Utah Business Magazine

Green Wheels

Hybrid Cars Mean a Luxurious Drive

by Alex Koritz

11 October 2009—

With green being the new thing, hybrid cars are making their way to Utah’s roads. And that includes top-of-the-line hybrid cars, fit for anyone looking for a luxurious, but environmentally-friendly, drive. And though the economy has proven to be worse than a bumpy road for the U.S. auto industry, many experts are touting that hybrid cars will play a role in moving the economy forward. That includes Toyota’s Chief Prius engineer, Akihiko Otsuka, who recently told The New York Times that he expects hybrid sales to “push up the entire car market.”

Jim Brown, senior vice president of the Larry Miller Auto Group agrees, adding, “Environmentally-conscious consumers are buying the luxury hybrids, along with people that want the latest technology and are looking for greater efficiency out of the vehicles.”

Certain luxury hybrids are making inroads in the U.S. despite the economic hurdles and low gas prices. Here are a few green machines topping the list:

2009 Lexus LS600hL

This high-tech hybrid focuses on fuel economy and speed. The Lexus LS600hL is the only luxury V8 hybrid car on the market. Competing brands offer a V12 edition of their luxury hybrids, but the Lexus model offers a V8 seamlessly integrated with an electric motor. This gas-electric hybrid is rated at 20 mile per gallon in the city, and can hit 60 miles per hour in 5.5 seconds. Sleek and silent, the LS600hL starts at roughly $106,000.

The Mercedes-Benz S400 BlueHybrid

The new Mercedes hybrid is a “mid-hybrid” that engages the engine after it’s switched off and then idle. It has a 15-kilowatt electric motor that sits between a 275-horsepower 3.5-liter V6 engine and achieves 30 miles per gallon. The BlueHybrid is planned for later this year and isn’t priced yet, although it is expected to sell for around $88,000. It is the very first electric hybrid in the world that uses a battery with lithium ion cells.

Toyota Prius V

Toyota has improved its Prius gasoline-electric hybrid, making it a little bigger, more powerful, luxurious and fuel-efficient. Enhanced with solar roof panels, lane-keeping, radar cruise control and an innovative navigation system, the new Prius gets three to four miles per gallon more than the old one. The hybrid starts at roughly $27,000.

Down the Road

Despite rollercoaster-like sales pro-jections, hybrid technology will begin to filter into mid-priced cars, bringing green technology prices down. However, at the same time luxury manufactures will continue to incorporate hybrid technology into their lines, which will have the opposite effect—boosting their prices. But most experts agree, the hybrid market, whether in a recession or in a growth economy, will continue to expand.

Cashed Out

Start-ups Face a Funding Dry Spell

by Alex Koritz

01 July 2009—

Business Building Gadgets

Three Utah Companies on the Mobility Fast Track

by Alex Koritz

01 July 2009—

Utah Business Magazine
Recession Resilient
Utah’s Direct Selling Industry is Up and Running
by Alex Koritz
17 March 2009—

The reasons Utah is a mecca for direct selling companies are many, but can be narrowed down to a few key characteristics: the state’s close-knit community, foreign language skills and Utah’s entrepreneurial spirit. Utah is not alone, however. According to the Direct Selling Association, estimated U.S. sales exceed $30.8 billion with 15 million direct sellers nationwide.

The Direct Selling Association defines direct selling as the sale of a consumer product or service, person-to-person, away from a fixed retail location. Direct selling companies are seller-based, meaning more income goes to the distributor when he or she makes a sale and not to up line management. They often market higher-end, one-time-sale items, such as water filters or cookware.

There are other sales models, such as the network marketing model, also known as multi-level marketing, which allows sellers to build a long-term residual income. Network marketing distributors typically sell to their social network, but compared to the direct selling model, retail commissions are much lower and most money is made on commissions to up line management in the network tree. And then there are the illegal pyramid schemes. These scams involve large numbers of people at the bottom of a pyramid paying money to people at the top of the pyramid. Each new participant pays to advance upward as newcomers join the scheme.

An Image Problem
Today the direct selling industry has come under the microscope of the media and business community. Heath-oriented companies have been accused of allowing the exaggerated claims of their distributors to run rampant. While image problems are not new to direct selling companies, and are in fact part of its legacy, these accusations have led to changes in the way some of these companies do business.

“MonaVie does not turn away from this and we take it very seriously. We have an entire department dedicated to educating our distributors,” says Dell Brown, chief operating officer of MonaVie. “We are very conservative about MonaVie’s health claims and believe it’s completely unnecessary for distributors to exaggerate its health claims. The product will sell based on its real, substantiated health properties.”

XanGo, the first company to market the dietary mangosteen juice, also employs a full-time department of professionals whose job it is to educate their distributors. Education consists of seminars, conferences, videos, written materials and other instructions about the right ways to promote XanGo products. This also involves discipline, when needed, for those who do not comply with the company’s policies and procedures.

USANA, a maker of nutritional and personal care products, has its distributors enter into an agreement that authorizes them to sell USANA products and earn a commission based on sales, provided only that they follow the terms and conditions contained in the agreement. Distributors must make only authorized claims regarding the benefits of USANA products. If a distributor makes an improper claim about the product’s benefits, they are in breach of the contract and can lose the right to sell USANA products.

Questions Answered
To ensure creditability, and to help their distributors sell product, many direct selling companies are undertaking third-party verification efforts. USANA, for example, bases its manufacturing on Good Manufacturing Practices (GMP) and undergoes regular audits of its Salt Lake City manufacturing facility. Additionally, the National Sanitation Foundation (NSF) has certified the label claims on its core products.

NuSkin employs 100 scientists to help validate its products. “Scientific validation is a key part of our product development process,” says Kara Schneck, senior director of corporate communications for NuSkin. “In addition to our in-house scientists, we also uniquely operate four full-time laboratories.”

The cosmetic company has also stepped beyond traditional skin care and introduced a slew of technology devices. The Nu Skin ProDerm™ Skin Analyzer takes a scientific approach to skin care by combining pattern recognition science, optical imaging and dermatology, giving the user an objective assessment of their skin.

Growing Strong
According to the Direct Selling Association, direct sales performance generally follows the overall economy. For example, if economic growth is one percentage point above average, real direct sales growth is slightly more than one percentage point above average. Retail sales in general also follow the overall economy.

However, recession years appear to be different. In years in which the economy has experienced a recession in any part of the year, direct sales have grown. The period of 1987-2007 contains three recession years (1990, 1991, 2001). In all three of these years, direct sales grew more than the Gross Domestic Product (GDP) did. Two of these years, 1990 and 1991, saw inflation-adjusted direct sales growth in excess of 5 percent.

“The current economy is unprecedent-ed and people are looking for ways to take control of their financial future. Direct sales provide a way for people to do just that,” says MonaVie’s Brown.

In fact, 2009 is looking quite optimistic for MonaVie. Maria Fiorini Ramirez, who was named the top inflation forecaster from 2001-2004 by The Wall Street Journal, recently stated that MonaVie is perfectly positioned for growth.

The direct selling industry typically runs counter-cyclical to a recession-burdened economy. As people lose their jobs or experience a cut in benefits or bonuses, they look for other ways to supplement their income. A direct selling opportunity offers little financial risk and an opportunity for people to increase, or in some cases replace, their income.

“Direct selling offers a unique and flexible business opportunity in the current economic environment,” adds NuSkin’s Schneck. “Some people have been laid off and some are nervous about their current jobs. Direct selling offers them a safety net and a way to complement their income.”

Utah’s direct selling strength has played a key role in keeping the state’s economy strong and ranked among the nation’s best. As the U.S. economy experiences a recession, the direct selling industry is resilient, and if the past is any indication, it will continue to be so.

The wind blew fierce. Sporadic gusts that stripped whatever leaves autumn had so far missed. There had been only thirteen days of actual sunshine within the last three months. The rain continued with unbelievable endurance, coming down at a 45-degree angle against my fogged window. It was the time of the dying. The bridge between summer’s glee and winter’s disappointment. That brief moment when life flashes by in brief explosions of regrets and what-ifs.
I first encountered death when I was twelve years old. A friend of mine, my near neighbor, was hit by a speeding car and killed. That was October. Eight years later, death would once again scream in my ears, like the screech of car tires.
I was in the middle of a mission for my church, with one more year of service remaining. Teaching the gospel of Christ had been difficult at the start, frustrating in the middle, and a hopeless endeavor in the end.  But I still preached with a naive hope and an unwavering vigor.
Seven o’clock in the morning and the only thing on my mind was the painful separation from my bed. I cradled the scriptures on my lap, wrapped a blanket around my shoulders, and hoped spiritual enlightenment would effortlessly fall into my head like the rain outside my window. My assigned missionary companion, Joe Hansen, hobbled into the room and crashed onto the sofa. We waited for the two other missionaries that lived with us and then proceeded to study the scriptures. It’s interesting how the most tragic of days can start out so ordinary.

Nine-thirty rolled around and the other two missionaries left the apartment. Hansen and I sat at the kitchen table to plan out our day. I had coincidently gone to high school with him. I couldn’t stand him then. He had been on the football team and exemplified all the stereotypes that accompanied that. But now he was different. Now he had changed. A humility had settled into his prideful bones that seemed somehow out of place, and despite our different high school experiences, we became fast friends.
“We have a teaching appointment at noon,” he announced while snatching an apple from the fridge.
“What do you want to do until then?” I responded.
“We can knock on doors, check other teaching requests, whatever.”
“Sounds good to me, let’s go.”
We gathered our scriptures and teaching materials, stuffed them into our packs, and headed to the front vestibule where we stored our bicycles. Even with our rain-jackets we were immediately waterlogged. We left the inner city of Columbus, Ohio, and headed into the Bottoms, an area where the city slopped downward toward the Scioto River. This was where low-income white people lived, or at least survived. Columbus was a very segregated city. The blacks were on the east side and whites on the west. The Bottoms was the most undesirable place to proselyte in our assigned area, but a lot of teaching requests were called in from there. Our church was currently advertising free bibles on TV commercials. People would call the number on the screen, and we would deliver it to them. This allowed us to share our message with them. Sometimes. More often then not they snatched the bible from our hands and latched the door quicker than I could say my own name.

The one redeeming thing about trips to the Bottoms was the river trail. We rode it slowly that day in order to lessen the mud our tires kept flinging into our faces. Lush vegetation painted in the colors of autumn bordered the trail on the right side; the left side was the river. As we stopped to rest, a cardinal flew across the river directly toward us.  A quick flash of crimson blurred my vision, then the cardinal was gone, perhaps to seek shelter from the endless rain, and we continued on our way. Other frequent sights along the river were turtles.  These creatures had transfixed me from first glimpse.  How they gracefully yet clumsily entered the water and disappeared beneath its murky surface. Days after I had arrived in this area we encountered a fishermen along this trail. As we conversed with him he pulled a large turtle from his line. I didn’t know people fished for turtles before that day. After pulling it ashore he knocked its head repeatedly against a rock until blood gushed forth and threatened to spill onto my shoes. He offered to cook us turtle soup later that evening. We politely declined. I stood there watching the turtle’s blood pool about my toes. Transfixed.

We finally left the river and entered the Bottoms. Empty wrappers, drenched cardboard boxes, smashed Bud Light bottles, empty cigarette packages—these were the gatekeepers of the Bottoms. I felt guilty at my own disgust and remembered Jesus had spent much of his ministry in places just like this. Among the poor and the sinners, the diseased and lowly. But I was not Jesus, and I was disgusted.

We stopped to visit a man whom the missionaries had been trying to teach for years. He had company over and we got caught up in a discussion. Before we knew it the time was fast approaching one o’clock in the afternoon. We were almost an hour late for our noon appointment.

We said quick goodbyes and rushed out the door. Yards surrounded by chain-link fences and yellow grass, despite the rain, blurred as we sped to our appointment. Upon arriving, we locked our bicycles together and hurried to the door. It was wide open. We rang the doorbell. No answer. We knocked. No answer.

“Is anybody home?” I called into the house. No answer. We were an hour late and now they were gone. Apparently they had left the front door open. Famished, we returned to our apartment for lunch. The rest of the day was routine and mundane and wet.

The following morning we arose, studied, ate breakfast, and out of guilt returned to the teaching appointment we had missed. We knew a woman at a neighboring house so we stopped by. Her porch was adorned with odd sculptures, hippie beads, and multi-colored pots. I knocked.

“Well hello, missionaries, come in.”
“How are you today, Mrs. Hendrick?” I asked.
“Fine, just fine. Boy oh boy, you’uns must be soaked to the bone. Damn rain ain’t let up a bit. Pardon my French, boys, but this weather makes my old bones hurt.”
“Mine too,” Hansen said with a crooked smile. We stood shivering in the doorway until I remembered why we had stopped by.
“Mrs. Hendrick,” I began, “do you know anything about the Davies, at 153, just down the street?”
She stood there, frozen. Her mouth opened twice without a sound. She stood there—transfixed.

Finally, she blurted, “Haven’t ya boys heard what happened?”
“No,” we said in unison.
“Well, yesterday Mr. Davies . . . he. . .uhm . . . murdered his three little children. With a mallet, just plain murdered ‘em.” Stunned silence.
“When?” was all I could muster.
“Yesterday at noon. Poor kids, but now they’re in the arms of Jesus. Perhaps ‘twas a blessing, the man was cruel. Sure could’a used some religion, too bad ya boys didn’t get a chance to teach him.”

Wet and cold, we rode in silence. I was in front; Hansen a ways back to avoid the mud being flung by my rear tire.  It seemed a world of water. The rain struck vertical, the river flowed horizontal, and a tear escaped unabashed, rolling down my cheek.

“Sure could’a used some religion, too bad ya boys didn’t get a chance to teach him.” It echoed in my head. I jerked my brakes and waited for Hansen to pull up alongside me.

“Hansen,” I said as he skidded to a stop. “He killed his kids at noon. That’s when we were supposed to meet with him and give him a Bible.”    “I know,” he said, staring out across the dancing river.
“We could have stopped it. If he’d read that Bible or heard our message, he wouldn’t have murdered his kids.”
“You don’t know that. What if we’d arrived during the act?”
“Then we could have stopped him.”
“Maybe, maybe not. Look, the guy was obviously sick. A few Bible lessons weren’t going to stop this.”
“What if we’re held accountable by God? We were late.”
“Come on man, we’re not. There was nothing we could do. I hate the Bottoms; I hate coming down here. Let’s go.”

For days I couldn’t concentrate. My mind was filled with images of a crazed man killing his kids. With a mallet, for God sake. With a mallet.

What if we had done our duty? What a price to pay for being late. We could have stopped him. I couldn’t help thinking we could have stopped him.

The great poet, Robert Frost, wrote, “In three words I can sum up everything I’ve learned about life: it goes on.” How does one know if their hands are stained with blood? If their soul is under condemnation? No divine angel reveals it. No supernatural jury, no burning bush. God is the supreme judge. Only God can judge. Only God. On that rainy November afternoon I stepped into the miry clay of judgment. And only God could pull me out. Only God.

At dusk the rain stopped. For a brief moment the setting sun bathed us, cutting like a prism through the dispersing clouds. We stood on the lawn in front of our apartment and watched the sun sink into the west, into the Bottoms. It was an unusually cold November, the trees mostly stripped of leaves and the earth hard and cracked. Soon everything would look dead and forgotten, torn and lifeless. Like the children in the Bottoms. I yearned for summer. For fireflies scampering about the grass like a thousand glittering stars, signs announcing yard sales, the smell of barbeques and the sound of children laughing.

All far removed from this Fall in the Bottoms.

By Alex Koritz

Zions Bank CEO Scott Anderson appeared quite comfortable strolling in front of a class of seniors at West High School. Even though the media was situated in the back of the room, the students still may have not appreciated the significance of having the bank’s top executive speaking to them. Anderson’s message focused on the importance of using credit wisely. His mild, approachable manner captured the students’ attention as he utilized personal antidotes, lighthearted quizzes, and props that included giant-sized versions of credit cards that the students held up like contestants at a game show.

The event, appropriately held on National Get Smart About Credit Day, was one among 20 Zions-sponsored events held at high schools across Utah and Idaho—all designed to educate teens on the value of establishing good credit. Utah is now one of only eight states that require students to complete a general financial literacy course in order to graduate from high school.“In light of today’s credit crunch, we are reminded how critically important it is for young consumers to be financially literate early on so that they can make smart decisions while navigating an increasingly complex financial marketplace,” said Anderson.According to the Jump$tart Coalition’s 2008 national survey, only 48 percent of teens knew that a credit card holder who only pays the minimum amount on monthly balances will ultimately pay more in finance charges than a card holder who pays their balance in full. In addition, according to Bankrate.com, one in every three high school seniors uses a credit card, and 83 percent of college students use at least one credit card.
In closing remarks, Anderson announced that Zions would be giving the class $500 for them to invest—in whatever manner they deemed fit. He then promised Zions would double any profit the class made.
Tag-teaming the event at West High was Robert Brough, EVP of marketing and communications for Zions Bank. “We take very seriously being good corporate citizens. Giving back to the community is part of our history, and our success is tied to their success. “
Zions also sponsors Financial Peace University, which includes courses on financial literacy based on material from money guru Dave Ramsey. The bank strongly believes that teaching responsible debt management benefits everyone. If, for example, debt is borrowed and then not paid back, the community ultimately bears the burden.
Celebrating 135 years of business, Utah’s oldest financial institution has braved some of our nation’s worst financial disasters, including the Great Depression, heavy inflation in the 1970s, and the current financial crisis, emerging from each with a relatively good bill of health. Zions Currently operates 138 full-service banking offices in Idaho and Utah with approximately 2,700 employees. In addition, the bank offers a comprehensive array of investment and mortgage services, and has a network of loan origination offices for small businesses nationwide.
From it’s founding, Zions has held unusually close ties to the community. Driven by top leadership, the bank has a culture of service—encouraging its employees to get involved in all types of charitable activities. The Zions Employee Service Team (ZEST), along with other internal service committees, seeks out new and ongoing opportunities to serve across Utah and Idaho.
Zions Bank’s service arm extends far beyond financial education. The bank recently completed its annual Paint-A-Thon, in which employees painted 60 homes across Utah and Idaho, including landscaping, for low-income seniors who couldn’t do the work themselves. 730 homes later, the Paint-A-Thon is running on its 18th year.
When asked what advice he’d give other organizations wanting to make a difference, Brough suggests reaching out to service foundations and offering assistance. “It isn’t always about giving money; time and helping hands are extremely valuable. They’ll be thrilled to get whatever help they can.”
While financial scandals continue to pepper the news, it’s refreshing to see organizations like Zions stepping beyond corporate mediocrity by embracing their corporate citizenry.

Alex Koritz

Mark DeYoung

Propelling Utah’s Aviation Industry

by Alex Koritz

19 December 2008—

In business, natural selection rules. Consider these tips to stay relevant in a tumultuous marketplace

By Jim Thornton

In today’s Darwinian marketplace, savvy companies recognize the need to adapt in order to remain competitive. Or in some cases, just to survive. This often entails reinventing your company’s vision to more closely align with trends and what your customers really want. A business leader should always think like an entrepreneur or an inventor. If you get too comfortable with business-as-usual, you’ll lose your edge.
In a turbulent economy and/or unstable political climate, companies have a natural tendency to play it safe, cease investing and in some cases cut costs. This is a mistake. Take, for example, JetBlue following the tragic events of 9-11. As flights drastically decreased, airlines began layoffs and other cost cutting measures. CEO David Neeleman saw it differently and committed to not lay off any of the airline’s 2,000 employees. Instead, Neeleman continued investing in his company and refined his marketing activities. The company was able to emerge from 2001 as one of the nation’s most profitable airlines.
Citing another example, Abercrombie & Fitch Co., after falling on hard times, reinvented itself during the Mid-90s. The company successfully positioned itself to be the hippest clothing line for college-age consumers. Observing how many clothing retailers lose control of their brand, Abercrombie took complete control of its product—from the brand’s atmosphere in its stores to its product development cycle. The company’s marketing strategy also included the A&F Quarterly—a magazine for its target customer, a popular website, and particular attention to where it located its retail stores.
Natural selection will reward those companies that are agile and able to adapt. Adapting can consist of altering product offerings and target markets, boosting customer service, and reinventing brands.    When I took over Provo Craft in 2005, the company was going through some challenges. Although the company’s performance was laudable, there was potential for more accelerated growth. Revaluating our approach, we began to target a market segment that had been ignored to date— technology products specifically for the female market.  We rolled out the Cricut™ Personal Electronic Cutter machine, which has since won numerous awards within the industry and without. We will shortly roll out a silk-screening product and a thermal bookbinding system. In addition, we saw a void in the “Green” space and will soon announce a solar-powered battery pack and several other environment-friendly initiatives. Since changing direction Provo Craft has tripled profits.
Here are three crucial steps to consider before changing company direction:

Know what your customers are thinking
Utilize customer feedback. Through surveys, or good old fashion research, find out what your customers really want and give it to them. Utilizing customer feedback will not only help in the product creation process, but will help refine operations, sales processes and whatever kinks you may have been previously blind to.

Give your brand a facelift
Brands get stale. Once you’re sure what your customers want, revive your brand and highlight the uniqueness of your offering. Start with new company messaging that will filter down to your new logo, packaging, advertising strategies and coverage in the press.

Hire the right team
This may be the most important thing you do. During my first year at Provo Craft I personally took on all executive roles to flush out the bugs. I then recruited several Fortune 500 executives to come join the company. Our CFO, Dave Chase, was recruited from Honeywell International; our executive vice president of sales and marketing, Brad Brusa, came from Newell-Rubbermaid; and our vice president of business development, Jeff Coulter, came from Intel.
I knew that without this caliber of talent we’d never reach our potential. It’s largely due to this executive team that Provo Craft has reached a pinnacle of success.
Companies need to anticipate changes in the marketplace and adapt before it’s too late. If competitors make the change first, it becomes that much harder to differentiate yourself. Natural selection has a way of dealing with companies that fall behind the pack.

Profitability is on the mind of fund managers. Utah private equity firms are encouraging the slashing of costs, boosting of sales and new markets, and the paying down of debt. And it’s the CEOs that are in the hot seat. Private equity firms expect their CEOs to make the smart and aggressive moves that yield the required financial results. This often means making changes to management and culture to sustain those results.

“Utah firms are tightening up,” says Kent Thomas, founder of CFO Solutions. “However, there is still a lot of money circulating looking for good investment opportunities.”
In today’s tender economy, and with predictions of recession on the lips of financial pundits, private equity firms are treading lightly. Expect to see turnaround investments and buyout equity gain further traction because the price of companies will fall, while growth equity or “injection investments” will decrease.
“The fall out in the credit markets have made investors more cautious, but there is still reasonable activity in Utah,” said Fraser Bullock, co-founder and managing director of Sorenson Capital.
Despite the gloomy economic forecast nationally, private equity has made recent inroads in Utah. Sorenson Capital just closed their second fund, breaking a Utah record with over $400 million raised. Philanthropist John Huntsman Sr. and Robert Gay have started a new fund, Huntsman Gay Capital, with Steve Young, Richard Lawson and Ron Mika as key executives. In addition, Aries Capital, a new fund stemming out of Peterson Partners, has begun raising money.
“We’re also seeing a lot more interest in Utah from outside private equity groups,” says Jeremy Neilson, managing director of the Utah Fund of Funds.  “As Utah companies get more mature, and as CEOs and entrepreneurs demonstrate a track record of success, investments look a lot more attractive.”
Bullock agrees. “A great track record is the first thing we look for. Second, we want to see if the CEO can build a robust team of talent individuals. Third, we want to make sure the CEO has a clearly defined vision for the business.”
Although Utah’s economy ranks near the top, local firms are still focused on streamlining the operations of their portfolio companies. According to a recent Ernst & Young study, buyout firms replaced CEOs or CFOs at 17 of the 23 U.S. companies that they sold or took public in 2006. In order for CEOs to keep their jobs, it’s all about reaching the right benchmarks and the willingness to cooperate with these firms.
“Hitting the numbers and getting the desired results is most important,” adds Thomas. “However, the right attitude is vital. Private equity firms want someone they can work with. If a CEO has a big ego, is resistant to change and won’t take direction, the firm will drop them.”
That being said, private equity deals can be very attractive to CEOs and entrepreneurs. When buyout firms are typically looking to make three times the amount they invested, this can spell big money for the founder, CEO and exiting management team.
There are several examples of savvy Utah CEOs that have not only survived the private equity play, but thrived. Jim Thornton, CEO and president of Provo Craft Novelty, Inc., is one of these. Under the watchful eye of Sorenson Capital, Jim took over the company when it was failing to deliver the expected financial returns. In his first year he completely turned over the management team, personally took on all of their roles by himself to flush out the bugs, and reshaped it into a mega-profitable company. He grew the company’s revenue 38% in two years with an improvement of 227% in EBITDA, earning him an Ernst & Young Entrepreneur Of The Year for 2007.
“Working with the right private equity group is key,” said Thornton. “It’s a tough, scrutinized environment, but if you pull together the right team and focus on delivering the required results, it’s a win-win situation.”
Bullock says private equity firms want to act as advisors and counselors. “We don’t want to interfere with the daily operations of the business, but it’s important to have a CEO that sees us as a partner.”
Jonathan Coon of 1-800 CONTACTS is another notable example. In 1995 while completing an MBA program at Brigham Young University, he began selling contact lenses to other students. Seeing an opportunity he couldn’t pass up, he secured a business loan and raised a small amount of capital from a private investor. Last summer Coon successfully navigated the private equity waters and sold his company to Fenway Partners, a transaction valued at $347.87 million.
From the private equity point of view, they are looking to the horizon and the future of their investment. Period. They want a CEO who performs financially but is also tight on the softer skills, such as building teams, the ability to lead and inspire, and someone who will cooperate with them. If not, it’s often a deal breaker. The CEO is ultimately expendable.
To survive such a fate, Thomas advises that CEOs take their time courting the private equity group. “Do the research. Understand what the firm is looking for. They typically want their return within 2 to 5 years, and they’ll be very aggressive in achieving that.”