SHARE:
Mixing Business With Pleasure
Most in attendance are longtime friends. Indeed, three in the group - Tampa lawyer Mike Kass, public relations entrepreneur Tom Hall and safety equipment distributor David Crannell - have been meeting with the group for a decade. One newcomer, ABI Companies CEO Hank Booth, is attending his first TEC meeting.
After snacking on bagels and donuts, the group settles down for a day of work. Part business school, part networking, the CEOs spend the next ten hours learning (or reinforcing) professional skills, solving real problems and sharing information about themselves and their companies on a confidential basis. "I enjoy having a network of people you can talk to and get honest feedback," says Jerry Messerman, president and CEO of Design Options, a Tampa office furniture systems maker.
TEC Florida, based in Jacksonville, is part of a worldwide group of 4,800 CEOs who run companies with revenues of $3 million and up. Each local TEC group consists of up to 14 members from non-competing industries plus a full-time chairman. In addition to monthly meetings, each TEC member spends two hours a month discussing his company's issues with the chairman. TEC membership (by invitation only) costs $2,175 a quarter.
Problem solving, or "processing issues" as TEC calls it, is at the heart of the monthly meetings. CEOs present real problems and other members recommend creative solutions. On this February afternoon, Southern Culvert President Kell C. Williams has the first issue, asking how to promote a new gasket for his concrete pipes. The group's questions come fast and furious for the next 15 minutes: Who is your customer? What customer problem does this solve? How have you announced new products in the past? The CEOs give quick "feedback" or possible solutions; Williams gets an audiotape of the brainstorming session. "I totally appreciate the camaraderie," says Williams. "It's like having a board of directors."
By Barbara Miracle
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SMALL-BIZ LAW
More Job Lawsuits?
Florida's small-business owners who believe they are exempt from federal job discrimination laws, listen up. You may be subject to employee lawsuits after all.
In January, the U.S. Supreme Court expanded the number of businesses subject to Title VII of the Civil Rights Act of 1964 when it clarified the definition of "employee." Title VII, which protects workers from job discrimination due to race, gender, color, religion or national origin, applies only to companies with 15 or more workers for each working day in 20 or more weeks of the year. The Supreme Court ruled that all workers on the payroll, including those on leaves of absence or who work sporadically, must be counted.
Many of Florida's smaller businesses already are subject to local job discrimination ordinances. Some apply to companies with as few as five workers.
With the Supreme Court's decision, more businesses also are likely to be subject to other state and federal job discrimination laws. The Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990 and the Florida Human Rights Act of 1992 have similar 15-worker thresholds. "The principle will be cited in a huge variety of cases and will probably be followed," says Robin Fawsett, a partner who represents management in labor and employment law cases for Shutts & Bowen in Orlando.
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GROWING A BUSINESS
All It Takes Is 10% Down
Two years ago, Tape Technologies owner Sam Phillips had an enviable problem - too much business and not enough manufacturing space. His north Florida company, which exports to 25 countries, makes pressure-sensitive vinyl film used for automobile pinstriping and road sign lettering. "We had gone from $1 million to $2 million in a brief period of time. We were bursting at the seams," he says.
So, when Phillips learned that a supplier's 28,000-square-foot facility in Green Cove Springs was for sale, he quickly inked the deal and began to look for financing. "I thought that I was going to have to go to the bank and cough up a 30% down payment," recalls Phillips.
Instead, he turned to the Business Development Corp. of Northeast Florida Inc. (BDC), one of the 10 Certified Development Corporations (CDCs) that operate in Florida. The CDCs are private, nonprofit organizations that administer the Small Business Administration's "504" loan program [see box], which provides long-term financing to small businesses for real estate and equipment. "The CDC is kind of a hand-holding entity," says BDC director Pat Ferm.
Advantages of the SBA 504 loan program include a 10% down payment (15% for new businesses),a below-market interest rate and a payback period of 20 years. With the SBA 504 program, Phillips put down just $61,200 of the $622,200 he spent for the new facility. First Union National Bank of Florida loaned Phillips $306,000, and the BDC's 504 funds provided the remaining $255,000. Because of the lower down payment, Phillips was able to purchase a forklift, racks and other equipment. He says, "If I had gone with a conventional loan, it would have been all I could do to finance the building."
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QUESTIONS AND ANSWERS
SBA 504 Loan Program
Ten nonprofit Certified Development Corporations (CDCs) - eight based in Florida and two in Alabama - provide financing to Florida businesses under the Small Business Administration's 504 loan program.
The loan package consists of three parts: a bank loan, SBA-guaranteed funds provided through the CDC and owner's equity.
Florida ranks eighth in the nation in SBA 504 loan volume, with 260 loans totaling more than $88 million for the year ended September 30, 1996. A few details:
Who can borrow? For-profit businesses with less than $6 million in net worth and less than $2 million in after-tax profits may participate.
What projects can be financed? The loan may be used to acquire fixed assets, such as land, buildings, machinery and equipment. The funds cannot be used for working capital or inventory.
What are other requirements? In some cases, businesses must create one new job for every $35,000 of SBA-504 funds included in the loan.
How much money will I need for a down payment? In most cases, owners put down 10% of the total project cost. Business owners who have a great deal of personal wealth that is liquid (cash, certificates of deposit, stock) may have to fund more of the project. Also, a 15% down payment is required for businesses less than two years old.
Who loans the money? Typically, a bank will loan 50% of the project's cost and holds the first mortgage on the property. A Certified Development Corp. provides SBA-guaranteed funds for 40% of the total project's cost up to $750,000 (or $1 million for exporters, minority-owned businesses and other special situations). The remaining 10% comes from the owner's equity.
What are the terms of the loan? For real estate, funds are loaned for 20 years at a fixed interest rate, which is generally 1% to 2% lower than conventional loan rates. For equipment and machinery only, loans are made for 10 years.
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COMPANY PROFILE:
Nutty Bavarian Going Nuts
For the Nutty Bavarian, a Lake Mary maker of cinnamon-glazed nuts, controlling overhead is a priority. If the idea of almonds and pecans covered with a sugary-cinnamon syrup doesn't whet your appetite, Nutty Bavarian President David Brent says one whiff of the warm nuts roasting in syrup will change your mind. "They stop you dead in your tracks," he enthuses, adding, "And they are good for you."
Whatever its nutritional benefits, the nutty concoction seems to be a hit with consumers. In 1996, Lake Mary-based Nutty Bavarian posted sales of $3.2 million, up from $220,000 in 1991. That put it on the Inc. 500 list of America's fastest growing companies.
The nuts are packaged in brightly colored paper cones, sell for $3 each and are sold from 122 portable carts in shopping malls, movie theaters, theme parks and other venues where people buy snack food.
Founded in 1989, Nutty Bavarian's rapid growth began when Brent bought a 50% stake in the company in early 1994. An unlikely candidate to run a snack food company, Brent is an aeronautical engineer with two degrees from the Massachusetts Institute of Technology. After jobs with Boeing, McDonnell Douglas and California's Jet Propulsion Laboratory, he gave up his engineering career to join his wife's friend, John Mautner, at the Nutty Bavarian. "Looking back now, I was an idiot," Brent proclaims, "I didn't know anything about running a business."
Brent's first year was difficult. While Nutty Bavarian was able to bolster sales by tripling the number of sales carts to 30, the increase in operating expenses ate up profits.
So Brent and Mautner took a hard look at overhead costs and began penny-pinching everywhere, from buying nuts from growers rather than the local distributor to cutting out cellular phones and overnight mail. More important, the company began to alter its focus from retail to wholesale, a shift that resulted in profitability by the second half of 1995. Mautner sold his company stake in mid 1996 and Brent took on a new investment partner, retired New York investment banker James Blaine.
Nutty Bavarian, which employs 30, now sells its products, packaging and support system to licensees and vendors, retaining only a few company-owned carts in Florida and Branson, Mo. "We make money on the glaze," says Brent. "That's our biggest profit."
By adding licensees in the U.S. and introducing the nuts in international markets by way of corporate partnerships, Nutty Bavarian hopes to reach its lofty goal of $20 million in revenues by the year 2000. Says Brent, as he ticks off a list of sales locations that have barely been tapped, "It's not unrealistic at all."
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No Free Advice
The Clinton administration is recommending that SBDCs begin charging for their one-on-one counseling sessions with prospective and current small business owners. That policy shift is designed to offset a proposed $16 million cut in SBDC funding in President Clinton's 1998 budget request.
SBIR How-To
Small business owners can learn about the federal government's Small Business Innovation Research (SBIR) grants at the National SBIR Conference in Kissimmee, April 2-4. The three-day program will explore preparing a proposal, how to turn research into commercial projects, financing, intellectual property and market research. The conference, to be held at the Hyatt Orlando, costs $225. For more information, call 360/683-5391 or access the Internet registration form at http://zyn.com/sbir
Getting Started
The first phase of the Central Florida Business Incubation Center, designed for small, low-tech manufacturers that hire economically disadvantaged workers, opened in a 12,000-square-foot facility at the Port of Sanford. The center offers below-market rent, secretarial services and help with marketing and business planning. The center is sponsored by Seminole County, Seminole Community College and the Seminole County Port Authority.
