Friday , December 14, 2018

June 2013

Featured In This Issue

June 2013


When Malcom McLean patented the intermodal shipping container in 1956, he revolutionized the transport of goods and cargo. No longer were the sale of goods limited to specific regions; thanks to the ease and uniformity of intermodal containers, goods could travel the world.

Well, shipping container architecture is once again taking center stage, or rather, becoming the stage for hospitality venues, tradeshows and other public events with Boxman Studios’ design, development, and deployment of them as immersive brand environments for events and trade shows around the world.

Containers Come Full Circle

Few inventions can boast as profound a social and economic impact on everyday life as the shipping container. It’s a large steel box built in standard sizes to support the transportation of goods by ship, truck, train, and sometimes even airplanes. Invented by native North Carolinian Malcom McLean (Maxton, N.C.)—known as the truck driver who reinvented shipping—the shipping container replaced wooden crates and loosely packed boxes that were clumsy, expensive and time time-consuming to load and unload.

Because of its uniform design—stackability, versatility, strength, resistance to theft, and ease of loading and unloading—the uncomplicated shipping container greatly reduced the costs of production and distribution, some say by up to 90 percent. Nearly every product imported into this country is transported via a ship in a metal shipping container.

Once the ship arrives in port, the containers are removed from the ship via a large crane and transferred onto railroad cars and tractor trailers for transport into the interior areas of the country.

Today, the majority of shipping containers are manufactured in China with over 21,000 landing on U.S. shores each day. In the United States we have an overabundance of used shipping containers because of the economics of international trade; we import more than we export. But once they’re here, they’re oftentimes orphaned. This is where Boxman Studios comes in.

“We see endless possibilities in the repurposing of these very sustainable boxes,” attests David Campbell, president, CEO and founder of Boxman Studios, LLC.

Serial Entrepreneur

Campbell calls himself a “serial entrepreneur,” at one point in his childhood aspiring to be an architect. Today, he lives in Myers Park with his wife and three children.

Campbell grew up in Katonah, N.Y., and earned a journalism degree from Ohio Wesleyan University in 1995. He returned to New York City and joined up as a stock broker with Prudential Securities, becoming a trader on Wall Street.

An invitation to play golf in Charlotte a year later turned into a job offer with investment and brokerage firm Interstate Johnson Lane. After three years, he changed industries and accepted accepting a position with Harris Murr and Associates, a Charlotte-based real estate developer.

Three years later, his burning desire to become an entrepreneur led him to open his own real estate development company, Acer Development, specializing in commercial properties, specifically office and retail space. Today, Campbell still keeps a hand in this business.

Campbell describes himself as a visionary—a contemplative person. He deliberately takes time for reflection and goal-setting. He clears his calendar for one day every 90 days, going it solo oftentimes in the mountains to reassess and redefine his goals, dreams and expectations of life.

He credits this open mindset of continually seeking out challenges for this current chapter in his life. In 2008, after reading an article about new uses for decommissioned shipping containers, he was intrigued. So he bought one and started playing in the mobile hospitality space. By 2009, he had a staff of 11.

One of his first gigs was to set up a mobile hospitality venue at the Charlotte Motor Speedway. Using a shipping container, Campbell’s vision was to create a positive sensory experience for each visitor, a concept called “experiential marketing.” Unfortunately, right before the event, the client cancelled. Having already designed a ‘Pop-up Party’ for his client, Campbell decided to attend the racetrack event anyway and throw a party to see who would come.

“The unique design of the container as a hospitality venue attracted many visitors,” says Campbell. “I knew I was onto to something as I watched people slowly realize what the venue was made of and thought it was really cool. It validated our design principles.”

Boxman Studios modifies these decommissioned shipping containers on a five-acre, 65,000-square-foot property just north of Charlotte. Both corporate offices and manufacturing are housed here, along with space for trucks that transport these repurposed containers to client locations around the country. Boxman Studios also has a storage, manufacturing and distribution center in Los Angeles.

A Better Brand Experience

Campbell has structured Boxman Studios into three separate business proficiencies—design, development and deployment. The design process is highly collaborative, with the first question asked of the client, “What do you what want to achieve?”

“I have all the faith in the world that we can create unique and one-of-a-kind experiences for our clients and for their customers,” says Campbell.

“We have a custom solutions mentality,” describes Campbell. “When working with our customers, we want our solutions to be easier, cheaper and cooler than our competition.” Campbell says he has created a company culture around the “just say yes” approach to customers.

For all of Boxman Studios’ projects, the main goal in the architectural design of a mobile hospitality venue is to facilitate interaction. Whether throwing a party or creating a pop-up retail space, clients typically want an attractive, interesting and welcoming venue to entertain and impress clients.

And with using sustainable architecture such as shipping containers, Campbell points out that he is helping his clients align their brand with a responsible environmentally-friendly solution.

Boxman Studios’ mobile hospitality venues are oftentimes pop-up parties that are popular rental units for many reasons. It arrives as a box, the flaps go down and is adorned with a bar, couches, TV, stereos, WiFi, electrical (either power or solar), and customized branding—all built in and already attached. The only thing left to add are the people.

Campbell has positioned his company as a strong player in the experiential marketing space. Essentially, experiential marketing attempts to connect consumers with brands in personally memorable and relevant ways by creating a positive sensory experience to influence or motivate potential customers to become loyal brand users.

Experiential marketing uses tactics that ignite the senses and emotions, whether it is audio or visual (or a melding of both), a physical sampling of a product, an anticipation of winning something, or many other forms. In Boxman Studios’ case, they’re creating an architecturally unique sensory experience for the visitor to get their attention. Once they’ve gotten their attention, the next step is to share a brand’s message in a memorable way that will stick.

Jack Daniels is one of the better known brands taking advantage of experiential marketing rather than traditional approaches. The company prides itself as independence with a shot of rebel. They used that mentality to create a comfortable environment for visitors to sit with a brand ambassador, discuss whiskey versus bourbon, and sample some good old No. 7. Jack Daniels gave customers a memorable experience.

Red Bull is not only a high-energy drink, it is a high-energy company. They needed a customized venue that could travel with them anywhere. Boxman Studios created a convenience store-style interactive booth using a 20-foot container which features all the comforts and amenities of a convenience store, down to the snacks and ice-cold Red Bull. It is easy to set up and break down, and it can accommodate virtually any space.

Boxman Studios’ sales team targets global brands, architectural firms designing sustainable environments, and/or marketing firms who support global brands selling solutions in support of tradeshows, events or clients in need of a permanent or semi permanent building.

“These custom-built designs have many applications where we can create an environment that’s memorable, adds to our client’s brand equity, and highly complements what they are selling,” says Campbell.

Launching Customized Environments

In 2012, Mark McInnis from Javelin, an experiential marketing agency in St. Louis, Mo., reached out to Boxman Studios to help their client Samsung with the North American launch of their new Galaxy S III phone targeting the consumer market. Samsung wanted to take the technology to the people and let them interact with the phones in an intimate environment to experience all of its features directly.

Samsung’s 12-week, eight-city campaign took America by storm in customized environments that let people experience the smartphone on a personal level. Starting with a repurposed 20-foot container, Boxman Studios customized a ‘cabana’ design maximizing  showroom space and giving Samsung representatives room to engage with prospective customers.

Fully customized and appropriately branded, Boxman Studios’ iconic solution attracted crowds in every market. The comprehensive campaign turned out to be so successful, that Samsung continued the tour in three additional markets.

Earlier this year, Javelin reached out to Boxman Studios on another Samsung project, this time targeting college students. This road tour was designed to introduce Samsung’s next generation phone, the Galaxy S 4. For four days, a Boxman Studios’ mobile hospitality venue was set up in a recreational area on six campuses for the students to try out the latest and greatest Samsung phones and win prizes.

McInnis says, “Boxman’s mobile hospitality venues give a sense of premium quality that feels permanent, versus another mobile technology that’s typically on wheels. These venues on campuses work very well for us,” says McInnis.

“After an all day event, you can lock them up at night, return the next morning, open them up, host the event and then drive them out to the next location. For these types of road tours, Boxman handles all the logistics including providing trucks, drivers, loading and unloading. It truly is a great resource to have in our toolkit to offer our clients,” adds McInnis.

Google’s Garage

Each year, the world’s leading thinkers and doers gather at the TED Conference for an event many describe as the  “ultimate brain spa” or “a four-day journey in the future in the company of those creating it.”

Google wanted to have a big presence at this event and was given courtyard property outside the Long Beach Convention Center to create an iconic presence. The venue needed to be large enough to accommodate visitors from the TED Conference, and yet small enough to fit into a limited footprint. It also had to be versatile enough to include a range of activities to keep convention goers engaged and entertained. Boxman Studios was called in.

Two weeks before the TED Conference, Boxman Studios began setting up shop in Los Angeles with five, 40-foot shipping containers. Reaching 24 feet into the air, Boxman Studios designed and created three temporary buildings that were dubbed the ‘Google Garage.’ Each container was delicately lifted from the street into Google’s assigned space outside of the Long Beach Convention Center.

A 3,000-square-foot structure was then filled with all things Google, including interactive YouTube screens, viewing areas for the TED talks, an Android charging station, a basketball hoop, a claw machine, a coffee bar, and various other cool activities to take a break from the conference. The result—Boxman Studios created an innovative, yet iconic space for attendees.

As a young boy, Campbell’s dream of becoming an architect didn’t necessarily involve big metal boxes used for sleek hospitality venues. But looking out to the future, Campbell has big dreams for these sustainable customized shipping containers. He sees endless possibilities including pop-up buildings for emergency services and greater uses in the education, medical and growing of food industries.

Based in Charlotte, Argus Fire Control designs, manufactures and installs automatic fire protection and metal detection systems to keep textile, non-woven and recycling businesses safe from fire. Many of their customers are cotton spinning mills which make the yarn or thread that goes into woven or knitted fabric. These mills are at a particularly high risk for fire.

“Over the past 20 years the production rate of spinning machines has increased in velocity, multiplying the risk of spark and fire” explains Michael Viniconis, who’s been president of Argus Fire Control for the last 10 of them. “Many modern mills run 24 hours a day and are almost ‘lights out’ with few people and only security cameras in production departments, making fire detection an issue.

“Argus products can extinguish a fire while it’s still a single spark. Our products can detect a spark and extinguish it or control it in less than 50 milliseconds—that’s one-20th of a second.”

Besides protecting people from injury, fire detection and protection equipment safeguards mill machinery which has an average value of $100,000 per machine and prevents loss of production time at an estimated rate of $2,000 per hour or more.

Argus also has products that detect loose metal traveling in production lines. “Metal will damage machines and cause sparks,” explains Viniconis. “Our products detect metal as small as two millimeters and remove it without interrupting production.”

Argus products include automatic fire protection systems for bale openers, infrared spark detectors, spark diverter systems, metal diverter systems, filtration system fire protection and their newest product, the high speed AD-50eC THS-TT Metal and Spark Diverter designed to be the most compact and sensitive product of its kind on the market.

Argus uses their products to design a customized solution for each customer. “Costs range from $5,000 to protect a small machine to $500,000 for a large mill installation. There may be multiple processes in cotton spinning mills and textile mills and each machine is a little different, requiring a different solution,” says Viniconis. “The mill will send us a machinery drawing and we’ll advise them on what they need, we’ll have a technical discussion and then we’ll put it all together.”

Regional Roots

The roots of Argus Fire Control trace back to the 1940s and an Atlantacompany called Southeastern Safety Appliances which sold safety goggles and handheld fire extinguishers. Argus founder, Dick Thomas came up with the idea of automating the process.

Initially the company protected Southeastern U.S. spinning mills like Parkdale Mills, Frontier Yarns and Gildan. But as the textile industry—key industry for the Carolinas since the early1900s—started to shift, so did company operations.

“At one time there were about 600 spinning mills in the U.S.,” explains Viniconis. “Now there are probably 50. By the early 2000s much cotton spinning had shifted to Pakistan, India, China, Bangladesh, Brazil and Mexico. That business—and our customer base—began moving offshore.”

It was something that Viniconis himself had done. Growing up on a small Connecticut farm, he dreamed of traveling the world—a shortwave radio, a gift from his father, allowed him to listen to broadcasts of Radio Cairo and All India Radio and to fall asleep to the chimes of Big Ben from the BBC.

Later Viniconis studied International Relations at Colby College in Maine and received a scholarship to spend his junior year studying in Vienna and Paris. Graduation led to a 14-year career with KLM Royal Dutch Airlines.

Viniconis continues, “Luckily, Dick Thomas and his wife Jeanne, who ran the business together, had forethought. They had the vision to see that the textile industry might not always stay in the U.S. and were already exporting to Latin America and Europe. When I came on board in the 1990s, they tasked me with developing more business overseas.

“I figured I didn’t know anything about fire protection or textiles but after working at KLM, I knew about international trade. I found out quickly this isn’t something where you make one trip overseas and change your balance sheet. It takes years to develop some international markets.

“It was three years of travel to Pakistan—more than 10 visits—before we started generating business there. The management of most companies wouldn’t have the patience but Dick Thomas did. He said, ‘Just keep going. It’ll happen.’

“And it has continued to happen,” the veteran Viniconis says, his lifelong “travel bug” not yet satiated.

Argus Fire Control participates in an average of five major industry trade shows around the globe each year.

“Myanmar and Cambodia are new markets with trade shows coming up,” explains Viniconis. “At first I may just go to the shows as a visitor with brochures, business cards and an open mind. I meet the local companies, find an agent and then possibly exhibit at next year’s show.”

Viniconis is quick to point out that the encouragement of Argus’ international growth is strongly supported by company Chairman Bob Duncan and Vice Chairman George Wagner.

“They have invested a great deal of time, money and patience to reach current levels of exports in these markets, and they have carefully assembled a team of international-minded and dedicated staff, engineers and technicians to support this growth,” affirms Viniconis.

Export Promotion

Argus Fire Control also takes advantage of the resources of the U.S. Department of Commerce and the U.S. Export Assistance Center (USEAC) to stay ahead of emerging markets. “The Department of Commerce has been instrumental in getting us overseas,” says Viniconis.

“They assisted us with raw data to identify markets we should consider. We still use them to identify new markets and different sales channels. They can open the doors to U.S. embassies and attaches around the world.”

The USEAC opened its Charlotte office in 1996. Greg Sizemore is the director. “Argus used our program called ‘Gold Key Service,’ where we can set up meetings for them or for other North Carolina companies with qualified buyers abroad,” Sizemore explains. “We have offices in over 80 countries and our people abroad can find key distributors and develop market intelligence. We can even provide interpreters and driving services. It’s one of the best things we do with an over 80 percent success rate.

“But the key to success internationally is travel. Mike Viniconis knows this. His passport is easily two inches thick with annexes stapled onto the back. When you get on a plane you’re proving to potential buyers that you’re serious about their market and you’re willing to commit. Getting on a plane and building that relationship with prospective buyers overseas is critical to international success.”

Since the Thomases retired from Argus in the late 1990s, Viniconis has continued to spearhead the company’s international push. One five-week business junket last fall had him in Pakistan, India, Thailand, Indonesia, Singapore and Japan. Since September 2012, he’s been overseas for a total of 15 weeks.

The push has paid off; Argus Fire Control now does business in more than 50 countries and exports of their product are 80 percent of their total sales. And while Argus exports to the more familiar regions of Europe and Southeast Asia, it seems no location is too exotic. Current work includes a project in a remote corner of Uzbekistan and they just concluded agreements for three textile mills being built in Angola.

“We do business in countries where there are no Starbucks or McDonalds,” Viniconis says. “It’s been interesting as well as a lot of fun.”

Argus credits their use of independent sales agents in each country as key to their success. “The art of this business is to find the right agent,” says Viniconis. “We’re doing extremely well now in Bangladesh, India, Pakistan, Mexico and Korea because we have good agents there and the markets are doing well. Having the right agent is critical to a small business exporting successfully.”

Viniconis affirms there is great demand overseas for American products. “Everywhere we’ve done business we find American products are held in high regard. Overseas markets like Americans’ honesty in business, they like the service we provide and the high quality and reliability of the products. American products last.

“Argus has systems out there that are 15 or 20 years old. We joke that it’s not good to be a spare parts salesman for Argus; you won’t make any money. These systems have to operate not only locally in the Carolinas but also in Uzbekistan—that’s a long way to go to replace a part. These systems need to work.

“We design our products to be as ‘plug and play’ and as robust as possible so they don’t require much service, just normal maintenance. We also train the end user, the mill, to do the service. If they prefer, they can contract maintenance to our agents but most of our customers do their own service.

“We’re not the low cost provider, but considering the life of the product, we offer great value and reliability.”

Viniconis maintains that internal R&D also factors heavily into design improvements and new products: “Our products have to perform under harsh industrial environments—dust, dirt, noise—and be able to withstand power fluctuations of 15 to 20 percent.

“Imagine the power grid in Bangladesh. Our systems need to be able to withstand power surges, brownouts and blackouts and to come back and operate as if nothing happened. That’s why we sometimes install triple levels of power protection.”

Shrink or Swim

For Argus Fire Control, the challenges of doing business globally are far outweighed by the benefits. One enormous benefit in particular stands out: survival.

Argus customer Parkdale Mills is a leading global provider of spun yarn. Parkdale President Dan Nation has worked with Argus Fire Control for 25 years and has a unique perspective on the company.

“The textile business was on the decline for awhile. There was a lot of consolidation and a lot of companies went out of business. This affected a huge part of Argus’ business, but rather than sit back and shrink with that market, they decided to make their market bigger, to expand overseas.

“I watched Mike build that business. It was amazing to see the places he would go—countries I would never go to. He’s a road warrior. Now they’re all over the world. When I became president of Parkdale, one of the first things I did was sit down and talk to Mike about how he took his company international, because he’s done as good a job at it as anybody I’ve seen,” attests Nation.

Viniconis states it simply, “If we had not expanded overseas, we would not exist. We couldn’t have survived on domestic business. Exports kept us alive and now the profitability of exports allows us to grow.”

And growth has led to a new Argus Fire Control facility. In May, the company moved to a 13,000-square-foot facility near I-85 and the Billy Graham Parkway. “I always like to be in either the landing or takeoff pattern of the airport,” Viniconis jokes.

In May, the company also received the prestigious President’s E Award for 2013 from the U.S. Department of Commerce and the White House. Winners of the E Award are recognized for their significant contribution to increasing U.S. exports.

“We’re very excited,” says Viniconis. “It’s an award that every exporter aspires to. We’ve had four steady years of export growth. Because of exports, Argus Fire Control never experienced the recession.”

     Viniconis is also a proud member of the North Carolina District Export Council and says he has learned a lot from his involvement with the group and from their chairman, Wayne Cooper, whom Viniconis considers a mentor.

“The Export Council is very active,” Viniconis says. “They host seminars and road shows and work with local community colleges. It’s made up of a cross section of industries—manufacturing and service—and every size of company from small businesses like Argus to Caterpillar. We’re all excited about exports.

“We mentor other businesses and encourage them to export. The statistics are that only one percent of businesses in the U.S. export and of that one percent, most only export to one other country.

“Any company making an interesting product nowadays probably gets inquiries from international customers. I’d advise them to take those inquiries and contact the Export Assistance Center or the District Export Council or me and we’ll tell them what their next step should be.

“Field those inquiries because you never know when your domestic market might start to wither and you need an international market to keep your company going and strong.”

In a true reversal of misfortune, and a well-deserved one at that, the U.S. is experiencing manufacturing and employment rebounds by engaging in job-creating economic opportunities with the Asia Pacific region.

The global economic redistribution of wealth—an economic upheaval for the U.S.—has come full circle. That is, the same economic forces that have diminished our manufacturing capabilities and workforce opportunities are now the very same forces reigniting them to serve increased demand from abroad.

Fortified by the U.S. participation in the 2009 Trans-Pacific Partnership for economic integration in the Asia-Pacific region which represents more than 40 percent of world trade, the goals to increase American exports to Asia and create good jobs at home are largely becoming a reality.

The Charlotte-headquartered Tides and Times Group USA (TTG) is one such reality, increasing U.S. exports of hardwood lumber, creating jobs here in America, and revitalizing the region’s lumber industry.

Now in business for over nine years, TTG employs more than 200 people in the processing and exporting of hardwood lumber. In 2012, the company produced 12 million board feet of green lumber for domestic markets, and exported 4,000 40-foot standard containers of kiln dried lumber to overseas markets, primarily China and Vietnam.

It’s on target to produce and export 30 percent more this year, and stands as one of the top three hardwood lumber exporters in the U.S.

President Jimmy Lee and his wife and company owner Grace Lee came to the U.S. from China, branching across continents, with roots in each.


Deep Roots

Vice President of Public Relations Larry Randall and Lee spend a lot of time traveling to TTG’s timber sites, sawmills and dry kilns across the Southeast. Randall remembers one afternoon when they were driving through a rural area and stopped at a convenience store.

“We were coming out of the store,” recalls Randall, “and Jimmy had an apple in his hand. I see him clean it, and he holds it up to the light, you know, and I can see his eyes are beaming a little bit. He looks happy. So we get in the car, and I say, ‘Jimmy, you really love apples, don’t you?’

“And Jimmy looked at me and said, ‘When I was a child in China, we were very poor, and sometimes I didn’t have enough food for school. There was a classmate whose dad had a little apple orchard, and a lot of times he handed an apple to me. Each time it was delicious, which never could I forget.’”

Lee smiles as Randall tells the story. “I cherish that apple,” he affirms.

Maybe it was the constant hunger, or maybe it was his family’s history as high-ranking members of society before the communist revolution—whatever it was, Lee always dreamed of being a businessman. He wanted to compete, and win, and make sure his family rose to the high level he wanted for them.

He knew he wouldn’t be able to afford schooling with expensive tuition, so he took advantage of lower tuition forestry universities to get his degree in wood machinery and master’s in wood science. After school, he went to work for International Paper where he rose quickly from salesman to sales manager.

During the 1990s and early 2000s, the political and economic climate in China changed drastically from when Lee was a boy. Instead of the government controlling everything, it started selling many government-owned companies to private individuals, and trade started to grow with the rest of the world.

By 2001, Lee saw that the tides were changing in his favor. He was approached by a lumber supplier in Taiwan, asking him to come work for them as a representative. He told them no, that he had a dream to work for himself. He would, however, be glad to work as a free agent, selling lumber in exchange for a commission.

They agreed. Perhaps because he offered to work for 3 percent, whereas most lumber reps demanded 6 percent.

It was a good deal for the supplier, and it worked well for Lee. Most reps lived in Taiwan, with higher living expenses, while Lee took advantage of lower costs in his country. Working out of home offices, he took advantage of low overhead, and in six months had generated the equivalent of $100,000.

“For somebody who started with $50, that was pretty good,” smiles Lee. Lee put the money straight back into the business, and by the end of 12 months had generated over a million dollars. And after that, revenue doubled every year.

Before too long, Lee began sourcing hardwood from America instead of Taiwan, where it had traditionally come from. He was among the first to do so. Little did he suspect that in a few short years, both he and his wife would be in America sourcing American hardwood lumber for their sales and distribution companies in mainland China and Hong Kong, Tides International Co., Ltd. and Tianrun Lumber Industry, Inc.


Branching Out

It happened in 2002—the event that changed the company’s trajectory. Lee had paid for two loads of lumber from a New York supplier, for a total of $38,000, and the supplier had disappeared without delivering the goods. Lee determined to come to America to take control and source his own materials.

Of course, coming to the States is not so easy as just deciding to come. It took a year to obtain a visa, and ultimately it was a student visa—to attend the National Hardwood Lumber Association’s lumber inspector school (NHLA) in Memphis.

An education at the NHLA is a ticket to significant opportunity in the American lumber market, says Lee. He had won entry into the school, and the visa to allow him to study, but he still had some big challenges in store—not least of which was the entirely new culture.

“I came into the States the last day of 2003,” recalls Lee. “In China, New Year’s Day is a happy day, when family gets together. So I came to the States alone and I felt really lost. I didn’t even know how to order a meal.”

He recalls being baffled by seeing the item “ranch” listed on a menu, and thinking that it must mean a really big meal, because he had learned that “ranch” means a large, expansive space for raising cows or horses. He became even more confused when the waitress explained that it was a dressing, because he knew “dressing” meant something to do with clothes.

“That happened to me quite a lot,” he says. “People laughed at me.”

Despite the challenges, Lee says America was better than he expected. The lady he rented from helped him with the language, and he did well in school. He liked the people and saw lots of opportunity. So he asked Grace to join him, and she too attended the NHLA training (and graduated at the top of her class, Lee is proud to share).

Within a year of graduating from NHLA inspector school, Lee started Tides and Times Group USA as a new company in the U.S. and won a work visa based on his investment in creating U.S. jobs. Grace joined him as a sales person a year later.

“She was born for sales,” says Lee. Very quickly, her performance outstripped the competition. Lee put her in charge of COCO Lumber, one of TTG’s subsidiaries. TTG, originally based in High Point, grew quickly. Meanwhile, the company in China was still growing fast, and Lee prepared to sell it so he could focus on the U.S. business. That sale was complete in 2008.

Growing Fast

“I was working 16 hours a day through the week most of the time before I hired the first employee, Larry Randall, in 2007. Larry understands not only the culture of the Southeast, but also the hardwood connects and the nuances to this industry. With Larry’s valuable set of competencies to the company, I only need to work 12 hours a day,” says Lee.

Lee subsequently rounded out his top management team with the additions of Grace Lee, Herb Nanney, Ralph Laughter, Steven Wu and some other. He found that the Chinese competence and the southeast U.S. competence created a formidable partnership.

“Now you can see our growth,” nods Lee. “For export alone, we handled 37 containers in 2004, and that number increased to 220 in 2005, 460 in 2006, 902 in 2007, 1,548 in 2008, 1,753 in 2009, 3,225 in 2010, 3,821 in 2011, and 4,018 in 2012. The key is the managerial staff and company strategy.”

However, the company still had obstacles to overcome, the largest being the dwindling supply and increasing competition for export-ready lumber. TTG acted aggressively, purchasing green (undried) lumber, and having it custom dried. Then the company began purchasing sawmills, so it could buy standing timber and have it sawed, dried, graded and sorted in TTG facilities.

Once again, the timing was perfect. Most lumber buyers had hit a wall in response to the economy. Where they had always relied on short-term credit to make purchases, collecting revenue on the other end, credit was suddenly unavailable. Simultaneously, sawmills and drying kilns were shutting down all over the region as demand for their products dried up.

Lee’s financial strength, due to his business success in China, placed him in a perfect position to make cash purchases at historic low prices. As a result, since 2009, TTG has purchased, reopened and improved eight facilities in North Carolina, South Carolina and Virginia, including sawmills and hardwood dry kiln facilities.

Although the company still purchases about half of its kiln dried lumber need, it has also continued to purchase sawmills and dry kilns across the Southeast. TTG’s subsidiaries now include Oak Valley Hardwoods, Inc.; COCO Lumber Company, LLC; Tides International Company; and Bluesky Lumber Industry, LLC.

The company has created approximately 200 jobs, more than 140 of which were added in the state of North Carolina over the past three years. TTG expects to expand its business to New York, Pennsylvania and other Northern states in the near future.

TTG has come a long way from initially sourcing hardwood lumber from American lumber manufacturers. As the market has changed, the company has changed strategy and even begun marketing lumber in Vietnam. TTG is now one of the major oak-flooring suppliers to the U.S. flooring industry and one of the major hardwood lumber suppliers to overseas markets, especially China and Vietnam. Nearly 40 percent of annual exports are from the sawmills in the Carolinas and Virginia.

Randall says that size, and Lee’s reputation, have their advantages. Besides economies of scale, TTG is a preferred buyer across the region due to the size of their orders and the fact that sellers know they will be treated fairly. At the same time, Lee’s consistent record of fair dealing means that he can always export on a ship where many exporters are vying for limited space.

This combination of strengths has contributed to TTG becoming one of the top three lumber exporters in the country. Which is not, apparently, good enough for Lee. He plans to become the No. 1 lumber exporter within the next five years. And then he plans to start an entirely new business.

But, Lee says, they do plan to slow down slightly over the next few years, so he can stay healthy. Instead of shooting for 100 percent growth each year, they’re going to settle into only 30 percent.

Wood products imports are predicted to grow as China remains the global gorilla. North American lumber prices are forecasted to soar in 2013 and reach record highs in 2014. A new five-year outlook shows that supply and demand conditions in wood products for the long-awaited “super-cycle” are now taking hold, with the full impact still some 3-plus years away.

Lee is quick to credit the hospitality and support of the Charlotte Chamber, the Charlotte business community and the people of North Carolina. He’s also a member of the Chinese Chamber of Commerce. And he hasn’t forgotten those apples—he makes sure his companies give back to their communities regularly.

In retrospect, Lee says coming to the U.S. was the best decision they ever made. They love it here and they love Charlotte. Oh yeah, about that new business he’s going to start when he’s reached the top with this one? It’ll be a high end restaurant. Because for all his success, Lee hasn’t forgotten what it’s like to be hungry.

A lot has changed since the third century BC when Archimedes singlehandedly brought inventions from the drawing board to the battlefield. The Greek mathematician was a genius at applying science to the practical problems of his day and for transforming ideas into innovations.

Today the roles Archimedes played—researcher, inventor, funder, prototype builder, marketer and manufacturer—are distributed throughout any number of individuals and institutions. To stitch them back together, we moderns need offices, administrators, brokers, professionals, even legislation.

The name for the stitching operation is technology transfer. Sometimes called “technology commercialization,” the term applies to the process for turning an invention into a manufactured product. The term originally had a more limited definition, one that centered only on federally funded research.

At the University of North Carolina at Charlotte (UNC Charlotte) Office of Technology Transfer, staff members collate industry, state, local and federal government-funded research into the one product Charlotte craves: economic development.

Refining the Patent Process

Before 1980, federally-funded research was difficult to commercialize. That unfortunate situation resulted from good intentions gone awry.

In the early 1940s the federal government actively funded the invention and construction of weapons with war-winning potential. The proximity fuse that knocked out German V-2 rockets and the atomic bomb were two of their headliners.

Flushed with success and convinced that science was the key to social, economic and military progress, the government continued spending on university-based R&D after the war. At the time, it seemed prudent to retain the patents on every invention they funded. But there was no unified or consistent policy across government agencies for granting licenses to commercialize its patents. That meant miles of red tape for any business brave enough to attempt a transfer of technology from the government to the private sector.

By the end of the 1970s, the U.S. government had accumulated 28,000 patents with fewer than 5 percent commercially licensed. Faced with shuttered steel mills, a tsunami of automobiles imported from places other than Detroit, and a mid-1970s stagflation, Congress acted to free up the patent log jam. The Bayh-Dole Act of 1980 was their stick of dynamite.

The act coined the phrase “technology transfer.” More importantly, it reversed, decentralized and revolutionized ownership of government-funded inventions and discoveries. Academic institutions that carried out the actual research now owned the inventions, not the government. They were also the ones responsible for commercializing research findings.

This meant starting a small business or “spinout” with or without the participation of the inventor. It also involved granting licenses to the inventor or others so they could capitalize on the university’s patents. The act also insured that inventors shared in any income derived from the production of their ideas.

“Since Bayh-Dole, there is little doubt that academic technology transfer has had a positive impact on the economy,” says Jodi Talley, director of communications at the Association of University Technology Managers (AUTM). “Technology transfer spurred the creation of 670 new companies and 591 new products in 2011 alone.”

In 2002, The Economist named Bayh-Dole “the most inspired act of legislation over the past half century.”

“The [Bayh-Dole] Act was a great first step,” says Carl P.B. Mahler II, executive director of UNC Charlotte’s Office of Technology Transfer and a patent attorney. “If the feds want to be serious about doing technology transfer, they need to go the next step.

“That involves money,” continues Mahler. “Congress can remove a large stumbling block for universities by authorizing the National Science Foundation (NSF) and the National Institute of Health (NIH) to make grants for two tech transfer expenses: prototype building and patent applications.

“It wouldn’t take much money,” he says. “If NSF and NIH added an extra five percent to every grant they fund that has industrial relevance, that would speed commercialization at every American research university.”


Processing Ideas at UNC Charlotte

Even with Mahler’s expertise as a patent attorney and the work of Associate Director Brad Fach who is a patent agent, the patent process averages $10,000 but can be as much as $20,000. UNC Charlotte provides funds for about 20 patent applications per year.

University-based research is certainly intellectual, but it is not necessarily intellectual property. To achieve that status, discoveries are awarded a patent, copyright, trademark or declared a trade secret. All four are designed to reward clever inventors and risk-taking manufacturers and to prevent unauthorized use, manufacture or duplication. Only the first two are pursued at UNC Charlotte.

Patents and copyright protection begins with an invention report; UNC Charlotte receives 40 to 50 each year. “That is almost off the chart for most universities,” says Mahler. He is not blowing smoke

Using 2010 AUTM data, UNC Charlotte with $35 million of research ranks fifth among 148 research universities in the United States and Canada in terms of new inventions reported per dollar spent on research.

The typical research university averages one startup for every $50 million to $60 million in research done annually, Mahler estimates. UNC Charlotte is creating one for about $10 million in research.

For most of its inventions, Mahler’s office quickly produces a provisional patent application, an internal document that establishes an early priority date for an idea. This is important because the America Invents Act, which recently took effect, changed the U.S. to a first-to-file country from the former first-to-invent model.

“Having a working prototype usually no longer has a bearing on whether or not a patent will issue,” explains Fach, “unless the patent pertains to an area such as biotechnology where it is not clear whether or not an invention actually works. In those cases, a working prototype can be necessary.”

“For, say, mechanical or electrical devices the science is so well understood that the patent office can look at the invention and determine whether or not it will work,” Mahler adds, and jokes, “although you’d probably need to provide a working prototype before you can get a patent on a perpetual motion machine.”

UNC Charlotte’s obtains five to 10 utility patents per year. As per Mahler’s Patent Primer, a utility patent protects a “process, machine, article of manufacture, composition of matter, and improvement of the preceding items.”

Among the 148 AUTM universities, UNC Charlotte ranks third in number of patents filed, 15th in patents issued, and third in new startup companies (all per dollar spent on research).

“With the exception of the 15, we have been among the top 10 universities every year for the past 10 years,” touts Mahler.

Fach adds, “AUTM rankings are all calculated on a ‘per dollar spent on research’ basis. Schools like MIT and Stanford that have huge research budgets dwarf us in terms of the raw numbers of patent filings, patents issued, and start-up companies, but when you look at the numbers on a ‘per dollar spent on research’ basis, UNC Charlotte really stands out—which means that we are consistently among the most efficient universities at turning our research into practical inventions.”


The Tech Transfer Process

Only about 25 percent of the UNC Charlotte researchers that file an invention report want to be involved in a startup company.

“We lose about half of those by attrition,” says Mahler. “Usually the better the researcher, the less likely you are to be a really good business person. It is the very rare person who can do both.”

Over the five-year period from 2005 to 2009, over 70 percent of UNC Charlotte’s inventions came from the following departments: Software and Information Science (71), Mechanical Engineering and Engineering Science (53), Electrical and Computer Engineering (45), and Physics and Optical Science (44).

Note the concentration of computer-related inventions. “We have a lot of world class researchers in computers largely because of our work with banks like Wells Fargo and Bank of America,” says Mahler. “Banks need cybersecurity and the ability to visualize Big Data—two areas where the university is particularly strong,” adds Fach.

Cleverness easily crosses department lines on the Charlotte campus. “There are fewer silos here than anywhere else,” says Mahler, who previously worked at research Goliaths Case Western Reserve University and Carnegie-Mellon University. To make his point, he cites an invention to blast kidney stones that came from the UNC Charlotte physics department. Another to prolong the viability of a kidney removed from a donor for transplant sprang from the minds of a UNC Charlotte mechanical engineer and a biology professor.

With 10 to 20 percent of their research sponsored by industry, Charlotte researchers are a practical lot. Many came to the university after years of work in industry. Their focus is applied research and their goal is quickly solving business-related problems. Contrast that ethic with medical research. In that setting, inventions are five to 15 years away from the operating room or pharmacy.

The general model for tech transfer begins with an invention followed by a patent owned by the university, a license for the exclusive use of the patent, partnerships with entrepreneurs, production, royalties paid to the university by license holders and possibly, the eventual sale of the spinout company.

Some ideas are in the middle of that process. UNC Charlotte owns the patent on Dr. Faramarz Farahi’s energy-generating fabric for tents, backpacks, awnings and curtains. The fabric itself remains nameless, but its potential for military use and for generating small amounts of energy from the sun might be called revolutionary.

Dr. Farahi, a professor of physics and optics, has a few samples, an exclusive license to produce the flexible fiber optics-based product and a company name: Parasol. He lacks a production facility. He and his partners are discussing that possibility with a few companies, but none have signed on the dotted line.

The tech transfer process has moved further along for Dr. Pinku Mukherjee, associate professor of biology. She and Dr. Rahul Puri are cofounders of CanDiag, Inc., a Waxhaw, N.C. spinout. Like Dr. Farahi, the patent for their tumor antibody and resulting blood test is owned by the university, their employer, with CanDiag receiving a worldwide exclusive license.

The blood test has proved remarkably effective in the early diagnosis of breast cancer. After winning the $50,000 grand prize in the 2012 Charlotte Venture Challenge, Dr. Mukherjee herself proved effective in raising $500,000 more from venture capitalists. The patented antibody has the potential of locating a cancer site, finding where it may have metastasized, targeting drugs to the site, and checking on any possible recurrence.

Another company, founded as a startup in 2007, is even further along in the tech transfer process. Submarines use sonar to detect submerged objects; Charlotte-based InfoSense, Inc. uses acoustics to detect sewer line blockages. For cities plagued with Godzilla-size grease clogs and root breakthrough, that is a significant accomplishment. Sensor information allows crews to prioritize clog-busting maintenance and repairs.

InfoSense has been so successful that electrical and computer engineering associate professor and inventor Dr. Ivan Howitt has taken a sabbatical from the university.


Real Economic Development

Calyptix Security is even further along the tech transfer trail. Founded in 2002 and in production by early 2006, Calyptix provides military-grade computer security to small and medium-sized businesses. The type of technology Calyptix provides is far more dynamic and adaptive than the products of larger, more established companies such as Symantec and Norton.

Inventor Dr. Lawrence Teo founded Calyptix with UNC Charlotte professor Dr. Yuliang Zheng. Charlotte attorney Ben Yarbrough brought capital and business savvy to the firm. “The university’s technology transfer office is very easy to work with and supportive of our efforts,” says Yarbrough. “They want us to succeed.”

Headquartered at Ventureprise in Charlotte, Calyptix Security produces software that automatically knocks out worms, spyware, spam, denial of service attacks and other modern nuisances.

Only one of the university’s hundreds of spinouts has been sold. “It was a real home run for the university,” touts Mahler. Digital Optics Corporation, the Charlotte manufacturer of the lens in smartphones and other innovations, sold to Tessera Technologies, Inc. in 2006 for $60 million.

“We didn’t get much in terms of payout,” says Mahler, “but that is not how we grade ourselves. We like to look at the economic impact to the community and Digital Optics brought in 200 to 250 jobs.”

“Universities have a tendency to overvalue inventions,” says Mahler. Perhaps that holds true for community leaders as well. Invention is synonymous with new, creation, discovery and design, all long-standing American business values.

    A more important value is in the relationship between businesses and the university. “We always want industry to feel they’ve gotten a good deal and our inventors to feel they’ve not been taken advantage of,” says Mahler. “Everyone needs to walk away satisfied and respected.”

“Universities that go into technology transfer expecting to make money are usually going to be disappointed,” maintains Mahler. “UNC Charlotte sees technology transfer in broader terms. It is a societal benefit to professors, sponsors, students and the general public. Like horse races, baseball games, the stock market and technology transfer, predicting success and making money are difficult.

“For us,” says Mahler, “the big measure is what we are doing to help economic development.”

Archimedes would be proud.

For decades, the American economy grew and prospered thanks, at least in part, to the post-war manufacturing boom. American companies found that domestic markets provided robust demand for their products, and sales and profits soared.

But over the last 30 years, as globalization and automation have changed the nature of American manufacturing, many industries have moved their manufacturing operations overseas. As our traditional manufacturing base began to erode, the high-paying manufacturing jobs of the 1960s and 1970s relocated abroad.

This shift of manufacturing to offshore locations helped give rise to new, growing middle classes in places like China, India, and Brazil. So with domestic purchasing power stagnating and new wealth being created abroad, American companies are increasingly looking to these new global markets as fertile ground for their products and services.

Thanks to the Internet and online commerce, gone are the days when only large multi-national corporations can be meaningful players in international trade. Today, small and medium-sized businesses can easily connect with buyers around the world. That’s the message that Greg Sizemore, director of the Charlotte U.S. Export Assistance Center, touts.

Right now, he points out, the United States represents only about 5 percent of worldwide buyers, so as domestic markets mature and emerging markets continue to grow, looking abroad will become increasingly important for more and more American businesses of all sizes.

Sizemore’s employer, the U.S. Commercial Service (USCS) is the trade promotion arm of the U.S. Department of Commerce’s International Trade Administration, and was established to help American businesses take advantage of opportunities in international trade. The USCS maintains 80 Export Assistance Centers across the United States and offices in U.S. embassies and consulates in nearly 80 countries.

The USCS trade professionals help connect U.S. companies with international buyers, while also providing market intelligence, trade counseling, business matchmaking, and advocacy/commercial diplomacy support. In North Carolina, the lead U.S. Export Assistance Center is located on East Morehead Street in Charlotte with satellite facilities in Greensboro and Raleigh.


Why Export?

In March of 2010, President Obama signed an executive order establishing the National Export Initiative (NEI) with the goal of doubling U.S. exports by the end of 2014. The Obama Administration sees increasing exports as an ideal way to create more U.S. jobs and boost the economic recovery.

In 2012, U.S. exports hit an all-time record of $2.2 trillion, despite significant economic headwinds from Europe and other parts of the world. Exports as a share of U.S. GDP were 13.9 percent, tying a record set in 2011. Growth in exports to America’s free trade agreement partners as well as record exports of motor vehicles and agricultural products were key contributors to the success.

In North Carolina, exports of merchandise totaled $28.7 billion in 2012. Canada is far and away North Carolina’s largest trading partner, representing over 24 percent of the total. Fast growing China, with 9 percent of N.C. exports, has now surpassed Mexico’s 8 percent. And while Europe is a tough market for exports due to high barriers of entry, if looked at collectively, the European Union would be second only to Canada for N.C. exports.

North Carolina’s largest export category is chemicals, accounting for over 18 percent of total merchandise exports in 2012. Other top categories include machinery, transportation equipment, computer and electronic products, and textiles and fabrics. And whether its sweet Muscadine wines from the Yadkin Valley that are becoming hot sellers in Asia, aerospace products from a bevy of component manufacturers in Monroe, or a rapidly expanding energy services sector in Charlotte, North Carolina’s export base continues to diversify.

The Charlotte-Gastonia-Rock Hill metropolitan area is the state’s largest export source, generating $6.3 billion of exports in 2011. Greensboro-Winston-Salem was second with $5.4 billion, and Raleigh-Durham was third at $4.9 billion.

“We used to spend a lot of our time telling companies about the benefits of exporting,” says Sizemore. “But these days, we don’t usually need to have that conversation because as soon as a company puts up a website, whether they know it or not, they are competing globally.

“We tell our clients to consider going to those parts of the world where their competitors are not,” continues Sizemore. “We tell them to look at Latin America, Asia, Eastern Europe, the Middle East, and even selectively at markets in Africa.”

Sizemore says there are a number of key benefits of exporting in addition to simply growing the market for their products or services. He points out that business cycles vary around the world, and when growth slows in one place, it’s often accelerating somewhere else. Exporting allows a company to offset a downturn in one region by looking for new opportunities in another.

Exporting may also allow a company to extend the life cycle of their products by introducing them into new markets. Products that no longer sell in the U.S. often still have viable markets abroad, particularly in the developing world.

“A great example of life-cycle extension are the components used by the textile industry,” explains Sizemore. “A lot of that manufacturing has gone abroad, so those component manufacturers are able to follow that work overseas. The developing world also buys products that support more labor-intensive work that we don’t have much need for in the U.S. anymore.

“Some of the companies that we work with say if not for exporting, they might have gone under in 2008,” continues Sizemore. “Not only that, they often tell us the tweaks they made to their products to compete globally helped increase the product life cycle here at home. If they had never looked overseas they would have never made those innovations.”


Selling Worldwide Opportunities

The U.S. Export Assistance Centers exist primarily to serve small and medium-sized businesses. Over 8,700 companies exported products from North Carolina in 2010 (the most recent data available) and over 88 percent of those were businesses with fewer than 500 employees. But only about 1 percent of all small businesses export, and of those, about 60 percent are exporting to just one or two markets.

The Export Assistance Center says their typical client is a business-to-business supplier providing a solution for a manufacturing process. As a lot of heavy manufacturing has shifted overseas, they are seeing increased demand in the U.S. for higher-tech light manufacturing that supports those industries that have moved offshore.

“People often ask us where they should export, but I think it all comes back to their product,” says George Thomas, senior trade specialist with the Charlotte U.S. Export Assistance Center. “We have to take a look at the product and where it might make sense, as well as the skill set in the company and their experience in exporting. We try to create a customized export plan for each client.

“I have an aerospace client from up in Mooresville that will be exhibiting their armed surveillance airplane at the Paris Air Show this summer,” Thomas continues. “We sent their literature to our Embassy in the Philippines, put an Embassy letter on top of that, and hand-delivered an invitation to the Philippine Ministry of Defense officials that might be attending the air show. We’re also doing a similar thing in Indonesia and Bulgaria.”

The hallmark of the Export Assistance Center’s offerings is their Gold Key Service which helps introduce small businesses to potential export markets. Commercial specialists in an overseas U.S. embassy or consulate help evaluate the company’s products for fit in their market. These specialists come from the business community in that country and know the language, customs and culture. They also help identify potential agents that can sell the company’s product locally.

“To get the process started, we’ll do a conference call with the industry specialist in the embassy that is going to help that company find partners to work with,” explains Thomas. “The company sends over its marketing literature and we put embassy letterhead on it and it gets sent out to potential partners and agents.”

“Our goal is to get people on airplanes and in front of qualified buyers overseas,” adds Sizemore. “Building that relationship is still critical in global business. We’ve got a lot of great technology out there, but there is no substitute for building those relationships.”

Based on the profile of the client’s typical buyer, industry specialists in the overseas office will pre-qualify agents and distributors and set up meetings for the company. Before they get on a plane at Charlotte-Douglas, the company already knows whom they are meeting with, they have an itinerary, and in some cases, they’ve already begun to correspond.

Local in-country staff meets them when they get off the plane, a driver helps them negotiate the city, and an interpreter is on hand for the meetings. Within two days they could meet with 10 or 15 folks.

The Export Assistance Center also conducts six or seven Export University seminars around the state, with two being held this year in the Charlotte area. The program covers the essentials of exporting—how to get paid, how to ship, how to find qualified buyers overseas, and how to comply with U.S. export regulations.

The North Carolina District Export Council, one of 56 District Export Councils in the U.S., sponsors Export University. The District Export Councils are not-for-profit private sector organizations whose members are appointed by the Secretary of Commerce and which work closely with the U.S. Export Assistance Centers to help small and medium sized businesses that want to export their products.

The U.S. Export Assistance Center trade specialists all have years of international experience as well as private sector business experience, and many have lived overseas. Most of the export counseling services they offer are free of charge, with the primary exception being the Gold Key Service, which costs a small business $700 per trip, plus the costs of drivers and interpreters. The Export University is $65 per attendee, but those funds go to the District Export Council that then uses the funds raised to provide stipends of up to $350 to companies to help defray the cost of using the Gold Key Service.

“Every day we’re on the phone, sending emails, coordinating conference calls with our overseas posts, looking at market intelligence for a company, looking at a target market, assessing standards, assessing documentary requirements, or maybe getting that random call to help solve an export-related problem for a client,” explains Sizemore. “We answer all those calls and its all for free in our U.S.-based offices. But when things go overseas, our overseas offices work on a cost-recovery basis, so that’s why they charge for Gold Key.”

Besides the U.S. Commercial Service, the Small Business Administration also has their regional international trade finance specialists co-located in the Charlotte Export Assistance Center. The Export-Import Bank and the N.C. Small Business and Technology Development Center also have an employee in the Charlotte office one day a week.


Charlotte: Global Trade Center

    “This city is quickly coalescing around trade and I think Charlotte is positioning itself to compete globally in international trade,” says Sizemore. “A big driver of that is going to be the new intermodal center at the airport, but I also think you have some great resources out at Central Piedmont Community College and UNC Charlotte, and I think those resources are going to generate new ideas for export education and high tech products that can be quickly integrated into trade and manufacturing processes here in Charlotte.”

Sizemore thinks that Charlotte area companies are going to see increased access to export resources and those who support the export business—including private sector folks that provide freight forwarding services and the international departments at the banks— are going to see more demand for their services.

He also points out that with increased exports come higher paying jobs. Americans working for firms that export earn, on average, 15 percent more than those who work for non-exporting firms.

“A lot of this is just good timing and a number of things are coming together that will make a difference in a very short amount of time,” Sizemore predicts. “We’ve got the intermodal center coming on line at about the same time as the expansion of the Panama Canal, plus we’ve got the President’s National Export Initiative as well as state and local initiatives like the Mayor Foxx’s Export Charlotte. It’s really an exciting time to be involved with international trade in Charlotte.”


Part Four: What is the Current Status of the Merger and Acquisition Market?


As we discussed in the last three articles, it is important to take into account personal motives and objective conditions when you are trying to determine the best time to sell your business. For owners who toil long and hard to overcome the endless challenges that test the survival and success of their businesses, the thought of someday selling out for a lot of money seems, at best, a pipe dream.

A typical business owner in this situation may think, “Who would want to buy my business?”

As many owners have discovered, the merger and acquisition (M&A) marketplace can be receptive to acquiring privately owned businesses—maybe even businesses like yours. In some niches, even smaller businesses are able to sell to much larger cash buyers. But the market can be fickle. A number of factors can fuel or damper the “buying and selling” mania. These can include:


  • The current state of the economy. A healthy economy tends to encourage investor confidence and a greater willingness to put money in otherwise illiquid businesses. A stagnant or contracting economy can depress valuation, thereby creating favorable conditions for a buyer’s market.


  • Fluctuating interest rates. Low, stable interest rates can provide buyers with inexpensive funds to buy your business. Climbing interest rates can increase acquisition costs and dampen buyer enthusiasm.


  • Availability and pricing of financing. The availability and cost of financing can directly impact deal activity. When financing is readily available to buyers at attractive rates, deal activity can become frenzied because buyers can leverage their equity investment. This means they could pay more for businesses and this is the point in the M&A cycle when it may be favorable for owners to be poised to sell their businesses.


  • Corporate earnings overall and in the industry. Strong earnings can provide cash and the tendency for future cash availability; weak earnings tend to portend the opposite.


  • Stock market value. To keep corporate earnings ever-increasing, it can make sense for publicly owned companies to acquire closely held companies with price/earning ratios lower than the acquiring company’s. Much of the difference in the multiples of publicly owned versus privately owned companies are due to differences in size.


  • M&A currency. When publicly owned stock is trading at high earnings multiples, it makes sense for those companies to use their stock for acquisitions. As the stock market contracts in value, it can be a reasonable expectation for a chilling effect on the M&A marketplace.


  • Supply and Demand. According to a Big Four CPA firm website in 2010, “71 percent of small to midsize business owners plan to exit within the next 10 years (2010-2020).” Practically all sellers in the next 5 to 10 years will be baby boomers (born in or before 1965). There are many more baby boomers than any other generation before or after. According to Inc. Magazine, “this movement will result in a glut of companies on the market driving down valuation and giving new leverage to buyers.”


Due to demographics and the law of supply and demand, it may be becoming more a “buyer’s market.” Therefore, if you are personally ready to sell and your business is ready for sale, there may be opportunities in selling your business now and potential dangers if you delay.

It is important for owners to be constantly aware of the condition of the M&A market, and the M&A market in their industry for companies of their size. Usually, transaction intermediaries serving your industry can best advise you. If the M&A market for your business is healthy, you may have the opportunity to adjust your personal timetables to take advantage of it.

When the M&A market is favorable (a lot of buyers offering high multiples), you need to recognize that adjusting your “ideal” departure date can be a whole lot easier than adjusting your financial needs. Conversely, when markets shut down, your personal goals may need to likewise adjust.

Whether you find yourself leaning toward selling your business now or in the future, today is a good time to begin creating a plan for preparing your business for your eventual exit. An experienced legal professional, in conjunction with your other advisors, can help guide you through the process of reviewing all of the factors associated with exiting your business and creating a comprehensive exit plan that addresses all of your personal and business objectives.


Article presented by Robert Norris, founder and managing partner of Wishart Norris law firm, a member of Business Enterprise Institute’s International Network of Exit Planning Professionals. © 2013 Business Enterprise Institute, Inc. Reprinted with permission. Wishart Norris law firm partners with owners of closely-held businesses to provide comprehensive legal services in all areas of business, tax, estate planning, exit planning, succession planning, purchases and sales of businesses, real estate, family law, and litigation. For more information, contact Robert Norris at 704-364-0010 or

I am going to tell you a secret fundamental to business success. Actually, it’s not a secret because we all already know about this principle. Truth is, we have been carrying it with us since childhood but because we’re all so busy, we’ve forgotten how critically important it is. Remember The Golden Rule? You know, “Do unto others as you would have done unto you”? As humans, we desire mutual respect and, sometimes, even to feel special. The great “secret” we’ve neglected is service. That’s it!

When was the last time you received amazing service? I’m talking about what we’ve come to consider “above and beyond” service? Thinking of that interaction, would you return to the business because of how you were treated? Did you rave about your experience to someone else? Mediocre service is so commonplace that a company providing good service stands out. A company providing amazing service will dominate its competition.

Amazing service allows a company to gain and maintain a competitive advantage in the marketplace. It’s service that makes customers regulars. Excellent service turns clients into advocates—true raving fans.

Too often, companies make the critical mistake of separating customer service from marketing. Customer service is a company’s greatest marketing plan. Stellar service leads to brand loyalty, word-of-mouth marketing, and increased sales. Effective marketing begins before the first advertising dollar is ever spent.

The most powerful marketing campaign begins with the creation of internal systems allowing for the delivery of amazing service, consistently. Once these systems have been established and are ingrained within the company culture, only then should an external marketing plan be crafted.

Consider the diagram below. Companies often begin with External Marketing, having ignored the foundation required for an external marketing plan to thrive: Amaze The Customer.

Why do so many companies fail to deliver great service? There are a number of reasons, the most common being investing a disproportionate amount on the “what” and not nearly enough on the “why.” Generally, established companies concentrate on product far more than consumer experience. Of course high product quality is imperative, but how the customer feels while engaging with the company is as important. This is true regardless of the product.

Why do I think this way? I was raised on the small Caribbean island of Antigua; the son of parents who were hoteliers by day and managers of a five-star French restaurant by night. Despite the hotel being 15 minutes from the beach and, having been built in the ’50s, lacking modernity, occupancy was consistently high. We saw repeat guests year after year.

In 1987, the hotel was sold. The new owner, who believed that facility upgrades would garner higher profits, didn’t know the secret and by 1990 the hotel was shuttered. After over 30 years of strong business, the hotel closed because the new ownership lacked something that my family had figured out from the onset: treat people better than they expect to be treated. Having been born into hospitality, I adopted a philosophy that would apply to all of my business ventures: “It’s not our job to please the customer…it’s our job to amaze them.”

Let’s apply the same principle to a more tangible product: stationery. Because we know the secret, we know that profitability is not solely determined by high sales volume. If a stationery company allowed its employees to exceed expectations by promoting a culture of service and became a customer service company that happened to sell stationery, sales would improve. If people were treated better than expected, especially when purchasing something like stationery, the customer base would grow. Guaranteed.

Corporations spend thousands of dollars to gain competitive advantage through means of advertising involving slick design, memorable slogans and commercials that stir emotion. Though these are valid ways of attracting customers, ask anyone who has been on hold for more than five minutes with ‘customer service’ where that company should be investing their money—advertising or customer service—and you’ll remember that customer retention starts with corporate culture.

The irony? Our greatest opportunity to impact profitability costs absolutely nothing; choosing to invest time, resources, focus and dollars elsewhere could potentially cost us everything. Let’s choose to amaze the customer.

Many taxpayers who own a business also own the real estate used by that company. So how do you best protect yourself when you own both the operations and real estate of a business? The most common solution is to hold the real estate in an entity separate from the operations of the business and lease back that property to the business.

This arrangement between a business and a rental property that are owned by the same person is called a “self-rental.” For the self-rental rules to apply, the person has to materially participate in the business. This arrangement is a common business practice, primarily used to legitimately limit the owner’s liability exposure.


Entity Choice

If you decide to separate your real estate from the operating portion of your business, you must first determine what form of entity to use for holding the self-rental real estate. The most common entity used is a limited liability company (LLC).

The benefits of an LLC are (1) better liability protection for the business owners, (2) flow-through tax treatment to the owners, and (3) tax-friendly transfers of properties in and out of the entity. If your business is operating as an LLC, you may have the added advantage of removing the net rental income from the burden of self-employment tax.


The Self-Rental “Trap”

The advantages of self-rental are many but there are also issues related to self-rental that must be understood. Like other expenses, rent must be “ordinary and necessary” for the operating entity to deduct the expense. The IRS requires that the rent be at fair market value, so self-rental taxpayers should document their proper rental rate by comparison to existing rents in the local area.

In general, rental income is considered to be “passive” income rather than “active” (earned) income. Passive income is income received on a regular basis, with little effort on the part of the recipient to maintain it. The IRS defines passive income as only coming from two sources: rental activity or “trade or business activities in which you do not materially participate.”

The IRS, however, considers self-rental income as nonpassive. What would ordinarily be considered income from a passive activity is treated as non-passive income because the owner materially participates in the operating-lessee entity. A taxpayer with net income from a self-rental cannot offset this income with losses generated from other rental property. This rule prevents a taxpayer with passive activity losses from other rental property artificially creating passive income within the self-rental to absorb those losses.

On the flip side, a net loss from the self-rental is considered passive. The net loss from the self-rental activity is only deductible to the extent of passive income generated. A self-rental activity with a loss would not be currently deductible. The passive loss would be carried forward and could be used in future years, when other passive income is generated. Please note, in this situation, if the self-rental activity generated income in future years, that income can be offset only by the passive losses coming forward from the self-rental activity.


Making Self-Rental Work for You

Separation of the operating and real estate components of your business is sound business and tax sense. Current proposed regulations for the new 3.8 percent federal tax on net investment income in 2013 for higher income taxpayers include passive activity income in that category. Although income from self-rental is not considered passive activity income, the proposed regulations interpret the law as imposing an additional requirement for exemption from the net investment income tax: that the activity be a trade or business.

Rental without significant services has not been considered a trade or business in the past. Therefore, the ability to reduce self-employment tax through self-rental will be limited to owners who are not subject to the net investment income tax. Owners of property rented to an S corporation may find that their taxes are increased by the 3.8 percent net investment income tax on the self-rental.

To set up a self-rental, consult your attorney and tax advisor to assist in selecting the structure that best meets your needs and to ensure you do not undermine your business and tax goals. The assistance of a knowledgeable tax advisor in structuring a self-rental can translate into peace of mind and dollars saved.

A critical element in protecting your finances, critical infrastructure, intellectual property and other valuable digital information is preventing the theft of your digital identity. Whether an individual or corporate entity, a system administrator or administrative assistant, an executive or network engineer, the compromise of your identity provides “the keys to kingdom” for a hacker or corporate thief.

Traditional thieves will plan multiple means of gaining entry into a home or facility, but will first start with the easiest means of access. Very few will attempt to pick a lock or disarm a security system before checking to see if the door is locked or if someone left a key under the mat.

Cyber criminals are no different; they start with the easiest route—assuming your digital identity and separating it from your physical identity. Once a cyberthief has your digital identity, there is little you can do to stop the damage.

The first layer of defense against identity theft is protecting the physical medium by which you enter the digital domain. Whether it be smartphones, tablets, or networked computers—all provide easy attack vectors for the hacker.

An unlocked smartphone or a tablet with a simple four-digit password is synonymous with leaving the key under the mat. While screen-locked passwords are easily bypassed, taking the time to enter a more complex password might dissuade the hacker.

To ensure security of your physical device, it is always recommended that you encrypt the drive. The latest Android and iOS mobile devices now provide strong encryption for multiple data storage media including the microSD cards.

The next layer of access into the digital world is through networks and servers, which includes wireless and wired routers, Bluetooth devices, and other peripherals that provide the communications link to the Internet. This equipment is often the focal point of an attack because it can be done remotely and on a large scale. Domestic and foreign hackers continuously “ping” devices attached to the Internet looking for that unlocked door.

When they find one, they gain access and control and then use it as a proxy for gathering and distributing information—often without the owner’s knowledge. The threat is so significant that the U.S. government established the National Vulnerability Database to track the vulnerabilities and criticality of those vulnerabilities for network equipment.

To protect your network layer, it’s usually the small things that make a difference. First, secure your wireless home network with WPA-type encryptionand change the manufacturer’s default passwords. By not changing the default passwords or leaving ports open and exposed, the “door” is unlocked on a router.

Next, avoid establishing an unlocked “guest” network and regularly download updates to the router firmware. When hackers and network professionals find vulnerabilities in network equipment, they often publish it on the Internet. Manufacturers respond to these postings by pushing out new software. If you do not download the new software, then your equipment will likely be compromised.

The third layer is cloud-based services such as Google Apps, Microsoft Live and Apple’s iCloud. These services provide an entry point into large repositories of personal information from passwords to personal information. Combine that information with data collected by retail vendors, social media sites, and app developers (under the auspices of monitoring the “experience” of that app)—the distribution of all of that information across public and private databases—and the digital version of you can then be generated in hours.

Google and other service providers are now offering security services that can be remotely activated if a smartphone or tablet is lost or stolen. Google Apps, for example, allows the administrator to remotely block access to the email server and cloud-based documents along with the ability to remotely wipe the device if it lost, stolen or compromised.

While this might seem to be somewhat overwhelming, don’t be intimidated. Using these remote security services is relatively easy and most small business owners can implement them on their own.

These examples and recommendations merely scratch the surface of potential vulnerabilities for small businesses, but are intended to raise your awareness. It is always advisable to consult with a specialist in technical surveillance and security systems to provide professional services related to information security.


Content contributed by Advanced Mission Systems, LLC, a company specializing in technical surveillance and physical, electronic and cyber security for military, law enforcement, commercial and individual use. For more information, contact Jerry Snyder at 980-819-2600 or visit Snyder is President of Advanced Mission Systems, LLC. AMS specializes in technical surveillance and physical, electronic and cyber security for military, law enforcement, commercial and individual use.

On April 16, 2013, Senators Schumer, McCain, Durbin, Graham, Menendez, Rubio, Bennet and Flake (the “Gang of Eight”) introduced the Border Security, Economic Opportunity and Immigration Modernization Act.

The comprehensive immigration reform (CIR) bill would: (1) enhance U.S. border security and the current employment verification system; (2) create a method by which undocumented foreign nationals currently in the U.S. may qualify for provisional immigrant status; and (3) amend methods of legal immigration for high and low skilled workers.

The Gang of Eight recognizes America’s need to modernize its current legal immigration system—balancing fairness to American workers against the economic need for foreign labor.

On May 21, 2013, the Senate Judiciary Committee advanced the CIR to the Senate floor for debate and vote. As the bill winds its way through the Senate, a bipartisan group of eight House Representatives is working on its own legislation—a collection of individual bills to address CIR, which would likely necessitate harmonization with the Senate bill.


Border Security

     The Gang of Eight touts its legislation as containing the toughest border immigration enforcement measures in U.S. history. The legislation requires that specific goals be met before those granted provisional immigrant status may apply for green cards.

First, the Department of Homeland Security (DHS) must create, fund and initiate a border security and border fence plan within 6 months. Next, DHS must then achieve complete border awareness and at least 90 percent apprehension rates in high risk sectors along the southern border within 5 years.

As part of internal security, the bill calls for universal implementation of an E-Verify system by which employers would be responsible for verifying each employee’s authorization to work through the DHS and Social Security Administration’s database. The bill also requires implementation of an exit system within 10 years to prevent visa overstays.


Provisional Immigrant Status for America’s Undocumented Population

The next piece of CIR legislation attempts to deal fairly with America’s undocumented population, estimated at approximately 11 million, without granting amnesty or federal benefits. The bill would prohibit undocumented immigrants from applying for temporary provisional immigrant status until the border security and fencing plan is in place.

Thereafter, undocumented immigrants who come forward would need to pass background checks, be fingerprinted, pay $2,000 in fines as well as taxes owed, be gainfully employed and prove physical presence in the U.S. since before 2012. By registering these individuals, the government would know more about a population that has been living in the shadows (who they are, in what activities they are engaged, etc.).

The legislation would prohibit those granted such provisional immigrant status from obtaining green cards or citizenship for 10 years unless border security, employment verification and exit system goals have been met. Status could be revoked for commission of a serious crime or failure to comply with employment, public charge, tax or physical presence requirements.

To take into account fairness to legal immigrants, the legislation proposes a longer, more costly and less certain path for undocumented immigrants to obtain status. Young undocumented individuals whose parents brought them to the U.S. illegally, however, would not be punished for their parents’ mistakes.


Legal Immigration

   The Gang of Eight recognizes the need to modernize our legal immigration system to grow our economy and create jobs for American workers. Its proposal focuses on a more merit-based immigration system to help America attract and retain the best and brightest foreign talent, including entrepreneurs, innovators, investors and highly skilled workers in the STEM (Science, Technology, Engineering, Mathematics) disciplines.

At the same time, it protects American workers by prohibiting work visas in areas where unemployment rates are excessive and for jobs that Americans are willing and able to do. Instead of educating highly skilled workers and requiring that they return to their home countries to benefit competing economies, graduates would be granted green cards incentivizing them to remain in the U.S. and contribute to our economy. The legislation also contemplates a revised guest worker program to ensure that America has sufficient lower skilled labor to meet current and future demand.


Content contributed by Steven H. Garfinkel, J.D., Managing Partner of Garfinkel Immigration Law Firm and a nationally recognized immigration law specialist with over 25 years of business immigration law experience. For more information, contact him at 704-442-8000 or or visit

Publisher's Posts

Health care spending is huge, consuming nearly 18 percent of the U.S. Gross Domestic Product. Many layers of rules and regulations from both our health insurance companies and health care providers have made it impossible to determine the costs of many even simple procedures, let alone the complicated ones. Health insurance premiums continue to increase at a rapid rate, but no better health care is being delivered. Clearly, there is a lot wrong.

It will be interesting to observe the impact of the Affordable Care Act (ACA) beginning in October of this year when those who are self-employed or employees of firms with less than 50 workers will be given the opportunity to enroll in coverage from a federal health insurance exchange.

October 1, 2013, will be the opening date for applications to the qualified health care plans being offered by private health insurance companies in your area through the federal exchange. Coverage will begin January 1, 2014. Many firms with more than 50 employees can maintain their own health care plans that were in place as of March 23, 2010, because they have been grandfathered in or approved by the Act.

Anthony Wright, executive director of advocacy group Health Access, describes the fundamental nature of the change produced by the ACA: “It’s a revolutionary improvement to move from a broken market where people are charged by how sick they are, to a competitive market where people pay what they can afford, based on a percentage of their income, on a sliding scale. Most consumers buying coverage in the individual market will get financial help and see their premiums go down.”

The ACA requires a set of core, federally-mandated benefits. The essential packages are intended to mirror those provided under a typical employer-sponsored health plan. At a minimum, the core benefits include:


  • Ambulatory patient services, such as doctor’s visits and outpatient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services,­­ including oral and vision care


The ACA links the essential health benefits package to limits on cost-sharing. So health plans that are required to provide essential health benefits will also be required to limit the amount consumers will have to pay out-of-pocket. Specifically, health plans will be prohibited from requiring consumers to pay annual cost-sharing that is greater than the limits for high deductible plans linked to health savings accounts.

Within these allowable limits, all health plans except grandfathered or self-insured plans will be required to provide consumers with specified levels of coverage. Levels of coverage are set as percentages of the actuarial value of a plan that covers the full essential benefits package with no cost-sharing. These levels are represented as Bronze, Silver, Gold, and Platinum. Coverage will be set at 60 percent, 70 percent, 80 percent, and 90 percent respectively.

While we will not know the actual costs of plans in the health exchange for the Charlotte region until they are published, and speculation that rates will be outrageous is rampant, the rates for California exchanges, under the rubric “Covered California,” have recently been released.

In California, it was speculated that rates might average about $5,200 per year; however, the actual rates are much less at an average of $272 per month for the lowest priced silver plans or an annual rate of about$3,265, and will be available from some 13 insurance plans. And it is just one of 16 states, along with the District of Columbia, on track to operate such an exchange.

Other states, including North Carolina and South Carolina, have chosen not to participate in a state-based model—at least for now—and are relying on a federally-facilitated exchange to provide people with that coverage, or entering into a partnership with the federal exchange.

At any rate, even the attempt to set uniform standards of care at uniform prices alone should be championed as a welcome change to our health care system, as well as making health care affordable on an equal basis to those less fortunate through no fault of their own.

Early indications show lots of reasons for states to “opt in” to the intentions of the new Affordable Care Act.


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