The modern touch
Maine entrepreneurs see the allure of bringing
out-of-date businesses into the 21st century
BY WHIT RICHARDSON
photo/david a.
rodgers
Up to date: At Drapeau's Costumes of
Maine, in Lisbon Falls, old-fashioned costumes of
Renaissance and medieval women belie a modern
company |
In August 2006,
when Kris Cornish acquired Drapeau's Costumes of Maine, a
costume shop in Lewiston, the business lacked even the most
basic facets of a business. There was no computer, no copy
machine, no fax machine. When it came to business records, the
former owner presented Cornish with 15 years worth of paper
receipts in cardboard boxes. "They had a phone answering
machine and that was it," she says.
To top it off, the
building in Lewiston where the business was located was for
sale and in decrepit shape. After purchasing the business,
Cornish had to scatter trash cans around the shop to catch
water drips from a cracked ceiling.
But in just more
than one year, Cornish has taken this neglected business and
turned it around. This past Halloween, the store rented
roughly 520 costumes. Last year, the store rented 390 during
Halloween. Overall, gross sales are up 20% since she acquired
the business, she says.
She's done so by investing in
technology to bring her business into the 21st century and
help her better manage her business and cash flow. It also
included a large commitment of time and capital. In total,
Cornish and her husband are in debt to the tune of $250,000
after buying the business and a new building in Lisbon Falls
to which Drapeau's could relocate, she says. (For more on
this, see "Dollars and cents," this page.)
Cornish
faced what many new business owners face after acquiring a
neglected business: little to none of the appropriate
technology, old bookkeeping procedures and a stale or
nonexistent marketing plan. Getting the company out of the
dark ages will likely take long hours and plenty of money, but
the reward of a more efficient - and profitable - company
often outweighs those challenges.
Those buying an
existing business often are attracted to these kinds of
fixer-uppers, says Steve Vlachos, a senior associate at the
Portland business brokerage CBI. "It's all about understanding
the opportunities," says Vlachos. "Or, more specifically,
[figuring out] what's missing from that Maine company they
could add to it."
The state doesn't track the number of
Maine businesses that are bought and sold in any given year,
but Vlachos says in his experience the majority of businesses
that go on the market in Maine probably need some measure of
modernization. "We're loaded with these companies that have
been around 100 years that have survived somehow," he
says.
In a global economy, however, many of these
old-line Maine businesses face new threats, from offshore
manufacturers to big-box stores. "Everybody has to step their
game up," Vlachos says. "And there are a lot of Maine
companies that have not done that."
The lure of
technology
On a recent afternoon in a back room at the
costume shop, Cornish leafs through a stack of receipts from
March 2005. The former owner of Drapeau's, Venise Berube, left
Cornish with more than a dozen boxes of old business records
dating back to the early 90s. Cornish ended up taking only six
of the boxes - the ones that had receipts from the last four
years.
She organized the receipts by month and culled
what useful information she could, such as the average number
of costumes the store rented per month. That number, in turn,
helped her establish a threshold for the number of costumes
she needed to rent per month to stay afloat. (She needs to
rent a minimum of 89 costumes a month to pay her basic bills,
she says. The store is renting an average of around 110
costumes a month, Cornish says.)
The writing was often
cryptic and the receipts lacked important information, such as
a name or contact information for the person renting the
costume. In describing what's being rented, the former owner
simply wrote "purple hat" or "Alf mask." Cornish knew the
system, which relied more on Berube's memory than any formal
system, had to go.
As a result, Cornish's big
investment, besides a new building, was in technology. She
traded an old cash register with a paper spool for a
computerized register that categorizes sales and provides
Cornish with up-to-the-minute sales reports. Where the former
owner delivered the cash register's paper tape to an
accountant every month, "I can get good numbers everyday and
follow the numbers myself," Cornish says.
She bought
ACT, a database program, to track customers' buying habits,
which helped her over the last few months to develop a direct
marketing campaign to target people who over the last two
years donned the garb of Santa Claus, Mrs. Claus or one of
Santa's elves. She bought a copy and fax machine. She bought
"real phones" - "that sounds stupid, but they had rotary
phones," she says. She bought a computer and hooked up
Internet access. And, of course, she launched a
website.
In the future, Cornish wants to bar code every
item in the store so she can pay closer attention to what
costumes are in or out at any moment, and which are the big
sellers (medieval and Renaissance) and which are not (harem
girls). "The technology is going to be the thing that moves us
over the edge," she says. "At least I can know what my
customers want. It will up the customer service
exponentially."
When taking the helm at an out-dated
company, "it's hard to go wrong with modernizing and improving
technology," says John Collard, a turnaround management
consultant and chairman of Strategic Management Partners
Inc. in Annapolis, Md.
Investing in technology was a
key ingredient in Mike Cote's turnaround of Look's Canning Co.
in Whiting, which he purchased in 2003. The Down East canning
company, founded in 1917, produced clam chowder and other
canned seafood products under the Bar Harbor and Atlantic
labels. Now known as Look's Gourmet Food, Cote took the
company, which still cooked clam chowder in 60-gallon vats and
relied on people to carry around four-gallon, stainless steel
pails of the chowder between production stations, and invested
roughly $500,000 in venture capital funding to modernize the
plant. The new automated canning equipment has increased
output from 10 cans a minute to 60 cans a minute.
But
while the company was "extremely archaic," Cote says, that was
one of the "charms and allures of the brand." Cote, a former
Pepperidge Farm and Odwalla executive, knew that no matter how
old-school the plant was, the Bar Harbor brand name and the
small-batch production process was priceless. So, when Cote
installed a conveyor belt and automated canning equipment in
his processing plant, he made sure that chowder was produced
in 60-gallon batches like it had been for decades. While on
paper it may be more efficient to produce the chowder in
larger batches, Cote saw the value of small-batch production
in the specialty food market he was trying to tap.
Cote
has turned Look's Gourmet Foods into a niche specialty food
producer that ships its Bar Harbor and Atlantic brand
products all over the country. The business has grown
five-fold in the four years since he purchased it - growth
that this year landed the company on Inc. magazine's list of
the 5,000 fastest growing U.S. private companies.
That
ability to see past a shabby exterior and glimpse a business'
underlying value is requisite for people looking to acquire an
out-of-date business, says Vlachos, who brokered the sale of
Look's Canning Co. to Cote in 2003.
photo/whit
richardson
Jeff Johnson, who bought The Paint
Pot in Portland earlier this month, might invest next
year in new paint-mixing technologies as part of a plan
to update the
business |
Sweat
equity
Drapeau's and Look's Gourmet are extreme
examples of businesses in need of a modern overhaul, but even
businesses that are relatively up-to-date are fair game for a
new owner who sees areas where modernization could pay
dividends. That's exactly what Jeff Johnson figured when, in
mid-November, he acquired The Paint Pot, a paint store in
Portland.
The previous owners hadn't neglected the
business, Johnson says, but he believed the store's "old-style
environment" could be updated. For example, while the previous
owners had invested in a new cash register that tracked the
store's inventory, Johnson says they were scratching the
surface when it came to the useful data the system could
provide - from daily sales reports to identifying what's
selling and what's not. "They were using it to report,"
Johnson says. "You need to use a system like that to
manage."
But, Johnson is asking himself how to take
advantage of opportunities to modernize the business while
maintaining and building on the strengths the existing
business already has, such as its customer service. Will
investing "six figures" in new paint-mixing technologies and a
second location during the next year put customer service at
risk? He doesn't think so, but admits that "it's a fine line
you walk."
Along with an investment of capital to
modernize a business through technology upgrades, a new owner
also must invest a large amount of time and effort to turn a
business around. In 2006, Andrew Broskie acquired New
Dimension Homes, a Clinton-based builder of post-and-beam
homes, and immediately set about giving it a "top-to-bottom
and bottom-to-top redo," he says. That meant adding new
technology and a wireless Internet network, and installing a
new phone system.
But it also meant plenty of personal
sacrifice: Broskie says he slept in the company's model home
for four months and often fell asleep at the computer late at
night. But it paid off. Broskie says sales at New Dimension
Homes are up more than 100% this year, and that he expects
them to more than double again next year. "And, the Lord
willing, we'll just keep it up for three or four years," says
Broskie.
Cote, after acquiring the languishing canning
company, immediately started working seven days a week, 18
hours a day, he says. He could be talking to a potential
client one minute, answering phones the next and working on
the production floor filling tin cans with clam chowder after
that. The benefit: He was able to identify what worked, what
didn't, what vestiges of the old company should stay, which
should be scrapped.
An initial evaluation of the
company is necessary to make decisions on whether to scrap one
aspect and invest in another, says Vlachos. One thing a new
owner, who often takes on debt to acquire a business, must not
do is stick with the status quo, Vlachos says. "If they run it
the same way the last guy did, they will fail."
While
Cote's 18-hour days have been scaled back to 14-hour days, he
now spends most of his time on the marketing and sales side of
the business, where his strengths lie. Last year, Cote spent
120 nights in hotels as he travelled on sales calls.
It takes a certain type of person to acquire an aging
business and update it to 21st century standards, Vlachos
says. "A Maine business owner is someone who's a sales pro,
who's an HR leader, who's a marketing whiz, who knows how to
clean the men's room and drive a truck if they have to -
that's your typical Maine business owner," Vlachos
says.
Broskie, who recently purchased a second outdated
post-and-beam building business in Rockport, puts it another
way: What's necessary is "the confidence to do what you know
has to be done, whatever that is," he says. "If you have a
good vision of what [the company] should look like and the
skills to get it there, I think it's worth the
effort." |
