2004 Spring

Customizing Solutions

ISHRS Report

The Media hasn’t gone away

by Bobbi Russell

The 10th Annual Live Surgery Workshop

pg.3

pg. 8

pg.14

How They See Us

Dave Barker ...and his Hair Loss vision

pg. 5

The National Hair Journal

Volume 8 No.29

THE PROFESSIONAL PUBLICATION OF HAIR REPLACEMENT & RESTORATION AND SKIN HEALTH

Spring 2004

Stem Cells That Grow Hair Identified

HAIR CARE GIANT’S PROFITS SOAR 22%

Philadelphia, 03/04 – Researchers at the University of Pennsylvania have identified the stem cells that turn into hair follicles.

Dr. George Cotsarelis and his team were able to mark the bulge stem cells (the part of the hair follicle where stem cells are located) by getting them to produce a green fluorescent protein (GFP) that the surrounding cells did not have. Standard

cell sorting machines were then able to separate out the glowing cells from the others. Four weeks after transplanting the stem cells into the skin of mice, they had created new cells that produced hair. "Now that we can isolate stem cells involved in hair growth, we can develop targets for manipulating hair growth," the doctor commented, adding that he hopes to isolate

The Art of Head Shaving

Transgenic Mouse Has 80% More Hair

Venice, CA, 02/04 - An ergonomic new razor specially for shaving the head has been launched by HeadBlade. Made of yellow plastic with non-slip rubber grips, users slip their middle finger through a loop to hold it s e c u r e ly.

Shaving is claimed to simple and fast: resting the HeadBlade on the scalp, users are advised to take long smooth strokes using no pressure. HeadBlade is a California Limited Liability Company founded by Todd Greene.

Los Angeles, 02/03 expressed in the skin.

Scientists at the University Noggin appears to play a of Southern California critical role in the developheaded by Cheng-Ming ment of integument (skin Chuong, M.D., Ph.D., proand associated features). fessor of pathology at the Chuong and his associates Keck School of Medicine, found that the fur of the have designed a transgenic transgenic mice was sigmouse that grows more n i fi c a n t ly thicker, with hair than other mice. In a hair follicle density Dr. Cheng-Ming Chuong paper in the American increasing by as much as Journal of Pathology, the researchers 80 percent. They also grew more whiskers describe the creation of a mouse in which than normal mice, with several whiskers a particular gene called “Noggin” is over- sprouting from each follicle.

Cincinnati, OH, 02/04 - Procter & Gamble, the world’s largest hair care products manufacturer, saw its profits leap 22% to $1.82 billion. In the last quarter of 2003, P&G, often described as the most astute marketing company in the US, has been investing heavily in hair care and recently acquired Clairol and Wella. P&G has been shedding marginal brands in recent years in order to focus more aggressively on the higher margin personal care market. P&G recently circulated a letter indicating that the company was prepared to participate in hair loss research and inviting inquiries.

Farrell Hair Replacement Partners with Premiere Products Los A n ge l e s , 0 3 / 0 4 - Fa rrell Hair Replacement, a manufacturer of highend lace hair systems, has formed a marketing alliance with Premiere Products Inc. (PPI) to create a new line of products called, Farrell Formula. It will include a four-step adhesion process, removers, shampoos, conditioners, and skin treatment products. PPI has been m a n u facturing adhesives and related products for the medical and healthcare industries for over 25 years and provides specialist services for the motion picture industry. Richard Farrell is well known for designing the “Ultra-Custom” lace hair systems, claimed to be the most undetectable products available.

Bald Cocaine Dealer Fingered by Shampoo Brescia, Italy, 02/04 – Italian police were not fooled by a drug dealer who let his imagination get the better of him. The smuggler stuffed a shampoo bottle with 400 grams of cocaine and packed it with his other toiletries so as not to arouse any suspicion. What he failed to notice is he had a thinning problem – in fact he was totally bald! The police were more observant. After his arrest, the man told the officers he was only a local dealer and offered to cooperate with them to trace a ring which was smuggling drugs from Colombia and Peru. To date, this information has led to 16 more arrests.

We’ll Leave the Light On For You San Diego, O3/O4 - It has been long known that light makes plants thrive and even helps regulate the internal clock of the human body, but scientists are still discovering the potential of something so commonplace we take it for granted.

Lack of light can create mood swings and depression. Daylight bulbs in offices can enhance concentration and productivity.

Even the return of the sun in Spring causes the fur in animals to change color and texture, so why are people so surprised that that same light focused into a low l evel laser beam can stimulate hair growth in humans? In 2004, it is expected that the FDA will join Health Canada and Health Singapore and approve a hand held laser for the treatment of hair loss.

This may be the beginning of a flood of laser applications that will embrace wound-healing therapies, treatment of inflammation as well as multiple cosmetic applications. Meanwhile, the fashion industry has discovered the benefits of light and a ladies handbag designer is planning to introduce a line of purses with luminescent interiors, using the latest EL light technology. Over the next few years, luminescence is predicted to touch every aspect of consumer’s lives.

Sparring with the Future Temecula, CA, 03/04 - Should hair management professionals add more clientpampering to their traditional hair care services? Consider this. Hotel spa resorts are expanding faster than any other category, according to the International Spa Association, more than doubling from

stem cells in an adult human scalp also and transplant them to other areas of the scalp, generating new hair growth. However, he predicts that an effective treatment using this technology is still many years away.

Hair grows from cells located at the base of the hair follicle and hair loss often occurs when follicles do not continue through a natural cycle of growth, rest and re-growth.

1999 to 2001, the last year tabulated. Men and women stressed out from demanding business schedules are rushing to find ways to unwind and be pampered. And hotels and day spas around the country are investing millions to make sure they find the experience they are seeking. The La Costa Spa outside San Diego, CA recently spent $12 million to renovate its facilities, and it is not alone. If you think spas are just for women, think again. Although 70% of spa visitors today are women, the industry now has its eye on men and even teenagers.

It predicts that relaxation and well-being services are only just beginning. In 2002, spa spending topped $14.5 billion, up 300% from 1999 and seven times the size of the hair management market

New Physician-Directed Marketing Group Gastonia, NC, 02/04 - Michael Sumner, president of the Sumner Group, has founded a new marketing group offering marketing support to hair restoration physicians. The MDH Alliance owns the vanity number, 1-800-MD-HAIRS nationwide, and is offering to lease local area access to the number to doctors who enroll as Alliance members. The Alliance positions itself as the only “physician-directed” marketing group. It is headquartered in Gastonia, NC. Mark D. Baxa, MD is the Medical Director. The Alliance will hold its first meeting in June in Hilton Head, SC

L’Oreal Launches Men’s Thickening Shampoo New York, 03/04 - New Vive for Men is a daily thickening shampoo with Regenium-XY that L’Oreal claims give “Up to 50% thickerlooking hair for better scalp coverage.”

Advertising repeats L’Oreal’s established theme,"Because You’re Worth It.” The “thickness” claims are based on user experience described in the fine print as, “Consumer perceptions among men who saw a thickening effect using shampoo and gel.”

Korvue Receives 2003 Technology Award San Diego , 0 3 / 0 4 - KO RVUE® has been nominated as recipient of the National Hair Journal 2003 Technology Award. Korvue is a software program developed by Verasoft Corp. for use in hair replacement and restoration studios and is the indust ry ’s only dedicated salon/clinic management application that automates eve ry d ay tasks to improve accuracy and efficiency.

Since early 2001, over 30 studios have p a rticipated in on-site testing and product development. Their feedback led the software engineers to add and ref ine features including contract creation/management, hair system ordering/tracking, multi-level security, and a built-in appointment book. The trophy was received by Gerald McCaig and Chief Technology Officer, Martin Trivonov.

2 The National Hair Journal Spring 2004

MICRO POINT SOLUTIONS

It’s all about convergence - It hardly seems possible, but this Spring, The National Hair Journal enters its eighth year of publication! When we began, the hair management industry was disorganized and stagnant.

Worse, the different segments were fighting with each other and confusing the public in the process.

Today, the market is smarter and converging. Most professionals recognize that no single hair loss solution will cut it any more. Indeed, combination therapies and procedures are more and more the norm.

This makes great demands on owners and technicians who grew up in the old environment and it requires that they invest time, and probably money, in continuing education in order to understand these new technologies. This is resulting in a very uneven market place. Those businesses that embrace change and attend workshops for professional training and networking are doing very well. On the other hand, salons and clinics that count on the old tried-and-true technologies are finding it harder and harder to stay afloat.

New business is hard to come by and clients are being seduced by new solutions. The American consumer will always want new products and fast answers to their problems. It’s part of our culture.

Without innovation, we are going nowhere.

Which brings me to my second point We have outstanding technology! We have fabulous hairloss solutions. No one today has to have bad looking hair unless they choose to. But that is not enough! Its great to have sophisticated hair loss solutions, but nothing is going to happen unless the public knows about them.

Listen Up - That's why we launched "The National Hair Hour," a weekly radio show.

After twelve months on the air, it was the top-ranked Saturday evening block show on its host station, KLSX. We’re not talking late night or the wee hours of the morning. This was prime listening time!

Was it because we were the slickest broadcasters out there? Certainly not. But what we were doing was bringing listeners hair information they could not get anywhere else. And as we all know, there are 50 million men and 40 million women urgently wanting that information!

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not talking about an infomercial; we offer listeners serious, balanced information from the leaders in the field. Top information from the top people on a top station! As you will read in this issue, we go live to hair and seminars and conferences around the country and broadcast the news as it happens. Think what this can mean for the industry. I will be sharing our plans to roll out this radio program across the balance of the country in 2004... and suggest some ways you can take advantage of this opportunity to dialogue with the consumer.

What is with the website? - I am a little embarrassed about our website which has been under construction for far too long!

It’s a classic case of over-reaching. We wanted to go beyond a simple information service and provide a number of new interactive features that we thought were important. For example, we would like to host discussion forums, moderated by qualified experts, an interactive calendar where you could visit the location of upcoming events and browse the program, as well as obvious things like checking and updating your subscription or reserving advertising space. The bad news is these kinds of activities take time to design; the good news is we are only a few weeks away from completion! Check back at www.nationalhairjournal.com periodically to see how we’re doing.

In this issue – It has been a busy start to the year. Our ‘Seen N Heard’ section has overflowed its usual one page and you will find pictures and reports from medical and non-medical conferences the length and breadth of the country. You may also note that the borders between these events are blurring, as shown by the Virtual Reality conference where a keynote speaker was… a hair restoration surgeon!

In our “Personal Profiles” we talk with two studio owners about how they built successful businesses. We hope you enjoy getting to know them both. We chose to postpone a great article by the lady who made the hair for “Lord of the Rings” because we wanted to bring to bring it to you with more pictures and background.

With a subject this exciting, words were not enough. Look for it in the next edition of The Journal, it’s great reading.

If it works, expand it! - This Spring, we brought the show to the East Coast.

Saturdays nights will never be the same in 22 states that lie in the footprint of top New York talk station, WOR710-AM. And just so our friends around the world don’t feel left out, we also broadcast live via the Internet. This is huge! I’ll say it again… This is huge! For the first time, we are bringing the top hair loss experts to the microphone to share their insights and recommendations with the public. We’re

Thanks for your involvement, support and friendship,

Marsha Scott Recognized For Her Charity Work

her own expense.

Marsha Scott’s generosity and goodwill has not gone unnoticed by the local media either and she was the subject of an extensive article in the Bethel NewsTimes featuring a tanned and vibrant Marsha at work in her salon with a client. The sub heading read, “Salon Provides An Alternative To Wigs.”

Marsha Scott’s Hair Loss Clinic for Women received the “Spirit of Noel” award from Modern Salon’s ‘Mirror Image’ program which honors professionals in the beauty salon industry who have demonstrated leadership, generosity and a commitment to the fight against breast cancer. The award is named after the late Noel de Caprio, founder of Noelle Spa for Beauty and Well-Being in Stamford, Ct. Marsha regularly volunteers her time to participate in the Cancer Society’s “Look Good, Feel Good” program as well as the “Relay for Life,” where she sets up a mini booth at

Chris Webb Editor in Chief

4 The National Hair Journal Spring 2004

It’s All About Service Says Bill O’Brien, Apollo Nashville The Hair Journal routinely reports on the latest hair loss research and marketing trends at the corporate level; but what about the family-owned salons and studios that make up the backbone of the hair replacement industry? In this series of “Personal Profiles” we introduce individual businesses and the people are behind them. Today, we profile Bill O’Brian and his wife from Nashville, TN and discuss the things that are important to them personally and to their business. Back in the 80’s when Mrs. O’Brian started her career; hair replacement was very much a man’s world, with few women clients and no women owners. She set out to change all that and built an impressive business along the way.

NHJ: Bill, today, this is very much a husband and wife business isn’t it, but who got it started?

BILL: Actually, my wife owned the business before we were married. She started it in Nashville back in 1983.

NHJ: Did it start out as a regular beauty salon?

BILL: No, it was hair replacement from the outset.

NHJ: What attracted her to this market?

BILL: She liked being able to do more than cut and style hair. With hair replacement, she could completely change the way someone feels about themselves.

NHJ: She must have been one of the first women to own a men’s hair replacement studio?

BILL: I would say she was probably the first.

NHJ: Does a woman bring something extra to hair replacement?

BILL: Today, women are the backbone of the industry. Men are focusing on sales and management and it is the women today who are providing the creative input. They are the ones who make the difference in how the hair looks once it’s installed and styled.

They make it fit the client’s lifestyle.

NHJ: As more women enter the industry, are you seeing more fashion awareness in general?

BILL: Absolutely. We are also getting more women clients than ever before. Women are realizing that things have changed and they can get a natural looking hair replacement instead of a heavy wig.

NHJ: There are 40 million women who suffer from hair loss. That’s a huge number…

BILL: Right. That is a very high number and I think it’s a part of the market that a lot of people are missing. When I first got involved with Apollo, everyone wanted to shy away from women because they thought they would be difficult customers. We did not understand that they had the same problems as men. Women kept their problem hidden better than the men did too. Now, the industry is better equipped to handle their needs and this is something that has really boomed our business NHJ: Tell us about your business in Nashville. How many chairs do you have; how many employees?

BILL: We have fourteen employees at our two locations. We have about seven hundred active clients. Like everyone else, we also have a number of clients who only come in to buy a hair replacement and a do-it-yourself attachment like tape and then we may not see them again for six to eight months.

NHJ: How many of your clients are on service-plans today?

BILL: Over fifty percent.

NHJ: Do you believe that service-plans are important to clients, or are they just a marketing gimmick?

BILL: At first I thought this was a marketing technique so factories would sell more hair. But after getting involved with the light

skin-based units, I understand the logic.

The new units are more natural and much lighter and that is what the client wants.

Like any sophisticated product, these units need professional attention and that’s why the service plans are so valuable.

NHJ: Have your clients now gone to full head bonding?

BILL: Most of our clients who are on the service plan are in full head bonds. The first year that we got into these, everyone was having problems with the adhesive, but technology has gotten to the point that it’s just not a problem anymore. Of all the clients we have had in the last five years in full head bonds, we have had zero adverse reactions.

NHJ: You are located in a fiercely competitive hair town: You have a Hair Club close by and there’s no lack of medical hair restoration centers, yet you and your 14 staff run a successful business. What’s the secret?

BILL: Service. Knock peoples socks off with great service! When clients come to the door you treat them not as a number but as a person with individual needs. Every hair replacement client is different. The color of the hair is different; their personalities are different. We are friends with our clients. We know the names of our clients’ spouses… even their dog’s names.

NHJ: Imagine I am coming into your studio today for service. Tell me why I will feel more cared for with you than I would be if I were going down the road to a competitor?

BILL: When you come in the door we are not going to hit you with fourteen different types of upgrades and we are not going to pressure you for a sale. We are going to

bring you in, sit you in a chair and ask how things went last month. We will ask if you had a problem with the unit. We want to know if you had problems with tangles when you shampooed. We want to address every one of your concerns. This is YOUR time.

NHJ: Who asks these questions, the floor manager or a stylist?

BILL: I will. I go in and speak to almost every client. However, each one of my stylists is also trained to do this also. We all know that when a client sits in his stylist’s chair he will tell his stylist things he might not tell me or might not even tell his wife or girlfriend. The first fifteen minutes in the chair is the client’s time to talk about his hair.

NHJ: What management tools do you use to keep track of your clients?

BILL: We till use the old card system though the information is also in the computer. We like to have the client’s card in our hand when we see him. We can look at that card and know exactly what he had last month or even last year. We can sit there and have a conversation with the client without having to get up to check the information. He does not need you to be running back and forth since he is paying you very well for the time he is there.

NHJ: Some studios claim to get a client in and out within thirty or forty minutes, but you don’t believe in rushing these service visits do you?

BILL: Absolutely not. Every one of our client appointments are set for one hour. If he is expecting delivery of a new unit, he is set for an hour and a half. If it takes two hours so be it. We don’t look at our clients as cattle that you need to run through the doors. They are individuals with individual needs and they need your time.

NHJ: Where do you recruit your stylists from?

BILL: From the local beauty schools. We like to get young technicians who haven’t been with other companies. In the past, I hired people who had previously worked at other hair replacement companies. I ended up having to retrain them because they had been taught bad habits. Young students right out of school are sharp and eager to learn. It also helps that our industry pays better than a regular barber shop.

NHJ: How do you train your stylists? Do they serve an apprenticeship or do you

have a formal training program?

BILL: We have a training program. My wife does that. We have also have other salons around the country send their technicians for my wife to train.

NHJ: Do you attend a lot of the shows and workshops?

BILL: We try to attend all the shows that are available.

NHJ: Do you read widely and research hair loss as well?

BILL: I do my research. And of course I read your magazine.

NHJ: Is the Hair Journal helpful?

BILL: It is one of the best sources of information that we have.

NHJ: If you were describing your salon to somebody who could not see it, what kind of character are you trying to give your facility?

BILL: Comfortable. We want clients to come through the door like they are coming through their own front door. They can sit down and read a magazine while they serve themselves to the refreshments we put out for them. Our facility is really clean and well kept, but we don’t want our clients to feel like they are in such a sanitary situation that they are too scared to even touch anything or to move things around.

NHJ: What advice would you give someone who wants to get into hair replacement; what are the keys to success?

BILL: Hard work. If you get up early and stay late then you are lucky in life. I think that is the secret. You have to be there; you can’t service your clients properly if every time they call you are not available. Most of my clients have my personal cell number. If they have an emergency or a big problem they can contact me.

NHJ: Is this a good career?

BILL: Yes. I think it is very rewarding. I was in construction and had my own subcontracting company before I got into this and I never got the same personal satisfaction. A lot of my clients are cancer patients or accident patients and I am proud and rewarded to be able to make a difference in their lives.

NHJ: What do you expect from your suppliers?

BILL: Be honest. Give us good quality hair at a decent price. I don’t believe its right to beat up on the wholesalers because you will end up with poor quality hair. You get what you pay for.

NHJ

5 The National Hair Journal Spring 2004

PERSONAL PROFILES DAVE BARKER A Hair Loss Vision – Don’t Leave Home Without It! Dave Barker got into the hair replacement business with nothing more than his two hands, an American Express card…and a vision of the future. A former barber doing $5 haircuts, Dave and his wife now own and operate International Hair Restoration Systems (IHRS), a successful full-service hair loss center in Jacksonville, FL. How does a small town barber build a thriving multi-solution business in one of the most image-conscious parts of the country? That’s what this interview is all about. It’s always a special pleasure to research these “Personal Profiles” and getting to know Dave Barker was no exception. We hope you will find his story – and advice – as stimulating as we did.

CW: Let’s give a little bit of color to this interview; tell me where you are and what time of day it is.

DB: I’m in Jacksonville, FL and it’s about 7:00pm.

CW: Everywhere else in the country it’s a freezing cold day, but for you it’s a nice warm evening, isn’t it?

DB: That’s right; it’s about 70 degrees right now.

CW: Now we’ve antagonized everyone, Dave, let’s play safe and talk about your business. What services do you offer?

DB: We have a full service company. We do non-surgical hair addition for men and women. We also offer hair transplantation as well as laser light therapy.

CW: I’m assuming you didn’t offer all of these services from day one; what led you to expand your service base? Was it a marketing decision or at the request of your clients?

DB: A little bit of both. If you only do one treatment, it’s not possible to really meet the needs of your clients. There are almost as many types of treatments as there are reasons for losing hair. You need to offer most of the proven solutions available if you want to be serious about taking care of your clients.

CW: Did you start off in the hair industry yourself as a cosmetologist or a barber?

DB: I actually started off as a barber in West Virginia in 1993. Then I decided that I wanted to get into hair replacement.

I moved to Atlanta in 1994 and worked for HRS for a short time, and then I went to Jacksonville.

CW: And of course, you wear hair yourself?

DB: Yes I do.

CW: How did you start your own first hair replacement business? Take our readers through it step by step? Did you have some money saved up? Did you have to use your credit cards?

DB: When I had the barber shop, I lived in a small town of 2500 people. I was doing $5 haircuts. It was very difficult moneywise even though I was actually the highest priced guy in town at $5! So I applied for an American Express card and went to one of On-Rite’s training classes to learn the ropes. After that my mind was made up and I sold the $5 Hair business. It was time to move on. I started off working for another hair replacement business in Jacksonville, but I also moonlighted as a telemarketer to save some extra money.

That’s how I raised to cash that allowed me to buy the business later.

CW: Can you remember your first client?

DB: Oh yes.

CW: What brought him in your door?

Dave Barker DB: I ran an ad in the paper that said, “Male models wanted with thinning or balding hair:” And then Tommy came in to see me. Tommy and his wife actually.

We sat down and did a consultation and I told him I’d never done this before, but said “I think I can help you.” And we went from there.

CW: Was this your very first consultation?

DB: Yes it was.

CW: And you closed your first consultation.

DB: Yes I did. The sale price was $150 because I was new and needed the business. The client was very happy!

CW: Let’s fast-forward. What was the first step you took to diversify and expand your new business?

DB: When I bought the business, it was a predominantly male market. My first step was to acquire a laser and we aggressively went after the female business.

CW: Why the laser?

DB: Well, I wanted to be able to offer something to everyone. There is a certain segment of people who aren’t ready for surgical restoration and yet are also not candidates for non-surgical because they have too much hair. I wanted something that would help them maintain what they still had.

CW: A lot of people are skeptical about the laser. Yet you jumped in with two feet.

How did you get the information you needed?

DB: Many of the decisions I’ve made were based on conversations with friends in the business who have a lot more experience than me. This was one of them. I knew people who were treating clients successfully with the laser and I decided if it could work for them it could work for me. I admit that even after I bought my first laser, I was still skeptical. But it turned out to be a wise decision. Lasers definitely have a place in our business.

CW: Apart from the business benefits, have you seen significant physical results from the use of the laser?

DB: I have, yes sir. You can’t take somebody who is a class 7 hair loss and expect to give them a full head of hair. That’s not going to happen. Most of our success is in treating ladies who have general thinning.

Women who still have the majority of their hair, just slight thinning. We have had very good success with them.

CW: What kind of laser are you using?

DB: I’m using two lasers in my office, including the “Harmonix 3000.”

CW: And what would your advice be to anyone who is considering a laser?

DB: I would strongly suggest they get involved with it. From a business stand point it’s a good profit center and also it’s something they are offering their clients that somebody else down the street is not.

Some people aren’t emotionally ready for non-surgical hair addition or transplants and that is something that is a little easier, at least opens up the doors for them to look into options about hair loss.

CW: Without divulging any confidential information, what might be a good business model for somebody, perhaps a small salon owner who is about to invest in a laser?

DB: The way that we started was by marketing to our old leads. I had a very large bank of old leads of people who had been in for consultation but not committed or had not been in at all. I sent a flyer out (continued on page 19)

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6 The National Hair Journal Spring 2004

SELLING YOUR BUSINESS THE ACQUISITION AGREEMENT FROM A SELLER’S PERSPECTIVE

By Joel Morgenthau he focus of this series of articles has been the sale of a small business from a seller’s perspective. In our first article, we discussed the ways in which a small business owner can prepare his business for sale by making his company more valuable to a potential buyer.

The next article dealt with pre-agreement considerations, such as determination of the sales price and the structure of the sale (i.e., asset vs. stock). This final article in the trilogy will be devoted to the purchase agreement itself. As in the other articles, the type of business we will focus on is a small to medium sized closely held corporation operating in one or more locations and employing fewer than 50 people. We will focus on those provisions that are common to all purchase agreements, regardless of form (asset sale, stock sale or merger) and will assume that the manner of payment will be for cash or cash and promissory notes (as opposed to the stock or other property of the purchaser).

T

Acquisition Agreement - Generally speaking, as a matter of protocol, the acquisition agreement will be drafted by the attorney for the buyer. This is important since the party who drafts the agreement has an initial advantage in terms of the overall structure and the specific language of the agreement. The acquisition agreement will first identify the parties to the transaction. In both asset and stock transactions, both the corporation itself and the selling shareholders will usually be parties to the agreement. The next provision of the agreement will describe the property being sold. Frequently, in an asset acquisition, a schedule will be attached to the agreement which describes in detail the property being acquired, such as furniture, equipment, inventory, contracts, customer lists, intellectual property (trademarks, trade names, patents and copyrights), websites, telephone numbers and other forms of tangible and intangible personal property. If there is certain property which the seller wishes to retain, the seller should be sure to have its attorney describe such property in a provision of the agreement dealing with “Excluded Assets.” In a stock transaction, the acquisition agreement will merely identify the stock being sold.

Purchase Price - The next provision in the acquisition agreement usually deals with the purchase price. The seller, for obvious reasons, would like the entire purchase price to be paid in cash at the closing. The buyer, on the other hand, may request the seller to defer payment of a portion of the purchase price. To the extent that the seller finances a portion of the purchase price, the agreement should provide that the deferred purchase price is evidenced by a promissory note, which provides for the payment of interest and contains other normal and customary provisions. The seller will also want to make sure that it has adequate security to protect against the buyer’s default. One of the best forms of security is a letter of credit issued by the buyer’s bank, which secures the full amount of the deferred purchase price.

More typically, however, the seller will secure the buyer’s promissory note by taking a first priority security interest in the assets of the company being sold.

Earn Outs - In some acquisitions, the

amount of the final purchase price may be contingent upon the earnings of the company being sold after the closing. This contingency is referred to as an “earnout,” and is used to bridge the gap between the seller’s desire to base the purchase price on the future earnings of the company and the buyer’s desire to base the purchase price on the history of earnings of the company. Typically, the buyer is extremely reluctant to pay the seller for an income stream that might not materialize.

In essence, an earn-out provision provides that if certain contractually agreed upon net income levels are achieved at certain intervals after the closing, the seller will receive additional payments of purchase price. If the acquisition agreement contains an earn-out provision, the seller should pay careful attention to the definition of net income so that only agreed upon expenses are chargeable against rev-

enues in arriving at a net income figure.

Holdbacks - Finally, in addition to deferred or contingent payments, a portion of the purchase price is sometimes held back by the purchaser to secure the seller’s obligation to indemnify the buyer against certain liabilities. Again, it is in the seller’s best interest for the holdback to be as small as possible for as short a time frame as possible. While the amount of the holdback is entirely negotiable, the seller’s attorney should bargain for 5% of the purchase price and should in no event allow the holdback to exceed 10%.

Representations & Warranties - One of the most important provisions in the acquisition agreement is the seller’s representations and warranties. The representations and warranties are the seller’s statements of fact about the company

being sold. These statements of fact are relied upon by the buyer in entering into the agreement and, specifically, in agreeing to the purchase price.

The seller and its attorney must review the seller’s representations and warranties very carefully. To the extent that a representation and warranty in a draft of the acquisition agreement is not completely accurate, the seller must correct it. This is often accomplished by prefacing the representation and warranty with an exception and a reference to a disclosure schedule to the acquisition agreement containing information necessary to make the representation accurate. For instance, a representation with respect to litigation should list on the schedule all actions, proceedings and claims pending or threatened against the Company. (continued on page 10)

AVENTI CORP

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A

fter forty years of success and millions of dollars in sales, Leonard Venti has now created a company - Aventi Corp. The company capitalizes on Leonard’s hair replacement management expertise, and provides consulting services to individual hair replacement salons and companies nationwide.

Re-Organizing Whether you are starting a new company or improving an existing one, it is important to have a business mission, concept, and vision. Re-organizing has been a management trend in recent years. Unfortunately, it has not always been applied and used in an effective way to increase revenues.

Don Hale of The Hair Loss Center in Nashville Tennessee says ”Leonard took my already busy store and turned up the volume. We have more clients now than ever -and we’re earning more as a result of his program. More than I could have imagined” A business or company that has been in existence for sometime usually

Leonard Venti has an infrastructure in place.

Therefore it may be necessary to drastically alter that structure and reorganize to become more effective.

Preparations for Growth Before attempting to get more business, you must lay some groundwork. This is what Leonard Venti does amazingly well. He calls it TQM. His basic principles for the Total Quality Management (TQM) philosophy of doing business are: a. satisfy the customer b. satisfy the supplier c. continuously improve the process

Says Leonard “customers want to get their money's worth from a product or service they purchase. For the companies that hired me to conduct sales seminars, I have generated $100.000 in sales and $300.000 in accounts receivable to be collected over the next year. All that, in just 1 week with the help of one assistant and one technician!”

I realized continues Leonard “we must change our ways of doing business. That is why I started Aventi Corp. Anyone like myself, to be in the business for over forty years has to have the passion for it and the pride of being a hair replacement professional. I would like to spend the next decade helping others!”

Do companies and individuals would like to see better sales results? Most likely, they do. But the question is, How? From within one’s own organization it is hard to see exactly who does what, why and how. Only those who are open to new thinking, skills and attitudes and apply this knowledge effectively will stand any chance of success and survival in the marketplace.

Aventi Corp. provides a no up front cost framework, step-by-step analysis, training, and support for developing the necessary sales structure for increased efficiency of individual sales, hair program sales, contracting new clients and re-activating inactive ones.

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8 The National Hair Journal Sppring 2004

CUSTOMIZING SOLUTIONS

for individual situations

E

very day in the salon I am given the opportunity to help change a women’s life.

Just the other day I was having a consultation with a very sweet lady who had finally worked up enough courage to talk to someone about her hair. As we sat and talked, she confided in me about her personal struggles with her hair. I told her that she was not alone and together we looked together at pictures of other women who had once been in the same situation and had come to me for advice.

She immediately noticed the smiles on their faces. That’s when she realized that this is how she wanted to look and feel too and she turned to me and said, “What can you do for me?”

As a professional I now had several important decisions to make. This special person was depending on me to make the right choices for her. I strongly believe that at times like these, people look to us

as their hair doctor. So, like any good doctor, the first thing I do is ask my client a series of questions. And I listen carefully to everything she says. By doing this I can determine her special needs and I can choose the best possible attachment solution for her situation. Here are some of the questions I ask.

1. Is she active in outdoor activities? Does she swim, walk, run, play tennis or work in her garden a lot? If the answer is yes, medium or heavy density is not recommended. Instead, I would use mediumlight or light density hair. This will make the hair cooler and easier to handle in

By Bobbi Russell high-activity lifestyles.

2. Is she good at styling her hair? Does she blow-dry, set or use a curling iron? If the client is not familiar with proper styling techniques, several things need to be considered. Lower density hair will make the process easier to handle and less stressful. Proper styling instruction will be needed however, and will take extra time in the service and in possible followup visits. This can directly affect the value of your service.

3. Does she have allergies or skin sensitivities? Because many different products are used in our industry, a skin patch-test is always necessary before any service.

Knowing about the possibilities of a reaction beforehand can save you a lot of problems later.

4. Is she still experiencing hair loss? If the client is still losing a lot of hair, make sure that you do not choose a permanent

attachment that requires hair and scalp strength to keep it secure.

5. Is she under a doctor’s care for her hair or scalp? Some doctors do not want their patients to wear any type of permanent or aggressive type of attachment. Make sure doctors’recommendations are always followed.

6. Is she on medications of any kind? Are the side effects of the medications a possible reason for her hair loss? Determining if the condition is temporary or permanent will determine the type of hair attachment you choose for her.

3 The National Hair Journal Spring 2004

How They See Us No, the media hasn’t gone away...

Hip Hair? - No, the media has not gone away. Wigs and toupees still have great entertainment value. Take “The Astonishing Birth of the Cool Toupee” on page 110 of GQ Magazine, April 2004. The young men who read GQ are told, “Toupees usually come in two styles: “You’re Not Fooling Anybody Pal” and “Davy Crockett,” adding for good measure. Many of them look like roadkill, and none of them look stylish…”

The picture nearby shows four hairpiece

designs called “Wiglets” created by Juan-Carlos Castro for Yoko Devereaux as a spoof wig collection that joins his i rr everent Tee shirts, fake handbag knockoffs and other in-your-face accessories.

Extreme MakeOver Discovers Hair – ABC’s Extreme Makeover continues to build an audience for cosmetic surgery buffs. But it wasn’t until September 2003, that hair replacement was added to hair styling. The pioneer was stylist Frank Mills, Founder of Euro Hair

International of Beverly Hills and on September 3rd he performed the first hair replacement on "Extreme Makeover."

Hair restoration surgery is hard to demonstrate on television because it can take six months or longer before the benefits are seen, so it wasn’t until March 2004 that they found a way to feature hair transplant surgery on the show. But in Episode 217 on the 10th of that month, Patrick, a 38-year-old music DJ, Internet technician and cook from Kissee Mills, Missouri visited the

Beverly Hills clinic of board-certified hair transplant surgeon, Dr. Craig L. Ziering and for the first time, hair restoration surgery was up there alongside face lifts, eye shape restructuring, chin implant, liposuction, absculpting, LASIK eye surgery, tooth whitening and porcelain veneers.

Hard on the heels of Patrick’s hair restoration came another hair procedure, Hair Flaps. On March 25th, Extreme Makeover declared that “Toupees and

transplants aren’t the only answer” and shared their insider “Secret” with help from Toby Mayer, MD, FACS of the Beverly Hills Institute who presented examples of Hair Flap procedures. Stressing the dramatic impact of flap surgery, Dr, Mayer added, “If men could snap their fingers and have a full head of hair, you’d never see another bald man.”

Street Journal, giving readers the weekend to think about it. In a groundbreaking ad campaign, Vive Thickening Shampoo is taking thin hair to the financial community. A full page, color insertion on page 5 told investment bankers and industry chieftains that they can get “Up to 50% thicker-looking hair” thanks to “ R eg e n i u m - X Y technology.” The famous L’Oreal tagline is sure to resonate well in the nation’s boardrooms, “Because You’re Worth It!” GQ Says Head Shaving Is Culturally Sexy Glen O’Brian, GQ magazine’s “Style Guy” has advice for men with thinning hair – just shave your head.

When asked by a reader whether shaving his head was an advisable solution, he r e p l i e d , “A b s o l u t e l y.

Black athletes and actors have made the look culturally sexy to the point that bald unattractive white men are now getting the hotties…”

NHJ

Recession, What Recession?

- Asked L’Oreal in the Friday, March 26 edition of the Wall

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Similar to Finasteride, Revivogen uses all-natural ingredients to effectively inhibit DHT production.

Dr. A. Khadavi

This article is based on an interview with Alex Khadavi, MD, CEO, and Founder of Revivogen that appeared in the Winter 2002 Edition of the National Hair Journal. Dr. Khadavi is a medical doctor and dermatologist specializing in hair loss and skin cancer treatment. While still a 21-yearold undergraduate at UCLA, Dr. Alex Khadavi began to lose his hair. A confident premed student and cancer researcher, he found no solution to his

Hair loss is a gradual process. By the time someone notices that they are thinning, they have likely already lost 50% of the density in the affected area.

That’s why your first priority when a man or woman consults you about their hair loss, is to help them KEEP THE HAIR THEY STILL HAVE. Of course, they should explore all the replacement solutions ava i l a ble to them, but while they are weighing their choices, they need your help to protect the valuable hair they still

have. You can recommend one of the two FDA approved drugs – one available only with a doctor’s prescription; the other sold in supermarkets and wholesale clubs. Or you can suggest Revivogen; the only natural product that compares to the FDA approved medications, but is supported and distributed by hairloss professionals like yourself.

R ev ivogen stimulates fine, miniaturized hairs to become thicker and fuller. Which is precisely what your clients need. If you look at the physiology of androgenetic alopecia you will see that large, mature hairs slowly shrink, lose their pigmentation and miniaturize. That’s where Revivogen comes in. Revivogen stimulates the miniaturized or baby hairs into maturity to create fuller, thicker looking hair.

This is the reversal of the hair loss process. Revivogen works through the same mechanism as the FDA approved

treatments for hair loss using natural ingredients.

We are so confident about Revivogen that we offer a 90-day money back guarantee. This allows users like you to try the product and see it working without any risk. We believe every hairloss sufferer will benefit from Revivogen whether on not they go on to choose a hair system or restoration surgery.

That’s a lot of happy men and women and a lot of prospective clients.

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For more information about Revivogen, call today (877) 512-4247 or visit our web site at www.revivogen.com.

9 The National Hair Journal Spring 2004

7. Is her condition temporary or more permanent? If the hair loss is a temporary situation, a non-aggressive tempor a ry solution should always be the answer.

8. Does she use Rogaine, Nioxin or any other hair growing products? Knowing the products your client is using helps determine the proper hair and scalp care recommendations that you will give her at the end of your service.

9. Is she oily or dry? Some types of bonding agents do not respond well with lots of oil, so this should always be considered.

10. Is she tender headed? Does she get bad headaches or migraines? If the client is sensitive or gets headaches easily, tracking or weaving may not be the best option because of the possible tightness. You might want to consider a bond or a temporary attachment.

11. How attached to her own hair is she? Will she allow you to cut down or possibly shave part of her hair if needed? A lot of women want to keep every hair no matter how bad the situation.

Integrations with many different hole sizes can be chosen and will accommodate most situations. Integrations also allow her to feel her own hair being brushed and styled, making the hair feel more natural.

12. Is she happy with her color? What style is she interested in? Does she want to be trendy or classic? I have found that most women who have experienced hair loss have not been able to have the hairstyle and or color that they really want. They have been watching their friends change hair color and haircuts to keep up with the ever changing styles.

This is when the designer in all of us is given a chance to show our true talent.

These are only a few of the possible questions you can ask. Getting to really know your client is the key to being able to service her properly. I have profiled five clients below using some of the questions I discussed.

CASE HISTORIES A. In the first picture (below) my client is a young woman 21 years of age who recently had radiation and a brain tumor removed. She has always had long hair and desired to maintain the same look.

We had a custom 20” skin piece made for her that matched her current hair color. (Q-#5) The doctor informed us that there would be no hair growth for approximately 6 months. We first used a very gentle water-soluble bond that I replaced for her twice a week when we shampooed. Short ly after that, her mother learned how to apply it for her.

It would only take a few minutes. After her hair started to grow back, and her scalp was not as sensitive we attached her hair with micro links. As the hair grew even longer we made a track and changed her to an integration system and layered her hair into a beautiful layer look. She was able to wear her hair up in an up-do for her sisters wedding and the best part was that no one ever knew that she had lost her hair. She now has her own hair back and it is all one length to mid-back. She remains cancer free.

B. In the second picture, this woman was experiencing male pattern hair loss in the crown. (Q-#1) She is a runner and plays tennis on a regular basis.

She has been a slave to hats and wigs for years. I ordered a custom 10” partial

skin crown, light density, with custom coloring. I shaved the hair loss area down very short and used a skin grafting solution. The results were very pleasing to her. She now wears her own hair and is able to have a normal active lifestyle.

C. Client number three is a very special woman to me because she is always willing to share her situation with women that also have hair loss. She says that it changed her life and that not enough women know that there is help for them. (Q-#4) She has Fibromyalgia, a very painful condition that has caused much hair loss. Because of constant discomfort in her body, she only wants to wear her hair when she is out of the house. We chose a custom-made lightweight partial integration with a _” ribbon perimeter to attach two comb clips in the back. The front has a 1” poly front that we attach to her forehead with contour tape. By attaching the hair to her forehead in this way we were able to balance out her natural hairline.

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D. My fourth client has common female pattern loss. When she came to me several years ago she had very short curly hair. (Q-#11)She was very attached to her hair, and was very concerned that she would lose more hair due to the service. The first hair we put on her matched her curly short hair and had very light density. (Q-#12)She asked me to please make sure that no one would know that she added hair, but was very interested in change. As her own hair started to grow we have continually changed her style. We have made her hair longer, darker and lighter.

She says that she loves that she can change her hair like her friends do. She is currently wearing light brown hair with blonde streak highlights. The hair is a custom partial integration with remi hair and a _” poly around the entire perimeter. We attach the back of her hair with a weave and the front with a skin bonding solution. She come into the salon once a month to have her hair colored cut and reattached.

E. My last example is of a beautiful woman that I consulted with several years ago. During our first meeting we discovered that she was not emotionally ready for her additional hair. Recently she felt like it was time to, as she put it, “go for it”. She has female pattern hair loss. Even though her hair loss is in a more advanced stage, she was still not willing to entirely cover all her hair with a solid system so I chose to order a ready made partial integration. It was 5x6 in size, medium light density and multi-colored. (Q-#10)She expressed to me that she often gets severe headaches and needs to take a prescription medication for them. I decided to attach her hair with a skin grafting solution to avoid any additional discomfort. The style that we chose was the style that she was trying to achieve with her natural hair. Her hair stylist that has been doing her hair for years still works with her. She does her color and I do the additional hair. She recently called to tell me that her client has never been so beautiful. She said that she smiles more and seems more confident. The stylist told me thank you for making her friend feel good about herself. That is what our business is all about……

Bobbi Russell is a well-known educator and platform artist. She has appeared at major industry conferences and seminars and has been a contributing editor to The National Hair Journal for several years. Bobbi specializes in weaving, extensions and integration systems. She lives and works in Tampa, FL.

Harmonix Hair Solutions offers turn key opportunity to become an expert in hair treatment therapy which include:

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10 The National Hair Journal Spring 2004

SELLING

(continued from pg. 6)

Importance of Accuracy - From the seller’s point of view, the disclosure schedules are akin to an insurance policy; the seller will want to disclose as much factual information to the buyer as possible in order to make the representations and warranties accurate. Ultimately, if the seller’s representations and warranties are not accurate, the buyer would be entitled to sue the seller for damages under the indemnification provision of the agreement, which will be discussed below.

Generally, the selling shareholders and the selling company will be required to make certain representations and warranties in the acquisition agreement. If there is more than one selling shareholder, the selling shareholders will need to determine whether the representations should be made severally (by each shareholder alone), on a joint and several basis (each shareholder may be held liable for the whole amount of any breach) or on a pro rata basis (each shareholder is liable only to the extent of the percentage of his ownership in the selling company).

Although representations and warranties vary among agreements, the following are the most common: 1.

Status. These are basic representations dealing with the seller’s organization, power and authority to enter into the transaction.

2.

Financial Condition. The seller’s financial condition is usually tied to its financial statements or tax returns. The seller will generally be asked to represent that its financial statements are “true, accurate and complete in all material respects”.

3. Material Contracts. The seller will be required to make a representation and warranty with respect to all of the material contracts involved in the seller’s business, including customer contracts, and to list them on a schedule. As part of this representation or in a separate representation entitled “Consents,” the seller will also be required to list consents of a third party which are required in order for the seller to assign its material contracts to the buyer.

This requirement is extremely important in an asset acquisition. If a material contract provides that it cannot be assigned without the prior written consent of a third party, the contract cannot be transferred at the closing unless such consent is received. In a stock transaction, since the buyer is purchasing all of the stock of the seller, the buyer automatically inherits the seller’s contractual rights and obligations.

However, if the material contract involved contains a change of control provision, the consent of the third party to the contract will be required even in a stock transaction. The seller will need to carefully review with its attorney all of the seller’s material contracts in order to make the proper disclosure and to limit this representation accordingly.

4.

Customers. This is often an important representation, particularly in the hair replacement industry. Frequently, the buyer will require the seller to represent and warrant the number of the seller’s “active” customers and to represent and warrant whether any of the seller’s customers are “dissatisfied.” The representation and warranty with respect to the number of seller’s “active” customers is important to the buyer because it assists the buyer in determining the revenues of the seller’s business on a basis which is independent from the seller’s financial statements. A savvy seller will want to avoid

providing the buyer with a” guarantee” that there will be no loss of customers.

careful to avoid any kind of representation regarding transferability.

5. Employees and Employment Matters.

This representation will generally require the seller to list on a schedule its employees and independent contractors and to set forth their terms of employment, including salary. The buyer will often want the seller to represent that there are no pending on threatened claims by present and former employees, including claims based on workers compensation, sexual harassment, and sexual and age discrimination.

Because the industry is so competitive and customers are often loyal to their technicians, the purchaser will also want the seller to represent whether its employees have entered into restrictive covenant agreements.

8. Environmental. This is an important representation in the hair replacement industry due to fact that some of the products used to service clients, such as hair dyes and adhesives, contain what are called “hazardous products.” Generally speaking, hazardous products are chemicals which can be dangerous if handled improperly. In order to avoid liability for the prior acts of the seller, the buyer will want the seller to represent that it has complied with all environmental laws. A knowledgeable attorney will be able to protect the seller by limiting this representation.

6. Litigation. The seller will be required to represent and warrant that no material litigations are pending or threatened against it. To the extent that several litigations are pending or threatened against the seller, the seller will be required to disclose them on a schedule to the acquisition agreement. Once full and complete disclosure is made, in most cases the seller will not be liable to the buyer for litigations that are commenced after the closing and about which the seller had no knowledge.

7.

Permits. The seller will be required to represent and warrant the status of licenses and permits which are necessary for seller to operate its business and to list them on a schedule to the acquisition agreement. If any of the seller’s licenses are not in good standing, the seller’s attorney should be so advised in order that appropriate disclosure can be made. Since licenses and permits are generally not transferable, the seller’s attorney should be

Other Representations - In addition to the representations and warranties described above, the acquisition agreement will contain other important representations, such as those concerning suppliers, intellectual property, equipment and inventory, accounts receivable, liabilities, compliance with applicable laws, tax matters, insurance and employee benefit matters. The seller should be aware of the date as of which representations are being made. If the signing of the acquisition agreement and the closing occur simultaneously, the representations will be deemed to have been made as of that date.

If, however, the agreement is signed on one date and the closing occurs on later date, the representations will be deemed to have been made both as of the signing date and the closing date. If it is anticipated that circumstances will change during the interim period (as they often do), the acquisition agreement should provide for the delivery of updated schedules so that the representations and warranties are correct not only as of the date the agreement is signed, but on the date of closing as well. (continued on page 22)

I am pleased to announce a special agreement with Professional Hair Labs to make its products available to Apollo members and associates worldwide. These products have been designed and extensively tested to provide you with the safest, best-performing and most cost-effective adhesives and removers on the market.

Chuck Nelson, Founder, CEO, Apollo Hair Systems Int’l.

14 The National Hair Journal Spring 2004

The National Hair Journal PROMOTING

medical supplement

C O O P E R A T I O N B E T W E E N T H E A RT I S T R Y O F H A I R R E P L A C E M E N T A N D T H E S C I E N C E O F H A I R R E S T O R AT I O N

improvements in survival rates of transplanted hair and increased hair growth. Dr Jerry Cooley also reviewed graft storage solutions, So, what is new? Mostly, improved options for hair asking if Ischemia Reperfusion was

By John Vincent, Medical Editor loss; efficiency in the transplant procedure and more the principal cause of rejection in consistent aesthetic results. Dr. Ken Washenik, chief o rgan transplants, could it be factor medical officer at Bosley and principal at the Orlando, Fl, 03/04 - Over 150 hair surgeons and in hair transplantation also. His Aderans Research Institute, a hair duplication staff members converged on Lake Buena Vista, conclusion? Hair grafts can be proresearch company, in a brave, early-morning presenFlorida, for of the International Society of Hair tected against oxidation by using a tation told listeners that hair cloning, or “follicle Restoration Surgery's 10th Annual Live Surgery chilled hypothermic holding soluneogenesis” as he prefers to call it, is now a reality.

Workshop. Dr. Matt Leavitt, the event's host since its tion. In a discussion Cell-based hair about improvements transplants are in surgical technique, achievable, but Panel discussion chaired by Dr. Antonio Mazola with Drs. Marcelo challenges (Lto R) Jerry Cooley, MD, Matt Leavitt, DO and Bill Parsley, MD Gandelman of Brazil, remain, notably work closely with hair replacement professionals.

David Perez of Mexico, (current in hair orientaISHRS president), Mario Marzola of tion and the conAnd, "Its OK to be bald” says Louisville hair surAustralia and Patrick Frechet of Paris, sistency of new geon, Dr. William Parsley, “But if you don’t like how stressed how sophisticated restoration growth.

Dr. you look, we have wonderful solutions.” An ISHRS procedures have become with new Washenik pre"Golden Follicle" award winner in 2003, Dr. Parsley i n s t rumentation.

A d d i t i o n a l ly, new dicted that tissue Dr. Arthur Katona shows eyebrow surgery results says hair restoration is a commitment--an agreement techniques are assuring better patient engineering will between the patient and surgeon which must be kept experiences with 'painless' anesthesia and post operbe used to supplement traditional hair restoration Dr. Matt Leavitt in live surgery demonstration by both sides. The 'bad' hair transplants we somea t ive healing agents. techniques for the foreseeable future, not replace it. times see may be the result of a procedure which was Dr. Jerry Cooley of Charlotte Dermatology Hair inception, his Executive Assistant, Valerie Dr, Frechet continued to "wow" his colleagues with poorly planned and/or not '"finished."

Center shares his enthusiasm. A Montalbano and event Co-chairman, Dr. David his scalp-reduction techcompany he is working with in Perez, are responsible for what is considered the most niques. Patient photographs Europe is also 'hot on the trail' of proimportant teaching event for hair restoration surgery. showed impressive results, ducing more hair from less.

This year was a classic example. with large areas of baldness Meanwhile all doctors we spoke with being transformed into Once again, the Journal's "National Hair Hour" radio are urging their patients to "Do evenly-distributed, naturalprogram provided live, on-the-spot coverage for men everything you can to hold on to all looking heads of hair. and women wanting to learn the latest about hair loss the hair you have. Don’t lose more Tissue reduction is indeed solutions. Chris Webb and I had the privilege of hosthair waiting for the silver bullet." alive and well in the hands ing two roundtable discussions which brought The two FDA-approved products of artists like Dr. Frechet. together some of the most emiM i n ox i d i l When asked how many nent international hair sur(Rogaine) and Chris Webb with Dr. Alan Bauman doctors could get these geons to share their knowledge Finasteride kinds of results, he replied modestly, 'Any doctor and insights with Hair Hour (Propecia), continue to who is willing to learn by watching what I do can do listeners. To put this panel demonstrate their effectivethis!" event into perspective, it was Dr. Tony Mangubat &Chris Webb ness and are frequently used As many of our readers know, a topic very much 'on like having Richard Petty, Bill together more even better my brain', is the issue of transitioning clients from Elliott, Dale, JR and Rusty Dr. Tony Mangubat of Seattle, the incoming presiresults. In an important prehair system to hair restoration surgery. Since not Wallace give you the latest on dent of the ISHRS, summed up the message that sentation, Dr. Leavitt indicatevery system wearer wants or needs the complete what's up in stock car racing!

Live Surgery Workshop should convey to the public: ed that a one-year, doubleThe discussions will be broadappearance of a full head of hair, Dr. Perez and Dr. Today, there is no reason why someone who is bothblind, randomized study had Michael Beehner of NY described some of their cast on the National Hair Hour, ered by hair loss and is a candidate for hair restorademonstrated that the use of strategies help system wearers make the change to which airs every Saturday at tion, cannot count on receiving a natural result from Finasteride by hair restoration transplants 'painlessly.’ Both agree that the key is to 9:00pm on WOR-710AM. a member of the ISHRS. Dr. Edward Epstein & Dr. Sharon Keene patients resulted in significant

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15 The National Hair Journal Spring 2004

TACTICS FOR THE

SMALLER

STUDIO

By Andrew Wright Much of the attention in today's hair replacement business is given to the larger studio. By "larger studio", I'm referring to the studio, usually in a major market, that has gross sales of over $1,000,000 a year. By attention, I mean advertising campaigns, promotional programs, sales strategies, manufacturer's deals and incentive programs, etc., etc.

Yet the fact is that the backbone of the hair replacement industry has been, and will continue to be, the smaller studio. Smaller, of course, is a relative term. A studio could be the dominant "player" in its market and still be considered smaller in terms of gross sales. This is frequently the case in markets with small populations. Or smallish markets that border a much bigger one.

Conversely, a studio could be the second or third largest in a major market, and even brushing up against or even exceeding $1,000,000 a year in gross sales, and still be considered "smaller", due to the size of its competition.

No matter how you define what a smaller studio is, it's easy to categorize what a smaller studio isn't. And that's the studio spending $15,000 a month on TV advertising, another $3,000 a month in Yellow Pages, and perhaps an additional $4,000 in print ads, The joy of being small Despite this country's preoccupation with the notion that "bigger is better", that doesn't always hold true when it comes to the hair replacement business.

First of all, big gross sales don't always translate into big net profits. Larger studios have more overhead, naturally, bigger turnover of personnel, higher client turnover, and of course, higher promotional costs. These factors all cut into profitability. In short, once a studio becomes "big", the efforts required to remain big can be very costly.

And when I refer to cost, I'm not talking about dollars and cents alone. Many people in our business eschew the 14-hour day and prefer a more reasonable workload that leaves more time for personal endeavors and pursuits.

Moreover, smaller studios frequently have a more stable client base. Clients who remain with a studio over the years despite the overtures of the "big boys" are a steady source of business--one that generally is far less problematic than a transient client who is always looking for "the next best deal" or the "next best thing."

be far more likely to go elsewhere.

When all is said and done, despite all the differences between big studios and small studios, they all face the common problem of procuring new business.

Big Studio vs. Small Studio What works for a large studio frequently won't work, or isn't feasible, for a smaller studio.

Big television campaigns, when executed properly, do produce big results. But for smaller studios that can't afford, or are not willing to spend, the big dollars needed to fund a television campaign, TV is essentially worthless.

The same goes for most other media vehicles.

Outdoor billboards can be prohibitively expensive, radio can cost almost as much as TV, and newspaper advertising is notoriously inefficient.

There is another factor at work here, too. I call it "the rising tide" theory. You've all heard the saying that "a rising tide lifts all boats."

Absolutely true. But the problem is that when it comes to the hair replacement business, the rising tide lifts the bigger studio boat higher than it lifts the smaller studio boat.

What do I mean? Let's say the dominant studio in a market constantly runs TV advertising. In effect, what that studio is doing is not only selling his/her own services, but the whole concept of non-surgical hair replacement in general.

Even if the viewer isn't currently searching for a solution to his hair loss, a seed has been planted that non-surgical is definitely a way to

go, versus surgical, Propecia, etc.

They're wrong. Dead wrong.

When it comes time to do something about his hair loss, even if the potential client doesn't remember the name of the studio that ran the commercials, it is far more likely that he will see advertising from that studio when he is ready to make a decision than from a smaller studio. Because the bigger studio simply has more of an advertising presence, a bigger "share of voice" as it is referred to on Madison Avenue.

What the smaller studios need are promotional programs that are feasible based on what money they can afford to spend and what results they can reasonably achieve. Giving a TV campaign to a smaller studio with a limited budget is like giving a twelve-year old a car for his birthday. It's a great present, but unfortunately, it can't be used.

What does that mean? The rich get richer, and the poor get poorer. The bigger studio will get a far higher percentage of "lay down" sales than a smaller studio--a percentage even higher than its relative share of market. In effect, the bigger studio gets more for its advertising dollar in the long run, percentage wise, than the smaller studio will.

Tactics for the smaller studio What smaller studios need to compete is a set of tactics and solutions devised especially for them. The smaller studio cannot ever, let me repeat this, can never expect to use the same tools as the larger studio and compete effectively. The dollar differential when it comes to ad spending insures that it is impossibility.

But what we see in this business, unfortunately, is for manufacturers to treat the smaller studio just like the larger one. Most manufacturers advocate the same advertising and promotional pro grams that they develop for big studios as being suitable for smaller studios.

Making more from existing clients One strategy that is imminently sound is for smaller studios to wring more profit from its present client base. By selling services that are more profitable, there's no real added expense or increase in overhead. Any incremental dollars go straight to the bottom line.

Program selling, which has been with us for almost a decade, is certainly a way for studios to upgrade present-day clients to a more profitable level of service. But by now, most studios have used program selling as a tool and are of the opinion, probably correct, that they have converted as many of their clients as possible to programs.

The fact is that many studios don't want to "push" their clients into programs any more than they already have for fear of alienating the client.

The manufacturer should share the burden. If a manufacturer is truly interested in helping its smaller studio clients, they should also be willing (continued on pg.18)

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Finally, the work turned out by a smaller studio, in terms of quality of client appearance, is often just as good or better than what larger studios are capable of. For many smaller studio owners, the ability to better control the quality of the work done by the studio is a benefit and form of compensation more valuable than that which is measured in dollars and cents alone.

On the other hand‌.

Despite the many advantages that small studio owners enjoy, there are also problems that, if not checked, can have disastrous consequences.

Chief among them is client attrition. No matter how loyal a client base a small studio might have, the fact remains that clients do leave, for factors totally beyond a studio's control. Some attrition is going to happen no matter how well a studio is run. And an inability to replace lost clients will result in a downward spiral of profits year after year.

Smaller studios with a "family atmosphere" are also more vulnerable on the occasion when a key employee, such as a technician, leaves.

Even if the technician does not go to another studio and try to poach her former clients, the potential problem is that the former clients will not feel "tied" to the studio any more and will

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7 The National Hair Journal Fall 2004

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18 The National Hair Journal Spring 2004

SMALLER STUDIO ( cont. from pg. 15) to assume some of the risk in such a venture.

What we're doing at On Rite is to provide a line of skin and lace grafts that we guarantee for program sales purposes. That is, if the studio can't satisfy the client with the graft, we'll replace it after it has already been cut in or worn within a stated time period. So there's no financial risk on the studio's part.

This guarantee allows studios to become very creative, and ultimately very effective, in presenting program sales to existing clients. One way to use a guaranteed graft to its fullest benefit is for the studio to offer a "full head bonding" transition to his clients on a free trial basis. As in, "Hey Mr. Smith, your current graft is not looking its best, it may be time for a new one soon, but before we even talk about that, I've got something for you that you can try for free. If you like it, we can set up something for you that's very affordable. If you don't like it, we'll go back to what you have, and you've lost nothing."

The aforementioned sales presentation is so client-friendly that no one will ever object to such an offer being made. There's very little risk in alienating a current client with such an approach. And there's a good deal of probability for success because the client can actually experience the product/service for himself. So it's a win-win situation.

A different slant on promotion There's a great difference in the money that needs to be spent to convert balding men to the idea of non-surgical hair replacement versus the money that needs to be spent in extending a "free" offer like the one mentioned above.

At On Rite, we've developed low-cost promotional efforts like small-space newspaper ads to extend the "free" offer to present day wearers and first-time, non-wearing clients alike. It's far easier to interest present-day wearers in visiting your studio when the offer is so stunningly attractive. And for the skeptical, first-time client, a “try it, you’ll like it” offer raises the probability of the man picking up the phone, rather than some vague promise of "improving your appear-

ance" or "gaining more confidence."

What's more, a free offer is just the thing to convert old, dead leads into new, interested prospects. And it can be accomplished through a simple, low-cost mailing through a single letter. We've also developed some interesting techniques at On Rite that can make such a letter even more effective.

Smaller studios are NOT an afterthought The key to effective marketing by smaller studios is to replace the need for big ad budgets with creative thinking. That begins in the product development stage. For example, offering skin grafts that can be cut down to fit almost any client allows the smaller studio for greater flexibility in "seizing the moment" when an opportunity presents itself.

Conversely, product development cannot begin in a vacuum. "How will this product" fit into a smaller studio's marketing plans should also be addressed long before a new graft is brought to market. As well, promotional materials should be developed along with the product to help the studio implement the program and assure its success.

And in developing these promotional materials, much thought should be given to what they will ultimately cost the studio to utilize, and what rate of return can be reasonably expected when they're used.

This is the sort of thinking that goes on at our company when we consider how we can best serve the smaller studio. And in our minds, smaller studios should expect no less from those who solicit their business. No one can go it alone these days. Not the manufacturer, not the bigger studio, and certainly not the smaller studio. Effective collaboration will lead to success. For the smaller studio, that begins with the realization that its needs require a different kind of effort than its larger competition.

Andrew Wright is President of On Rite Company Inc., located in Ft. Lauderdale, FL. Established in 1975, the company is one of the largest distributors of men’s hair replacement products and services in the world. In addition to hair grafts, systems and full cranial coverage for men, On Rite provides marketing materials and programs to retail centers.

Q&A TECHNOLOGY CORNER

This is where you will find answers to your technical questions. If you have a software, computer imaging, laser set up or any other question that needs an expert opinion, please Email us at news@nationalhairjournal.com.

Custom letters to clients and prospects Q: I would like to send personalized promotional letters to some of my clients and prospects. What is the best way to go about this?

A: This is most commonly referred to as a mail merge. Several software programs support this, such as Microsoft Word, ACT!, and KORVUE. All of these programs allow you to select a group of contacts and send personalized letters to them. While Word is the most powerful letter editor, it is more cumbersome to do quality mail merges.

ACT! Is the top “contact management” application and has great capabilities for merging, but it requires some time and patience to set up the “merge document templates.” KORVUE is more expensive that the others, but its mail merging capabilities are unmatched.

You can learn more about these products here …

Microsoft Word http://office.microsoft.com ACT! www.act.com Korvue www.korvue.com Managing ‘Program’ memberships Q: I have a small studio and I am find-

ing that program memberships take a lot of time to manage and are causing many problems for me. Is there anything out there that will help me with this?

A: At this time, KORVUE is the only software specifically designed for hair replacement and restoration studios and provides full program-management. For example, simply clicking a button will automatically bill your program client's account with his or her corresponding monthly fees. The program also tracks and counts down program services and hair systems, provides the capability to automatically add late fees, and supports auto-renewing contracts. Another very handy feature is that it will also tell you when to order your client’s next hair system. KORVUE could save you countless hours of time.

Affordable Medical Insurance Q: I am a small studio with one employee. How can we get our staff medical insurance at a price everyone can afford?

A: Medical expenses are one of the biggest concerns facing individuals and businesses today. Even the most dedicated employer may find itself swamped with terms and conditions that are difficult to understand. That’s why The National Hair Society is working with a major insurance broker to leverage our buying to negotiate solid, cost-effective plan for its members. We will be reporting on the progress of these negotiations in the next Hair Journal.

On Rite names Levy to lead ORAM division NEW YORK - On Rite President Andrew Wright announced today that Steve Levy would become Sales and Marketing Director of ORAM, On Rite’s Advanced Marketing group. Mr. Levy was promoted from a Sales Consultant position that he had held for the past two years at On Rite.

A graduate of Northeastern University in Boston, Levy started his career in New York City, first at Bamberger's, then as an entrepreneur in the garment center. He spent the next twenty years in Florida serving Snap-On tools in various capacities, lastly as a franchise dealer, before joining On Rite. "Steve's sales and marketing experience, combined with his reputation as a constant performer, will be a great asset to the studios that make up the ORAM organization," said Wright.

19 The National Hair Journal Spring 2004

Dave Barker

( cont. from pg. 5)

explaining the program and made some follow up phone calls. That was all that it needed to get started.

CW: After you introduced the laser, what was your next diversification?

DB: We decided to develop our women’s business more aggressively. We’re still in the process of doing that. About 2 years ago, on a given Saturday, maybe we’d see 10 consultations, 9 men and 1 woman.

Last Saturday, we had 9 consultations, 8 of them were women and 1 was a man!

CW: What steps have you taken to prepare yourself and your staff to take better care of the sensitivities and special styling needs of women.

DB: We’ve tried being more sensitive to women’s needs, from the way that we handle the consultation, the décor of the consultation room and the approach that we use. I am currently doing most of the

DB: We take a different approach to the typical hair presentation. We are a little softer with the consultation… and we also offer everything. Clients know that if they go see the guy who just does surgery, or hair additions, or just does lasers, then they know that’s what they want them to get involved with. But because we offer everything, they figure we’ll guide them towards what’s really best for them.

CW: What do you see happening in the traditional hair replacement market today?

DB: I have been to a lot of meetings lately and a lot of people are concerned about their business being down and so forth. I really think that our market is growing and that we can do well in the hair replacement business, but you have to take a different approach. I thing that offering all the different options is the way of the future. We are not really showing a product, we’re providing a service. And if you keep trying to sell a product, you’re not going to make it.

somebody who doesn’t have a clear vision of the future? What do you see ahead?

DB: You can’t be aggressive in this business without constantly updating your marketing strategy, diversifying, looking for new revenue streams, looking for new ways to serve your clients. If you can’t change, your business is going to decrease and then eventually will be gone. If you can’t change, you need to get out.

ISHRS IS READY FOR PRIMETIME! Once again, The National Hair Hour broadcast live from the 10th Annual ISHRS Live Surgery Workshop, hosting two roundtable discussions featuring leading surgeons and researchers.

The National Hair Journal About Us - The National Hair Journal is part of The National Hair Group, a business consortium committed to the development of the hair-management industry. The National Hair Group provides information services via The National Hair Journal a business newspaper, The National Hair Journal Online, an interactive website and The Insight Group, which organizes management workshops and retreats. The Group also provides consumer education and information services via The National Hair Hour, a weekly radio show.

Mission - To provide hair-management professionals from all disciplines with accurate information that will help them make better business decisions and provide superior service to their patients and clients.

EDITOR IN CHIEF Christopher R. Webb cwebb@nationalhairjournal.com

CREATIVE DIRECTOR Avi Roth aroth@nationalhairjournal.com

Contributing Correspondents

Oh I remember Yesterday…

Was is the music or was it the hair?

Education & Technical Isaac Brakha James Toscano James Britt Bobbi Russel From L to R: John Vincent (NHJ/NHH Co-host), Dr. Patrick Frechet, Dr. Mario Marzola (Australia)… and the back of Chris Webb’s recently restored head.

Medical Adviser Shelley Friedman, DO Legal Joel Morgenthau Marketing & Sales Mark Deo Tim Paulsen Medical Alan J. Bauman, MD John Vincent

Webb and Vincent talk with distinguished guests.

Source: AARP, Nov/Dec 2003.

Beatles fans should read Lennon Legend by James Henke for more information aboutthe group’s early years… and photos of the haircuts that made them famous! female consultations myself, but I’m hiring a female consultant because I know, based on conversations with clients, that they would feel more comfortable speaking to a woman.

CW: Walk me through your facility, starting outside the building. I’ve just parked in your parking lot, what do I see?

DB: We are in an office complex rather than a free-standing building. It’s very private and easily accessible. You walk in the door and you’are greeted by the receptionist…

CW: I’m interrupting you, but what is the atmosphere in the reception and consultation room? What mood are you trying to create for your visitors?

DB: We used to have a very clinical atmosphere because we offer transplants.

We wanted to look like a doctor’s office and in many ways it still very reflects that.

But we’ve tried to create a softer mood in the consultation room. We want it to be comfortable, more like a living room. In one consultation room I have a small round table and the other consultation room is set up just like a living room in your house with no desk.

CW: Have you changed your consultation techniques also?

DB: Yes. People today are too savvy.

They don’t go for that. If you try to hammer something down somebody’s throat, even if you do convince them to go ahead, it’s not really their decision so they are not going to be a long term client. You’re just shuffling people through the door and you can’t gain any ground like that.

CW: How much homework are your clients doing before they come and talk with you?

DB: A lot of research. A lot of clients are Internet savvy. I would say the average person we see has probably been to just about everybody in town - or has plans to do so.

CW: What makes your studio different?

CW: What information or support services do you need to make you more successful?

DB: The best thing the industry could do is to pull together. The greatest successes I’ve ever had - and some of the greatest failures I avoided – resulted from talking to other people in the business. I don’t care who you are, you can always find somebody who has been in business longer than you have and they’ll be able to help you out. We have to network together as an industry.

CW: How about getting information to help you in your business to make your management decisions?

DB: I listen to a lot of tapes, a lot of books on tape. I try to pattern myself after people who have already proven themselves, whether or not they are in our industry. I go to a lot of meetings and try to gather information that way. I belong to the Transitions group that has been a big asset for me.

CW: How many shows do you attend a year?

DB: Probably anywhere from 2 to 6 a year.

CW: So that’s a huge investment of time and in money. Do you think this is vital to keep you in touch with the way the business is developing?

DB: I definitely do and I can’t think of one show that I’ve gone to that I didn’t get at least one idea that was worthwhile.

CW: How many conferences have you been to this year?

DB: This year, I’ve already been to 3.

CW: What advice would you give to somebody who is coming into the industry and thinks they can make a career in hair replacement?

DB: I would suggest that they think long and hard about it. As excited as I was to get in this business, it wasn’t quite what I thought it was going to be. It looked like an opportunity to make a lot of money with minimal work and it’s definitely not that.

CW: What advice would you give to

The first roundtable, took place in the open air, alongside the welcome cocktail party and included Matthew L. Leavitt, DO., Dr. Patrick Frechet, Dr. Mario Marzola (Australia), Marcelo Gandelman, MD., (Brazil) and Dr. Antonio Mangubat, MD. Temperatures dropped to record lows that night and participants who arrived in shirtsleeves and lightweight suits are to be commended as much for their survival skills as they are for their medical expertise!

The second roundtable took place two days later and featured David Perez-Meza, MD, William Parsley, MD, Kenneth Washenik, MD, PhD, Michael Beehner, MD and Jerry Cooley, MD.

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20 The National Hair Journal Spring 2004 ness, and their clients.

To kick off the "Change in Attitude" theme, two men "off the street" were brought in for makeovers. A team of technicians added hair to the men's balding pates among other grooming improvements, with help in clothing the men from Elena Castaneda of New York Image Consultant. Later in the day, the same process was repeated, this time with two women, one of whom had significant hair loss.

line of women’s hair grafts, named Temptress™, was introduced, as was Syntress™, the new man-made fiber from Gemtress. And appropriately enough, a mini-seminar titled “How to Build Your Women’s Business” was greeted with enthusiasm and interest.

David Ray, instructs the Men’s “Bonding Class – Men’s hair What Works Best”. replacement also was thoroughly explored, through classes In both cases, the and presentacrowd was stunned by tions. In addithe results.

An tion to styling, intriguing hint of attachments, things to come, full-head bondaccording to Mr. ing, and mold Wright: "Well, nothmaking, busiAndy Wright gives the crowd a ing shakes people up n e s s - bu i l d i n g warm welcome. in this business more strategies were than when they step also covered. back and see the difOn Rite consulRob Hoffman speaks to owners & managers on the ference they make in tant and indus“Confessions of a Studio Owner.” people's appearance. try veteran Leo It makes you take Benjamin gave a what you do a little bit presentation on On Rite's '04 Conference more seriously, and finding new with a little more clients in today’s pride. And one of the tough men’s marIn warm, but not always so sunny Ft. Lauderdale, things we wanted to Excitement fills the air in the main ballroom. Over ket; a class on On Rite held its '04 conference at the Marriott 300 clients attended the On Rite 2004 Annual do was to “Making the Conference. The theme was “Think Attitude”. change peoInternet Work for ple's attitudes You” was also about the business." given. It was hosted by Peter Cammann of The "change in attitude" Hairloss.com, a Division theme was also echoed in of On Rite. Hairloss.com many of the classes and is becoming active in web presentations that were optimization, as well as The Ultratress Hair Progression Workshop, “Less conducted during the twoweb design and enhanceStress, More Tress.” day affair. “Hair that ment for clients looking Changes Attitudes” was to ride the wave of new busi“We all get caught up in the day-to-day of our busithe subject of a styling ness being generated via the nesses”, said Wright. “The overall mission of this exercise, while Internet. conference wasn’t just to show a new way to attach All heads turned to view an emotional and breathtak- “Confessions of a Studio hair or to demonstrate new products. It was to look Owner” and “Making It Naturally, new products were ing makeover. Both female models are wearing the at the business anew, from every aspect, to stand Work for Men” continued d i s p l ayed and demonstrated, new Temptress ™ and Ultratress™ line. back and gain perspective, and yes, quite frankly, to the subject of attitudinal the latest and greatest styling change attitudes about who we are, what we do, change. trends were shown and disMarina Hotel on Florida's Intracoastal waterway on and the opportunities that await us. If everyone Much time was spent on the cussed, and of course, there February 8th and 9th. Over 300 attendees gathered Elena Castaneda, from New York who attended went back home fresh and eager to women’s business during the conwas much sharing of experifor what was billed as a "Change in Attitude."

Image Consultant, emceed the open their studio doors, with a little added enthusiference, as well. There were ences during the various cockmain event, “Extreme asm and some new ideas they can’t wait to impleclasses in On Rite’s Ultratress™ tail parties and meals that On The theme of the show was indeed, "Attitude," and Makeovers”. ment, well then, we did a pretty good job.” product, including one that Rite hosted. But more than it was reflected in the entire weekend's activities.

Judging by the comments and smiles that emanatdemonstrated how it could be anything else, according to The idea, as communicated by the opening speech ed from the attendees at the end of the conference, made to work for women’s hair loss in addition to Andy Wright, a different sense of perspective was given by On Rite President Andrew Wright, was to it was a job well done, Andy. lengthening and volumizing. The new Gemtress promoted, discussed, and hopefully, embraced. change the attendees’attitudes about hair, the busi-

ON THE WATERFRONT

CYBERHAIR IN CALIFORNIA

tor, Laurie Nash (Another Look Hair Institute/Lansing, MI), creating a new look with no adhesive and no mess. The audience was definitely impressed!

San Diego , Feb ‘ 0 4 – Cyberhair’s 2004 National Meeting kicked off on Feb. 7th with a welcome reception on the terrace of the Catamaran Resort Hotel. Next morning, IHI President, Peter Gensler, introduced IHI staff together with special guests from Aderans and the Philippines. A special guest speaker, and legendary NASCAR driver, then shared his experiences as a Cyberhair client before giving each Cyberhair dealer a personal autographed picture.

With the meeting concluded, it was time to head outdoors for the annual Muckers Tournament. Competition was fierce, but in the end Bob Schmidt, (HRJ Hair Solutions/Lima, OH) took the trophy- his second year as the Muckers victor. Day 2 was topped off with an Awa r d s D i n n e r.

Receiving Special Achievement in Cyberhair Awards were Carol Craig, Caroly n Jones, Mike M a h o n ey, Ray S c h n e i d e r, and Sal Tirnirella.

M r. Yuji Sugai, R&D Manager at Allen A rt h u r (Manila) Inc., then gave a slide show presentation featuring Aderan's new factory in the Philippines. Guest saw the improved space, equipment and technolog y designed to keep the company at the forefront of the hair replacement industry. Darla Smith, Vice President of IHI, reviewed the latest Cyberhair advances. She was followed by Trevor Hendrickson and Wade Arnold of T8 Design a company IHI has teamed up with for website development.

That evening, everyone gathered for a dinner cruise on The Bahia Belle Sternwheeler boat.

Guests were treated to a Steel Drum Band as they cruised beautiful Mission Bay. Day 2 began with men's Cyberhair marketing.

Peter Gensler presented marketing material that included a new men's Cyber commercial and a new photo mailer. Jim Hill from DK International spoke about Cyberhair M, New

Man®, Caring Totien,®' Best Hair Import s ® , N ew Wo m a n ® , Concise Hair ®, and the CEA P r o g r a m (Cyberhair E x t r e m e A d vantage) that a l l ows clients to wear Cyberhair on a program basis. Amy Gibson, a former daytime television actress living with Alopecia Areata from the age of 13, then made a moving presentation about her own experiences. Amy created Crown & Glory Enterprises in order to help others

experiencing similar situations. She offered Cyber dealers a unique perspective on dealing with women and hair loss.

M e a n while, to demonstrate Micro Po i n t Accent's new 18" hair length, Michelle Smith, IHI Technical Consultant and Educator, was attaching special "alternatives to extensions". Within an hour and 15 minutes, she had attached 140 Accents (14,000 strands of Cyberhair) to Cyberhair distribu-

On Tuesday, The National Hair J o u rnal's Chris Webb made a presentation that focused on how the hair replacement industry is evolving and what it will need to be successful in the market of tomorrow. Katie Haas, IHI's Cyberhair Business Development Manager, then outlined the Cyber Business Plan and Peter Gensler handed out $2,500 worth of “CyberDollars” to each Cyber dealer to launch the program. The meeting wrapped up with an invitation to everyone to take advantage of the 2004 Factory Tour and to send in their suggestions for the next Cyber meeting – the group’s 10th anniversary!

All in attendance agreed that it this had been a very productive meeting in sunny San Diego!

21 The National Hair Journal Spring 2004

with

NEW IMAGE

Irvine, CA, 01/02 - Local market seminars or, "Regionals" as they are more popularly known have been a huge success for New Image and this January the team was on the road again; this time in Irvine, California. As always, Scott Walmsley and Mike Montemurro were on hand to greet their guests.

New Image has developed a number of new products for the burgeoning women’s market and David Hamblen, Redken platform artist, made a series of fashion-forward presentations, demonstrating "Twisted Techniques," and New Image's "Secret Strands" hair extensions.

It was good to see so many West Coast guests networking together.

Salon owners and stylists who find it difficult to leave their work for three days to attend an event on the other side of the country were delighted to receive hands-on instruction and to meet their New Image friends right in their own neighborhood!

These photographs capture some of those moments and, of course, the winning bid at the usual live auction! We could not resist including a picture of marketing director, Daryl Graham, who left his laptop computer for a few minutes to grab some photographs. Someone please tell him that the nose goes to the left of the viewfinder!

The Problem Is Not Budweiser; It's Us! Deerfield Beach, FL, 01/04 - That's how Lance Centofanti opened an aggressive and farsighted Virtual Reality conference in January. Centofanti told conference attendees that if the media finds fault with hair replacement products, it's because the industry fails to hold its clients accountable. "People are held accountable in virtually every other daily activity,” said

Tim Paulson receiving a standing ovation from the Virtual Reality Dealers! Way to go Tim!

Centofanti, "Even dogs are held accountable by their owners. But somehow hairpiece wearers get away with poor styling and maintenance.” “This has to stop!”

Centofanti told guests that the hair management industry today has many outstanding solutions, which used solo or in combi-

"Salon of the Year" winners Verg & Cheryl Christoffels (center) with NHJ’s Chris Webb (left) and Lance Centofanti

to demonstrate his skills to Eastern Bloc stylists and receive a special award. The focus of Virtual Reality would always be the creation of fashionable, modern hair styles said President, Michael Napolitano, but group members were also encouraged to take advantage of unique corporate programs such as, "Virtual Reality Live" in which an elite styling and marFrom left to right Eleanor Napolitano (founder of American Hairlines), Annie Frustaci (Hair Solutions for men,NY), Shannon Sorbara (Next keting team visits a Generations,FL) Al Baroca (Movie & a makeover), Bruno Frustaci (Hair virtual reality dealSolutions for men,NY) & Michael Napolitano (American Hairlines,CEO) er to share their corporate skills nation can create sophisticated, unde- and resources. tectable hair loss solutions. “It's up to hair replacement specialists to master these new As proof of Centofanti's vision of the technologies” asserted Centofanti, and future, he invited Dr. Alan Bowman to outthat's what he promised to deliver to every line the latest developments in medical hair regrowth and restoration and discuss ways Virtual Reality dealer. in which the different segments of the hair Members of the Virtual Reality group were reminded that they are part of a select team that is committed to excellence. It was not a coincidence said Centofanti that the "Salon of the Year" winner (Verg Christoffels & Co.) was a Virtual Reality dealer, as was Bruno Frustacci, who was The Design Team show what is hot in Trendy cuts! From left to right - Kathy Montefusco, Izabella Topilyer, and Andrea Green show how easy the Trend en route to Moscow grafts are to cut in.

Shannon Sorbara preparing to create Al Barroca's (Movie & a makeover) hair look fantastic! Chris Licursi is speaking about the adventure on Movie & a makeover.

management industry could work together to provide clients with optimum hair los

Neil Greenberg of the GFG Group, Julia Villaorduna Sales Manager, and Lance Centofanti Vice President of American Hairlines discussing New marketing materials and strageties for the Virtual Reality Studios.

solutions. Marketing expert, Tim Paulsen followed with powerful strategies for the evolving hair market.

The Virtual Reality meetings are always notable for their production values and serious, business-oriented content. This year was no exception as participants rolled up their sleeves for two days of hard-nosed business planning. This is a serious group that works hard to stay ahead of the market.

22 The National Hair Journal Spring 2004

SELLING

(continued from pg.10)

Limiting Representations - One of the most important functions of the seller’s attorney will be to limit the representations and warranties requested by the buyer.

During the due diligence phase of the acquisition process, the seller should be sure to fully disclose to its attorney those areas of the seller’s business which represent potential sources of liability. Armed with this knowledge, the seller’s attorney can help the seller to avoid liability for breach of representations or warranties made to the buyer by limiting or qualifying such representations and warranties.

There are several ways to limit or qualify representations. First, the seller’s attorney can try to limit the seller’s representations to the “knowledge” of the seller and or its shareholders. For example, the purchaser may request a broad representation such as this: “The seller is not now, nor has it been in the past, in violation of applicable environmental laws.” As a result, if the seller violated any environmental law at any time in the past, it would be in breach of this representation. If this representation is limited to the “knowledge” of the seller, the seller would not be in breach of this representation (even if the seller violated an environmental law) if it was unaware of the violation at the time that the representation was made. A second way of limiting a representation is to limit the time frame.

In the example set forth above, the “past” can be limited to the past six months or one year.

One way of qualifying a representation is by making it subject to “materiality.” For example, if the seller is asked to provide a representation that its financial statements are “true, accurate and complete”; the seller can limit that representation by providing that such statements are true, accurate and complete “in all material respects”.

The materiality qualification can also be used to limit a representation by a dollar amount. For example, if the seller is asked to provide a list of all material contracts, the seller can limit the list to contracts involving the payment of consideration in excess of a specified dollar amount (e.g., $5,000).

Indemnification - Apart from representations and warranties, one of the most intensely negotiated provisions of the acquisition agreement is the one dealing with indemnification. In this provision, the parties agree to indemnify each other from and against any breaches of the representations and warranties and non-fulfillment of the covenants contained in the agreement. The seller’s attorney should make sure that the indemnification provision is mutual (i.e. it applies to the seller and the buyer) and covers claims between the parties to the acquisition agreement as well as third party claims.

There are several ways to limit the seller’s indemnification obligation to the buyer.

The first is to limit the survival period of the representations and warranties. This is a matter of negotiation, but a rule of thumb is that general representations survive for no more than two (2) years after the closing and that other representations, such those relating to taxes and environmental matters, survive for the applicable period of the statute of limitations.

Another way to limit the seller’s indemnification obligation is to provide for a “basket”. The “basket” will function as a sort of deductible so that the buyer cannot assert a claim against the seller until the aggregate of the buyer’s claims exceed a certain dollar limit. Normally, indemnification provisions which contain baskets provide that, once that threshold is exceeded, the buyer is either entitled to collect on all claims (including the basket amount) or

only on those claims which exceed the amount of the basket. Obviously, the seller’s attorney should negotiate for the latter.

The size of the basket is again a matter of negotiation. In our experience, an acceptable range would be between1% and 5% of the purchase price, depending on the size of a deal.

Another device used to limit the seller’s indemnification obligation for the seller to negotiate a cap (or ceiling) on the aggregate amount of liability that the seller can be responsible for under the indemnification provision. Again, this amount is negotiable; in no event, however, should the cap exceed the amount of the purchase price.

The acquisition agreement will contain a number of other provisions dealing with matters such as closing conditions, confidentiality, restrictive covenants, termination of the agreement, governing law and jurisdiction. One important provision that is often overlooked is a dispute resolution mechanism. When we represent small businesses, we generally recommend that disputes between the parties arising under the acquisition agreement be subject to arbitration. In our experience, arbitration tends to be most expeditious and least costly method of resolving disputes. For instance, if a dispute arises over the amount of an earn-out, the seller will want a speedy resolution as opposed to being tied up in litigation for what could amount to years.

A carefully negotiated acquisition agreement will enable the seller to retain the purchase price it negotiated, rather than to see the purchase price diminished by the buyer’s claims for indemnification. An experienced attorney, with expertise in mergers and acquisitions in the hair industry, can be a seller’s most important ally.

Joel Morgenthau is a partner at Morgenthau & Greenes, LLP, a New York based law firm with over 25 years experience in the hair industry. Barbara Comer, an associate at the firm, assisted in the preparation of this article. Inquiries about this article may be directed to: jmorgenthau@mg-llp.com.

TM

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Hair Synergies, LLC - If you are contemplating selling or buying a hairmanagement business, you may consult with Joel Morgenthau through Hair Synergies, a Mergers & Acquisitions

S t a rt to Like Yo ur Hair Ag a i n .

company that specializes in the hair industry. Contact The National Hair Journal for more information. (626) 320-1044; or email to: cwebb@nationalhairjournal.com).