton Roads, the SBI Minerva Awards are named after the Roman Goddess of Commerce, proving that women demonstrating excellence in business leadership is no new concept. •
For tickets, visit sbiminerva. eventbrite.com. Table reservations are available by e-mailing editor@ smallbusinessinsight.com.
presenting sponsor
•
Sponsorship opportunities are still available! Show your support for these exceptional women business owners! Call 757880-2751 for info. Gold sponsors
Holiday Inn Select 1570 N. Military Hwy Norfolk, VA 23502
This is the first installment of the SBI Insight Series, which includes a monthly breakfast with leaders from the local business community who share their perspective on getting the greatest ROI in your business. RSVP
info@smallbusinessinsight.com
4 Small Business Insight | January/February 2011
CONTENTS
Jan. Feb. 2011 It’s Logistics. Furniture Classics owner Michael Ricks uses the Hipage Company, Inc. in Norfolk for overseas sourcing because customs brokers and international freight forwarders have the know-how to be timeefficient and cost-effective in shipping. PAGE 34
INSIGHT
Manufacturing in Hampton Roads
Is there a community in Hampton Roads to foster growth among manufacturers? What resources are available, and what kinds of manufacturers call this place home?
p. 28
On the cover
xTuple CEO Ned Lilly discusses what his software products have to offer manufacturers to boost productivity and efficiency in the workplace on page 38. Photo by Paul Chin, Jr.
Photo courtesy of the Virginia Port Authority
Reeling In More Big Players Learn how HREDA and tax incentives entice manufacturers to set up shop in Hampton Roads.
p. 32
Overseas Sourcing How to go about finding an overseas supplier for your manufacturing or distributing business.
p. 34
Breathing Easy Air Systems International owner David Angelico offers advice for how to hire and retain exceptional employees.
p. 40
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CONTENTS STRATEGY Take Out The Headtrash
your mind for 21 Clear focused sales.
Selling A New Product
22
Take a few tips from Soluble Solutions to successfully market goods.
Top-Down Selling
24
p. 27
“It’s not about identifying some arbitrary numerical goal upon which to get depressed or excited over, depending upon how close you are to it. Your statement should be never-ending.”
— Glenn Davis, president of On Call Holdings, gives his insight on scripting the perfect business and vision statements.
New to SBI Hampton Roads:
Main Street
There’s no denying this simple fact: Hampton Roads is a big place. While it seems to be daunting to cover this entire region in a business magazine, we’ve decided to take it one district at a time. Beginning on page 9, take a look at Old Town Hampton and the Ghent Business District, and see what business owners have to say about business there. To learn more about these businesses, visit www.smallbusinessinsight.com.
6 Small Business Insight | January/February 2011
COLUMNS
CHARITY Toby’s Dream Foundation
the gift of making 47 Give dreams come true.
COMMUNITY
Commercial Real Estate
14
Take advantage of low lease rates now, while you can.
SBI Owners Council
42
Information Technology
16
How to select the right IT talent to keep your business connected.
18
OC hosts special reception at Local Inc. 500/5000 Luncheon.
Town Scapes
44
Owners exemplify what healthy, symbiotic work life is like with friends.
Work For Dad
Accounting
What is your game plan for exiting your business when the time comes?
Selling as the owner of the business presents interesting challenges.
46
A few years of chores and yardwork can yield retirement security.
Exclusively Online Challenges Create Opportunities
by Cherie James, CPA
Jan./Feb. 2011 Vol. 3, Issue 1 900 Commonwealth Place, Suite 212 Virginia Beach, VA 23464 757-880-7461 | smallbusinessinsight.com e-mail: info@smallbusinessinsight.com
PUBLISHER Art Radtke
As a new small business owner, Cherie James speaks with local real estate professionals to ascertain their perspectives on the current economy and its impact on their businesses. Are vacancies rising, falling or remaining stable in the multi-family housing sector? Is a virtual office the answer for a new small business? Get the insight at www.smallbusinessinsight.com.
ASSISTANT TO THE PUBLISHER Shannon Highland
Plug into
editor
community.
Jessica O. Swink
Copy Editor
Jackie Gilmartin
Art Director Paul Chin, Jr.
www.facebook.com/ sbi.hamptonroads
Contributing Writers
Paul Chin, Jr. Glenn Davis Paul DiNardo, CPA Blake Dozier Cherie James, CPA Brad McDonald Al Moore T.J. Prieur Art Radtke Julie Sokolowski, CPA Jessica O. Swink
Contact Us Please e-mail info@smallbusinessinsight.com for information regarding: Advertising SBI Emerging Businesses Letters to the Editor Subscriptions E-mail sbiownerscouncilHR@ gmail.com for info on SBI Owners Council
We at Small Business Insight are excited for all businesses preparing to have one of their best years ever in 2011, hope to fill the pages of this magazine with stories of their success. Happy new year!
www.twitter.com/ sbi_hamptonrds
Group: SBI Hampton Roads
www.flickr.com/photos/ smallbusinessinsight
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Growing stronger businesses.
Editor’s Desk
You’ve Come A Long Way, Baby A lot can happen in a year.
SBI Owners Council gives owners access to the best advice they can ever receive: advice from other business owners. More details available at www.smallbusinessinsight.com.
For instance, an infant goes from being a completely helpless alien without his or her mother to developing cognitive, language, and motor skills to the point of being an actual little person, complete with the ability to grab and pull someone’s hair and responding to his or her own name. A football team can go from a 8-5 record and losing The Game to its arch rival to recruiting a Heisman trophy winner and playing in the BCS National Championship game. (War Eagle!) Contracts can be signed and, in a matter of one year, businesses can double, triple and even quadruple in size, depending on the size of the contract. Finally, a magazine can grow from an 8-page black-and-white newsletter to a 48-page full-color magazine distributed to more than 8,000 small business owners in Hampton Roads. SBI Hampton Roads has done just that. In December 2010, we celebrated our one-year anniversary of publication in the Hampton Roads area. Today, we hardly have a chance to catch our breath as we plan events for 200+ attendees, let alone our upcoming Insight Breakfasts for advertisers. Also, our SBI Owners Council is a thriving organization for small business owners, with events each month including luncheons, socials, workshops and full-day seminars. We have a full plate of events scheduled for 2011, and we are even expanding into other markets throughout the year. More than anything, our aim at Small Business Insight is to help foster small business growth in Hampton Roads, as we believe this is a driving factor for a healthy economy. If you are a small business owner and are finding that owning a business is lonely, terrifying, stressful, fulfilling, heroic, humbling, or all of the above, two things: we agree, and we’re here to help. Small Business Insight is your tool and, through the magazine, events and membership organizations, I’m proud to say we are willing and able to be a top resource for Hampton Roads business owners. A year ago, we were a squiggling, vulnerable alien, trying to conquer the world. Next year, who knows where we’ll be. Where will your business be in a year? Until next time,
8 Small Business Insight | January/February 2011
Main Street Words from business owners about their neck of the woods.
In this issue:
In this new section of Small Business Insight, we highlight two business districts, and get the scoop from owners on what it’s like in their business communities.
&
Old Town Hampton Ghent Business District
To view responses from small business owners in each featured area, visit www.smallbusinessinsight.com.
All Photos by: Paul Chin, Jr.
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Main Street
Old Town Hampton
Old Meets New In Hampton
An all-inclusive community meets old-time charm. By Art Radtke
Old town Hampton is the oldest continuousEnglish-speaking settlement in North America, tracing its roots back to 1610. The harbor served as an entry point for ships from Europe with many shops and restaurants to serve both the travelers and locals alike. The city has seen many changes in the last 400 years, but still serves as a resting place for travelers and locals. Anchored by the Virginia Air and Space Center and the waterfront, the business district offers a community of businesses that is unique in its diversity and friendliness. This is best shown by the receptions hosted by the dock master for visiting boaters at one of the many great and diverse restaurants that is available to her within walking distance of the docks. These range from La Bodega, a gourmet wine and cheese shop, to Brent’s, an upscale eatery offering a rotating menu of fine-dining delights. If old-time Southern dining is more to your liking, then you need to visit either the Grey Goose or Mary Helen’s Southern and Creole Cuisine for some of the best home cooking you’ve had in a long time. If shopping is on your to-do list, Hampton has many unique shops for you to visit including the likes of The Virginia Store, Shabby Chic, Best of British and The Hampton Stationery — one of the oldest stores in town. Whenever you visit Hampton, you will be thrilled with the eclectic variety of shops, restaurants and activities it offers. For more information, visit www.downtownhampton.com.
10 Small Business Insight | January/February 2011
Go online to read about the following businesses: • • • •
Brent’s Health Partners Home Healthcare, Inc. Shabby Chic The Virginia Store
www.smallbusinessinsight.com
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Main Street
Ghent Business District
Go online to read about the following businesses: •
•
12 Small Business Insight | January/February 2011
Batchelder & Collins, Inc. • Calvin & Lloyd • Changes Hairstyling & City Spa • Doumar’s Cones and Barbecue Five Points Community Farm Market • Frank Spicer Co., Inc. • Gayle’s Wigs N Things • Guy’s Upholstering & Interiors • Harbor Gallery • Hustead’s Canvas Creations • Levin’s of Virginia • Mediation Center • Michael B. Hamar, PC • Naro Cinema • New Leaf Ghent • Novelties Unlimited • Rapid Refill • Rowena’s Inc. • The Space Above • Yukon Lumber Company
www.smallbusinessinsight.com
Convenience Meets Quaint
Ghent Business District satisfies both consumers and business owners needs. By Paul Chin, Jr.
Ghent is one of Hampton Roads’ most unique business districts. In its few square blocks, there are artisans, eclectic gift shops, wonderful restaurants, and professional services. Our area’s oldest business landmarks — Naro Cinema and Doumar’s Cones and Barbecue — are both located in Ghent. Ghent thrives on its local pride and support. Many of the business owners grew up in the area, went to Maury or Granby High School, received degrees from Old Dominion University and stayed in the area to live and work. The Ghent Business Association plays an integral part of this community and coordinates events and activities all year long. Rowena Fullinwider, owner of Rowena’s,
says that living in Ghent is convenient because “everything you need is right there.” Ghent is reminiscent of a time before mega malls and department stores. The area has a high concentration of niche craftsman producing fine hand made products. Chris Calvert, owner of Yukon Lumber, deals in exotic lumber used for high end photo frames and furniture. Brad Bonney, owner of Guy’s Upholstery, creates custom made furniture for the most luxurious hotels in the country. Richard Levin, owner of Levin’s of Virginia, makes the “antiques of tomorrow” because his handmade beds have a double lifetime guarantee. Claus Ihleman, owner of Decorum Furniture and the Palace Shops, said “the key
is to find out where you can find the best made product to meet the consumers need, regardless of where its made. We are happily finding that it’s an American made product.” As the economy slowed, Ghent was affected like the rest of the nation, but not as severe. The business owners found that their niches kept them busy, as their specialties couldn’t be duplicated or cheapened. Small business is the backbone of our economy and supporting the local business districts like Ghent eases the recovery. When asked about opportunities in Ghent, Richard Levin said “I’m bullish on Ghent, its historic Ghent, it’s only going to get better.”
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Columns
Commercial Real Estate BLAKE DOZIER CB RICHARD ELLIS
L
Take Advantage of Affordable Lease Rates While They Exist ifelong residents and local business owners in Hampton Roads know that our region has three major economic engines: the port, the military/industrial complex, and tourism.
Typically the port and tourism are more directly affected by macroeconomic trends, and so predictably, they both have been down over the last few years due to the global recession. The military has been a more constant driver to our economy, but with recent announcements of the possible closure of the Joint Forces Command and the potential loss of an aircraft carrier to Florida, it has seemed that every pillar of our region’s economic vitality is under siege. Those are just some of the biggest reasons among many that multiple manufacturing, import/export businesses in Hampton Roads and even companies that have considered locating here have hunkered down and put expansion plans on hold. This has created incredible opportunities for companies that use warehouse and manufacturing space. There is a host of reasons to believe that the future of the Port of Virginia is bright, and so owners of companies that use a port would be wise to lock into low lease rates in quality space here. In the years leading up to the recent global recession, there was an unbelievable level of hype surrounding the projected shift of importing of goods from the West Coast over to the East Coast. Several legitimate factors contributed to this, including the congestion at the West Coast ports and the proposed widening of the Panama Canal to accommodate today’s larger ships.
The constant threat of union strikes on several years to buy land and build large the West Coast caused major supply chain industrial buildings on the speculation that headaches, and many companies began di- the tenants would come. versifying their supply chains and sending Many of them pulled the trigger and their goods to East Coast ports. built state of the art industrial facilities of Projections on future growth in imports/ 100,000 to almost 400,000 square feet. exports were based on a constant high levThe three biggest buildings that were el of growth that was shattered in 2008 and delivered on a speculative basis (without 2009. a lease in place) here in Hampton Roads Port throughput for the Virginia Port fa- have been empty since their completions cilities in 2009 decreased 16 percent over in 2007 and early 2008. 2008 according to the Virginia Port AuAnother large one that was completed in thority. 2006 is still almost half empty. For much During the good years that led up to the of the time since those buildings were debust, everyone was buying the hype of un- livered, the lease rates for Hampton Roads limited constant growth in global trade and industrial buildings were not competitive the pending explosion in new large port us- with buildings in port cities of Charlesers that would come to Hampton Roads to ton and Savannah, and many companies utilize the Port of Virginia. looked here and ultimately decided to go There were very few large industrial to those markets instead. buildings available so if a tenant had a As a result, availability rates are now need and could consider Hampton Roads, around 13.5 percent and lease rates today there were limited to no options for them for large warehouse space are 25 to 50 perto lease unless they waited a long time for cent below the peak of late 2007 and early a build to suit. 2008. Many of these companies went to other markets that There is a host of reasons to already had an abunbelieve that the future of the Port of dance of large cheap Virginia is bright, and so owners of space. A “who’s who” of different national companies that use a port would be industrial property wise to lock into low lease rates in developers came to quality space here. Hampton Roads in a constant stream for
14 Small Business Insight | January/February 2011
Fortunately, the tide is turning and good fundamentals and improvements in Port infrastructure will lead to a solid and steady recovery. Port throughput at the Port of Virginia was up 10.5 percent during the period of January through October 2010 over the same period in 2009 according to the Virginia Port Authority. Joe D. Harris, spokesman for the Virginia Port Authority had this to say about the competitive position our port facilities have placed us: “From water depth to capacity to modern facilities to rail access to capacity for expansion, we have a number of assets that are unparalleled on the US East Coast. During the next five or six years a new class of big vessels graduates into service and that is when this unique set of assets is really going to begin to pay dividends because there will only be one place on the East Coast that can handle those vessels: Virginia. In comparison with our competitors, we’ve completed all the planning and
building – we’re ready.” It’s not just the Port improvements and the widening of the Panama Canal that make Hampton Roads’ future bright. Virginia has been consistently ranked as the top or near the top state for business by Forbes Magazine. Our region’s strategic Mid-Atlantic location allows a company based here to deliver products to 100 million consumers within a 10-hour truck drive. The Heartland Corridor rail connection opened in September and cuts more than 230 miles off of the rail route from the Port of Virginia to Chicago and has the height on each bridge and tunnel to accommodate double stacked containers. And these are just a few of our assets. Even though we are seeing small signs of improvement with port throughput and even in the overall economy, the industrial market will not recover until many of the large blocks of space that have been sitting empty are able to obtain tenants, and therein lies the opportunity for businesses
that use industrial space. An overall improving economy is very slowly eliminating uncertainty and inspiring many business owners to start making moves again and take advantage of the depressed industrial market. Once the handful of large spaces is leased up, our rates will rise again until more supply can be delivered and, for the foreseeable future, it will likely be delivered at a much slower pace. Hampton Roads has many assets, and industrial space can be acquired at a discount right now so that your business can take advantage of those assets. Blake Dozier is a commercial real estate agent in the Norfolk, Virginia office of CB Richard Ellis. He can be reached at 757.217.1878 or by e-mail at blake. dozier@cbre.com.
www.paulchinjr.com paulchinjr@gmail.com | 757.630.2183
Commercial, Event & Por trait Photography
Columns
Information Technology AL MOORE MARATHON CONSULTING
S
Leveraging IT Talent For Your Small Business mall and medium sized businesses often face a significant challenge when it comes to supporting their information technology assets.
Dependence on information technology can be just as important for a small business as it is for a global business. However, the funding and resources needed to support the technology are generally not as available as they are in the larger businesses. This article presents an affordable, costeffective solution to that challenge. This is particularly true when it comes to staffing. One question frequently heard is this, “What type of person do we need to hire to keep our systems operational and up to date?� The real answer is not about a person. It is about personnel. For a growing company that relies on technology as a key component of its operation, the demands are too broad to be met by one individual. A highly paid network engineer, systems architect, or business analyst will not be happy if he or she finds themselves changing printer cartridges all day. By the same token, a network administrator or mid-level software developer is not likely to be up the challenge of defining and executing an IT strategy for the enterprise. When one takes inventory of the various responsibilities required to support and enhance the software and other IT assets needed to run a
company, the picture usually looks like this:
16 Small Business Insight | January/February 2011
As one can see, the knowledge, skill, and experience required cover too many topics and responsibilities to be handled effectively by a single individual. One popular approach is to utilize a blended staffing strategy under which the company holds its employee count to a minimum. Outside resources are then brought in on a contract or consulting basis to assist with peak loads or to address specific technology or management issues. Salaried employees are typically responsible for daily, somewhat routine tasks such as network and user administration, end user support, and spot hardware replacements.
Consulting resources are used for higher level requirements such as technology utilization planning, priority definition, large scale network or software upgrades, project management, and assistance with software selection. A critical component in the blended staffing strategy is the selection of one or two service providers. Holding the number to a minimum allows the company to establish long-term relationships with the service providers. This relationship benefits the buyer by creating a body of knowledge within the buyer company and the service provider. This enables the provider to deliver a high level of continuity to the buyer and avoids the need to re-orient the service provider on each and every IT project. This allows the buyer to undertake tactical IT changes that align with the overall IT strategy. When searching for an IT service provider, the buyer should seek a provider with:
1.
An outstanding track record of success when assisting companies of like size
2.
A wide range of service offerings that align with the buyer’s anticipated needs
their services in accordance with industry “Best Practices”
Depth of resources that will allow the provider to be responsive to critical, shortterm needs and lessen the dependence on specific individuals
Utilization of Best Practices during software development and project management tends to lower the Total Cost of Ownership for those application systems
Close proximity to the buyer in order to avoid travel and per diem expenses
Use of outside providers lessens the dependence on any single employee and dramatically decreases the risk of having all systems under the control of a single individual.
3. 4.
Utilization of the blended staffing strategy provides the following benefits to the smaller enterprise:
1. A wide range of talents can be
brought to bear, without exposing the buyer to increased salary expenses
2.
Outside service providers maintain awareness of industry trends and techniques that typically goes beyond what an in-house employee can provide; this applies to those techniques that have been proven to be ineffective, as well
3. Good IT service providers deliver
4. 5.
As shown, the blended staffing strategy offers many benefits. When used properly by the small or mid-tier business, those organizations can place their IT capabilities on par with those of far larger organizations. Al Moore is the president of Marathon Consulting, LLC, a Virginia Beach-based IT consulting firm serving commercial and local government organizations since 2006. Al specializes in identifying and implementing IT solutions that bring measurable value to Marathon’s clients.
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Columns
Accounting for Small Business PAUL DINARDO WALL, EINHORN & CHERNITZER
What Will Happen To Your Business When You Leave? We understand that business owners are so busy addressing today’s economic challenges that they can overlook the critical task of exit planning. We also understand that, at some point:
2.
1.
D
All owners exit their businesses; and when that date arrives,
Owners want to exit on their terms; the two most important of which are financial independence and choosing the person or entity that will receive or buy the business.
esigning a comprehensive exit plan — based on your exit objectives and flexible enough to adapt to changing economic, business and personal circumstances — can be the difference between liquidating your company and selling or transferring it for millions of dollars. Let’s look at the characteristics of a good exit plan in light of a sad, but common story of two hypothetical business owners who failed to plan. Several years ago, I met with Jim and Tim McCoy, the owners of a thriving construction company. What I assumed would be a business-planning meeting turned into a “We-are-getting-out-of-business-sohow-do-we-do-it?” meeting. As successful as they were, the McCoys were tired of navigating the labyrinth of government regulation and of paying ever-increasing taxes. Ultimately, the day-to-day grind of running a multi-million dollar company had taken its toll. For the McCoys, a sale to a third party was not feasible not only because neither brother was willing to remain with the company after a sale, but also because they had failed to develop a strong management team. Few savvy buyers will purchase a company without a great management team committed to remain after the sale. Transferring ownership to one or more key employees was also out of the question. None had been groomed to assume ownership responsibilities, nor had the McCoys taken action to fund this type of buyout.
Transferring the company to children was impossible because the children of both owners were too young to be active in the company. The McCoys’ only exit option was to liquidate because their highly profitable company had little worth beyond the value of its tangible assets. After the liquidation sale, dozens of employees lost jobs and Jim and Tim left millions of dollars on the table. How can you avoid the McCoys’ fate? Plan Ahead. The issues Jim and Tim ignored (among them grooming a management team and failing to plan) proved to be their downfall. But these and most other issues — if addressed in advance of your exit — can be resolved in a manner that is cost efficient, enables your business to be transferred and adds to the value of your business. In our experience, most owners with exit plans need five to 10 years to implement all the strategies necessary to exit successfully. Owners without exit plans spend far longer than that waiting and hoping for a buyer. Set Measurable Goals. Your exit plan must set goals, provide accountability, and measure results. This is especially important when one goal is to protect and grow value, and minimize taxes. Incorporate Flexibility. Create a plan with the flexibility necessary to react quickly and effectively when the unexpected happens. Use a Proven Process. One way to look at the exit planning process is to associate each step with a question. As you progress through the process, you will be
18 Small Business Insight | January/February 2011
able to answer “Yes” to each one. • Step One: Set Exit Objectives.
Do you know your retirement goals and what it will take—in cash—to reach them? • Step Two: Determine business value.
Do you know what your business is worth today, in cash?
• Step Three: Increase business value.
Have you identified the best ways to increase the value and cash flow of your company? • Step Four: The third-party sale.
Do you know how to sell your business to a third party without getting killed by taxes? (or)
• Step Five: Transfer your business to insiders.
Do you know how to transfer your business to insiders (family members, coowners, or employees) for cash rather than give it away?
• Step Six: Protect your business.
Do you have a continuity plan for your business should you die or become disabled? • Step Seven: Protect your family.
Do you have a plan to secure your family’s financial security should you die or become disabled? The thought and actions that go into answering these questions constitute your unique exit plan. Article presented by Paul G. DiNardo, Wall, Einhorn and Chernitzer, PC, pdinardo@wec-cpa.com a Member of Business Enterprise Institute’s International Network of Exit Planning Professionals™. © 2011 Business Enterprise Institute, Inc.
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$ Strategy
Step Up Your Sales Game
A special section DEDICATED TO THE LIFEBLOOD OF YOUR BUSINESS: SALES 20 Small Business Insight | January/February 2011
Sales
It’s Time To Take Out The Headtrash
Brad McDonald, president of Sandler Training in Norfolk, offers advice to those struggling with common problems converting sales.
Short-term sales training typically addresses sales skills. Attendees learn great tactics from masterful sales trainers. But this same training never covers the conceptual problems (a.k.a. headtrash) that plague most sales or business development professionals. All the skill training in the world won’t help much if the headtrash is not eliminated first. Here are five conceptual problems that affect most of us in sales at one time or another and to one degree or another. BUY CYCLE How do you treat salespeople? Do you bust their chops for a lower price, pump them for free information, and then say you need to “think it over?” People sell the way they buy and buy the way they sell. However you treat salespeople is how you will expect and allow prospects to treat you. If you can’t make a decision, don’t expect your prospects to make one. NEED FOR APPROVAL Most of us human beings want to be liked, for it’s more fun than not being liked. But a problem begins when we want to be liked more than we want to make a sale. We all have psychological trash we’re carrying around. And a lot of it has to do with not being liked or loved by the right people: parents, spouses, and friends. If you want to leave a sales call with your
Have you ever attended a one-day sales seminar – packed with great closing tactics, nifty ideas for overcoming objections, and slick methods for delivering rock-em, sock-em presentations … only to find yourself a few days later doing the same things you did before the seminar? What happened? Where did all the great ideas go? Why hadn’t you implemented what you learned? prospect liking you more than you want to leave with his check, you might have an approval problem. Remember: sales is no place to get your emotional needs met. Sales is a place to go to the bank. NEGATIVE SCRIPTS When I was in third grade, our neighbors bought a new car. As my parents and I marveled at it, I asked, “How much did it cost?” Mom reminded me that it’s not nice to ask about money. In ninth grade, she discovered I was bumming dimes and quarters from my classmates in the lunchroom. This time she reminded me it’s not nice to ask for money. Years later I came into sales and had to ask prospects about and for money on a daily basis. But Mom was standing on my shoulder telling me: That’s not nice. We all have scripts from early in life floating around our heads: Don’t talk to strangers. Don’t bother people. You’ll never amount to much. It’s never OK to fail ... and others. Examine your scripts and make sure they are not standing in the way of your sales success. BECOMING EMOTIONALLY INVOLVED When your mortgage payment depends on making a sale or when you think you’re about to finally close The Big One, it’s tough to stay objective. Think like a brain surgeon. You don’t want him getting excited when he’s cutting on you. Whether it’s reality or not, your attitude in front of
a prospect should always be: I’d love to work with you but I’m financially independent and I don’t need your business. Once you are emotionally involved in a sales process, you’ll find it difficult to be objective and you won’t be able to negotiate from a position of strength. MONEY CONCEPT How much do you really believe you are worth? How much do you really believe your services are worth? If you grew up without a whole lot of money, it’s likely that deep down you have a belief that you’re not really worth very much. In sales, you can work for days or weeks without making anything and then one day in about an hour you can make a $9,000 commission, that is if you can bear the intense negotiating skills of your prospect who’s threatening to cancel the sale if you don’t lower the price. But if you have a weak money concept you might start to waver, feel guilty, and lower the price, and your commission, in the process. Remember, you are making exactly what you believe you are worth, not a penny more or less. Conceptual problems are not easily or quickly corrected. Doing so takes a concerted, long-term effort. If you want to hit a hole-in-one in sales, take the headtrash out first, then you’ll have the emotional ability to put your great skills to work. smallbusinessinsight.com
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$
A Winning Formula Allan Staley, president, and Kerry McCarter, CEO, have a process that is anything but touch-and-go.
Finding A Solid Sales Solution For A New Product By Brad McDonald Photo by Paul Chin, Jr.
22 Small Business Insight | January/February 2011
S
how to use the bandages. It was not unusual for a doctor to ask the rep, in front of a patient, “How do I use your bandage on this particular wound?” “In fact,” McCarter said, “we learned a lot along the way. The sales rep had to think like an owner of a medical practice. He had to be able to address concepts and concerns such as:
elling is a tough business, even when you’re moving a tried and true product. Dealing with prospects’ stalls, trying to keep appointments with those who have little respect for your time, knowing your best clients are being wooed by competition ... it’s enough to frustrate even the most seasoned business professional.
Imagine dealing with all that and selling a new product. That’s a significant challenge. At Soluble Systems in Newport News, CEO Kerry McCarter and President Allan Staley have hit on a winning sales formula, while selling just two products, both very new to the market. The company manufactures and markets a line of advanced wound care products under the brand names of TheraSkin® and TheraGauze®. These products compete in the U.S. within two large and growing wound care markets, active biologics and synthetic dressings. Both TheraSkin and TheraGauze are designed to help healthcare professionals treat difficult-to-heal chronic wounds in a healthcare market that is driven more and more to use clinically effective, low-cost products. Although TheraGauze had been thoroughly tested and proven in laboratory conditions by the end of 2007, there was a lot of work to do to get it accepted in the market place. The target market was medical doctors in wound care centers and group practices that included a podiatrist (both products work especially well on diabetic foot wounds). The first sales effort used a network of independent medical sales representatives. A typical rep was selling thirty-plus products. You can imagine that these reps were selling on price and selling what was popular. They weren’t motivated to pull the “new” product out of their bag and invest the time necessary to clinically demonstrate the advantages of TheraGauze. With no active sales effort and nobody asking for something that they didn’t know about, the products sat at the bottom of the sales bag. In late 2008 McCarter made two course adjustments. The first was to eliminate the independent reps and bring on direct sales reps who were selling only TheraGauze. This proved a bit more successful, however volume still remained low. Medical professionals who tried the products reported great results but they were not maximizing the full scope of the products’ capabilities. The problem was that “smarter” sales reps were needed because the doctors were asking sophisticated questions about
• How much value will this bring the M.D.? • How will this product affect his practice? • Will the M.D. or R.N. have to think or act differently? • How much time and effort do I need to put into a customer’s practice in order to make this a success for him? The second adjustment followed the discovery that TheraGauze made a great cover (literally) for bio-engineered skin substitutes (engineered skin grafts). “M.D.s were using an ineffective $1 gauze to cover a $1,500 bio-engineered skin graft and found that a $10 TheraGauze cover gave them better results. Then we met LifeNet Health and they found that TheraGauze worked well over their human skin allografts. One thing led to another and we entered into an exclusive distribution agreement with them to market TheraSkin in early 2010,” McCarter said. The next step, one that appears to be working now, was to hire sales reps with a more specific profile in mind. The desired qualifications were: be a “hunter” who can easily prospect for new accounts; possess a technical understanding and working knowledge of biology and chemistry; and be able to hold one’s own in a sophisticated medical discussion. Along the way Staley and McCarter learned a couple of other lessons: • Hire from startups as these folks are accustomed to making cold calls and doing cold walk-ins. • Don’t hire from established businesses because those reps are content with small increases in new business, they’re not hungry; they have more of a “farmer” mentality than a “hunter” mindset. • Don’t keep hunters on a tight leash. The characteristics that make a sales rep strong at prospecting also make him stubborn and independent minded. • Attrition is inevitable. Hire slowly, fire quickly. Sales people looking for work frequently promise the world. It’s important to remember that most also finish the way they start. If they start slow, the chances of seeing any radically different behavior and results later on is small. Another significant lesson was the value of a sales manager. It’s tough running a start-up company, introducing new medical products, and trying to manage a sales force on top of that. Sales remained the weak link at Soluble Systems until they hired Stephen Forden as their VP of sales. Forden came from a solid background of sales and sales management in the medical products industry. Today, he monitors the sales reps’ daily activities and holds them accountable for proper sales behaviors and results. McCarter said, “We failed twice to find the right sales model for what we’re selling.” But now, after three years of creating, evaluating, and adjusting their sales team, Soluble Systems is enjoying rapidly growing sales and revenues. Yes, sales is a tough business, but with the right formula and the right people, McCarter and Staley are up to the challenge. smallbusinessinsight.com 23
$ Strategy
Step Up Your Sales Game
Blake White, Owner of Endurance Network Services
Top-down Selling How one owner transformed his company into a client-acquisition machine. By T. J. Prieur Photo by Paul Chin, Jr. 24 Small Business Insight | January/February 2011
How do you sell as the owner of a company? It’s no secret that owners of small businesses wear many hats, especially in the beginning years. Whatever needs to get accomplished for the job, the buck stops with the owner. When it comes to sales, though, sometimes it can be a different playing field when selling as the owner of the business, rather than an employee whose only job is to sell. Blake White, owner of Endurance Network Services, is no different. His computer network services business has 12 employees, including him and his partner who are constantly out in the field. One of the key differences in being part of a sales force as an owner, according to White, is the client perception involved around the sales process. “Clients see me as an owner, manager and sales person,” White explains. “It can become sensitive when you are trying to close a proposal and simultaneously continuing to provide management and/or delivery services with that client.” White explains that having a separate sales force allows the client to separate owner/manager apart from someone trying to sell me something. “As an owner and manager I want to ensure the client is very content with our ongoing relationship and the staff we have delivering services,” White explains. “If we have a proposal pending, clients are sometimes uncomfortable having regular conversations about our ongoing relationship because they feel the call or conversation will ultimately switch to sales.” Selling as an owner does have one benefit that stands out, though: The ability to move a proposal and the sales along quickly. “As the owner and sales manager, I can put a deal/proposal together very quickly. It doesn’t require a lengthened approval cycle,” White says. “We do one internal peer review on the technical piece of the proposal and can get right back to the client with pricing.” Endurance Network Services’ position in the IT industry is unique. Rather than trying to fulfill every facet of IT, Endurance narrows its focus to just one area: computer network services and their delivery. While most of the other firms in Hampton Roads are all-encompassing, White boasts that the strength of Endurance is in its consultants. White’s philosophy is simple: “Do what you know best, and focus on that. Try not to be every thing to every client, and turn down or refer in those other areas,” he says. “Have we missed opportunities? Yes. But at the end of the day, I know I can deliver on 100 percent of the services we offer.” Being aligned with a network of strong, non-competitive partners gives Endurance the ability to offer services not directly related to network systems. This allows White and his team to deliver a whole solution and not leave a client with no path to find the resources he or she is looking for. Another key differentiator for the team at Endurance is their intentional choice not to resell hardware and software, ensuring
the recommendation of hardware and software appropriate to the clients business goals. “Most of the companies that align with us as direct competitors sell hardware and software. If I’m advising you on what to buy, and I also sell that, it muddies the waters on what I will recommend, and there’s a tendency to over-recommend,” White explains. “I make recommendations and nothing more, and sometimes we use what (the clients) have already.” By providing turn-key installation and configuration services, White and his team assist the client in finding the lowest price on the hardware and software through other vendors, ensuring their recommendations are not influenced by a one-time hardware or software sale, according to White. Looking forward, White expects to grow his business to 20-30 employees in the next 2-3 years to keep up the same pace of business.
BASIC KEYS TO SUCCESS From Blake White, Endurance Network Services
1.
Be an active listener. Clients in our field are relaying business and productivity challenges that are usually tied to their computer systems. One has to listen closely to really understand the problem at hand.
2.
Ask good questions. Over time, you have to develop an understanding about how your product (for us, computer systems) ultimately increases the client’s bottom line. This can be through increasing employee productivity because systems are up more or can be by stretching the use of existing computer hardware/software to allow them to defer costs. One has to ask good questions about their business and the issues at hand to determine how to best help them improve the profitability of their company.
3.
Set expectations. I am a true believer that if I say I am going to call you on a certain day at a certain time, I have to deliver. The same goes for a proposal: Promise appropriately. I hear this as a continual complaint from new clients. Delivery proposal in person. Many companies send over the proposal in e-mail and wait to hear back. You have to meet in person for even the smallest proposals for new clients and explain the pros and cons. Again, listen to the client’s feedback and modify accordingly. Explain honestly how it’s going to better their company. Be willing to admit mistakes. So many times sales/ delivery people in our field aren’t willing to admit there was a solution oversight. This is a basic core principle. Always be 100 percent upfront with clients and talk through changes, etc.
4.
5.
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CEO
Corner
We all do it this time of year. From the day after Christmas until the middle of January, each of us is engrossed in the process of identifying that set of principles that will hopefully guide our activities over the next year making us a better person: our New Year’s resolutions. Much time is spent upon personal reflection and growth; yet, in business, many of us never spend the time to truly identify those principles that are to guide our company’s growth and success. In business, those principles are embodied in our mission statement, vision statement, or quality statement. All of which do one important thing: they identify the principles that are important to the success of our company so, that together, each member of the company
GLENN DAVIS ON CALL HOLDINGS
Make a Statement With Your Business in 2011
can embrace that commitment. When creating your statements, you will find them much more impactful if you keep the following in mind: Team Buy-in. Include your employees and management team in identifying the underlying principles that are important to them and the business. Remember, once created, everyone has to believe in the statements. Keep It Simple. If you can’t remember your statement without pulling it from your wallet first, you can’t expect your employees to. Forget the prose and spend some time to really capture the essence of what you’re trying to get at. You’ll find you end up with a statement that is both short and memorable, and most importantly will have
meaning. Make It A Journey, Not A Destination. It’s not about identifying some arbitrary numerical goal upon which to get depressed or excited over depending upon how close you are to it. Your statement should be never-ending. You want a statement that your employees can embody now and forever. Lead By Example. If you don’t believe in your statements and follow them, no one else will. And people can tell if you’re faking it. Drive Them Home. Make the statements part of your internal or external marketing. Make them constantly visible. Remember these are the guiding principles for the success of your company; why would you not?
For my company, I felt it was important for each of our team members to embody the same corporate mission and commitment to quality. After starting with lengthy, multi-sentence statements for a Mission Statement and Quality Statement, our team eventually narrowed it down to the following:
Mission Statement: Quality Statement: When asked whether we mean the success of our franchise owners, franchise clients, corporate clients, or employees our answer is simply “yes.” Our mission is to enable the success of everyone associated with our brands, as well as anyone using our services. And we practice it! That is why our call center takes it upon themselves to help a customer find a successful resolution to their problem, even if our company is unable to assist them, and even
““
””
Enable Success Good Enough Sucks
if that means supplying the contact information of a competitor. We believe that the success of our business is directly related to the success of those that come in contact with our brands whether it is via franchise ownership, employment, services rendered, or complete accident. As for our quality statement, as you can imagine, it started as some long cliché about customer service and VIP experiences. After some work and discussion with most of
our employees, we arrived at those three words. It not only embodies how we feel about the quality of service we provide, but our dress code, office events, and just about everything else associated with our company. The best part, no one forgets it. So as you are finalizing your New Year’s resolutions, I hope you add writing your Business Statements to the list. Trust me, it will make for a much more prosperous New Year! smallbusinessinsight.com
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Manufacturing in Hampton Roads
Safety goggles required. Gurusamy “Mani� Manivannan, Morphix Technologies director of product development, and CEO Bart Heenan in the Morphix Technologies laboratory, where their products are put to the test of hazardous chemicals.
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SPECIAL SECTION
Just what exactly is the manufacturing community like in Hampton Roads? By T. J. Prieur Photos by Paul Chin, Jr.
“There’s a pretty big grouping of manufacturing in this area,” says Joe Stark, general manager of Bauer Compressors. “We lead a pretty quiet existence here. People drive by all the time and when they finally come in here, they say ‘Wow, we had no idea.’” Located in Norfolk, Bauer Compressors, Inc., is the U.S. headquarters of BAUER, which is a German-based manufacturing company specializing in high-pressure compressors and purification systems. BAUER specializes in the markets of breathing air and industrial air, to paintball guns and plastics technology. With offices internationally from Hong Kong to France, India to Egypt, BAUER’s Norfolk location is a 115,000 square-foot facility, and is the headquarters for the other four branches in the country. According to Stark, the parent company began in 1945 in a home garage. After parts were sold and the market was getting tapped in the U.S., it became obvious that a location was needed to handle the company’s business in the states. So the search ensued. “When Mr. Bauer first came over here, he looked all over,” Stark explains. “He was in the Midwest, in the central states, and the Northeast. They wanted proximity to a port because we bring in containers full of compressor pump and other engineered-type products.” When it came to the climate, Stark says, Bauer liked what he saw in Hampton Roads. Combined with a good smallbusinessinsight.com
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Manufacturing in Hampton Roads
Above, Bauer Technologies general manager Joe Stark stands next to a compressor block “cut away” used in training exercises. Left, a compressor block installed onto a mounting plate during a sub-assembly operation.
that most everything that we wanted to look for, we were able to find within a close proximity from us.” This is reflected in hiring decisions as well. Most of the employees at Bauer Compressors, Inc. have local roots in infrastructure and located close to major cities, he decided to open up shop here.
“There was an educated workforce, too, so it was a good pool of people to pull from,” Stark explains. “When you brought everything together, it just made sense that if you were going to do manufacturing, this is a good place to be.” Stark explains that most of the manufacturing community in Hampton Roads support the shipyard industries. “A lot of smaller manufacturing companies around here have a niche market (for example, some deal with government contracting), but it is a fairly strong area for manufacturing. As we’ve grown over the years, we’ve had several years of doubledigit growth back to back and had to reevaluate our competency sets and realize
Extension Partnership (VPMEP, which is now called GENEDGE Alliance), and the ODU Business Gateway. “Being a small company, we can’t do it all, so we do what we can to go out and find people to support us. Through meetings through the Corporate Circle at Old Dominion, I’ve met other people who have put me in touch with who to talk to,” Stark says. Recently, Stark has also joined Virginia Business Excellence Consortium, which is a network of businesses to help people solve common problems. Bart Heenan, CEO of Morphix Technologies, has a different outlook on his place in the manufacturing community, however. Morphix Technologies, located in Virginia Beach, develops and manufactures products that help detect hazardous chemicals and toxic gases in the air. Their products are used worldwide by military, first responders, emergency workers, homeland security and industrial personnel. While there are many benefits to being located in Hampton Roads, Heenan says his company relates more to a technology and scientific pool of resources, rather than a manufacturing one. “I don’t think there is a community of manufacturing in Hampton Roads,” Heenan explains. “A lot of our future growth is developing new products and bringing those to the market, so we see ourselves as
It just made sense that if you were going to do manufacturing, this is a good place to be. Hampton Roads, and have their own history and background in this area. Stark says most of the hiring and referrals are done through networking and interacting with suppliers. “Many years ago, I got in touch with Old Dominion University, and became a corporate sponsor of their College of Engineering,” Stark says. “So I always maintain a couple of interns at Old Dominion. Through them, I found more agencies.” The agencies Stark mentions are Virginia’s Philpott Manufacturing
30 Small Business Insight | January/February 2011
a manufacturing company and a technology company.” Heenan goes on to reflect that perhaps the function of the identity of Morphix is more technology-driven than traditional manufacturers, which puts the business in a different category all together. “We may be different from traditional manufacturers in that we outsource a lot of our production,” Heenan explains. “What we do here is make our key component (sensor) and complete the final assembly and testing ourself. It is molded and sewn
elsewhere, so we don’t do that kind of manufacturing.” The products created by Morphix use color-change technology to measure the level of exposure to toxic environments. The products are lightweight, waterproof and rugged, allowing their use throughout a large market. “Chemical detection is a pretty large market in that it is something the industry needs to keep their workers safe. That’s a relatively large market, and in that market, we fill a small niche,” Heenan explains. “On the order of hundreds of companies that participate in chemical detection market, we have a niche where a small number of companies in the world really compete directly with us, and what’s different about our products is that we are designing products to be used by every soldier, every firefighter, every cop, as opposed to traditional forms of chemical detection where you have an expert use a particular device.” Heenan explains that Morphix products are simple enough that all users can be trained on them in 5 minutes and you can go out and use it. One benefit Hampton Roads provides to Heenan is the abundant supply of workers. “There is a good supply of high-talent chemists in this area,” Heenan explains. “You’d think not being a chemical industry, there wouldn’t be a good supply of chemists, but we’ve found just the opposite. There is more of a supply than there is a demand.” Heenan explains that people graduating high school strong in science and pursuing higher education then come back to live in the area. “Also, the military is a big client for us. They aren’t the largest customer, but very big,” Heenan explains. “Having the Navy here, having JFCOM here if they stay, and NATO operations here — those all make for a great environment for us to sell directly to those clients. We are also a 3-hour drive to Washington DC, where military decisions are made.” Though Morphix Technologies is a niche manufacturing and technology/sciencedriven company, it still is surrounded by a plethora of resources. “We work with ODU, Norfolk State University and Christopher Newport University,” Heenan explains. “Also,
Hampton Roads Technology Council is a good forum for people to talk to one another, and there is a community of tech companies growing here.” While both Bauer Compressors, Inc. and Morphix Technologies are two different niche companies, they both fit under the manufacturing umbrella. Through different organizations and resources found in Hampton Roads, both of these successful businesses can continue to grow and become industry leaders in their markets. for years to come.
Morphix Technologies CEO Bart Heenan displays a couple of products that are designed to detect toxic chemicals in the air.
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Manufacturing in Hampton Roads
Reeling In More Big Players HREDA recruits; manufacturers benefit from area, tax breaks By Paul DiNardo Behind the scenes, the Hampton Roads Economic Development Alliance (HREDA) works to market Hampton Roads worldwide as the region of choice for business investment and expansion. HREDA serves as the region’s lead economic development and marketing organization for promoting and recruiting new business to locations in Hampton Roads. Their efforts are paying off. Over the past few years, Hampton Roads has been the beneficiary of international manufacturers establishing a U.S. domestic presence in Hampton Roads from countries as far away as the United Kingdom, China and Australia. “It is estimated that 13,000 personnel exit the military each year in Hampton Roads, offering a renewable supply of skilled and disciplined labor.” says Darryl Gosnell, President and CEO of HREDA. “Access to the labor pool makes our region unique. Hampton Roads has always had a very strong manufacturing base outside of shipbuilding for decades,” he says. Sometimes the companies first open their doors with only a sales office and distribution center. Eurus Blower, a manufacturer of positive displacement blowers, located from China in 2008. Cobham Composite Products located to Hampton Roads from the United Kingdom and provides composite products, including aircraft engine com-
Fishing for business HREDA lures manufacturers to Hampton Roads by boasting its labor pool and access to the port.
ponents, unmanned aerial vehicle components, and munitions for the civil and defense aerospace industries. One of the primary draws to the Hampton Roads region was the large base of defense-related industry. “Geography is also very important” says Gosnell. “We are located in the middle of the east coast with highway and rail access. Our world-class port which links us to the rest of the world is another major asset.” Hampton Roads currently is home to more than 300 manufacturing companies and 2010 was another active year for the region. HREDA hosted 13 manufacturers visiting the region, seven of which were looking to establish operations from abroad. “When an expansion or relocation project is identified, HREDA will act as a consultant and facilitator, helping the company investigate our region in a time efficient manner,” says Gosnell. “We’ll provide research, identify available sites and buildings and make introductions to state and local economic development personnel as well as to existing businesses in the region that can assist them.” Virginia is consistently rated as one of
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the best states in the country in which to conduct business. This pro-business climate manifests itself in a whole host of incentives and services to assist business growth and reduce the costs of opening or expanding a business facility with Virginia. Incentives include financial assistance, infrastructure development grants, tax credits and exemptions, customized training and technical support programs. Tax Benefits for Manufacturers in Hampton Roads One of the most valuable but often overlooked benefits of a manufacturer operating in Virginia is the lack of a “throwback” rule when determining state taxable income. If a manufacturer operates only in Virginia, then Virginia taxes 100 percent of the income. But what if a manufacturer operates in more than one state? The taxable income generated is typically shared, or “apportioned,” between the states in which the manufacturer operates based on a formula of sales, payroll and property deployed. If structured properly, under Virginia’s
apportionment rules, a multistate manufacturer could be in a position to apportion sales to states in which they are not required to file an income tax return, effectively apportioning sales to nowhere and escaping taxation! For the more environmentally conscious manufacturers, there is a green job creation tax credit that can be taken for up for five years. A “green job” means employment in industries relating to the field of renewable, alternative energies, including manufacture and operation of products used to generate electricity and other forms of energy from alternative sources that include hydrogen and fuel cell technology, landfill gas, geothermal heating systems, solar heating systems, hydropower systems, wind systems, and biomass and biofuel systems. Virginia manufacturers will be eligible to receive an income tax credit equal to 30 percent of all expenditures made for eligible worker retraining. Eligible worker retraining includes courses at Virginia community colleges
and private schools or retraining programs through approved apprenticeship agreements. The rate of Virginia’s sales tax is 5 percent and among the lowest in the nation. Manufacturers’ purchases used directly in production, including machinery, tools, spare parts, industrial fuels and raw materials are exempt from sale and use tax. A partial list of other exemptions is as follows: • Certified pollution control equipment and facilities • Custom computer software • Purchases used directly and exclusively in research and development (federal tax credits abound here as well!) • Semiconductor clean rooms and other tangible personal property used primarily in a semiconductor product. The New Jobs Program targets expansions of existing companies or new facility locations which involve competition with other states or countries. There must be an increase of 25 net new jobs within 12 months and require a capital investment of
as least $1 million. The Small Business New Jobs Program supports existing Virginia companies which have 250 employees or less. There must be an increase of five net new jobs and requires at least $100,000 in new capital investment. From time to time, manufacturers and distributors undergo an integration of new technology into their production processes, changing product lines in keeping with marketplace demands, or substantially changing service delivery processes, all of which require an assimilation of new skills and technical capabilities. The Retraining Program provides services and funding to manufacturing companies and distribution centers to assist in upgrading the skills of existing employees identified as essential to the production or distribution of a product. Hampton Roads offers may benefits to businesses looking for a competitive advantage and there are plenty of resources available to help locate them.
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Manufacturing in Hampton Roads
Overseas Sourcing: Resources, advice and perspective from local distributors
By Al Moore & Blake Dozier Photos courtesy of Virginia Port Authority
Between 1910 and the mid1930s,
the U.S. Navy based its Asiatic Fleet in the Chinese Republic. The period was marked by highs and lows in the relationship and ended poorly. Among others, an enduring image emerged: that of the China sailor. These career Navy personnel would spend their entire careers in the U.S. Asiatic Fleet. Many retired and took up residence in the Republic. The modern image of this lifestyle was cemented 34 Small Business Insight | January/February 2011
by the 1966 film, “The Sand Peoples,” starring the late Steve McQueen. Life was good and the living was easy for those individuals who knew their way around the country. Asia has again emerged as a valuable center of economic activity, with many countries providing millions of tons of manufactured goods. Knowing one’s way around that market is just as essential now as it was a century ago. Thankfully, mutual economic benefit rules the day — not gunboat diplomacy. If you’re one of the millions of people who own a small business and have an idea for a great consumer product, how do you go about acquiring an offshore supplier? You have done enough market research to know that demand exists and there is limited com-
petition. You’ve contacted U.S. manufacturers and their quoted prices are too high to be competitive. Friends keep telling you to look overseas. Where do you start? Like most business ventures, overseas sourcing presents a host of opportunities, as well as pitfalls. This article will help shed some light on this approach to product development. SBI did not have to travel far to get the answers. We spoke with owners and supply chain managers from several Hampton Roadsbased companies that have been sourcing product in Asia since the mid-80s. They each have enough experience to write a book. The stories they tell prove just how much the process has matured over the past 25 to 30 years. smallbusinessinsight.com
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Getting goods from the overseas manufacturing site to customers can be a lot more complicated than one would think.
Ed Hayes, operations manager for SwimWays Corporation, spends a significant amount of time in Asia, visiting factories, attending national and regional trade shows, and making deals. “It’s just so much easier than it was 25 years ago,” says Hayes. “The Internet and the amount if information it provides creates a much more reliable trading path,” he continued. Ed suggested doing a Google search for a trading company that specializes in the type of product you want built. “If you Google ‘Chinese trading company toys,’ Google will return more names than you can use,” Hayes says. Trading companies are the first and most important step a buyer can take. They serve as a “super middleman,” between the buyer and producer, handling multiple phases of the product development and production cycle. The better ones specialize in a limited number of product categories, have long relationships with multiple factories, and offer a full range of pre- and post-production services.
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Based on a sketch, photograph, or actual sample of the item, the trading company can perform all of the product engineering and manufacturing specification tasks. They provide production quality control, post-production inspection, and packaging. Therefore, a potential buyer can start with a product idea, and get a fully loaded price quote for everything needed to put it on the loading dock. A surprising aspect of this process is its lack of formality and contractual documentation. According to Michael Ricks, owner of Furniture Classics in Norfolk, “It’s all based on a handshake. Once a relationship is established, the paperwork just gets in the way.” Ricks’ company sells quality furniture wholesale to 30 of the top 100 furniture retailers in America. He travels abroad several times a year to visit the places where his products are manufactured. His products are sourced from Indonesia, China, the Philippines, Vietnam and Egypt. Both Ricks and Hayes commented on the fact that these trading companies are bonded, have been in business for years, and have a reputation to uphold. Hayes went on to say that the horror stories sometimes reported in the press are extremely rare. According to both of these very experienced buyers, the typical procurement cycle contains these steps: Identify a reputable trading company, check references, provide them with a sample or other adequate description of the item, execute a non-disclosure agreement (NDA), have them produce a sample and a price quote for the initial tooling and eventual production, visit the factory, be prepared to make a 30 percent down payment to cover tooling and start-up costs and pay the remaining 70 percent when the product ships and, finally, take delivery and inspect the goods. One of the hurdles is the quantity, referred to as the MOQ – minimum order quantity. Typically, the best deals can be acquired when shipping container-sized lots. Getting goods from the overseas manufacturing site to customers can be a lot more complicated than one would think. Many companies use customs brokers and international freight forwarders to handle this process. The Hipage Company, Inc. in Norfolk was founded in 1927 and is one of the largest privately held companies in the country in its industry. Executive vice president and co-owner Linwood D. Beckner explained that a customs broker and freight forwarder is “essentially like a travel agent for cargo and helps clients meet the regulatory requirements of the countries they are shipping to or from, including everything necessary for the cargo to clear US Customs and be delivered to its final destination.” Furniture Classics uses Hipage to assist with their overseas sourcing because customs brokers and international freight forwarders “know how to ship anything from point A to point B and do it in as short a time as possible and at least cost as possible,” according to Beckner. These companies have proven that, armed with little more than an idea, a small business can convert that idea into a real business venture, and in a relatively short time.
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Manufacturing in Hampton Roads
Collective Brainpower.
xTuple software provides manufacturers with an ever-expanding ERP solution. By T. J. Prieur Photo by Paul Chin, Jr. Manufacturers have many, if not most, of the business needs of that they would have to maintain themselves, essentially getting larger companies. With those needs come a number of complexi- into the software business,” Lilly explains. “Open source meets ties in processes, and most manufacturers use, or would like to use, that need, and it’s a business process solution, not a technical one: some sort of ERP — Enterprise Resource Planning — software to You piggyback on the collective brainpower and work of tens of manage the flow of information in the business. thousands of companies in various industries, and get a product An ERP system links all the operations inside a business – from that is more powerful, more adaptable to your needs, and easier to sales to accounting, from customer relationship management to maintain over time.” purchasing, manufacturing, inventory, and distribution. xTuple doesn’t just service manufacturers, though. The software Unfortunately, there is no one-size-fits-all ERP solution for all is applicable to just about any form of small business, including small manufacturing businesses. A cost of hundreds of thousands distribution, retail, and professional services. xTuple has the abil— if not millions — of dollars is just not an option for manufactur- ity to manage financials, inventory control, purchasing, customer ers whose survival may hinge on a $20 part holding up a million- relationships and sales, all in one system. dollar operation. So far, the free version of the software (PostBooks Edition) has While there are entry-level options such as Quickbooks desk- been downloaded more than 450,000 times, and has been the #1 top accounting software , there is a large gap between those two most active open-source project in the world, as measured by the choices, with little in between. widely-used SourceForge.net website. This verEnter Ned Lilly, CEO of xTuple, an opension also contains significant manufacturing funcsource ERP software company based in Nortionality. folk. Open source is a method of making “There are many companies running their busisoftware that allows users around the world ness on the free software that we never hear from,” to have free access to the “source code” of Lilly says. “These people are smart, sophisticated, the software so they can make improvements and agile enough to install and set up the software or customizations to fit their business more on their own — from watching our how-to videos, quickly – and inexpensively. reading our documentation and message boards on “xTuple began life as OpenMFG,” Lilly our website. In return, many of them end up helpexplains. “As the name suggests, the coming us fix bugs, contribute enhancements, and anpany sought to bring together the worlds of swer other peoples’ questions. There aren’t always open-source software and manufacturing.” dollars changing hands, but there’s value being For Lilly, the two worlds are a match made created on both ends.” in heaven. xTuple’s two commercially licensed products, “Open source seemed like a natural anxTuple Manufacturing and xTuple Standard, offer swer to the business questions faced by small the same core functionality, but add additional feato mid-sized manufacturers: They needed tures for bigger companies. The same code makes an affordable solution that could be easily the software look and feel exactly the same. modified to reflect individual business proSo companies that may have needs for the more cesses, but not something totally customized — Ned Lilly, CEO of xTuple complex software can “ease into” the software
“There aren’t always dollars exchanging hands, but there’s value being created on both ends.”
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“We’re growing at a good clip, and with all the input from users around the world, our product improves at an exponential rate, with an overall quality and rate of improvement superior to products from companies 100 times our size.” — Ned Lilly, CEO of xTuple
with the free downloadable version, and when the business owner is ready, he or she can buy the licenses for the commercial versions. “Manufacturers are still the largest segment of our customer base — and fundamentally, that makes sense, because manufacturing is where ERP can deliver the most value, most quickly, by helping to control costs, increase profits, and grow the business,” Lilly explains. “The current xTuple Manufacturing product is the direct descendant of the original OpenMFG product, and we have simply added enhancements over the years as customers have requested them — or in some cases, written them themselves.” As an example, Lilly cites one customer who wrote a module based on Lean Manufacturing and “Theory of Constraints” concepts that is, essentially, a simplified shop schedule. It gives floor workers a constant view into what the top priorities for production are, given the ever-shifting real-world dynamics of a growing business. The team goals at xTuple are two-fold: make the software as easy as possible for people to use, and put it in as many people’s hands as possible. By not working themselves into knots trying to monetize every pair of “eyeballs” looking at xTuple’s product,
Lilly explains that everything has a way of working itself out. “This kind of software is so mission critical, it’s going to be a rare company that won’t want some sort of safety net when they’re using it to run the business. So whether a company has largely educated themselves on the product, or whether we’ve worked with them in a more traditional sales process, by the time they’re ready to go live, we’re able to give them exceptional customer support.” Lilly says. “We’re growing at a good clip, and with all the input from users around the world, our product improves at an exponential rate, with an overall quality and rate of improvement superior to products from companies 100 times our size.” Lilly says this quality dynamic, and the range of companies that xTuple works with, make his job a gratifying one, and one that makes him excited to go to work each day. “Companies of all size need these tools, and we’re trying to put the software in the hands of more small businesses, so it’s not just global giants using this,” Lilly says. “Small business is where innovation happens. It’s where the most meaningful economic activity happens. And we really feel like we’re doing our part to help smaller companies be more competitive, regardless of the macroeconomic climate. It’s exciting.” smallbusinessinsight.com
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Insight
Manufacturing in Hampton Roads
David Angelico, President of Air Systems International
Breathing Easy
Through growth and economic downturn, Air Systems continues to run efficiently and grow steadily By T. J. Prieur Photo by Paul Chin, Jr.
avid Angelico has been in the safety business since 1977. When he started his business 26 years ago, he only had $5,000 in the bank and a credit card. Not once has he missed a payday, and has never had to lay off anyone because of the recession. What’s his secret? “It’s just a matter of having good people around you, and people who can do certain specialized jobs in the company,” Angelico says. His business, Air Systems International with global headquarters in Chesapeake, has distributors in every major country in the world. Selling more than 700 products to aid in breathing air filtration for confined spaces, Angelico specializes in tailoring breathing apparatuses to a variety of industries, including fire/ rescue, SCUBA divers and the Navy. “We’ve built the business from the customer’s needs,” Angelico explains. “They tell you what they need and we fulfill it.” Most of the items available from Air Systems first comes from a catalog of items. From there, each customer can customize that product to fit his or her needs. Because most of his business is generated by word of mouth, Angelico is careful to cover the needs of each customer, big or small, and exhibit unparalleled customer service from purchase
throughout the life of that product. “Boeing recommends our products,” Angelico says. “We do a good job over the years taking care of them. Also, the Air Force, Army — when they think of breathing air, or safety products, they think of us.” Although Angelico and his team put much emphasis on customer satisfaction and retention, employee satisfaction and retention is a worthwhile byproduct. The first employee Angelico ever hired is still with the company, 23 years later. “The biggest challenge is bringing together different personalities and getting people to work together,” Angelico says. “The best way to do that is to treat them as you would want to be treated. We work together as a unit, though, and it seems to work.” When it comes to running the business, Angelico has a simple philosophy: The buck stops with him. “When there’s a lot of different personalities and types of people running the company, it’s too much on the control side,” Angelico explains. “There is only one person to answer to and that’s our customer. I want to make them know we get everything right. In my job, it’s always getting the customer first.” Like any other small business, Air Systems has its own sets of challenges. According to Angelico, one of the hardest challenges is growing a business from a small- to medium-sized business. Acquiring capital and manpower to get to the next level is sometimes easier said than done. “The advantage with us is that we are a very niche market. We deal with so many different people and communicate with those people, so we have the manpower to take care of people,” Angelico says. The next step in the evolution of Air Systems, according to Angelico, is to bring in an external salesforce. This, he hopes, will help get his business to the next level. One area that Air Systems is not struggling heavily in is dealing with the current economic state. “We’ve been through four or five recessions in the past, so we just know how to handle it,” Angelico explains. “Just cut expenses, and work through it. So far, we’ve beaten last year’s numbers.” Angelico credits this relaxed, focus drive to having serviced different industries for 30 years now.
There is only one person to answer to and that’s our customer. “You have to understand your customer. You provide the product and back it up with good service,” Angelico explains. “This goes to the simple things like the person answering the phone. Trying to stay up to date with communication. Make sure you are on top of that.” By keeping customers happy and communicating as clearly as possible, Angelico and his team at Air Systems continually meet their goals of both customer and employee satisfaction. smallbusinessinsight.com
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Bob Fitzgerald of Bosh Technology Services, Mike Melo of ITA International and Steve Palmer of Anchor Innovation.
Tim Hogeland of Rocket Direct Communications, Matt Strother of GStek, Inc., Paul DiNardo of Wall, Einhorn & Chernitzer, Tim Strother of GStek and Greg Olson of Rocket Direct Communications.
The 2010 Local Inc. Honoree Luncheon
Lake Wright, Virginia Beach
Deb Mundy of Small Business Insight, Mark Johnson and Nina Cunningham of Liberty Tax and Debbie Higgins of Impressions In Print.
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Allie Wittkamp and Mark Hubbard of TowneBank
A Great-looking Group All the local Inc. 500/5000 honorees in attendance pose for a photo.
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n Nov. 4, Small Business Insight hosted a sell-out luncheon to honor all of the local honorees who made the Inc. 500/5000 List of FastestGrowing Private Companies in America. Before the luncheon began, the SBI Owners Council held a private reception for all of the honorees and Council members. Success story after success story poured out and business owners across Hampton Roads made introductions and connections to further their business. The SBI Owners Council is designed to consistently provide opportunities for business owners to learn from the best experts around: other business owners. Modeled around peer-advisory and exclusive events that encourage conversation and proactive networking, owners come together to work through issues, celebrate successes, and foster strategic relationships that prove beneficial in the long-term. Since its inception in the summer of 2010, the SBI Owners Council has grown to more than 50 member businesses, representing industries ranging from financial, legal, industrial, retail and everything in between. If you are interested in joining this premier organization of business owners, you may visit www. smallbusinessinsight.com/sbi-ownerscouncil for more information, or e-mail sbiownerscouncilhr@gmail.com. Those who qualify for membership into the SBI Owners Council may attend one event as a guest for the cost of that event.
Upcoming Owners Council Events January
February
March
April
Owners Council Luncheon
Owners Council Luncheon
Owners Council Luncheon
Owners Council Luncheon
Paul DiNardo, partner at Wall, Einhorn & Chernizer will discuss the lesser-known tax exemptions business owners should know.
Chuck Schue, president of UrsaNav, will speak on his business’ success, and how to overcome struggles presented by company growth.
For the topic and information about the speaker at this Owners Council luncheon, please view our events calendar on our website.
For the topic and information about the speaker at this Owners Council luncheon, please view our events calendar on our website.
McCormick & Schmicks 211 Market Street Virginia Beach
Coastal Catering 4216 Virginia Beach Blvd. Virginia Beach
McCormick & Schmicks 211 Market Street Virginia Beach
McCormick & Schmicks 211 Market Street Virginia Beach
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11:30 a.m.-1 p.m.
*
23
11:30 a.m.-1 p.m.
15
11:30 a.m.-1 p.m.
19
11:30 a.m.-1 p.m.
For a more complete list of events for the SBI Owners Council, view the Events Calendar on www.smallbusinessinsight.com. OC events are exclusive to members, and those who qualify may attend one event for the cost of that event.
We hit 50! The SBI Owners Council is growing at a steady pace. In early January, grew to a 50-member-strong organization. For a complete list of member businesses, visit www.smallbusinessinsight.com/sbi-owners-council. smallbusinessinsight.com
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Community
Townscapes
C
ultivating a Strong Business Relationship
By T. J. Prieur Photo by Paul Chin, Jr.
Doug White and Meade Stone became fast friends shortly after graduating from college. While Stone worked in commercial real estate and White worked for a lobbying firm, the two developed a vision for working together. “We reached a point where we didn’t know exactly what White and Stone packed their bags and headed to Texas, where the two got a crash course in everything they needed to know to run a landscaping business. “We wanted to secure something before we invested a lot of time and capital,” Stone explains. So from 5 a.m. to 10 p.m., the conversation continued about how to build a successful landscaping business in Hampton Roads. “We came back and thought that this was something we could do, and we had the peace of mind of, ‘We should go after this,’” White says. From there, the duo began pursuing contracts and bidding on a few projects. In the morning hours, White and Stone
we wanted to do. We looked to purchase some businesses, and got frustrated and was ready to get moving,” Stone reflects. Finally, an associate in property management suggested they call a friend in Texas who was recapturing the market in landscaping. The rest, is history.
would mow grass and in the afternoon, the two doffed the yard work attire and cleaned up for an afternoon of sales and pursuing more work. Today, their business, Town Scapes, is three crews strong and growing, focusing mainly on commercial jobs as far north as Baltimore, and as far south as Raleigh. “I think that within landscaping in Hampton roads, there is plenty of room in the pool for people to swim,” Stone says. “It’s a great market, and even though things have slowed, cities still require grass to be cut.” Stone goes on to explain their strategy as aggressive, yet conservative, meaning the two are constantly searching for new leads, but are conservative enough to not
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take on more than they can handle, and handle well. “This recession, fortunately or unfortunately has weeded out those that can’t compete,” Stone explains. “We have a natural ebb and flow, and we are not out selling every day while not servicing the needs we have now. We have a good foothold in this marketplace and a lot of people have given us great opportunities.” While taking a one-step-at-a-time approach to growth, the Town Scapes owners spend a lot of time recruiting the right employees, partnering with firms that have helped them find the right people. By compensating their employees better than average, Stone says, people stay with them longer.
“One thing we’ve always been challenged with is attracting good clients and keeping them, but the same thing applies with employees,” White explains. “It’s fundamental to business. If you can narrow down how to do that, it helps productivity, and you’ll win more than you lose.” Stone reflects: “We’re intense on management and scrutiny and the job getting done correctly and well, but give a lot of freedom to our employees to feel empowered so they don’t have to call on us all the time.” White agrees. “Everyone is given a different gift set, and sometimes it’s never been cultivated. Sometimes, there are foundations there that you can cultivate, and that’s a diamond in a rough for an employer. You hear them out and, naturally, it grows itself.”
Within landscaping in Hampton Roads, there is plenty of room in the pool for people to swim. It’s a great market; even though the development of things has slowed, cities still require grass to be cut. This seems to be a recipe for success. The two friends have a sound working relationship, and business is good. “Our partnership has been an important piece,” White says. “Promoting each other’s gifts with each other has been important and crucial to success.” When the two friends spend about 10 hours a day together, White admits “sometimes he has to carry the weight for me, and me for him” and that there are obviously times when issues arise, but picking up that piece is crucial. Stone reflects: “It’s a nice partnership.
There’s always someone in the wheel house, spending time with a client or future client. With a one-person operation, it’s hard to go on vacation, but it has been helpful to know if I am away for the weekend, everything is covered.” The only problem, it seems, is semantics. “We get called each other’s name a lot,” White says. “I’m Meade a lot. He’s Doug sometimes. It’s fun though because we work with and for a lot of great people.”
Friends First. From left, Doug White and Meade Stone with mowing equipment.
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Work For Dad
Working for Dad
Tracy Cabiroy, owner of Work For Dad.
What seems like a simple concept is helping secure the futures of today’s teens. By T. J. Prieur Photo by Paul Chin, Jr. At age 14, Tracy Cabiroy began working for her father. The money she made doing a few odds and ends was invested into a Roth IRA and it compounded interest. Now, at age 26, Cabiroy not only has saved the retirement funds of that of an average 50-year-old, but she is applying this practice to her own business, called Work For Dad. “Before Work For Dad, there was in no way, shape, or form any way for teenagers to start planing for their retirement,” Cabiroy explains. “There were money markets and mutual funds, but no real opportunity to take advantage of any tax opportunity.” The concept is simple. Parents draw up a service contract with Cabiroy, outlining light housework and yardwork that may need to be accomplished. Cabiroy then employees the child, and it is her job to ensure her clients (Mom and Dad) stay happy. The parents select the pay rate, and when the child earns a paycheck, it is di-
rect deposited into a bank account, then, with the help of a financial advisor, moved into a Roth IRA. According to Cabiroy, 14 is the “magic number,” meaning it is the earliest a child can work with a work permit. The child is also responsible for filing his or her W2 and paying taxes, making this process an educational one. “We are taking advantage of the lowest tax bracket they will ever be in, and we allow that money to grow tax free, without impacting the ability to borrow for college later,” Cabiroy says. By assigning each teenage employee a well-matched, bonifide financial advisor, many financial lessons are learned along the way, as well as the assurance the funds will be managed properly.
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“Social Security is a touchy subject these days,” Cabiroy says. “I’m convinced it won’t be around for me, and certainly not for the kids. This is a way to protect their future, and guarantee some sort of security without impacting their life up to that point.” Having only been incorporated since November 2010, Cabiroy looks forward to a productive 2011, and spends her time getting the word out by visiting schools and networking events. “In five years, I want to have as many employees as Busch Gardens (2,000 employees. My less-than-20-year goal is to have as many as Wal-Mart,” she says. “When I’m reported on by NBC Nightly News, that’s when I’ll know I have made it.”
We are taking advantage of the lowest tax bracket they will ever be in, and we allow that money to grow tax free....
Charity
Toby’s Dream Foundation
Kristen, age 3. Her dream: To go to Disney World
CHARITY
When Dreams Come True By Julie Sokolowski, CPA Photos Submitted
This year, 21 local children with lifethreatening illnesses were able to see one of their dreams come true, because of the efforts of Toby’s Dream Foundation. In its first year of existence, 59 children from the area were referred to The Foundation. The mission of The Foundation is to “Ensure that the children living with life-threatening illnesses in Greater Hampton Roads and the Eastern Shore of Virginia have the opportunity and resources to imagine and experience their most fantastic dream.” As a result, no child who qualifies is referred to The Foundation is turned away. According to Joan Steele, executive director of the organization, the average cost of a dream is $5,500. “Dreams are determined by the children themselves and Toby’s Dream makes every effort to make the dream more magical than the child ever imagined,” she explained. Steele also touched on the organization’s core principles, saying “The purpose of the dream is to put joy into their lives and to give them hope for the future. We do not discriminate with race, religion, (or) socioeconomic status. Everybody receives a dream that qualifies.” Steele went on to state, “We’re a local organization serving local children with life-threatening illnesses. We take care of our own.” Toby’s Dream Foundation relies on public support from donations, sponsorships and volunteers. “We’re always looking for volunteers.
Dream Maker volunteers go through special training, but then trained to go out and interview the children, to find out what their dream would be, and of course we need special event volunteers as well… (and) always donations, “ said Steele. Since it is a new organization, one of the greatest challenges is spreading awareness of the organization and its purpose. Toby’s Dream Foundation was recently chosen by DOMA Technologies, Inc. to be a recipient of their recent DOMA Charity Challenge. “DOMA Technologies a wonderful supporter of Toby’s Dream,” said Steele. The event raised over $350,000 to support seven local charities, which was a great opportunity for the organization, however there are still many dreams to fulfill. Steele recalled a special dream from the past year. “We had a young man who wanted electronic DJ equipment, because he wanted to use it as a career tool, so we provided him with the top-of-the-line electronic equipment. Debbie Higgins, CEO of Impressions In Print, is a member of the Board of Directors of Toby’s Dream Foundation. According to Higgins, the fundraising is the main challenge. When asked why her business is involved and others should help, she said: “If you can give them one time in their little lives that they can just have a good time and stop thinking about being sick, then I want to be able to do that for them” To learn more about how to get involved, visit the website at www.tobysdream.org, or contact Joan Steele at Joan@tobysdream.org.
“We had a young man who wanted electronic DJ equipment, because he wanted to use it as a career tool, so we provided him with the top-ofthe-line electronic equipment.” —Joan Steele, executive director of Toby’s Dream Foundation John, age 11. His dream: A jetski
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