Friday , December 14, 2018

August 2014

Featured In This Issue

August 2015


Who knew the 2013 Color of the Year would be cobalt blue, or that the Fall/Winter 2014 hues would be bright jewel tones and soft romantic neutral tones? Who created the dyes and swatches of the Spring/Summer 2015 palette featuring a “rainforest” theme of tropical colors? And who makes those colors into a standard format that can be communicated to a global supplier base?


That would be a very well-known company in the textile industry—perhaps not so well-known here in Charlotte—but nonetheless right in our backyard: DyStar LP. Very simply put, DyStar LP and its parent conglomerate DyStar communicate major retailers’ constantly changing colors to international suppliers.


DyStar LP is a manufacturer and supplier of dye, chemical auxiliaries, specialty chemicals and services to the textile and leather industries throughout North America. They work to make sure colors in manufactured products are true to the intent of the retailers.


It is an impressive challenge that extends across all industries. DyStar LP relies on the resources and the reach of the DyStar group to interact with companies globally and to support their customers at all stages in the textile chain, from the first inspiration of a designer, through production and testing, to the finished product in the store.


DyStar prides itself on consistency and exceptional results. How do they do this? To understand, you first need to appreciate the company’s impressive lineage.


A Colorful Lineage


As it’s constituted today, DyStar’s lineage is a Who’s Who of over 150 years of integrations, mergers and acquisitions. At the same time, it also is a paradigm for successful survival of the decades-long exodus of apparel and textile production to Asia.


DyStar was a direct product of major changes that came to the textile industry during the 20th century—technological innovations, synthetic fibers, logistics, and globalization of the business.


By the late 1980s, the apparel segment was no longer the largest market for fiber products, with industrial and home furnishings together representing a larger proportion of the fiber market. Industry integration and global manufacturing closed down many smaller firms in the 1970s and ’80s.


Here in the U.S., 95 percent of the looms in North Carolina, South Carolina and Georgia shut down, and Alabama and Virginia also saw many factories close.


In the mid ’90s, globalization of the industry within Germany resulted in reorganization of companies and production chains, resulting in a vertical integration of the global value chain—from development to production to sale, a dynamic illustrated in the transformation of DyStar.


DyStar started as a joint venture in 1995 between the textile dye divisions of Hoechst Celanese and Bayer, functioning as a coloration specialist. It then embarked on an impressive expansion by strategic acquisitions of BASF, Mitsui, Zeneca, Color Solutions Inc. and Yorkshire Americas.


These acquisitions were pivotal in transforming the company into a solution provider, offering brands, retailers and their industry partners a complete range of colors, chemicals and services.


By 2004, DyStar was widely recognized as a leader in the textile market, and was acquired itself by private equity firm Platinum Equity for a price analysts estimated at $680 million.


With subsequent acquisitions of Rotta Group (2005), Boehme Group (2006), and Texanlab (2007), DyStar grew in strategic market segments—covering auxiliaries and leather, and becoming a full solution provider.


In the early 21st century disruption of the textile industry continued with advances in electronics, shifting global economics, and more restrictive chemical and environmental regulations. Massive consolidations among European producers were met with the expansion of Indian, Chinese and Asian firms closer to new consumer product makers.


Given the rapidly changing market, the complex collection of DyStar companies proved difficult for its private equity owner in the ‘credit crunch’ era: In the fall of 2009, facing liquidity pressure, DyStar’s German operations filed for insolvency.


In February 2010, China’s Zhejiang Longsheng Group (Lonsen) together with India-based Kiri Dyes and Chemicals purchased the assets of DyStar’s German operations and most of its global subsidiaries for a reported $70 million, and later that year, also Dystar’s North American operations for a reported $10 million.


Longsheng was a major manufacturer in dyes, intermediates and chemicals in China, and also a conglomerate with interests in steel, autoparts, real property and financial investment.


Kiri was one of the largest manufacturers and exporters of reactive dyes and intermediates in India, particularly known for its reactive “blacks” in the industry.


The acquisition included access to DyStar’s 16 manufacturing plants in 12 countries, its brand, patents, technical know-how and most importantly, a 21 percent global market share.


Able to acquire the assets of DyStar without liabilities, Lonsen and Kiri turned around the DyStar business, making it more cost-effective and moving it more towards the growing Asian textile market.


DyStar has continued to expand and diversify in recent years. In October 2012, DyStar acquired the exclusive dealer for DyStar products in Andean countries—Anglostar LLC and its subsidiaries.


And just last fall, DyStar acquired Lenmar Chemical Corporation of Dalton, Ga., a specialty chemical products manufacturer, to further diversify its product portfolio and technical expertise into the textile and carpet, fiber processing, laminate floor, water treatment, oil and agriculture industries.


Since 2012, all DyStar operations come under the umbrella of DyStar Global Holding (Singapore) Pte. Ltd., with shareholders Lonsen (63 percent) and Kiri (37 percent).


Today, the DyStar Group has 14 production facilities in 12 countries and sales companies in all major areas, over 2,000 employees worldwide, and serves about 7,000 customers. Last year, DyStar earned nearly $850 million, with 45 percent coming from Asian markets and 55 percent split between Europe (30 percent) and America (25 percent).


In the first half of 2014, DyStar has achieved a 13 percent increase in revenue compared to the same period last year and doubled the earnings after tax.


Local Color


In Charlotte, DyStar’s operations include DyStar LP and Color Solutions International.


Color Solutions was itself a product of the textile consolidation going on here in North Carolina. In 1999, John Darsey and Freddy Miller combined businesses to form Color Solutions Inc. Initially focused on creating cotton color standards, they were able to attract major retailers—their first account being Wal-Mart—and transitioned beyond to meet customer needs.


In 2002, DyStar acquired Color Solutions Inc., changed the name to Color Solutions International (CSI), and provided the financial resources, global exposure and technical expertise to expand their product line and services.


Ron Pedemonte serves as president and CEO of DyStar Americas, DyStar LP and CSI . With a background in chemistry, Pedemonte started his career with DyStar in 1991 as a research chemist focusing on developing novel reactive dyes and then was relocated to Germany to continue on new product developments.


Since 2000, he’s been in Charlotte as regional America product manager for reactive dyes, three years later becoming the regional business manager. In 2007, he was promoted to his current position and is also responsible for global textile services. He is the inventor or co-inventor of more than 25 patents in the field of reactive dye chemistry and has published numerous papers in biochemistry.


Although headquartered in Singapore, DyStar’s global head happens to reside here in Charlotte as well. In early 2012, Harry Dobrowolski took the reins as group president and CEO.


Dobrowolski brings a strong financial background to his leadership at DyStar. A native of Ravensburg, Germany, he has lived in the United States since 1985. He received his education in Germany, with a degree in business administration and finance.


He started with DyStar in 2005 as the head of Finance and Business Services for the Region Americas. Previously, he was CFO for Rohwedder North America, an automation systems provider and before that, he had a 20-year career with Siemens Company, which included management positions in Germany and South Africa, as well as the U.S.


Speaking of the 2010 acquisition of DyStar by Lonsen and Kiri, Dobrowolski says, “This was a totally new beginning for us.  Since 2010, we’ve had very positive and sustainable growth in our results.”


Dobrowolski attributes the financial turnaround of the company to the right strategy and support from shareholders as well as integration of the supply chain. DyStar now has offices, competence centers, agencies and production plants in over 50 countries.


“This helps to ensure our expertise is both local and global for brands and retailers, mills and dye houses,” he reports. “What’s more, there are no superstars. We used to have very good managers; now we have the best team.”


Dobrowolski paints the larger picture: Following the reorganization in 2009, DyStar instituted several changes in operations. It closed some production plants in Germany and Indonesia as they had become outdated and were highly energy-intensive.


Production was shifted to more modern plants, primarily in China, where DyStar invested in state-of-the-art production technology. The new shareholders also helped to integrate the supply system and continue to be an important part of the leadership team.


“It is more than a partnership,” says Dobrowolski, “They need us to sell product and we need our shareholders to provide both suppliers and marketing information,” says Dobrowolski. “We work together very closely on a daily basis.”


A Colorful Presence


DyStar LP operates out of two production sites in Reidsville, N.C., and Dalton, Ga., and four warehouses located in Reidsville, Dalton, California and the Dominican Republic.


Through its CSI division, the company uses DyStar dyes to create over 5,000 CSI formula colors for fabric manufactured across the globe. These colors are developed through face-to-face contact with designers and color managers who have a specific color in mind.


“Globally, we are establishing color standards for more than 100 well-known brands,” says Pedemonte. “Some dyes have a lineage of 50 years or longer.”


“A retailer comes to us with a color palette for the season, whether it is spring or summer, fall or winter, holiday or back to school. They ask us to replicate the color in such a way that it can be communicated to their supply base,” describes Pedemonte. “We are smack in the middle of the textile supply chain, supplying color standards.”


“We take a retailer’s inspirational color pieces and make them into a standard format that can be communicated to a global supplier base,” continues Pedemonte. “Not only are we providing a service, but we are producing a color standard that is produced with dyes found in other countries; we lend technical support.”


The product offered to retailers consists of a certified standard (dye recipe with DyStar dyes) that is sold to global textile mills and vendors via the international website. The textile mill customer then uses this formulation to produce its fabric samples and production using DyStar dyes.


There are limitless applications for DyStar products—apparel, automotive, carpet, specialty chemical, denim, military/workwear and retailer/brand are their seven key markets.


DyStar LP maintains strong relationships with its customers; Pedemonte says that of the top 50 customers, 15 have been with the company for at least 10 years. Its diversified and well-balanced customer base of leading companies across a broad range of industries protects it from market fluctuations. High profile customers include Hanes, Fruit of the Loom, Shaw, Mohawk and Guilford Performance Textiles.


DyStar always has products in development. One of its current focuses is the denim industry. With a history of almost 120 years of producing Indigo, DyStar has developed a patented DyStar Indigo Vat 40 percent solution which represents the state-of-the-art in pre-reduced Indigo liquid. It allows for cleaner denim production and a reduction of the sodium hydrosulfite usage by 60 to 70 percent.


Coloring In the Future


As one of the premier companies in the field with a truly global reach, DyStar operates in many different legal jurisdictions and cultures and is responsible for complying with the laws in the countries in which it works. Additionally, the company aims to conduct business across boundaries with integrity and the highest ethical standards.


“It is our vision to become the world’s most sustainable and responsible supplier of colors, chemicals, and services to the global textile industry,” states Dobrowolski. “Our commitment to sustainability covers all three of its pillars, namely economic, environmental and social sustainability.”


Increasingly, rising wages in China and other countries, combined with higher transportation costs and new environmental regulations, have prompted a number of foreign and American textile companies to consider returning to the U.S. Also, with more consumers looking for ‘Made in the USA’ labels, some companies are turning back to American products.


Wal-Mart, for example, has pledged to buy $50 billion over the next decade in American-made products, including towels and washcloths.


Dobrowolski believes the trend back to Americas will continue—at least for the next few years. He adds that the textile industry itself is expanding because of consumer consumption.


“One of the factors undergirding a growing textile industry is the fact that consumers are buying more,” he says. “People don’t just buy what they need; they buy because they want the latest style or fashion color.”


With a growing industry and an expanding company, Dobrowolski expects DyStar to continue its growth path. But managing a large company with a complicated global supply chain can be challenging.


“We have to make sure our products—and the processes we use to produce them—are safe, follow strict environmental guidelines,” says Dobrowolski, “and their quality is top-notch and consistent worldwide.”


CEO Tom Duncan greets visitors to China-based Positec’s North American headquarters with a firm handshake and huge smile. Then, he ushers them over to a completely furnished workshop stretching the entire right wall of the reception area, complete with a huge workbench, drills, table saws, circular saws, replacement bits and blades, and more. He walks through the shop with a gleam in his eye; he says he gets to work his dream.


“Whether it’s an end user, a retail client, or a product developer, Positec is dedicated to providing a hands-on experience here at our Charlotte headquarters,” explains Duncan. “This workshop has been created so that we can not only test out our new products, but also provide our buyers with a totally immersive experience.”


Duncan laughs as he admits that he often feels like a kid in a toy store when new products arrive for testing in the workshop.


As is evident from the company’s name, short for Positive Technology, Positec’s entire approach to creating home improvement technology is one that centers on innovating for the customer. On display are many of the company’s products including a new battery powered string trimmer and a wheelbarrow that can transform into eight separate forms. One display shows off several of the company’s over 2,000 patents and Duncan says that another 2,000 are currently being processed.


Duncan cites the Worx TriVac patent as an example of the company’s innovative problem solving. The Worx TriVac is both a leaf blower and a vacuum, changing functions with the flip of a switch. Duncan describes how other leaf vacuums require a long, cumbersome barrel so that users can’t injure themselves by reaching into the vacuum.


Positec’s engineers decided to design a unit with a short barrel with a slight bend at the end to keep hands out of harm’s way, resulting in a blower/vacuum combo that is only slightly larger than a traditional hand vacuum.


“Because of one small, innovative change, the entire concept of a blower/vacuum combo has been turned on its head,” Duncan remarks, most satisfied.


Looking for a Start


After graduating from the University of Virginia in Charlottesville, Duncan describes his “first real job” with Lawler Ballard Advertising in Nashville, Tenn., where he wrote sales brochures and managed a few accounts.


“It was a great first business job. I’d compare it to the hub of a wheel—I dealt with different types of businesses. I’d visit a liqueur account in the morning and, while still in my suit, a dairy farm in the afternoon to learn about its forage grass for cows. The next day I’d visit a bank.


“I was hearing about the coming formation of the European Union, and that interested me,” Duncan continues. “I decided to get an M.B.A. in international business studies; I left my job and enrolled in the University of South Carolina (USC) Moore School of Business.


“As part of the program, I took an intensive German language course and then spent eight months in Germany as an intern at a packaging machinery company. Learning a language in school and then having to speak it in a business setting is one of the most humbling experiences you can have.”


“I’ve always had an international outlook when it comes to business. In fact, I think a lot of Positec’s success is due to that. I meet business owners all the time who are focused solely on their specific regions, and many are afraid to step out of their comfort zones,” he says. “I am completely comfortable in international communities. I enjoy the diversity, learning the culture…it’s all part of the fun.”


With his business degree in hand, Duncan went to work for Vermont American, a joint venture of Emerson Electric and Robert Bosch in 1992. “I was recruited because I knew German,” he says. “In 1998, I was promoted to vice president, and in 2000 Bosch bought Vermont American. He stayed on as vice president of international with the Accessory Business Unit of Robert Bosch Tool Group for a couple of years, but was intent on starting his own company.


“At that point, I wanted to do something entrepreneurial. So I left in 2003 and acquired the rights to use the Rockwell name for power tools. Rockwell International had sold premium-priced tools for professional tradesmen and serious do-it-yourselfers under the name until the early 1980s, but not since.


“I planned to reintroduce the brand with a new line of tools and sell them through stores like Sears, Lowe’s and Home Depot. So, I started looking for investors and a factory to make them.”


Making a Connection Abroad


“It was right about then, in 2004, that I met Don Gao in Shanghai.”


In the mid-1990s, Gao was a contract tool manufacturer with his own factory. He manufactured private-label hand tools for clients (as an OEM, original equipment manufacturer) such as Sears. He won a huge order for angle grinders from U.S. tool titan Black & Decker. In one year he shipped 700,000 of them, Then, Black & Decker cut its orders, deciding to make the grinders itself—and right in Gao’s own city, Suzhou.


But with Gao’s setback came inspiration. “Chinese companies are too focused on price,” he says. “You can succeed only if you build loyalty,” and he was convinced brands were the best way to do that.


So he started Positec to manufacture and distribute his own branded power tools, rolling out his Worx label in 2004.


“I think too often Americans have a negative perception of Chinese companies,” says Duncan. “But I have a unique perspective. I was impressed with Positec’s operation, which was entrepreneurial and driven by innovation.


“He was starting the Worx brand of tools and was interested in joining forces, so we began talking,” says Duncan. In late 2005, Gao hired Duncan to head up his North American operations to sell Worx and Rockwell lines of home improvement tools.


Also that year, the company selected Charlotte for its North American headquarters. It chose the Queen City over Atlanta and Chicago because of its proximity to Mooresville-based Lowe’s Cos. Inc., which has become one of the company’s largest customers.


“It just made all the sense in the world to be right next to the second-largest home-improvement retailer,” Duncan says. “It was the best decision we ever made. Our business with them has really expanded, and I think being here and having this office so close just makes doing business so much easier.”


Some of the same advantages apply since it is also relatively close to the Atlanta headquarters of Home Depot.


Duncan adds that it was also “because of the people.”


“There are so many talented professionals in the Charlotte region,” he says. “We have some of the best, brightest, and most experienced in the home improvement technology industry right here and we couldn’t pass up the opportunity to tap into that.”


Launching the Brands


Rolling out Rockwell and Worx brands of home improvement tools through Positec here in the U.S., Gao and Duncan faced stiff competition from some of the biggest names in the industry including Black & Decker. At first, breaking in with retailers such as Lowe’s, Home Depot and Sears was not easy. Sears and other clients weren’t receptive to the company’s brands, preferring instead that the company continue to provide the private-label tools carrying the store’s brand.


Fortunately, Duncan reached back to his experience at former employer Robert Bosch GmbH with television marketing directly to consumers, and in 2008 Positec aired its first infomercial around a lightweight, cordless lawn trimmer—the Worx GT. That year, the company sold 400,000 units, Duncan says, more than doubling the entire market.


As sales climbed, consumers began asking for Worx and Rockwell products, resulting in a change of heart from the big-name buyers. Retailers such as Lowe’s took notice and agreed to carry the products on their shelves, finding that infomercial products sold at a higher rate than most other brands.


Positec became a supplier to Lowe’s in October 2009 and was named its 2010 Innovator of the Year among Lowe’s 2,500 suppliers, becoming the first company to win a Lowe’s Supplier of the Year award in its first year as a vendor.


Positec was also awarded 2011 Product of the Year by DIY Weeks, the leading European trade magazine, for the Rockwell Sonicrafter oscillating tool and the G-Force angle grinder in the power tool category and the TriVac blower/vacuum and the Eco cordless mower for the garden tools category.


Also in 2011, Positec Tool Corporation settled into its present location in 25,000 square feet—the entire third floor—of the Linville Building, which is co-located with its 26,000-square-foot reverse-logistics warehouse facility in the Perimeter Woods Business Park in the Huntersville area.


In addition, the company relocated its retail distribution facility from Long Beach, Calif., to about 120,000 square feet of industrial space in Huntersville Business Park.


Today, Positec maintains facilities in China, Italy, Spain, Brazil, and Australia, and here in Charlotte, Memphis and Chicago, and also in Canada.


Positec’s U.S. sales last year totaled over $200 million and made up over half of the parent company’s total revenue. With consumers spending more on home improvement, Duncan expects Positec’s U.S. business to achieve double digit annual growth over the next few years. Further, with certain products such as lawn trimmers, Positec is gaining market share and creeping up on industry giants such as Stanley Black & Decker Inc.


“We’ve created more than 100 high-paying jobs in the United States,” Duncan notes, “and also a number for our business partners here.


All told, the global Positec Group is made up 4,000 employees operating in 12 subsidiaries worldwide with roughly $400 million in revenue. Gao is still sole owner.


Gao, who remembers leaving a state-owned company to start his business with the help of suppliers who allowed him to defer payments, says he has enough money. Except for one possibility he’s happy to contemplate: “Unless I buy Black & Decker,” he says with a smile.


Serving the Marketplace


Positec Tool Corporation’s customer service center is located right in the same building. Customer service representatives answer phone calls and emails from end users, retailers, and manufacturing and distribution partners.


“What we’ve found is that, in order to truly deliver value to our customers and partners, we have to be close to them. You can’t get closer than our headquarters.”


Innovation is Positec’s calling card, Duncan says. The company has developed a robotic lawn mower and a safe chainsaw called the “JawSaw.” The latter features a blade that’s partially enclosed to prevent injuries.


“It’s an industry with giants,” he says. “We’re definitely the smallest guy in the block. But we can offer innovation that maybe they don’t have or can’t provide. Or maybe we’re quicker on the draw than they are. That’s kind of been our niche. The only way we’re going to win is by being different.”


“What we’ve done,” Duncan continues, “is strike out on our own with premium pricing. Sure, you can get home improvement products cheaper elsewhere, but our products will outlast the competition year over year. Our premium pricing is designed to provide extra value for customers, most of whom will not need replacements or repairs, even through heavy use.”


Regarding Chinese manufacturing and its role and image within the United States, Duncan points out that the tide is slowly changing. In the past five years, wages have almost doubled for Chinese workers, placing many manufacturing centers in the country at a disadvantage.


Additionally, he notes, shipping large, bulky items from China is becoming cost prohibitive, causing many companies to begin investigating the benefits of transferring tasks to the United States. “We’re even considering transferring some functions that are now done in China to our North Carolina facility,” Duncan notes.


With the Worx and Rockwell brands putting out innovative products year after year, it seems that Positec is right on track to gain market share in the home improvement industry. At the company’s headquarters, engineers pore over customer feedback in order to define what needs to be done to create products that not only serve to make home improvement tasks easier, but also to construct design ideas that minimize cost and space while increasing efficiency.


“What our team is most committed to,” maintains Duncan, “is making life easier for home improvement enthusiasts the world over.


“Give us a home improvement task, and we’ll make it easier to complete and help you get it done faster. We know that in Charlotte, we’ve got the right people to help our customers get the job done.”

If there’s one thing Jim Heintz and Mark Ingram have learned in their combined 45 years in direct marketing, it’s that consumer data can be a messy business. The degree to which it can be cleaned up largely determines the success—or failure—of marketing efforts.


Both men built their careers within Charlotte-based United Mailing Service, representing the company’s leadership for more than 20 years. In 2011, the pair took over as owners and rebranded the company as UMS, showing a renewed determination to stay abreast of continuing developments in marketing technology and a commitment to continually exceed industry standards and bring new product and services to their clients.


As UMS celebrates 30 years serving the Charlotte community, Heintz and Ingram take pride in the proprietary processes they have developed, including cleansing data for use in direct marketing to improve industry-acceptable levels.


Targeting Appropriate Data


UMS is a full-service marketing communications company that focuses on data refinement and processing, direct marketing and printing. Its mission is to provide a full range of data resources, marketing analytics and technology to help customers accurately and powerfully target the best-qualified buyers and increase their sales and profit margins.


“Direct marketing is an ever-changing target,” acknowledges Heintz, chief executive officer for the company. “We use a number of services and approaches including print, analytic tools, direct mail and email.”


The partners describe the company as data-driven. “We’re focused on data and what it tells us is the best approach for the client,” says Ingram, who functions as chief marketing officer. “A lot of companies try to force a square peg into a round hole. We let the data help us understand the needs of a client from the facts, their history and goals. We then look at their marketing budget to devise a custom solution.”


Ingram explains that clients’ customer profiles are developed from data, which includes customer lead lists, detailed demographics and transactional reports of purchases. “These items are the holy grail of their business every day—and ours.”


Purchasing information and lists from data suppliers does not guarantee that a client’s message will reach its desired audience. Three to 10 percent of new purchased data will be unusable according to Ingram. “This is the acceptable level in the industry. Most customers live with that percentage of bad data, but we don’t,” he explains.


“We’ve created a process that reduces the bad data to one percent or less on purchased or customer data,” touts Heintz. “Plus, we no longer have to buy data with the typical level of bad product, as we now have our vendors using our process to get the data to one percent before we purchase it.”


“Our data cleansing process is critical for us and for clients with large databases,” says Ingram. “Instead of spending money on print, mail and postage on 100,000 pieces, we segment the list to the 90,000 that we know will actually get delivered.”


According to the partners, this is made possible through strategic partnerships with experts in related fields. “We’ve combined our knowledge to come up with new services and products that address client’s needs,” says Heintz. “We also get inspiration from our clients who come to us with challenges targeting very specific vertical markets.”


“UMS offers access to the most complete set of business and consumer data in the industry, along with an unmatched commitment to service and the success of our clients,” says Ingram.


After each marketing program is executed and delivered, follow-up services include providing results to clients in the form of response analysis, leads, sales and return on investment.


“The process to refine targeted customer lists and profiles is continuous,” says Ingram. “For certain vertical markets, no one else is using the data the way we are.”


Advancing with Technology


Both Heintz and Ingram had already been in their respective leadership roles prior to buying United Mailing Service from its founders. Each of them came up through the ranks learning the business firsthand.


Heintz started working at UMS as a shipping clerk in 1991, one day after arriving in Charlotte from his native Buffalo, N.Y. “One of the previous owners was from Rochester, so there was a connection,” says Heintz. “Plus, I was eager to start working.”


“I came right out of high school; just a young teenager wanting to get out. I’ve lived here longer than I lived in Buffalo now, so I’m a real Southerner. I eat my grits and my greens,” he says with a smile. “I love Charlotte. It’s a great city.”


Heintz worked his way up to machine operator, production manager, plant manager, vice president of operations, to president in 2008, and finally co-owner in 2011. “Being co-owner is definitely my most challenging role to date and I take a lot of pride in the 23 employees who decide to work here.”


Ingram started out in advertising after graduating from N.C. State University with a degree in business management and marketing. In 1993, he began work as a sales representative for United Mailing Service and was named executive vice president in 2007, before joining Heintz as co-owner in 2011.


Ingram has been instrumental in UMS’s growth from a conventional direct mail company to a complete turnkey marketing operation. They have accomplished this by using direct marketing techniques that include: data append, database mining and profiling for specialized list purchases, email marketing, digital and offset printing, QR codes, Purls (personalized URLs), as well as more recent advances in developing custom marketing portals.


“Originally, United Mailing Service focused on printing and direct mail,” says Ingram. “We wanted to push other technologies forward. We felt that the company had grown a bit stale and that there was more we could be doing to help our clients.” That was the impetus to the partners’ rebranding of the company—changing its name, logo and colors to indicate the new direction.


Other milestones along the way have included the move from a 13,000-square-foot facility to its current 50,000-square-foot facility. Of course, there always is continuous upgrading of machinery and restructuring staff to have key employees in the right positions.


“We’re growing and growing very fast; faster than any of our direct competitors,” claims Ingram. “We are on track to achieve 50 percent growth this year over last—a large increase over the moderate growth we saw after our first two years as owners.


“Some of that growth can be attributed to a second company that we started in December of 2011, SENIOROI, LLC, focusing only on marketing for retirement communities. In three years we have secured a national client base because of products and services that were designed specifically for the industry.


Multi-channel Marketing Strategically


UMS clients are spread across numerous industries including, travel, automotive, health care, and retirement solutions. Fifty percent of the company’s clients are located regionally, with others scattered around the country. “Most of our clients have been with us a long time and trust us,” says Heintz.


Both partners readily admit direct mail works, but not for everyone. UMS’s inclusion of email and social media marketing has added a new dimension to traditional direct mail which brought in new clients whose operations are more tech-savvy. At the same time, it has given the company a fresh opportunity to approach older customers with new services.


“A lot of our customers don’t yet recognize who we’ve become, or the refinements and specialization we’ve brought to the marketing process,” says Heintz. “But they trust us with their most important asset—their customers—and they know we value those relationships.


“One of our biggest challenges is to communicate to them who we are now and all the new things we can do.


“For example, with some customers, we can switch services from direct mail to email marketing which can free up substantial savings in print and postage to spend on other marketing services more wisely. In addition to marketing, they can also switch their billing process from paper to email.”


As marketing programs are refined, it becomes clear how much direct mail versus email or social media can generate for a given client, say the partners. The goal is to know who is more receptive to print; who prefers email or social media.


Direct mail contracts feed the printing contracts at UMS. For this reason, Heintz points out, “Printing companies—even if they are calling themselves marketing professionals—won’t attempt to switch clients to email as it represents a loss of business for them. Most printers and mailers are not open to offering this solution because they don’t understand how to make it a profit on the other side. With us it’s about what is best for our clients.”


But UMS is a full-service, multi-channel marketing company, and Ingram says that approach works best for most clients. “For some, we prospect with email, and then send direct mail to a smaller group after analyzing the results. It really depends on what approach will provide the highest return on investment for our clients.”


“UMS has just scratched the surface on social media,” Ingram continues. “Everybody is trying to figure out how to monetize social media; we are learning how to best use it.”


Recently, the director of Southeast sales for Twitter came to speak with the Charlotte Direct Marketing Association; Ingram sits on this board. “Getting this type of information is vital for our business. Right now, only the biggest brands in the country are using Twitter and other social media platforms to generate sales but that will increase—it will eventually trickle down.”


Print, Data, Direct


Sending out massive quantities of mail doesn’t happen without some daily challenges. For UMS, many of them center on working with the U.S. Postal Service (USPS). “It’s just about keeping up,” says Ingram. “Mailing rates are constantly changing. We have to upload new software between dates to enact immediate changes without any downtime.”


Regulations allowing for discounts also change frequently. “We pride ourselves in knowing the regulations and securing every discount,” assures Heintz. “The U.S. Postal Service has a lot of not-so-obvious rules; our years of knowledge about these rules are invaluable to our clients. We are the longest tenured direct marketing company in Charlotte.”


Email comes with its own set of regulations, set forth mostly by the different Internet service providers. These, too, change frequently as does the technology that delivers them.


Scheduling can also be tight at times, particularly with inevitable last minute changes to the design and production schedule. “Sometimes we’re waiting days for a client to complete their layout, photography. But we’re still held to the original mail schedule,” says Ingram. “We always do our best to accommodate our customers.”


UMS enjoys unusually high staff retention in the industry and the partners attribute this to fair treatment and extra perks and benefits.


“We truly appreciate our staff. They really stood behind us when we took over. They could see growth, consistent business, dedicated owners and increased job security,” says Heintz. “We ask a lot of them but we provide for them.”


UMS works with many non-profit companies and helps support them with sponsorships. “We try to give back,” notes Ingram.


The “Print, Data, Direct” mantra will continue for UMS, with an emphasis on providing the cleanest data possible. “We don’t see other companies developing their own processes. Some in the retirement industry have tried to copy ours but haven’t succeeded. It took us a lot of years to develop, but it sets us apart,” says Ingram.


“We’re in a great position for growth,” says Heintz. “We have room to grow in our facility. We’re getting ready to install additional equipment to further upgrade our services. Over the next year we plan to add five to 10 new employees to our staff.”


“I am very happy with our business at this point. I rose from shipping clerk to owner, but it’s not over yet,” says Heintz. Ingram contributes, “And we think the best is yet to come—for us and for our customers!”


K&L Gates LLP is a global law firm that currently has close to 2,000 lawyers in 48 offices, spanning five continents (26 U.S. offices, seven Asian offices, eight European offices, two Middle Eastern offices, four Australian offices and one South American office). The firm serves clients in key commercial and financial centers around the world.


With 35 major practice areas running the gamut of corporate, finance, litigation, intellectual property, real estate, policy and regulatory, financial services and energy, K&L Gates has the infrastructure, expertise and resources required by clients, regardless of size or industry.


In 2008, Kennedy Covington Lobdell & Hickman LLP (“Kennedy Covington”) looked at K&L Gates as an ideal partner to transition into the 21st century. At the time, Kennedy Covington was a North Carolina-based firm of 200 attorneys with offices in Charlotte, Raleigh, Research Triangle Park and Rock Hill.


It combined with the international law firm that year, making it part of one of the largest and most dynamic law firms in the world. It was a statement that they knew where business was going—business was going global.


“The most important thing is to be where our clients need us,” says partner Michael Hawley. “Increasingly, we are representing companies transacting and operating globally. That international involvement is either intentional or because clients are drawn to it by their business dealings. Eventually, all businesses will have international exposure; it’s where business is going; it’s a natural evolution.”


“It made sense for us to be in a position to better serve our clients by having access to resources that we simply could not provide as a geographically-concentrated, middle market firm,” explains administrative partner Sean Jones. “Looking at how things were changing in our region, it just made sense to combine with K&L Gates.”


“We also were attracted to K&L Gates because our client base and areas of specialization aligned nicely with their platform,” explains Jones. Clients across the platform range from startups to Fortune 500 companies, and Carolina specialty practices in securities, mergers and acquisitions, private equity, employee benefits, corporate law and supporting areas blended well with the K&L Gates’ practice offerings.


K&L Gates itself has a storied past. To the base firm (Kirkpatrick & Lockhart, a Pittsburgh firm founded in 1946) were added many comparably situated and like-minded firms over the years. Those firms came from all across the U.S. and from many corners of the world.


Two of particular note were London-based Nicholson Graham (formed in 1858) and Seattle-based Preston Gates & Ellis (founded in 1883), the latter carrying the name of William H. Gates, Sr., the father of Microsoft founder Bill Gates.


After several name changes, the firm concluded that its brand going forward would be best represented by the straightforward K&L Gates, proudly displayed at global offices all around the globe.


Acquiring Expertise


While K&L Gates is a relatively new brand, it is already receiving wide recognition. In 2013, Mergers & Acquisitions magazine named K&L Gates Law Firm of the Year.


For the last three years, the firm was named to the Global 20 by Law360, citing it as one of the 20 law firms with the greatest global reach. And in 2012, K&L Gates was named one of America’s Best Corporate Law Firms by Corporate Board Member Magazine, in association with FTI Consulting, Inc.


K&L Gates’ client service was also recognized among the top 10 in BTI Consulting Group’s Client Relationship Scorecard; and for the fourth consecutive year, the firm was among the top two law firms for first tier rankings in the 2014 U.S. News Best Lawyers survey of the Best Law Firms.


Recognition has also gone to K&L Gates’ Chairman and Global Managing Partner Peter J. Kalis. The American Lawyer identified Kalis as one of the 50 most influential innovators in the global legal industry in the last 50 years, and The National Law Journal included him on its inaugural list of the top 50 legal business trailblazers and pioneers.


Kalis, a Rhodes Scholar who received his doctorate in philosophy from Oxford University and served as editor-in-chief of the Yale Law Journal while attending there, has been an industry firebrand, often shaking up the status quo, and an outspoken advocate of innovation.


One big differentiator for K&L Gates is their embrace of technology. “Technology has always been part of our corporate culture,” explains Jones, “but with K&L Gates, it’s been taken to a new level. We have to be on the cutting edge of technology to seamlessly operate 48 offices around the globe.”


“K&L Gates is fully integrated,” confirmed Hawley. “It’s one firm, one partnership, and we use technology to connect with our partners and our clients, no matter where they are in the world. Technology is a huge driver for us.”


The firm’s rapid global expansion has also distinguished it from competitors, but Kalis’ most innovative—and controversial within the industry—move yet has been his push towards financial transparency.


When Kalis released the firm’s 2012 financial results in February 2013 (prepared to Securities and Exchange Commission reporting standards), it was the first time ever a U.S. law firm had disclosed its financial standing in such detail.


U.S. law firms, as private partnerships, are not required to publicly disclose their financial information, leaving industry publications with only voluntarily submitted surveys as the primary indicator of a firm’s financial health..


“Transparency makes an organization better,” maintains Kalis, “because it informs and empowers our clients and stakeholders, requires organizations to run themselves responsibly in real time, and discourages firms from tossing the dice into an uncertain future.”


Transparency and Innovation


Transparency and innovation are so important to the K&L Gates brand that the concepts are reflected across the globe in their office design. Each of the 48 offices is uniformly sleek, gleaming, white and minimalist.


The Charlotte office, which occupies the top floors of The Hearst Tower, offers broad views of downtown Charlotte through the distinctive glass triangles that crown the Tower. The office lobby and meeting and conference rooms are light, bright and spacious in the characteristic design of the brand.


In a blend of technology and design, digital screens dominate an entire wall of one conference room in the Charlotte office, facilitating video conferences, seminars and webinars.


“Thought leadership on cutting edge issues is very important to us,” says Jones. “That technology enables to us distribute, broadly and quickly, innovative information on those issues, whether through our webcasts, newsletter postings or video conferences. Partners are also frequent speakers at professional and community events.”


Thought leadership is stressed worldwide at K&L Gates. In June, a partner from K&L Gates’ Frankfurt, Germany, office, Mathias Schulze Steinen, was in Charlotte to speak at a global conference and to meet with a prospective client considering expansion into Germany.


Schulze Steinen is a regular visitor to the Carolinas and works with many businesses in the area. Noting the large presence of German companies in Charlotte and the Carolinas, Schulze Steinen remarks, “There is a very close relationship between the Carolinas and Germany. Germans like doing business here. Lots of German companies have their U.S. headquarters here in the Carolinas.


“Charlotte has direct flights to and from Germany and the workforce in the Carolinas is well educated and has a good skill set. This is something German companies very much appreciate. We need to be here, on a regular basis, connecting the dots between German companies with their operations in the U.S. and Carolinas companies doing business in Europe.”


Strategic Partnerships


Strategic partnerships is a strong theme in the K&L Gates Charlotte office. “We represent businesses,” says Hawley. “While we’re not business consultants, we regularly connect our clients with the right resources.


“One of the great benefits of a substantial platform like ours is that we can connect those dots for people. We can put a company in contact with others, and with experts, so they can find out if their product or idea is viable. If it is, we can help them with the legal logistics required to implement their strategy.


“The magic of the K&L Gates platform is that now we have colleagues like Mathias Schulze Steinen in places like Frankfurt. If someone comes to us with a product they’d like to market in Germany or Europe, we can engage Mathias to advise on the legal aspects. On the flipside, we can also do the same for a client of Mathias’ coming into the U.S. That ability extends throughout all of our 48 offices.


“We feel the Carolinas are an attractive place to enter the U.S. market—the cost of doing business, the quality of life, the level of sophistication here create an impressive package—but if a client prefers the West Coast, we can connect them with our office in Palo Alto or San Francisco. With K&L Gates we have resources to help a company no matter where their needs might be.”


This interaction between offices is another hallmark of the integration of K&L Gates. In 2013, 466 of their 500 largest clients used lawyers in two or more K&L Gates’ offices and 15 of their 20 largest clients used lawyers in 10 or more offices. “There are built-in synergies associated with this sort of work flow across offices,” states Jones.


The Charlotte office fosters inter-office connections through good, old fashioned Southern hospitality. “We have a reception every year for our colleagues coming into the U.S. for the annual K&L Gates partners’ meeting,” explains Hawley.


“We call it the International Connections Reception because we literally have partners from all over the globe attending. We take care of people very well here in the Carolinas—we feed them lots of barbecue, hush puppies and banana pudding—stuff that they’ve never had before,” he grins. “They enjoy it and are impressed with what they find here in the Carolinas, especially the sophistication of the markets.”


America’s Back in the Game


Jan Johnson, business development manager for the Charlotte office, points out, “The K&L Gates’ global platform provides a tremendous resource to our clients. For instance, if a client needs expertise in trade regulations, we’ve got more than 190 lawyers in our Washington, D.C., office and several of them are heavily involved in trade issues.


“The great thing is that no matter the question, no matter the need, no matter where in the world, we have someone somewhere who can answer that question or provide the service that client needs,” she adds.


“There are two ways a company can enter another country,” explains Hawley. “It can start an operation from scratch, or it can buy an existing business in that country. Activity in both areas is rebounding nicely. Our M&A (mergers and acquisitions) practice is a good indicator of economic growth, and we’ve seen solid improvement in M&A transactions going both ways; European and Asian companies buying American companies, and vice versa.”


Schulze Steinen agrees with the predictions of a growing U.S. economy, “America’s back in the game. That’s what we think in Europe,” he says.


“There’s never been a better time for global business in Charlotte,” says Hawley. “Trade between the Carolinas and other countries is about to explode. Our job is to provide the legal resources needed to support that growth, across our global footprint.”


“We’re the same lawyers, doing the same things as we’ve always done, we’re just doing them with a bigger platform and with a larger resource base,” Hawley concludes.


“For 50 years we’ve been assisting Carolinas-based companies with their legal needs,” says Jones. “That’s always been, and is still, the bread and butter of, what we do. With the K&L platform, we just have more resources to offer clients now. It’s about being local, but thinking globally.”

When most people hear the name Alibaba, they think of a character from “Ali Baba and the Forty Thieves,” one of the most familiar of the The Arabian Nights stories. But Alibaba also happens to be the name of the largest global tech company that you’ve probably never heard of. While Alibaba controls 80 percent of China’s online shopping market, it has little name recognition in the United States. But that may all be about to change.


Alibaba is in the process of amending its prospectus for an initial public offering (IPO) on the New York Stock Exchange (NYSE), which will probably occur sometime in September. Alibaba’s market cap will rank up there with household names like Microsoft, IBM, Oracle, Samsung, and Facebook. Some think the offering may approach $20 billion and value the company at well over $150 billion.


Now, in addition to launching what could be one of the largest IPOs ever, Alibaba has set its sights on the American online shopping market. But can a Chinese company and its dynamic founder who has “Americanized” the Chinese market “Chinafy” the American market with the same success? What will be the impact on U.S. online commerce and what are the takeaways?


Amazon, eBay and PayPal With a Dash of Google


Hangzhou, China-based Alibaba Group is a collection of Internet-based e-commerce businesses including online web portals, online retail and payment services, a shopping search engine, and online mapping. Alibaba serves as a marketplace, connecting buyers and sellers, and runs a platform where people and merchants go to sell things and people come to buy. Alibaba says it has no desire to sell products itself so as not to compete with the merchants who drive its middleman/facilitator business model.


Alibaba is, by some measures, the world’s largest e-commerce company. According to The Wall Street Journal, transactions completed on its various online sites topped $248 billion in 2013. That’s more than Amazon and eBay combined. Alibaba’s three largest marketplaces—Taobao, Tmall, and have hundreds of millions of users and host millions of merchants and businesses. Alibaba has been likened to “a mix of Amazon, eBay and PayPal with a dash of Google thrown in.”


The company was founded in 1999 when Hangzhou native Jack Ma created the website, an English language business-to-business web portal designed to connect Chinese manufacturers with primarily American buyers. also offers a transaction-based retail website called, which allows smaller buyers to buy small quantities of goods at wholesale prices.


Alibaba’s consumer-to-consumer portal, Taobao, is similar to eBay and by itself is China’s largest e-commerce site. Founded in 2003, Taobao is a huge online marketplace where more than 8 million sellers sell over 900 million products direct to Chinese consumers. In such a huge marketplace, it can be hard for sellers to stand out, so advertising designed to drive traffic generates the vast majority of Taobao’s revenue. The company’s powerful search engine also directs traffic to sellers and is an important component of the Taobao advertising strategy. was launched in 2008 to complement Taobao, but instead of individuals and small businesses selling their products, Tmall is where large companies like Nike, Proctor & Gamble, Apple, Gap, and Walt Disney market their global brands to an increasingly affluent Chinese consumer base. These companies pay to be listed on the site and then advertise to compete and get noticed.


Alipay is an online payment escrow service linked to a customer’s bank account that is China’s biggest payments processor and operates similar to PayPal. Ma created Alipay in 2003 after realizing he could not successfully sell online without an escrow service to protect buyers and give them the confidence to do business with smaller merchants. Sellers do not get their money until the buyer is satisfied.


The company has also recently ventured into logistics because of China’s fragmented logistics network. Unlike the U.S. where UPS, FedEx, and the USPS provide quick and efficient delivery of products nationwide, in China there are literally millions of small one or two truck delivery services, along with a dozen or so larger providers. Ma and Alibaba are currently engaged in at least two major initiatives to create a software-based smart network to help integrate these millions of Chinese logistics providers to speed up product delivery all over China.


In June, Alibaba launched its first foray into the American retail marketplace, 11 Main (, which hosts more than 1,500 merchants in categories such as clothing, fashion accessories and jewelry, as well as home goods and arts and crafts. 11 Main is intended to be a go-to for unique, interesting, limited edition products. The brand is designed to evoke a Saturday morning stroll amongst the small, unique shops of Main Street as opposed to driving your car to the Wal-Mart parking lot.


In May this year, Ma stepped down as the Alibaba CEO, but he remains the company’s executive chairman as well as a major shareholder. Few people expect the passionate former English teacher to slip away to the sidelines, though. Most view it as delegating the immediate operations to others while Ma continues to set the course for Alibaba as it expands from its China base into a global market.


Entrepreneurialism in China


Dr. James A. Tompkins is an internationally known authority on supply chain strategy and operations. He is founder and CEO of Raleigh-based Tompkins International, a supply chain and logistics consulting firm. Tompkins has studied Alibaba’s success in China and also has considerable insight on how Alibaba will impact the U.S. marketplace.


“In 2014, I believe that Alibaba will do $420 billion in online sales,” predicts Tompkins. “By comparison, in the United States we only do $475 billion online. I also believe that by 2015, Alibaba will become the largest retail platform in the world…even larger than Wal-Mart.”


Tompkins also points out that Alibaba is growing rapidly, with revenue growth running at an astounding 70 percent per year from 2009 to 2013. That rapid growth has also driven profitability to stratospheric levels as Alibaba earns $0.43 in profit out of every dollar of revenue. By contrast, the profit leader in American online commerce is eBay whose margin in 2013 was just 17.8 percent. Alibaba’s amazing success has also helped make China the world’s largest e-commerce market.


“Alibaba’s IPO will be huge because it is based on the rise of the middle class in China,” suggests Tompkins. “Today in China, only a third of the gross domestic product (GDP) comes from consumers. In the U.S., two-thirds of our GDP comes from consumers, so the growth potential for China is enormous.”


Tompkins believes that to understand Alibaba’s goals, you have to understand its visionary founder, Jack Ma. Ma learned English as an unpaid tour guide for foreign visitors, and later taught English in China for five years. But when he saw the Internet for the first time on a visit to the United States in 1995, he immediately saw its potential as a great equalizer at home. “Our competitors are not in China, they are in Silicon Valley,” Ma has been quoted as saying.


“Jack Ma is also seen as the Godfather of entrepreneurs in China,” says Tompkins. “Alibaba has offered other entrepreneurs the opportunity to have a place to build their own business. He has helped millions of entrepreneurs and has revolutionized retailing in China, but the world certainly did not expect to be taught a lesson on entrepreneurism and commerce by China.”


Chinafication and Americanization


From the beginning, Ma said his goal was to create a global business, but his eyes were always on the United States. His first online business,, was designed to give Chinese manufacturers greater exposure in the West. So when the time came to expand outside of Asia, instead of focusing on other developing markets—like South America and Africa that have some similarities to the logistical challenges faced in China—Ma chose to set his sights squarely on the American market.


“Jack Ma’s area of expertise is not retail; it’s not technology; and it’s not logistics,” says Tompkins. “His area of expertise is the ‘Chinafication’ of things that work in the West. He studies what works in the West, adapts it and brings it to China. So he is extremely aware that when he comes back to the West he now needs to ‘Americanize’ what he did in China. And I think the real goal that Alibaba has for the IPO is to create brand recognition.”


Tompkins says learning about the U.S. market is one of the main reasons Alibaba has spent over a billion dollars on investments in U.S. companies over the last 18 months. These investments include sports merchandiser Fanatics, search engine Quixey, instant messaging service TangoMe, ride sharing and delivery service Lyft, luxury e-commerce 1stdibs, and online retail marketplace ShopRunner.


“His goal for M&A in China has been to increase his success and his profitability, but in the U.S. his goal for M&A has been to learn,” explains Tompkins. “When he’s made acquisitions in the U.S., he’s always asked for board seats to learn about the U.S.”


“Jack Ma practices martial arts, so he follows one of the key principals of Kung Fu, which is he should take your strength and turn it into his strength,” continues Tompkins. “His big competitors are the big American retailers, most of whom are mass merchants. So what does Jack do with his first true American site? He opens 11 Main, which is just the opposite of mass merchandising. It is designed as a personal relationship between a merchant and a customer. You have to request an invitation to join.


“The vision of a Chinese Internet company coming to the United States and being successful is a huge barrier because Americans are just a bit uncomfortable about learning entrepreneurship from a Chinese guy. They view China as a Communist country, so he faces some huge barriers. What he is doing is very Kung Fu.”


But Tompkins believes that 11 Main is just the first step in Alibaba’s American strategy. He says the next step could be the real game changer.


“I think there is also going to be a big marketplace that will not be just unique products,” he says. “In that marketplace he will have stores for office products, stores for toys, stores for women’s merchandise, stores for men’s merchandise, drug stores, grocery stores, and more. I don’t know what he will call it, but I think it will be up and operating before the 2015 holiday season.


“That is the site American retailers have to fear—especially American retailers that do not have a unique product offering. If I am a large department store and I sell Coach and Gucci and Ralph Lauren, I will have a problem, because why would you want to shop with me when you can shop at Jack’s store that has all of those things and is going to give you a really good price.”


But haven’t Amazon, eBay, and other online retailers both big and small been doing quite well in the U.S. market over the last 20 years or so? Can Alibaba really change things in the more mature U.S. online marketplace? Tompkins thinks they can.


“It has to do with being a huge marketplace,” Tompkins suggests. “If you can become big enough to become a destination, you can turn off the other search engines’ spiders because people will come to you first. Merchants will want to be on your site, and then because merchants want to be there, customers want to be there too.


“When more customers do, more and more merchants will as well, and it just snowballs. As the site gets bigger and bigger, merchants have to buy advertising, so they shift their advertising budget away from where it traditionally has been and they give that advertising to Alibaba.


“So the question is how do you get huge? How do you prime the pump? You do that by making your fees very low. The fees for 11 Main are about half or less than they are on the other major U.S. marketplaces that are out there,” Tompkins points out.


“That fee 11 Main charges its merchants is 3.5 percent, but there are three very important exceptions—one is for books, one is for music, and one is for movies. For those, the fee is 0 percent, a strategy that seems aimed squarely at Amazon’s core business,” says Tompkins with emphasis. “That’s Ma’s Kung Fu philosophy in action.”


Fueling the Counteroffensive


If Alibaba is successful in revolutionizing online commerce in the United States, how will that impact the Charlotte region and how should American companies respond? Tompkins says the Charlotte’s region’s retailers, like those anywhere else in America, can’t just play defense, they need to respond with a counteroffensive.


“The first thing is price,” he explains. “Retailers need to reduce operating cost. They need to reduce inventory cost. This will allow them to offer things like free delivery and free returns.


“Second is selection. They need to increase non-stock items as well as stock items. They need to offer a broad selection and they need to own a category.


“Third is convenience. They need to provide the speed of delivery that their customers desire. Most people will not pay for same day or next day delivery. Some people want it quicker, but others are willing to wait.


“Finally is the experience. A merchant needs to offer a personalized and engaging experience. Their customers must feel like they are related to individually.


“A merchant’s supply chain is the fuel for their counteroffensive,” Tompkins continues. “They need to develop a channel strategy, and their channels need to be transparent to their customers. They also need to define their distribution and fulfillment network, something I call ‘Get Local.’ That means they must meet the requirements of the customer from a shipping and logistics point of view.”


Tompkins believes that Charlotte may be well-positioned to take advantage of the need to “Get Local.”


“The Charlotte region is located within a 24 hour drive of 60 percent of the U.S. population,” he explains. “That is very important because if companies are going to ‘Get Local,’ they are going to need to locate in those areas where you can get to locations quickly. So I think that is a big plus for Charlotte.


“Another big plus for the third party logistics providers, and for distribution and warehousing, is where Charlotte is located relative to the east coast ports. Charleston, Savannah, and Wilmington are going to become more important when the Panama Canal widening opens and we find more ships traveling from Asia direct to the east coast as opposed to Asia to the west coast. I see that as a substantial shift.”


While Alibaba may not be a household name here in America just yet, Tompkins says companies need to begin planning their counteroffensive today. “I believe that by the holiday season of 2015, we’re all going to be talking about Alibaba.”


Five Remaining Elements of Planning for a Successful Sale to Insiders


The prior article dealt with the first five elements which should be part of a business owner’s plan to successfully transfer his or her company to “insiders” (family members, key employees and co-owners). They were: Time; Defined Owner’s Objectives; Business Cash Flow; Growth in Business Value (using Value Drivers); and Capable Management Desiring Ownership.


This article deals with the remaining five elements of planning for successful sales to insiders that keep owners in control of their business until they are paid the entire sales price.


Element 6: Minimizing Taxes upon Sale.

While no owner wants to pay more taxes than absolutely necessary, those contemplating insider transfers must focus on minimizing taxes. In insider transfers, it is imperative that the owners and advisors structure the sale to minimize taxes on the company’s cash flow (pre-tax income) because, without planning, the cash flow is taxed twice—once when the insider receives it (as the new owner) and then pays taxes before paying the prior owners to purchase the company; and again when the prior owners pay taxes on the proceeds they receive.


One goal of tax planning is to subject the company’s cash flow to taxation only once. Accomplishing this feat takes considerable planning, but it’s worth the time and trouble to save a third or more of the cash flow from this type of double taxation. One-time taxation means owners receive more money more quickly and thereby reduces risk of non-payment.


For instance, owners who include in their plan to transfer ownership to insiders a deferred compensation plan payable to the owners directly by the company pursuant to a deferred compensation agreement pay only one tax (though at ordinary income tax rates instead of capital gains tax rates).


Element 7: Regulate an Incremental Transfer of Ownership.

One of the most important advantages of the well-designed insider transfer plan is that it gives owners the ability to regulate how ownership is transferred, when it is transferred and how much ownership is transferred. If company performance falters, employees stumble, or if the owners choose instead to sell to a third party, the well-designed insider exit plan keeps the owners in the driver’s seat.


Element 8: Increased Control = Decreased Risk to Owners.

While business owners take risks every day, they don’t relish risking their own and their families’ future financial security. Therefore, it is advisable to use strategies to retain voting and operating control in the hands of the owners and shift operational business risk from the owners’ shoulders to that of the incoming owners, so that owners stay in control of their companies until they receive the entire sales price.


There are many ways to accomplish this. For instance, one way is to recapitalize the common stock of a company into two classes with one class being Class A Voting Stock consisting of one percent of the total shares (and total value of the company), and the other class being Class B Non-Voting Stock constituting 99 percent of the total shares and value of the company.


Owners can retain voting and operational control by first transferring all Class B Non-Voting shares to the insider and then only transferring the Class A Voting shares once the insider has paid the full purchase price.


Element 9: Written Road Map with Deadlines.

To succeed, it is highly advisable to put a transfer plan in writing and communicate it clearly (and regularly) to the eventual owner(s). If the plan is not in writing, it simply is not credible and neither the business owners, nor the employees, will take it seriously. More importantly, the written plan is the playbook for the business owners’ exit that will be used to coordinate actions with their advisors (thus reducing delay and cost).


The plan should include a timeline and provide accountability—who will do what, when—for all participants, including the owners! Use incremental, staged checkpoints. As they say, you’ll never finish a marathon if you don’t have mile-by-mile goals to meet.


Element 10: Education (yours).

Experience tells us that owners need to understand the ins and outs of insider transfers because, unlike sales to third parties, owners can control the business and the exit process until they are paid the entire sales price for the business. As a business owner, that education began the moment you started reading this article! Thanks for listening!

Accountants, bankers and CFOs work with financial information daily, but a number of successful small business owners and managers may not understand financial statement differences or accounting terms that are often used to explain business performance.


Successful sales, marketing, operations and purchasing managers and owners may have an incomplete understanding of financial statements and terms, because they have had little accounting training. Some basic concepts are explained below from a non-accounting business perspective:


Accounting. This refers to the techniques and procedures used to communicate financial information. Accounting is sometimes referred to as the “language of business,” and this language is used by accountants and other financial people to build financial statements.


Financial Statements. These are reports that show the financial performance of a business. The most common reports are the balance sheet, income statement, and statement of cash flows. Most small businesses create a balance sheet and income statement at the end of each month, and larger companies create a statement of cash flows. Think of financial statements as scorecards showing if and where a business is winning or losing.


Cash basis vs. Accrual Basis. These are the two primary ways that revenue and expenses are measured. A company’s financial statements can be built using cash accounting or accrual accounting. Cash accounting records revenue when cash is received and expenses when cash is paid. Accrual accounting records revenue when earned and expenses when incurred, regardless of whether cash has been collected or paid. It is common for small businesses to use cash accounting, but mid-size and larger companies use accrual accounting.


Generally Accepted Accounting Principles (GAAP). These are accounting standards used by public accountants and internal accounting departments. Think of GAAP as a set of guidelines that attempt to create uniformity in financial statement preparation. Bankers often ask for GAAP statements, because they want financial reports prepared according to these common accounting “rules.”


Balance Sheet. This financial report shows a snapshot of a business’ account balances on a specific day. The report has three sections: Assets (what the business owns), Liabilities (what the business owes) and Equity (the difference between what the business owns minus what it owes). The balance sheet always “balances” because the total assets equal total liabilities plus equity.


Some owners think this report shows the net value of the company if all assets were sold or converted to cash and all debts or liabilities paid. This is not entirely correct, because the actual prices earned from selling assets could be higher or lower than the values on the balance sheet. The balance sheet, however, does give an indication of a company’s net asset value and accumulated earnings since the business began.


Income Statement / Profit and Loss Statement. This financial report shows a company’s performance during a particular period such as a month or year, and it has three section: Revenue (money received from the sale of goods and services), Expenses (all company costs incurred to make and sale the goods or services), and Profits or Net Income (revenue minus expenses). Some owners think profits equal cash, but this is incorrect if the company uses accrual accounting: the income statement compares revenue to expenses, calculates a profit and shows what income may eventually be converted to earnings or cash.


The income statement and balance sheet are connected by net income, such that profits (on the income statement) increase equity (on the balance sheet) and losses decrease equity.


Statement of Cash Flows. This financial report shows whether a company has generated or used cash during a period. The balance sheet and income statement are used to build the statement of bash flows, and this report breaks down actual cash that has come into the business or gone out of the business from operating, investing and financing activities. Bankers and investors often focus on a company’s cash flow, but many small businesses unfortunately do not often analyze their cash flow.


Financial statements are scorecards created by businesses to track financial performance. Accounting tools and techniques are used to build financial statements, but even owners and managers who are “accounting challenged” can use financial statements to better understand and improve their company’s financial performance.


Publisher's Posts

The tidal wave of Chinese investment in the U.S. predicted by some and feared by others as a result of the record high number of transactions in the 3rd quarter of 2013 (and the over $14 billion record high Chinese investment in the U.S. for the year overall) has not materialized and is unlikely to, according to industry experts. In fact, China’s investment in the U.S. and around the world contracted in the first half of 2014.


Chinese investment trends are closely monitored by the Rhodium Group, which reports that China’s economic reform program is beginning to impact the country’s global investment profile, and while interest in U.S. assets continues to be strong, the industry focus is shifting towards real estate, advanced services and manufacturing.


According to their recent report, “Chinese companies spent $2.1 billion in the second quarter on investments in the U.S., and more than $10 billion worth of deals are currently pending. Notable is the recent increase in greenfield investments (foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up) and growing average capital expenditures for such projects.


“Investment in U.S. real estate continues to boom as investors and developers are looking for risk diversification and new opportunities abroad. Economic reforms are also changing price structures for Chinese manufacturers, incentivizing greater investment in overseas R&D facilities, brands and local manufacturing capacity.”


While China accounts for only a tiny share of total foreign direct investment in the United States, the upward trend is clearly underway. Chinese firms, according to the Rhodium Group, operate in at least 37 of the 50 states and have investments across a wide range of U.S. industries.


The growth in Chinese FDI is met with mixed responses. Some are anxious about those investments stimulating job creation opportunities. Others are concerned about the real motive behind those investments. An IPO by the Chinese company, Alibaba, is expected on the New York Stock Exchange in the coming months. Alibaba is already bigger than Amazon and Ebay combined. What will their entrance into the domestic U.S. economy mean? Will they be competitive? Will they play “fair” and follow U.S. laws?


Should the U.S. be wary of FDI from China like Alibaba? Well, yes, to a very large degree. According the Heritage Institute, it is important to understand “state owned entities” (SOEs). It is unclear how much state equity participates in Chinese companies or the level of participation by China in their success.


The history of the rule of law in the People’s Republic of China (PRC) is very weak. While the private role of Chinese companies has surged since the spring of 2012, the bulk of large transactions still involve SOEs. Under Chinese law, while private firms exist, they exist to serve the PRC. If the central government orders a firm to break American law, that firm has no recourse.


It is estimated that 90 percent of investment in private firms in China comes from the state’s account. Protected from competition, SOEs receive substantial subsidies, free land and other advantages. Whether those foreign firms can compete in the U.S. is still to be determined. We do not know if they can adjust to a competitive marketplace and its rules and regulations.


It is incumbent on the U.S. to clearly and precisely maintain the rule of law for all American transactions and require that all enterprises obey American laws. The U.S. must constantly monitor the practices of these companies so that American security is not jeopardized. And, the U.S. must ensure that the Food and Drug Administration, the Securities and Exchange Commission, and other regulatory bodies closely monitor the behavior of Chinese firms that do business in the United States.


A Committee of Foreign Investment in the United States (CFIUS) has been established to monitor and protect U.S. interests. Operating under the Treasury Department, CFIUS is an inter-agency committee authorized to review transactions that could result in control of a U.S. business by a foreign person (“covered transactions”), in order to determine the effect of such transactions on the national security of the United States.


If we are to maintain our status as the most attractive marketplace in the world, we must expect, as well as seek, FDI in the United States. At the same time, we need to make sure the rules for economic activity are clear and that American interests are protected for the long-term success of our nation.


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