• SmartCEO gathered a group of Future 50 alumni to discuss what set their companies on the path to fast growth.

  • Fast growth is both an exciting ride and a heavy responsibility. As people and systems scale, CEOs must keep a level head and decide which risks are worth taking, and which aren’t.

Riding the wave: CEOs share their strategies for staying on top of fast growth

 

TD Bank

Compiled by Tina Irgang

Photography by Insight-Visual Photography

This roundtable discussion will be published in the Spring 2017 issue of SmartCEO. The following transcript reflects highlights of the discussion. It is not a complete transcript.

Fast growth is both an exciting ride and a heavy responsibility. As people and systems scale, CEOs must keep a level head and decide which risks are worth taking, and which aren’t. SmartCEO and TD Bank assembled a group of New York-area alumni of SmartCEO’s Future 50 program, which celebrates fast growth, to share their strategies for boosting growth, and for staying in control while going 200 miles an hour.

Roundtable panelists:

  • Moderator: Diane Drewery, master chair, Vistage
  • Laura Page-Greifinger, BSN, MPA, president and CEO, QIRT (Quality In Real Time)
  • Michael S. Lessing, COO, Lessing’s
  • Louis C. Grassi, CPA, CFE, president and CEO, Grassi & Co.
  • Ross Adler, president, Adler Windows
  • Liz Elting, president and CEO, Transperfect
  • Nunzio De Filippis, CEO and COO, CargoTrans
  • Sponsor: Christina Uleano, vice president and senior commercial relationship manager, Manhattan North, TD Bank
  • Sponsor: Ralph Bumbaca, senior vice president, TD Bank
  • Sponsor: Dawn M. Carillo, vice president, U.S. field marketing strategy, TD Bank
  • Mark Gregorio, president, TEI Group
  • Adam Hersh, VP, senior vice president, sales and marketing, TEI Group
  • Lou Puleo, CEO, Focus Rx
  • Kevin Lee, executive chairman and co-founder, Didit
  • Mark DiMassimo, CEO, DiMassimo Goldstein

Click here to listen to the entire Roundtable discussion, or read an edited transcript of the conversation below.

Introductions

State your name very clearly, your business, and just a brief comment about what you do.

Lee: Kevin Lee, co-founder and executive chairman of Didit. I also run We-Care.com, which is a side passion venture. Didit is now a full-service agency. We started search engine marketing 20 years ago, and through 10 acquisitions, we’ve become full service. Just in a nutshell, We-Care is a platform for cause marketing, and it’s generated $8.2 million for nonprofits. It was the inspiration for Amazon Smile, for any of you who are familiar with Amazon Smile. By inspiration I mean that after five years, they decided to stop working with us and do it themselves after we did a test and proved just how much value we had. So we got to feel the brunt of the Amazon corporate culture, which you can read about in The [New York] Times.

De Filippis: I’m Nunzio De Filippis. I’m the CEO of CargoTrans. My father started CargoTrans in 1989. We are an import export company, so we’re an international freight forwarder [and] customs broker. Basically, we’ve grown from …… focusing on customs brokerage to vertical integration into international freight forwarding and distributions. We are helping the supply chain move their goods from origin to destination in either direction. In the U.S., we currently have five different offices, one in LA, three within the New York/New Jersey metro area, and in Miami as well. As of recently now, we’re looking to expand overseas in markets like China and India.

Adler: Good morning, everyone. I’m Ross Adler of Adler Windows, New York City’s premier window installation company. For over 30 years, we’ve worked with both commercial and residential clients on window installation and window repair projects in New York City and New York Metro.

Gregorio: Good morning, guys, Mark Gregorio in here. My company is called the TEI Group. We are vertical transportation experts. So I guess similar to Ross [Adler], all buildings have elevators, just like they have windows. We work in every market there is — commercial and residential, retail, hospitality. We’re local guys in New York, so we’ve got this kind of advantage over international conglomerates that are chasing the work in China and India right now, which are the largest markets in the world. By way of example, New York City has roughly 80,000 elevators in service right now. China is installing 500,000 a year for the last five years and continuing on that path. So we’re locals.

Lessing: Hi, I’m Michael Lessing, Lessing’s Hospitality Group. We’re a sixth-generation family-owned and operated business. We manage all types of food service. We have many restaurants, and special event catering facilities, as well as franchising.

Page-Greifinger: My name is Laura Page-Greifinger. I’m the president, CEO and founder of Quality In Real Time. QIRT, we’re known as. We do post-acute compliance reviews and audits, medical coding, diagnosis coding for home care, hospice, doctors’ offices, things like that. We started seven years ago, and we have now four offices: Birmingham, AL, Floral Park, NY, Detroit, MI and Battle Creek, MI. We employ almost 200 people now full-time.

Grassi: Good morning, I’m Lou Grassi, managing partner of Grassi & Co. We’re a CPA and consulting firm. We’re the 70th largest firm in the country, and we have three offices domestically and one office internationally.

DiMassimo: Hi, I’m Mark DiMassimo. I’m the founder and chief of DiMassimo Goldstein. We’re a 20-year-old “inspiring action agency.” That means we are an advertising agency that builds brands and businesses. But you always need to have your special line, right? We help companies build brand value while they build sales at the same time. Some of our biggest clients right now are Weight Watchers, TradeStation, Online Trading Academy, NASDAQ, and about 12 others.

Puleo: I’m Lou Puleo with Focus Rx. We are a local specialty home infusion company. I know that you probably don’t even know what that means, which is a good thing. But we basically offer access to patients who are in need of complex treatments dealing with complex diseases. We are now licensed. We are a five-year-young company, but are licensed in almost all 50 states, duly accredited.

Uleano: Good morning, everyone. Christina Uleano with TD Bank. I’m the senior relationship manager on the commercial team. Basically, my responsibilities are all aspects of banking and financial needs for clients in Manhattan and the Tri-State area.

Elting: My name is Liz Elting. I’m the founder and CEO of a company called Transperfect. We’re in the language technology and business solutions industry. We’re actually the largest privately held in our industry. We’re in 92 cities around the world, on six continents with about 4,000 employees, and we do everything from document translation to oral interpreting to website localization to software localization to other business-related services that we found in our clients’ needs, such as litigation support services [and] staffing services.

Drewery: I’m Diane Drewery. I have been a Vistage chair and executive coach for the last 13 years. I added up last night, the last decade or so I’ve worked with over 100 business owners, and I have facilitated over 200 group meetings, so I love working with small and medium-sized business owners to help you all grow your businesses and your leadership skills. That’s what it’s really about. I’m just delighted that SmartCEO has invited us here today. They’re doing a great job in the market.

So let’s talk a little bit about what we’re going to be talking about in the next hour. We’re going to be discussing your experience with strategic growth in your respective companies. So what does that mean? What is strategy? Webster defines it as the art of devising or employing plans towards accomplishing goals. It doesn’t just happen. So we want to get your insights for the record about some of the critical considerations that you have grappled with along the way as you grew your companies.

There’s a list of questions in front of you. We’re not going to go in order necessarily, but we do want to cover the water. This is a really diverse panel. We’ve got a good cross-section of businesses here, and I’m sure we’re going to get a lot of different perspectives.

Growth plan

Describe your company’s growth plan, specifically any particular actions over the last few years that you feel contributed the most to your growth.

De Filippis: The first thing that we did around 2012 was, we realized that we needed to invest in people first in order to lay a foundation to grow. And for that, we had to create some more management levels — clear divisions of departments to give people clear responsibilities of what they need to do within their departments, so that we can set ourselves up for growth.

The next biggest thing was technology. I think most of you here would agree that in order to grow, you need to be efficient, and we made heavy investments in technology, and we continue to do so. One, so internally we can have more efficient ways of working, but also to add value to our customers. We also looked into vertical integration. About four years ago, we were subcontracting our distribution with various warehouses in New Jersey and LA and Miami, so since we were the largest customer in these facilities, we decided to acquire these facilities, and now get into managing our own warehouses instead of subcontracting. Basically, we went from one office to five offices, and recently now we’ve been starting to do small mergers and acquisitions as well.

Gregorio: We started with zero. We essentially now have 250 employees, and we’ve been through many, many plateaus in business growth. The famous Jack Welch I think said, if you can’t do it better than anyone else, then don’t do it. So we continued to train; we were known to have the best technicians always as we grew. We continue to have that reputation, so the market seeks us out, often as a requested bidder on RFPs. It may or may not be our fit for the exact project. For example, Freedom Tower would not be a project I’m interested in, but we do 60-story buildings on a regular basis all the time now. The engineering world out there knows us to be very high quality, and we’ve continued that. So even the people who come through our system recognize that some of the best out there, they’re recruited heavily.

Loyalty is very strong to us. Culture of course trumps strategy all the time. You have to be always thinking, but you need to keep your good people close and your great people closer, and vice versa. That’s very important to us.

Lessing: Being a sixth-generation family business, we’re a little bit different in how we look at growth. We were stuck back in 2008, 2009, 2010, in kind of a no man’s land for us, and we needed to evolve the company. We were landlocked on Long Island. Our roots started in Manhattan, [but] we were landlocked on Long Island, so all of our business was there. And anyone from Long Island knows it’s tough to get on and off. So we went after an acquisition that helped catapult us off of the island and put us in four states. It was in our food service division side. And that was really a game changer for us. One, it almost doubled the size of the company. It added 350 employees, but we were able to buy a company that had all of the personnel kind of in place, and expand our footprint, and that was big for us.

Since then, we’ve been able to grow, and we look to grow at least 15 percent a year, and have been able to do between 10 and 13 percent a year, depending on the different acquisitions. And as you know, as you grow, it gets harder to keep your percentages going, but we’ve put the team together and it’s helping us now that we’re in four states, the opportunities are all around us, so that was just a big step for us.

Grassi: About six years ago, in our strategic planning session, we put together what we call a “triangular offensive move.” Three legs for the stool [included] organic growth, which is something we’ve done very well over the years. We decided that we would go and try acquisitions, which we’ve advised a lot of clients on, and until that point, we never did one ourselves. And the third leg was to take some disgruntled partners out of other CPA firms and bring them over to us. And we’ve wrapped that all around — we go to market in our niche groups. So we have seven predominant niche groups in the firm, and we go to market through those groups. And we have seven, ironically, service lines that wrap their arms around our niche-group players. So basically, I call it the intersection. If someone is running our technology group, well, obviously he and the market leader of tax consulting basically sit down and figure out how they’re going to expand the marketplace in tax consulting within that group. And the service line leaders pretty much talk to all of our industry groups, figuring out how they’re going to grow their service line within that niche group, and niche group leaders are speaking to them.

It’s been amazingly successful. We did a decent-size merger, which never goes 100 percent correctly. … And even though we’ve been through it with clients, going through it yourself — it’s like having your brother having a child, and now all of a sudden you have a child. It’s a very different experience. So that worked out really well after we got all the kinks out.

In the last five years, we’ve taken over about seven partners out of other CPA firms who have come over. I’m happy to say that every one of them has done well and succeeded in our organization. They came over because they saw something a little different in our firm, or what they had wanted in their firms but really couldn’t get. And the organic part of the equation has really gone well. Last year, we were in the top 10 fastest-growing firms in the country, without any mergers. So everyone above us had done an acquisition and we were just strictly 100 percent organic, so we’re really proud of that. So the strategy is working, but like any other strategy, it has to be tweaked. I believe there’s a title of a book, Only the Paranoid Survive, and I’m always feeling that unless we’re really on top of our game as a CEO. It’s a huge responsibility being a CEO. You’re responsible for a lot of families. We have over 300 people in our firm, and it’s a very responsible position, and you always have to be on top of your game because the marketplace changes a lot quicker than most people think it does.

Adler: Over the last nine years, Adler Windows has grown 600 percent. I was the 13th employee; we’re now over 90. I want to say it wasn’t strategic at first. It kind of happened by accident. I was brought into a family business to really maintain a very stable and profitable company, but I quickly identified a service gap in my industry, and we took advantage of it. So I made the move in 2007. Those in the construction trades know in New York, 2008 through 2011 weren’t the greatest years. However, we averaged 35 percent year-over-year growth throughout that time.

Our growth was really fueled at first by identifying and providing services that spoke to our customers, so everything we did was client-focused. As we continued to grow, it became strategic growth. We started to think about how we would manage this growth, and we really identified a number of 35 percent. We couldn’t backfill people fast enough to make profitable, quality work at that number. So we’ve now transitioned our strategy, so while we’re still very much focused on our clients and providing a platform that provides for them, filling that quality-of-service gap, it’s really a strategy around people now. So how do we find the right people? How do we recruit, train and retain the right people so that we’re sure that when they are client-facing, we are getting the best out of them? Behind that comes the location strategy, the financing strategy, the technology strategy, but they’re all really to serve two key stakeholders: our clients and our employees.

Page-Greifinger: Again, strategic growth, we did strategic planning every year, and the growth just occurred. It was all organic. We doubled our revenue every year for the past seven years. It’s very difficult to do that, but what it really stems from is that … I was a home care and hospice nurse my entire career. I became a consultant and found a lack of quality in agencies that impacted patient care. I formed Quality In Real Time, and all of a sudden, because I’d been in the industry so long, a lot of people knew me. It is an industry that talks to one another nationwide, one of the very few. And by word of mouth, all of a sudden I had all of these customers. And then outsourcing became a good thing to do for organizations who traditionally had held everything to their chest. They now wanted to outsource it. Staffing was an issue, and so on and so forth.

But my biggest thing was, how I treated my customers was how I wanted to be treated if I was approached by QIRT as an owner and runner of an agency, and that has worked very well. We still do that. One thing that did help us is that we had a real identity crisis in terms of what we were doing. We were just doing too much as QIRT, so we divided ourselves into five divisions, and that really seems to work. We’re not siloed, we work amongst each other, but it really did direct the client to the appropriate piece of our business that they needed to be in, and traditionally we have probably about 40 percent of our customers come on wanting one thing and wind up with three things that we offer. We have also a very strict rule of quality that our other competitors don’t have. We check our staff every month; we audit our own staff internally. I spend about half a million dollars on an educational group of people who educate our staff and continue to do so throughout the year. Staff like it and it really makes me feel good about what we do.

Lee: The first 10 years, we probably weren’t as strategic as we have been the last five, and that in-between five years was sort of a transition period. We were lucky in the first 10 years that we were probably one of the first 10 firms in the search-engine marketing space, and that became subject-matter expertise very quickly. At this point, I’ve done well over 500 speaking engagements, written over 800 columns in industry trade publications, and I was the founding chairperson of SEMPO, the search engine marketing nonprofit organization, and was the sort of longest-running original board member.

But that didn’t serve us so much after search-engine marketing became less sexy. We were able to get in the Inc. 500 twice and get in the Deloitte Fast 50 three times, as a result of just riding the coattails of the search-engine marketing industry. But as that started to become serviced differently within organizations, we realized we had to sort of make some fairly dramatic changes. And as part of that, we ventured into M&A. Our first M&A deal was sort of serendipity. We just got an opportunity to buy an agency second-hand that had previously been sold to Verizon Information Services. … And that went so well, we thought “This M&A stuff is super easy, let’s do some more.” Then we learned that not every M&A deal goes as swimmingly as the first one did.

At this point, after having done 10 deals in total, we’ve learned a lot about due diligence. And I would certainly say from a strategic planning perspective, if you’re going to do M&A, try to talk to a bunch of people who have done M&A so that you remember to ask the questions that you shouldn’t have to ask. “During M&A, like will you come to work every day?” That’s one we forgot to ask in one M&A deal. Apparently, they didn’t think that was a necessary part of their employment contract. One of the other cases, it was, “Are these clients listed on your financials you signed off on actually real?” There were some that sort of had done business with them recently that should not have been in the due diligence for the purposes of pro forma revenue and profit estimation. So we’ll probably never get perfect at M&A, though investment bankers I know say “Less than 40 percent of your deals had road bumps, that’s really great. Usually it’s 50 percent.” So I guess we got lucky and maybe made a few good calls so far.

Elting: So we started the company 24 years ago, and the idea was to spoil the client. Basically with the globalization, and given my experience in the translation industry at another agency, I saw that there was a need and that we could be doing it better, running it more like a business as opposed to a mom and pop. So we started the company and thought if we spoil the client, we will grow, because we will differentiate ourselves from the competition. And that, to this day, is why we’ve grown. So what we did was, we’d make sure that they were happy — not merely servicing them, but delighting them each and every time.

And so then as far as our growth strategy, there were really four parts. One is to keep adding people to service the clients we had. So much of our business was then and still is now repeat business from referrals, so we had to keep up with the business. And then secondly, from very early on, about from two years into it, we came up with this strategy — a plan that we would open a certain number of offices a year. In the early years, it was four offices a year – literally one per quarter. First in the U.S., and then we moved to Europe, and then Asia, Latin America, Australia and Africa, so that was part of the plan. We held ourselves to it as if we had a boss. So opening the offices was a key part.

And then thirdly, starting related lines of business. I mentioned that we are in the language industry, and we do anything a client needs in a foreign language. On paper, in a digital medium, cultural consulting, anything. We also found our clients needed things like litigation support, because we were working for all of the AmLaw 200, so we gave them litigation support services. And then we saw staffing was part of their needs, so we added staffing services to our repertoire. So adding related lines of business was key for servicing our clients and growing our business. And then fourthly, acquisitions. We did make quite a few acquisitions. I will say, out of all of our revenue, they only account for about 10 percent, so most of our growth has been organic, but we did get some great talent in technology as a result of the acquisitions.

Puleo: I guess this is more of a general observation, but it kind of ties into the second question. So not to take over the moderating, but conversationally I think it makes sense, because I’m hearing a lot of similarities in everyone’s story no matter if they’re mature companies or younger companies. The things that made them successful are all these elements that add up and make up this strategy. I noticed when we started our company, for us, it was charisma. We were trying to be everything to everybody.

We’re in the number-one healthcare market in the country here in New York, and so what I found started to define us — and really is a critical element the way I see it and ties into everything that everybody’s just said they are doing — was really and truly digging into our vision. Identifying who we were. And I know that sounds cliché, but if you do it right, it’s extremely powerful. So that for us sort of made up the DNA of our company, and comprised values, a statement of why we exist. So why do we exist? There’s a lot of competition out there. What’s going to make us different? For us, we exist to put the patient back in patient care. From there, we developed our mission. A little non-traditional, our mission was more about what we wanted to achieve internally. It wasn’t necessarily something that we might be communicating to the outside world. For us, it had a short-term element. That short-term element was, we need to build a platform. And then there was the achievable over the next two to three years. That achievable was, we want to build a platform that’s going to enable us to double our business in the next two to three years. So if we marry up all of these items, we use that as a tool to answer any of these kind of questions. Does a merger, does an acquisition make sense? Are we going to achieve what we’re looking to accomplish? If so, did we pick the right one?

So we did recently acquire a company. But it wasn’t a company that was doing exactly what we were doing. It was an add-on service that enabled us to service our patients in a better way. So for us, again, I hear a lot of similarities in story, but for us one of the most critical elements really was defining that vision for us that drove strategy and then tactics.

DiMassimo: We’ve been Inc. 5,000 and SmartCEO Future 50 for the last three years running, and I think we were growing at the same pace for the previous seven, but off of a rather small base from 10 years ago. We’ve really had different growth strategies that have sort of gotten us to the next level. I would say at least each of the last three years, we got to a certain level with myself and my partner really being the agency leadership. We had good managers, but we were really leaders.

And I would say about three years ago, we realized that to get to the next level, we needed a more robust leadership team, and that being a sort of creative-center advertising agency in New York City — the most competitive creative advertising market on the planet, with giant global competitors — that we needed a way to compete for the kind of talent that we needed around our table. So what we did was, we created a different sort of business model, which we called the “micro network.”

All of our growth has been organic so far. We have a line of credit with TD Bank — thank you, TD Bank — but sorry, we don’t use it very much because we tend to run off of cash flow from client fees. And you know, I think my bias for organic growth is just because I’m a marketing guy and that’s what I know, and so far that’s worked. We’ll see how things go going forward. I think I might have to grow some new limbs and some new talents.

So the micro network was all about finding really entrepreneurial leaders that got to a certain point in their career and couldn’t get a hybrid secure and entrepreneurial position anywhere else in the agency. We weren’t owned by anybody else, which is really rare today in the advertising business. There are very few independents of any scale left, so here was an opportunity where you could get upside, run a division, but be part of an integrated team as well and pull a salary as well as upside. That worked really well. We got great media leaders, great design leadership, great creative leadership, and the divisions really started to grow a lot, so we probably grew 43 percent in the year after we implemented that. And in the following year, we grew another 35 percent.

Being a paranoid CEO, what I noticed was that the middle was getting as thin as that old ozone hole we used to hear about. Everybody was so into building their divisions that to get anybody to the middle for the integrated business that was still 60, 65 percent of our revenue was very, very difficult. Again, I’m a marketer, not a financial modeler, and I might have modeled and said this is fine because we’re going tooutgrow this. We’re not going to be integrated anymore. We’re going to be five fantastic businesses. But I couldn’t get it together to really do that, so I reversed course in the next year. And I managed to convince five out of six of those leaders to commit to an integrated agency, changed all of the incentives to be shared incentives, and got into the entrepreneurial operating system and traction and rocket fuel, and that’s what we’ve been doing for the last year. And I would say our growth has slowed a bit. We’re still growing, which is great, but if we want to keep getting back into those lists, we’re going to have to figure out how to amp it up next.

Gregorio: I have to ask, what happened to the sixth leader who didn’t come on board with the new strategy?

DiMassimo: She left. She was somebody who was very comfortable running her own research firm as well as being a strategist. Our big trouble with her was that she wanted to run a research firm and not do strategy, and we needed strategy primarily. So when that changed, she left and became the chief strategy officer at a very large agency.

The global marketplace

How have the opportunities and risks in the global marketplace affected your businesses?

Gregorio: So in my world, as I just explained, the growth in Asia and now in India is astronomical from the developing markets. So the large global players have really put their key resources over there, and it’s left a void here on the quality side. … They’ve foundered here quite a bit, so that’s opened up tremendous opportunity for us. We continue to see larger and larger projects come our way that we would not have necessarily [seen before]. When the downturn happens there, which it inevitably will, we don’t know if they’ll come marching back here. The slowdown in China, which was 3 points of $600 billion, is really still larger than our whole market altogether. It really didn’t impact much. They’re still adding cities at amazing levels here. Whole cities like New York are built in two years’ time. It’s really quite remarkable.

Ross and I were talking earlier about how that’s impacted our supply chain. And it has some. At times, I will see a huge demand that will grow the market price in raw metals. For example, copper, which we use in much of the wiring, conduit and even hardware, can spike up. And you know, we’ll price our elevator jobs early on, maybe a year or two before the project will start. The larger equipment we’ll purchase right away, but we’re kind of hedging where the market will go. You know, I could have a few hundred thousand dollars’ worth of electrical equipment that could double in price — that could really hit my bottom line pretty quickly. So those are the impacts that we’ve seen in my work.

Elting: For us, the reason for my starting this company was, I was getting my MBA from NYU, I was majoring in international business and finance, and I saw business was becoming global. My timing was very fortunate. This was in 1992. And obviously it’s been increasing every year, and what’s very exciting to me is, we still are actually at the very beginning. I went to a very interesting seminar at NYU business school about six months ago. We’re not nearly as far along as people might think — which is exciting for my business because it gives opportunity for my business to grow, but also for all of our clients. Many of them are at the beginning of going global, and they’re seeing the ROI from being global. The way the world is now, it’s very easy to be global with technology; the ease of communicating abroad, communicating internationally and all of that. So it’s been a wonderful opportunity certainly for me, but also for our clients. And we do panels where they get in front of their competitors and they talk about how they’ve gone global, and how much it has positively affected their business.

De Filippis: Something that I hear everyone’s talking about here in terms of growth is having a vision. We were saying, having the clear vision and getting buy-in. Doing that globally is very challenging because you’re dealing with different cultures. They might not necessarily understand the drive or the goals that we have here in the States, or the vision that we have globally. So what we’ve been doing throughout the past five years is trying to meet people who think like us. You know, people who really share in that vision. We do believe that that trumps even skillset. Even training, on-the-job training — that could be done pretty easily. You can’t train culture, you can’t train vision, so it’s been a little slower than we would have liked, our international growth, but we’re finding the right people.

We do also think that the key to the success internationally is joint ventures, because you do need someone who understands the local cultures. I’m Italian and I was born here, and I go to Italy and it’s very different. The culture from an Italian American to a native Italian is not the same, so we still need local partners who understand that culture and those people and what their employees want. And slowly we’re getting there. We’ve had more success doing it that way than trying to do it all on our own.

Financing options

What are the pros and cons of looking toward traditional financing versus private equity, angels, etc.?

Lee: We only took an angel round once to fight a frivolous lawsuit in 2001. Other than that, we’ve always funded our growth organically. One of the two angels that came on board was actually interested in exiting, and we almost had a venture capital firm buy out that angel, but the angel actually passed away during the due diligence process and the company was in his daughter’s name. The company LLC interest was in his daughter’s name, so we couldn’t really go to her and say “Hey, your dad was interested in doing this deal, and can you please concentrate on that.” That was not something we could pull off. We ended up losing a bunch of steam as a result of that and end up not doing the deal. We ended up eventually exiting that angel partner three years ago ourselves, so that was a reverse dilution for the remaining partners, which we think was great because obviously we’re optimistic about the future of the business. We’ve certainly been pitched by PE firms and VC firms, and like I said, we got really far down the path with that one VC firm, prior to the odd circumstance. But I’ve looked at everything from subordinated debt to PE money. So far, I think we’re pretty pleased with where we are, organic funding.

Drewery: How many of you have relied on the traditional bank route? What was your thought process in relying on traditional funding?

Gregorio: I am a control freak, so I don’t really want somebody else telling me what to do. … The bank’s agenda is solely to make money from us and maybe some other products that we may want to buy, like real estate. And that’s fine. There’s always a relationship; it also helps to kind of keep our growth in check. By way of example, my accounts receivable today sits at $25 million, my accounts payable is probably in the range $7 million. We have to pay our suppliers right away if I want my material. We have a line of credit of $4 million and change, and I’m probably turning to it less than 20 percent. So sorry about that too for a bank, but it limits the working capital I use to fund my receivables, so we’re kind of cautious with that too.

Lee: I have one observation that I feel might be of interest to some of you. One common thread we found in our M&A is that often, the lines of credit have actually come in to be very dangerous for the companies because they think they’re drawing them down just to cover cash-flow gaps and such. But it ends up that over four, five, six, seven, 10 years, it just continues to accumulate to the point where they have these lines of credit they have signed personally on, and they cannot figure out fiscally how to deal with it. So you get these situations where maybe their growth plateaus for their business, and they can cover the interest on the line of credit, but they  can’t seem to make a dent in it. Often because they just don’t feel like making the lifestyle changes personally to allow for that to happen, but it’s just been a common thread. Probably 40 percent of our acquisitions, there’s been an outstanding line of credit that has been a dynamic in part of the M&A discussion because we’ve had to figure out how to deal with that.

Lessing: To Kevin’s point on the line of credit, we’ve actually seen a little bit of the opposite. We have a line of credit that we clean out right now for 364 days, so it really just limits us to the opposite of what you’re saying. We can’t use it for M&A, we can only use it for seasonality and whatnot. So we find ourselves where we don’t go to it, because if we did, we would have to clean it out shortly afterwards. We’ve been fortunate — we can get a lot of our M&As done through family funding organically. And our cash flow is one where a lot of people would like to be — we’re in the restaurant world, so we’re paid before the event, we’re paid after the event, so we have very little on the receivable side, so that gives us the cash flow.

We are working with banks now to go to a revolving line that will give us more access to it so that we can do an M&A and use some cash flows from the company and some cash flows from the line, and then we do our analysis that we’ll be able to pay back next time. The other thing we see with the bank we’re dealing with now, which is a smaller bank, is they constantly want us to go to kind of rework the whole mortgage, and rework all the paper again, and then you get into the fees and the timing of everything takes too long, and we wind up just going to the house and doing it that way. So we’re kind of in between both ways, but between our cash flows and getting a line of credit that is a full revolver, [we are trying] not to get into the problem that you’re having or seeing.

Lee: It’s our acquisitions targets that have had the problem. We have zero debt, but they have debt.

Puleo: I think one of the problems that we try to prevent from occurring in terms of accessing a line of credit is that it’s really short-term money, so it should be funding short-term projects or issues, in my opinion. So we’ve been careful about how we’ve approached that money. All of our growth has been organic as well, but we do have some of the strategies that will require longer-term money, and we’re in discussion about financing that more appropriately, rather than finding ourselves in that kind of issue. So as we’re expanding our presence as well, we may look to acquire some other organizations that are outside our area — again, getting off Long Island — that would give us points of access outside the area. Some of them are getting too nitty-gritty on it. So we’re looking at more term-loan type options, and we’re trying to hold on to that entrepreneurial sense which everyone is describing. Private equity, I receive probably a dozen calls a day at this point. We’re in a hot industry, there’s no two ways about, it which is a great position to be in, but at the same time,, we’re trying to manage not closing those doors and being smart about how we’re approaching future growth as well.

Adler: So our growth has been self-financed, organic, via just cash flow from the business and retained earnings. But as we continue to grow, the cash flow requirements continue to grow. The more money we have for the business, we’ve increased our line, we’re now putting a line in place to handle all our working capital requirements. As it relates to private equity, I know no one has gone through a transaction, but I keep an open line of communication with a few PE firms that really gives me access to their knowledge base. I’m able to leverage that information and put people and procedures in place. So understanding what PE is looking for to make a transaction allows me to really start to form my company in a way that it is eventually exitable, whether or not we exit.

Technology’s role

What is improving technology adding to your growth?

Page-Greifinger: Technology really is a large part of our business. We invested very heavily from retained earnings into building our own IT system. We picked the right partner the third time. The first two times didn’t work out very well, but upon doing that, we’ve built a system that has won awards. There is nothing like it. We have a strong competitive advantage, and our customers love it — it gives them dashboards. But technology going forward, at least in the healthcare industry, must include data analytics, of which there is very little in the post-acute provider field. So in 2017, we’ll be looking for two things: To develop this data analytics off that system, which we can do; it was built for that. The second thing is to make our auditors more productive, and by that I mean we’ll have some form of internal scrubbers with logic, and they cannot look at everything — the system will do things for them.

Drewery: How many of the rest of you have found that you had to build your own? … Almost half the room. And what were you building?

Adler: We leveraged an open-source piece of software. It was a CRM system, but what we found was that there was nothing else post-sale. And in my business, where we have so many interactions with our clients and our vendors after the sale is made, we brought in a developer to really develop the solution that allowed us to handle all the upfront CRM activities, and then turn that into a project. So a purchase ordering system, we do scheduling off it, we do invoicing. It basically became an ERP system, and it’s at the forefront of our operating strategy.

Drewery: I’m curious, what kind of investment did that represent?

Page-Greifinger: Almost $2 million.

Adler: We’re in for about $150-200,000.

Lee: We’re probably in about $16 million of investment in technology, but our entire business revolves around technology.

Puleo: In healthcare, particularly in pharmacy, it’s no longer simply about processing a prescription and sending it out the door. There are amazing analytics and data that we capture as part of the process that most companies really don’t know what to do with, and I would sort of put us in that bucket at this point. We’ve invested into operational software that allows us to pull in a tremendous amount of data. It is offered in the industry, but we’ve also had to add on other elements so that we can pull that data out and then translate it into usable information. What we found is that working with manufacturers, health insurers, the government — everyone wants to know what’s going on with patients at this point. Patient care, and adherence and costs, and so all of that gets captured, and there’s a value. If you can translate it back, you can position that back to those partners. And so we’re in the development stage of being able to pull that out and communicate it effectively back.

Drewery: And for the enhancements, what does that represent for you? How much do you spend?

Puleo: It’s been minimal for us right now. It’s more of an ongoing licensed service, so it’s about $5,000 per month to access those reports, and then there’s customizing that takes place, and that’s a case-by-case basis depending on how much we need to customize.

Drewery: Where does it really become a competitive edge? Is it just internal where you can operate more efficiently, or is it something your clients see?

DiMassimo: I’m also a control freak, and I like things simple, and my belief is that anything that can’t be sourced from the marketplace that is absolutely necessary, we will do. And my belief is that that’s almost nothing. By definition, that should be about nothing right now. Maybe it’s because we’re a service business. If we were in the business of licensing a platform — for example if we were in the search business — if we were in the business of licensing a platform that clients could use and that was essential to our model, then we’d have a couple of ways of making money off of the investment of creating software. We have a whole development department. What we do is, we put experience layers onto platforms that we find.

There’s a lot of talk about how these days the focus of management for a lot of companies is shifting from managing sort of the internal staff and the internal ecosystem to really sort of working together to turn outward to leverage platforms, to leverage networks, to really see what’s going on out there in the world. My sense is that if you invest heavily in your own software platform, then you need to maintain that. You need to keep that up to the quality level on the outside, so it better be something that you can’t get better from the outside.

Grassi: We’ve found over the years that there’s a lot of products on the market that are excellent, but our mission is we’re entrepreneurs serving entrepreneurs, and we always wanted to have that competitive advantage, so what we would do is, when we found some cracks in the system, we developed our own projects. It’s very expensive, but to us, if you’re going to dedicate yourself to an industry, you’d better be the industry leader. And so what we’ve done is, in those industry groups, we’ve developed our own software product. Obviously it’s not something we could make a lot of money if we wanted to sell it, but that’s our competitive advantage, so why would we want to sell it to our competitors? And you know, you constantly have to do updates and it is very expensive, but it just makes you want to penetrate the industry more, especially when you have upgrades and you’re going to spend a quarter million, half a million dollars just to upgrade something. And it’s worked out really well for us.

Drewery: Have any of you found any specific solutions that you’ve been able to just buy that have been particularly helpful that we want to share for our listening audience here?

Lee: I guess, these days on technology, you know they still use the word buy, but often you’re leasing. So if you think about the entire programmatic media ecosystem, for those of you who are crazy enough to try to look at that, almost everything is leased — DMPs, data management platforms, DSPs, which decide where the money should go in real time. Now those are all licensable platforms, and while there are some switching costs, the switching costs generally are not too high. So you put your best guess in as far as which of these platforms to use. In some cases, there’s a little bit of customization, but it’s almost like it’s not like old school where you have to buy the infrastructure and place a huge bet. Now with cloud computing and almost everything, at least in the marketing ecosystem, running on the cloud, it gives us a completely different level of flexibility that we never had.

De Filippis: So we actually do lease a system to help us manage our logistics, but there’s a lot of customization that we’re doing on our end. But something that we’ve seen that was very helpful is, systems actually helped improve employee morale. What I mean is, we’ve created a workflow system which basically dumbs it down in a way, the job. That’s I think a good thing because employees generally want to feel good about themselves. They don’t want to make errors, they don’t want to be in the manager’s office with a list of “Why did you miss this? Why did you miss that?” So when you take a look at all of these errors that are happening in any business in the day to day, good leaders [say], “Let’s look at these errors, and how do we stop them from happening over and over again?” So we use the technology to tackle these issues one at a time, and all of a sudden, morale went way up. People were like, this is something I kept getting wrong, now the system tells me do this now. They’ve just got to follow the directions. So that’s how we’ve used the technology to help our team grow.

Strategic planning

What kind of strategic, ongoing planning are you doing now, maybe in the last couple of years, and what do you anticipate you’re doing going forward for strategic growth? 

Page-Greifinger: One of the best things we ever did is, we kept growing and we really did it, but there was no thought behind it. It made me berserk really. Finally, what we did — and we’ve done it across all of our divisions now — is we have a staffing model. So everybody has to perform a number of units, whatever the unit is, per day. And by doing that, we can know how much staff we need for auditing or assessment review. We know how much staff we need for consulting hours, we know how much staff we need for compliance audits, and so on and so forth. That has been really a godsend for us. We now know, I have enough staff to go out and get a contract and that we might do 5,000 audits a month. We have enough staff to do that, or we have enough staff to start that process, and we now know we need to hire staff. So that’s been a real help for us.

Gregorio: So there are plateaus in business, and I’ve been through all of them. [I started] with a small company, with me doing the actual elevator work. And then you hire people to do the work, and then you have anxiety about them doing the work, and then you hire people to manage them well, and then you continue on and on. What I’ve noticed is, it takes time to let people go. There’s a book called Necessary Endings, which kind of woke me up to that. People just like the old story — this is where the company is, and why can’t it just stay here? You have to find people who are on the page of the new story, and that’s often a really small percentage of people who go all the way to the end. And ultimately, they become partners.

Drewery: For those of you that have a formalized, annual process for the strategic planning about your growth, what do you do?

Grassi: So each year, we do strategic planning for clients, but we won’t do it to ourselves. No one can operate on themselves. So we hire an outside facilitator, someone we respect in the industry. We bring him in; it’s a three-day event. We need to make sure that there’s total alignment in the organization. We may have different practice groups, we may have different service lines, but there needs to be total alignment within the organization to the vision and how we’re going to execute on our plans. So that is common throughout all of our practice groups and service lines.

And those sessions really bring everyone in. Basically, each of our business-line leaders and service-line leaders writes an actual business plan that they present to the group. And then basically, there’s mid-year reviews, there’s quarterly updates and reviews of those, where they come back to the group and say this is what we project, this is where we are. But it’s a living document, and too often it becomes an annual document that you do next year and you realize you didn’t do half the things you said you were going to do. So it needs to be a living document and there needs to be accountability in any organization. So if someone’s going to take on that responsibility for leading a group and they’re going to put forward and basically spend the time of others, they need to execute on their plans.

Contingency plans

What are your contingency plans if growth exceeds what you’re planning or falls dramatically short?

Lessing: Our company is broken into four distinct divisions. One division that we took on was the Lessing Franchise Group, which brought on Fast 5 Pizza. One reason we brought that on was because it gave us sustainable growth where we knew we could build three or four locations each year.

Elting: We’ve always had goals, from the beginning, but we were very conservative. We tried to grow slowly, carefully, but a good amount every year, and we continue with that. So we make sure we can finance it completely internally. We have no debt, no outside financing, and so we’re conservative because we started on a shoestring out of a dorm room. We’ve always had a certain level of profit, money in the bank we absolutely had to have. And we never took risks beyond that.

Another thing that’s helpful as far as how we’re set up, is we have a large number of subcontractors. So we have 4,000 full-time employees, but then we have a network of about 15,000 subcontractors, and that makes it so we can scale up and scale down according to business and client need, and that really protects us. And as we grow, we make sure we run it the leanest we can and rely on those outside subcontractors that we’ve been working with for years. We know them, we trust them. It really decreases risk for our company.

Gregorio: How do you ensure the quality of those subcontractors?

Elting: We’ve created a number of systems for our core business, our language business. We created something called Transperfect Language Certification (TLC,) and we’ve made it to be the gold standard in the industry as far as testing linguists. We test in 80 different areas for each area. For example, in finance, there are eight or 10 different tests. In life sciences or pharmaceuticals, there are eight or 10 tests. It’s like a certification. Because you know, as somebody said, we have to be the best in our industry. We have to be the gold standard in what we deliver.

A changing mindset

How have you adapted your mindset, your strategy, particularly as you have seen your various stages of growth?

Adler: In the earlier years, I was a doer, so I was on the forefront of the operation. I was out there selling, I was there interacting with clients. The growth I don’t want to say was 100 percent attributable [to me], but in the early days it was. We were 13 employees. As we continued to grow and brought on people, I really identified that future growth was going to be fueled by people and not by me. I became less of a doer and more of a mentor. Adler Windows means something, my name’s on the door, our reputation is paramount, and so when you start to let that go and put it in the hands of your employees, it’s really, really scary. So for me it became really just identifying the people that believed in the vision, that believed in the culture and that could be mentored so that I was sure when I sent them out in the field to interact with our clients, that they were operating like an Adler. We take that very seriously. We call our company a team of Adlers.

Lee: When the companies are smaller, commanding control or autocracy makes perfect sense, but as you grow, you get used to empowering the great members of your staff to take on more responsibility, and grow. And that requires a sort of shift in thinking from management. You know, my partner and I both like to keep our hands a little bit dirty because it’s important for us to be inventors and subject-matter experts, but we do really empower the better members of our team to sort of grow and take on the responsibility that we need in order to be able to continue to grow the company.

Gregorio: Even the great Elon Musk, who now has tens of thousands of employees, manages to stay connected to every level of the organization. I continue to find time to visit job sites, talk to new people, articulate the core values of the company, and ask some of my mid-level people what’s happening out there? What’s good, what’s bad? … What can we do to see that they’re focused? How do we help you grow into new positions in the company, and what are your expectations here? I found out that you have to keep trying for that. Keeping your hands dirty, staying very connected to the organization as it grows, is challenging because your own position becomes very demanding. Being the executive of the company, I have lots of other things to do. I only have five direct reports, but I spend lots of time with each one, and you have to keep trying I think as much as 10 percent of your time to stay connected not only to your customer base but to your internal people.

Puleo: I agree with what everyone has said, and I’m trying to incorporate all that into my approach. Another thing, being a younger person in a younger company, I’ve found that we are becoming something of a destination company, and we’re attracting top talent from the industry. People are far smarter at what they do than I’ll ever be, and so finding a way to enable those people, not stand in the way of that, listen, enable, motivate — to me that coincides with the empowering aspect of that. So not being threatened by that experience, embracing it, I think that’s been a key element for us.

Grassi: I would commend you on that, because you always need to empower your people, and you should never stop learning in an organization. We are advising business owners whose businesses are changing faster than the speed of sound right now, and you cannot have any static plans. There’s nothing in your organization that needs to be static except the way you obviously deliver services, and you just need to know that that could also change at the flick of a light. So we’re always attuned to that.

We have something called continuous learning in our organization. Everyone has to have continuous learning. They need to make a commitment if they enter into the management group. They need to make a commitment to continuous learning. But more importantly, it’s setting up the right systems within your organization. … I have all of these direct reports, but also I have breakfast with eight to 10 staff people twice a month, and basically their sole purpose there is to help me do my job better. So I think when people in the organization see that the CEO is looking to get better and obviously wants ideas from them, they want to give more to the organization. And I think that’s been part of our success — we listen to our people, we implement what they tell us, and it really works out well.

Page-Greifinger: I do the same thing. I think what you do is great. Now we have a remote workforce basically, and it’s very important to connect with them, so I had been doing town hall meetings with Skyping with everybody who wants to get on. Quarterly we do that, an overview of the company. We also survey our employees quarterly. We send a survey out to see what are their needs, what are their wants. And we’ve implemented some things also based on what they come back with. And what we’ve found is that we have a very happy workforce. We have people who want to apply to work for us, and when they get get there, they say that they’re treated very well, like professionals. We keep people. We have I think the best retention factor in the industry.  In an industry where people go between companies time and time again, we keep about 97 percent of our employees year over year. I think that’s really good in this business.

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