Featured In This Issue
When Electrolux relocated its North American headquarters to Charlotte in July 2010, it was the largest corporate relocation to the city in the last 25 years. With more than 40 million products sold in markets in more than 150 countries each year, Electrolux is a global leader in the design and manufacture of appliances for both consumer and professional use. Electrolux develops, designs and manufactures both major and small appliances including refrigerators, dishwashers, washing machines, dryers, stoves, air conditioners and vacuums.
The company’s North American business accounts for more than one third of Electrolux’s total global sales. The relocation of its North American headquarters brought Charlotte not only the prestige of being the regional home of a global company with household name recognition but also a commitment from Electrolux of new jobs for the area.
Jack Truong, president and CEO of Electrolux Major Appliances North America, who has a doctorate in chemical engineering and holds 11 U.S. patents and several international patents for innovation in his field, joined Electrolux in 2011.
“The community here in Charlotte has welcomed us with open arms,” Truong says. “We love being here and we look forward to working with everyone here to make this a growing part of the company for our global group.”
In our backyard
Since its relocation, Electrolux has proven to be a strong contributor to the Charlotte community. The company’s original commitment of adding 738 jobs to the area within five years was met and surpassed in two years, and the company currently has 80 openings at its headquarters on David Taylor Drive including positions in engineering, IT, sales, marketing and supply chain functions.
They also expect to add 80 more jobs in engineering, product testing and design when the research and development facility they opened just north of uptown, expands to include R&D for their washer and dryer business. The facility already houses R&D functions for vacuum products globally, electronic systems of all major appliances built in North America, and product design for all major and small appliances built in North America.
“All of our appliances that are built in North America are designed right here in Charlotte,” explains Eloise Hale of Electrolux North America’s corporate communications and media relations. “This addition not only signals our commitment to product innovation in our washer and dryer business but also builds on the design and testing capabilities that we have here in the city.”
Last August the company opened a 43,000-square-foot research and development lab at its refrigerator products manufacturing plant in Anderson, S.C. This Cold Technology Center and their other numerous R&D efforts demonstrate the importance of innovation to the company; an importance that dates back to its beginnings as the Frigidaire Company.
“Who invented the first refrigerator?” Truong asks. “Frigidaire.”
“Your mom or your grandmother probably said, ‘Please go get milk from the fridge,’” Truong continues. “That reference came from the Frigidaire brand. Frigidaire invented the first refrigerator in 1918. Who invented the first home freezer?”
Truong lists off other appliances: the first home air conditioner, the first refrigerator ice maker, the first washer and dryer combination unit for apartments, and the first stainless steel appliances for home use.
“The answer to each is ‘Frigidaire.’ All of these are the legendary innovations our company has brought to American consumers since 1918,” Truong says.
Frigidaire’s product innovation continues now through Electrolux, a Swedish appliance company, which bought Frigidaire in 1986.
“The combination of Electrolux, which is really about design and European aesthetics,” explains Truong, “with Frigidaire’s functionalities and cutting-edge technology, merges form and function to produce beautiful, innovative products for the consumer’s home.”
The Frigidaire name remains a popular mass brand of the company which has four different levels of residential products, three under the Frigidaire brand as well as one under their premium Electrolux line. The company also offers a line of kitchen and laundry products for commercial use.
Innovation for the home
“What we are doing in Charlotte and North America,” says Truong, “is understanding changing consumer behavior and designing and developing products for every type of family through the various stages of their social and economic cycles.
“Starting out in your career in your 20s, you begin with the Frigidaire mass products,” Truong explains. “As families grow, they move on to Frigidaire Gallery, a step up. This is typically what many Americans would have in their kitchens. The step up from that within the Frigidaire brand is called Frigidaire Professional. And when the family gets to the point where they can afford great products with the luxury of beautiful design to complement their kitchen, they choose the high-end Electrolux kitchen.
“The purpose of our company is about designing and developing cutting edge products, but it’s also about families. It’s about friends and families coming together in the kitchen. It’s about cooking healthy food for your family. We’ve found that, particularly in the U.S., more than 70 percent of households prefer to have great meals cooked at home. The kitchen has become the center of the house.
“The design of homes has changed too, so as we develop new appliances we make sure they change to take that into account. The kitchen of today is often open to a family room, so the dishwasher must be extremely quiet. Our latest innovation in the Frigidaire Gallery line is a dishwasher with what we call ‘orbital cleaning.’ A proprietary hydraulic system allows four times more water coverage to provide the best cleaning and the best drying but yet it’s still extremely quiet. You can’t hear it as you entertain friends and family.
“Right now, time is everything to the consumer. Rather than using gas or radiant energy, our new induction cooktop uses electromagnetic induction technology to boil water in only 90 seconds. We’ve put computer logic into our ovens. If you want to cook a turkey, the ovens have a special probe. You put it in the turkey, press the ‘perfect turkey” button and that’s all you have to do. A few hours later, when the turkey is ready, the oven rings, you open it up and it’s ready to serve.
“We’ve also developed new technology for our washers and dryers that allows you to wash a load in 15 minutes and then to dry it in 14 minutes. Everything’s done in 29 minutes.
“All of these innovations allow consumers to perform household tasks with high quality and in a shorter period of time so they have time to spend with their friends and family,” Truong sums up.
Electrolux’s continuing emphasis on innovation has yielded big results. Currently, Electrolux is a $17 billion global company—the second largest appliance company in the world with the largest global reach of any appliance company.
“We’re outperforming the industry,” cites Hale. “The industry as a whole is seeing declines, yet we’re seeing growth.”
The company has also been recognized by third parties for its achievements. The Frigidaire Gallery double oven range won the prestigious 2012 Good Housekeeping Very Innovative Products Top Ten Award. Each full size oven in the range is large enough to cook a 28-pound turkey but separate controls allow independent baking, broiling and roasting.
“A family can cook a ham in the top oven and bake cookies in the bottom oven simultaneously and both can be perfectly ready at mealtime,” says Truong.
Sustainability for the planet
Electrolux has also recently received recognition from three leading ratings organizations for its sustainability efforts. In December of last year, the non-profit organization Climate Counts named Electrolux as one of the world’s leading consumer goods companies in terms of addressing climate change.
For the second year running, the company was named Sector Leader in the RobecoSAM 2013 global sustainability rating and in January, Electrolux was included in the Global 100 ranking of the world’s most sustainable companies.
“We place great emphasis on sustainability,” explains Hale. “Appliances are a major user of energy. The appliance industry as a whole has been aggressive in driving down energy usage. All of our products are energy efficient and many are ‘Energy Star’ rated.” (Products earn “Energy Star” labeling by meeting energy efficiency requirements established by the U.S. Environmental Protection Agency.)
The company’s emphasis on eco-efficiency moves out of the manufacturing plant and into the classroom with its participation with UNC Charlotte in their “Urban Eden Initiative.” UNC Charlotte is one of 20 schools chosen to compete in the U.S. Department of Energy’s Solar Decathlon 2013. The worldwide competition, to be held in California in October, challenges academic teams to design and build highly energy-efficient solar-powered homes. Electrolux is an active sponsor of UNC Charlotte’s entry, the “Urban Eden” house.
“We’re donating both money and products,” explains Hale. “We’re also working directly with the students on the design of the kitchen and how best to bring energy efficiency to it.”
Electrolux is collaborating with UNC Charlotte in other ways as well. “We are working on several efforts with UNCC,” Hale says. “We are hiring graduates, offering internships and working with several of their departments on STEM (Science, Technology, Engineering and Mathematics) education.
Truong also speaks to the partnership: “I and our team work closely with the UNCC administration to identify our company’s needs and to help write the curriculum so that their graduates can be readily employed within Electrolux. We believe building standards in engineering and technology excellence is a key value we can bring to the Charlotte community.”
Electrolux’s community involvement extends beyond education. In the two years since their relocation they have been active in local non-profits with cash, sponsorships and in-kind donations to organizations such as the United Way of the Central Carolinas, the Charlotte Chamber of Commerce, the Arts and Science Council, and Johnson C. Smith University.
Last July Electrolux provided 940 air conditioners worth $140,000 to Mecklenburg residents in need through a donation to the Crisis Assistance Ministry.
“Community welfare, the arts and STEM education are important focus areas for us,” says Hale. “We are committed to growing here and being a good corporate partner.”
At home in the South
Electrolux’s growth has been especially beneficial to the Southeast. North Carolina and its neighboring states account for a generous percentage of Electrolux’s 14,000 employees in North America.
In addition to the more than 800 employees in Charlotte, their dishwasher production plant in Kinston, N.C., employs 600 and the Asheville national parts distribution center employs another 300.
Electrolux boasts the world’s largest top mount refrigerator production plant in Anderson, S.C., and the company produces one of out of every three stoves sold in United States from its Springfield, Tenn., factory.
To further underscore Electrolux’s commitment to the U.S. and the Southeast, Electrolux will soon move production of its high end ovens from Canada to Memphis,Tenn. The 750,000-square-foot state-of-the-art factory will open in June 2013, and at full capacity will create 1,200 new jobs in Memphis.
Truong points out that the economic impact should be even more beneficial. “For every manufacturing job we create, we typically create three additional jobs that our suppliers need to add to increase their production.”
In July 2012, Electrolux North America celebrated two years in Charlotte with a local campaign of billboards, advertising and sponsorships to thank the city for being such a great place to work and live.
As Electrolux North America headquarters settles into its third year in the Queen City, the company’s innovation, growth and expansion of local jobs as well as its interest, work and involvement in the community continue to be a cause for celebration.
Regarded not only as the finest modern architect but also a master builder, Frank Lloyd Wright was known to design everything that would be used in a building down to the lighting fixtures and the plates on the dinner table.
While the professionals at Clark Nexsen tend to leave the tableware decisions to the building owners, they are committed to the master builder philosophy through holistic, integrated design. This is reflected in the firm’s diverse staff which includes architects, engineers, interior designers and planners.
“This is my greatest sense of accomplishment; that we work with the whole building, the whole project. I see us as master builders,” says Peter Aranyi, managing principal of the Charlotte office.
Founded in 1920 in Lynchburg, Va., Clark Nexsen has become a full-service, integrated design firm headquartered in Norfolk, Va., with offices in Richmond and Roanoke, Va.; Raleigh and Charlotte, N.C.; Washington, DC; Atlanta, Macon and Brunswick, Ga.
Clark Nexsen has worked on projects in 46 states and 42 countries. It is recognized as one of the top 50 architectural firms in the nation.
One Big Family
While each of Clark Nexsen’s offices has its own culture, none is a separate profit center; the company runs as a whole.
“We’ve grown up together as one big family,” says Aranyi. “One reason this works so well is that the company is employee-owned. There are close to 100 stockholders in the company, which is run by a board of directors.” Aranyi sits on the board.
“We needed to have a broad base of stockholders to sustain the business over time,” he explains. The firm attributes its success to personalized service and diversity.
Charlotte is one of the largest offices and was started in 1994 with a merger between Clark Nexsen and Charlotte-based Gunn-Hardaway. Aranyi, who previously worked in the Norfolk office, came to Charlotte to head up the office 12 years ago. He also oversees the Roanoke office.
The overall firm specializes in higher education, commercial, offices, government, recreational, manufacturing, health care, and land planning projects. The Charlotte office’s primary focus is higher education projects, especially student life buildings such as housing, dining, academic buildings and student success centers.
Clark Nexsen operates out of 15,000 square feet of space in uptown Charlotte; its third location since opening here. “We previously had offices on Church Street and Morehead Street, and finally now on Elizabeth Avenue. We designed and upfitted our office space to promote staff collaboration,” says Aranyi. “Our Elizabeth office has become home.”
Company-wide, Clark Nexsen has over 500 employees; 54 of them are in Charlotte which includes 21 architects and 25 engineers.
Clark Nexsen’s clients and projects in Charlotte are equally diverse. Higher education projects are active at UNC Charlotte, UNC Chapel Hill, Winston-Salem State University, Duke University, Clemson, University of Virginia and Penn State.
“UNC at Charlotte has been a wonderful client,” says Aranyi. In Chapel Hill, the firm is designing a major student housing project that will replace Odom Village, built during WWII for returning soldiers. The firm has just recently developed a 10-year master plan for the redesign of 26 residence halls at Penn State University.
Since 2002, the firm has designed space for 20,000 beds for higher education housing; an average of 2,000 per year. Over the years, Clark Nexsen has designed many schools for Charlotte-Mecklenburg Schools as well.
The firm also enjoys significant military work, a consequence attributed to the company’s founders—two military men—one a captain, the other an admiral. Both NATO and the U.S. Navy have been clients, along with dozens of other Department of Defense agencies such as the U.S. Army, Air Force and Coast Guard.
The Charlotte office designed two dining facilities for the U.S. Marine Corps at Camp Pendleton in California which are just wrapping up construction. These facilities are designed to achieve LEED Gold and have received a design award from the local Charlotte AIA chapter. The firm is also under contract with the U.S. Navy on a worldwide energy contract, looking at ways to conserve energy across the country.
Private business clients include Family Dollar Stores and Duke Energy. “One of our interesting niches is indoor firing ranges,” says Aranyi. “We are working on new firing ranges for the Buncombe County Sheriff’s Department up in Asheville and are also doing a master plan for Union County.”
Sustaining the Community
Clark Nexsen’s success has driven it to give back, especially in mentoring students in the field. The Charlotte office is currently working with students at UNC Charlotte on the Solar Decathlon competition. Sponsored by the Department of Energy, this national program invites college campuses to compete in the design, build and operation of a solar-powered, smart home.
Its goal is to train the next generation of leaders in sustainable architecture, engineering and business by having them deliver innovative technologies using environmentally conscious, energy-efficient and marketable methods.
“We provide support to the students, giving them advice so they can do a better job,” says Aranyi. “We do it to contribute to the field,” he says, adding, “Students become great employees.”
Work began on the design of the home in October 2011 and construction started in February of this year. The competition will take place in California in October. The Norfolk office is similarly engaged this year with students at Old Dominion University, and previously worked with students at Virginia Tech when they won 5th place in the national completion.
As with any business, there are challenges. “Mine is time,” says Aranyi. “We travel extensively. Our work is diverse and spread out geographically. It’s hard to be in all the places I need to be but I try to get home in the evening to spend time with the family.”
“We’re constantly challenged—in a good way—to keep up with fast-moving technology and advances in the industry,” says Aranyi. “I tell my junior staff that what I see now is the stuff of comic books from the 1960s; we’re there, working in three dimensions and seeing projects as we never could before.”
The firm’s animation programs now use video game engines to model how a building functions with people in it and demonstrate to owners the experience of their projects before they are complete.
The firm is actively engaged in research to stay abreast of developments. “Buildings we design will typically be in place for 50 to 100 years. We are working on flexible design solutions for technologies that are not even in place yet. For instance, in the future, landline phones will be obsolete. Engineering will be required around new systems of communication. We’re making educated guesses about what will be needed for technologies that are not even discovered yet,” says Aranyi.
Committed to Growth
At Clark Nexsen, the junior staff helps the senior staff understand and employ new technology. The senior staff teaches the junior staff the business of integrated design and the communication skills and social graces involved with face-to-face meetings and picking up the phone and talking with a client, according to Aranyi. “Everyone brings value to the table,” says Aranyi.
Aranyi says Clark Nexsen weathered the recession better than most, a fact that he attributes to the foresight in 1994 to diversify.
“When I first came to Clark Nexsen, all of our work was military-related, but the Cold War ended and we saw the writing on the wall. That’s when we got into the higher education market,” explains Aranyi. While a few jobs were lost company-wide, the firm actually added offices during the recent recession years. With an 80 percent repeat business rate, the firm has continued to provide full design services.
Now, uncertainty over military spending is again affecting the firm and is one of Aranyi’s frustrations. He explains that the federal government has not yet disclosed their 2013/2014 projects. Normally, these are communicated a year in advance. “That our elected government cannot work together to keep the country running is demoralizing to companies like ours,” laments Aranyi.
Aranyi is a second generation architect; his father completed his architectural studies at NC State University and opened a business in Virginia Beach, becoming a key player in the solar field and named Energy Man of the Year in 1984 by the Department of Energy. The junior Aranyi worked in his father’s office as a teenager and initially, rejected architecture as a career choice.
“It was a kind of rebellion; I threatened to join the Air Force,” remembers Aranyi. But he found that he was intrigued and went on to study architecture at Hampton University in Virginia. He became a registered architect in record time because he worked during school and earned credit towards the three-year internship requirement. Aranyi lives in Charlotte with his wife, who is an artist, and twin sons. His daughter is enrolled at NC State University in graphic design.
Committed to professional learning and personal growth, Aranyi applied to and was accepted in the 20th class of the Leadership North Carolina program.
“I’m learning a great deal about North Carolina. I had been so focused on my career and the industry, I failed to realize the impact of social issues in our state—economic, health care and education issues,” says Aranyi. “Now my interests are much broader and I understand that as a leader in North Carolina, I have to be involved in these things. There’s a lot at stake right now.”
Active in the community, Clark Nexsen is involved with several charitable and educational organizations including Hands On Charlotte, Habitat for Humanity, the Dove’s Nest and Classroom Central.
They are once again participating in the American Institute of Architect’s program “Canstruction” in which participants build sculpture structures out of food cans, then donate the food to the Second Harvest Food Bank. The firm has also been active in the ACE Mentor program, working with area students who have interest in the architecture and engineering fields, and has just kicked off an Explorer program for architecture.
The firm will continue expanding its business, according to Aranyi. “We’re not comfortable sitting back and saying ‘We did it, we’re done.’ We will probably open an office on the west coast and continue looking west of the Mississippi.”
A remarkable trait of the firm is its workplace culture. It’s a friendly environment, a pleasant atmosphere where even the most junior staffers are encouraged to share their ideas.
“I value everyone’s opinion,” says Aranyi. “Any success that I have is because of all the people who work here.” The firm encourages the exchange of ideas “around the coffee maker.”
The firm also encourages staff and their families to get together at monthly events such as hockey or baseball games, outdoor cookouts or poker nights. “We have a Fun Committee to make sure we have some down time,” asserts Aranyi.
Aranyi holds several titles within the firm—senior vice president, operations director, managing principal, and board member. His current business card simply reads “Principal.”
“I’m waiting for the box to be empty,” he says with a smile. “I didn’t want to spend money for a title. When people ask what I do, I say, ‘I’m an architect.’”
When Carole McLeod’s husband of 29 years, Mans, was diagnosed with stage four brain cancer in July 2011, her world stopped revolving. She had just left a leadership position with a major waste services company 45 days earlier and was in final-stage negotiations to purchase a small waste hauling business of her own.
“The deal was going to close by the end of July,” she recalls. “And when my husband’s diagnosis came out, I had to call and say, ‘Guys, I can’t do this right now.’”
Successes and Trials
McLeod, a native Carolinian, grew up in Greensboro, the daughter of a highway patrolman. He saw plenty of totaled cars in his tenure as a cop, so when he retired, he started a vehicle wrecking company. Over time, he expanded the company and added a profitable salvage yard into the mix.
“Garbage is in my blood,” laughs McLeod. “I inherited his common sense,” McLeod says. “I learned to see an opportunity and grab it.”
Upon graduation from Appalachian State University with a degree in business, McLeod started out in sales. “I knew what I liked and what I was good at,” she says. She sold everything from accounting systems to postage meters.
Then, after eight years with a major solid waste removal company and a brief stint at a chemical company, McLeod partnered with an old business associate to start her own waste disposal company, New South Waste, in 1997.
“You knock on doors,” Weller told her. “I’ll drive.”
The timing—and leadership—were right, and the company grew quickly, doing $1.3 million in business its first year. As a matter of fact, she tripled her business plan during the second year of operation.
In June 2001, NAWBO recognized McLeod as its “Rising Star of the Year” for growing her business from one truck and one driver to 15 trucks and 20 employees in just four years. Crediting much of their success to “real quick” service and competitive pricing, it was not surprising that every major waste company in the area was vying to purchase McLeod’s business, and in 2005, she sold it for a tidy profit.
McLeod took a five-year hiatus to honor her non-compete agreement, and spent it enjoying a well-earned break.
But she wasn’t done with the industry. She came back for a brief stint at another southeast regional waste company in 2010. As their new district manager, she was responsible for everything related to the Charlotte market, from reviewing bidding procedures and managing accounts, to selecting an operations site and getting the right people and equipment on board.
“We did it, we entered the market successfully and created a lot of opportunity,” says McLeod. But McLeod’s entrepreneurial blood wouldn’t let her settle. Working for someone else was simply not what she was cut out for.
So in June 2011, she announced her resignation and set out to purchase a waste disposal business of her own. And that’s when Mans’ devastating diagnosis was announced.
The next few months were a blur for the McLeod’s as they sought treatment from Carolinas Medical and then Duke University, and their young adult children—Will and Anna—dealt with the implications of his prognosis.
McLeod took a few months to regroup, but she didn’t let her personal tragedy keep her down for long. She called on the family’s heritage for an old Scottish saying that kept her going: “Hold fast.”
“This means so many things,” she says. “It’s about being patient, holding on to the present moment, and to me, it’s holding fast to the people you really care about.”
So she held fast, and once treatments had begun for her husband and they’d settled into a routine, it occurred to her that his hiatus from working at Wells Fargo might be a blessing in disguise.
“We decided we were going to start this company,” she recalls. “We were going to work together while he went through treatment.”
So McLeod called up the little company she wanted to buy, MacLeod Construction (the similarity in name is a coincidence), and asked if their offer to sell still stood. It did.
“Everybody kept saying that we needed to think about retiring,” she says. “But we didn’t want to do that. We had obligations, and we weren’t going to just stop and retire.”
McLeod got in touch with a former employee, Eric Voner, from her first company and asked if he was interested in driving for her new company, Advantage Waste Recycling & Disposal, Inc. They met over dinner to talk business and discovered they had another significant thing in common: Voner’s wife was fighting a serious diagnosis of breast cancer.
“We just looked at each other,” McLeod says. “Who would have thought?”
With a common mission and a common battle, the two went full force into the business of taking care of waste—and each other. “He’s my right-hand man,” says McLeod. “He has done everything in this business, run it when I couldn’t, and been the best helper I could have hoped for.”
In less than a year of business, Advantage Waste Recycling grew to seven employees and over a million dollars in revenue, and was turning a profit by January 2013. McLeod credits the people around her for her success.
“My husband never doubted that I would be successful,” she says. “He believed in me.” And so did everyone she asked to come work for her. Kailie Alvas, now office manager for Advantage Waste Recycling, happily left a position at a more established company because she wanted to be a part of what McLeod was building. The company’s outside sales representative Marcy Nichol also worked with McLeod at another company and knew right away she wanted to join the new company.
“Everybody wants to be a part of something that grows,” says McLeod. “Our country and especially our industry have just been through a horrible period with layoffs and downsizing. People want to be a part of something positive, to have an opportunity to excel, to do more than they’ve ever been given to do before. To make a difference.”
More Tribulation and More Blessings
That’s also why Casey Simonds, owner of Simonds Sanitation, decided he wanted to sell his little company to McLeod at the end of 2012. His had father died a few years earlier, and he had built the little Gaston County company from nothing and was proud of what he had accomplished. Most of the large waste service companies wanted to purchase his business, but he didn’t want to do that. He chose McLeod instead.
McLeod eagerly began negotiations to acquire Simonds Sanitation by the end of November 2012.
And that’s when tragedy struck another devastating blow.
In October, Mans’ health took a sudden and devastating turn for the worse. For a second time, McLeod had to call up the company she wanted to purchase and ask for more time. Once again, time was granted.
For two months, McLeod and her family held fast to each other, as Mans began his final journey. Their 21-year-old son came home from college mid-semester to be with them. McLeod handed Will the reins of the company and said, “Here, do this.”
And he did. Voner, Alvas, Nichol, and the rest of the crew kept the wheels turning and the customers satisfied at Advantage Waste Recycling as the McLeod family stood vigil. In December 2012, Mans passed away.
Though her loss is still devastatingly fresh for her, McLeod is determined that her journey will not be one of sadness alone, or of defeat.
“I’ve got six employees who stood by me when I had to be out,” she says. “I’m going to make sure this company succeeds for them, because they took that leap of faith to come work for me. I’m doing it for them.”
In February 2013, knowing that her husband wanted it for her, she moved forward and completed the purchase of Simonds Sanitation, ensuring a strong foothold for the company in Gaston County. She considers herself lucky.
“People look at me funny when I say I’ve been blessed,” she admits. “But my husband would say I’ve been blessed, too. I’ve been blessed with people helping and promoting the business, and blessed with everything that’s happened around me.”
“Doing It for Them”
McLeod is determined to give as much as she has received. “Doing it for them” is one of her secrets to success. She has always taken an interest in mentoring young entrepreneurs. Her alma mater Appalachian State has benefited from her commitment via an endowment that helps aspiring entrepreneurs prepare for their careers.
In honor of Voner’s wife, who is still fighting breast cancer, Advantage Waste Recycling includes pink dumpsters among their offerings. The website prominently displays the Susan G. Komen logo and the company supports several cancer foundations.
In fact, the very structure of the business is based on giving back. It’s about maintaining a clean environment, both for the businesses and communities that they serve, and for the people who live in those environments.
McLeod says she’s pleased to see the entire industry moving toward cleaner, more sustainable ways of managing waste. She points to several major brands—Target and Walmart among them—as leaders in the environmentally friendly waste management fight, who began insisting to vendors that they recycle their waste. That demand moved the entire waste management industry strongly into recycling.
It’s been a tough transition for some companies, who have traditionally relied heavily on high profit margins from landfills to keep their business going. But for McLeod, it’s exciting. Advantage Waste Recycling already provides recycling pick-up and delivery to area recycling centers. By the end of 2013, McLeod expects to be providing the actual recycling service as well for some customers.
Most of Advantage Waste Recycling’s customers are contractors and commercial businesses that rent their dumpsters and contract for waste removal. So far, in their first 10 months of operation, the company’s revenue is approximately $1 million. This year, McLeod intends to also go after municipal contracts in some of Charlotte’s surrounding areas such as Gastonia and Belmont, and to expand gradually.
“It’s not about being the biggest,” she says. “It’s about growing a company that takes care of its employees and its community. It’s just a nice group of people that have come together to say, ‘We can do this.’”
She points out that when you have good employees and you take care of them, they take care of the customers and vendors. She says her team members are always getting just a little bit extra done, and making sure everything gets done right, even when it’s difficult. They’re able to provide faster, more reliable service than many others thanks to this.
McLeod’s quick to add that she has no interest in promoting herself to the world. “I don’t have to do this anymore. I could retire. But maybe my story will help somebody,” she says. Then, for the first time in the conversation, she tears up.
“Life is tough out there. Things are tough. Maybe my story will help somebody start something, do something. It’s hard, but they can do it.”
People tell McLeod that she is an inspiration. But she says she never set out to be that.
“I’m just trying to help these people who have committed to me; to help them get where they want to go,” she says. “All I’ve ever done is just take one step at a time, and hold fast.”
In the fall of 2001, Phrantceena Thate Halres was running a successful recruiting and staffing business in Raleigh. Typical of human resources firms, Halres offered a wide range of staffing services for administrative, accounting, professional, legal, and technical positions. Then came the terrorist attacks of 9/11. Halres didn’t know it right away, but that tragic event would permanently change the direction of her business.
A graduate of Wingate University, Halres had been providing staffing services since 1986 to a number of agencies of state government, as well as to companies around the Research Triangle. Her firm, Aelmings Human Resources Corporation, also advised clients on how to implement programs to recruit and train a diverse workforce.
But shortly after the 9/11 attacks, her telephone rang. It was one of her clients, Duke Energy. The new realities of a post-9/11 world meant increased security requirements at the nation’s nuclear power plants, and Duke needed help staffing those brand new security needs. The result was the formation of Total Protection Services Carolinas, LLC (TPS), a minority and woman-owned staffing firm dedicated to providing safety and security services to the nuclear power industry.
Safety and Security Services
After the call from Duke Energy, Halres started providing services to Duke in 2002. But with Duke Energy as her primary client, she soon realized a move would be necessary. Commutes to meetings at Duke’s Charlotte headquarters and to nuclear plant sites in South Carolina were proving to be logistical challenges from a Raleigh base. So in 2008, she moved the business to Charlotte. After stints in Ballantyne and Dilworth, TPS has now settled into a new home on Fairview Road near SouthPark.
In addition to Duke, other major clients now include Southern Company and Shaw Power Group. In all, TPS staffs around a dozen facilities and focuses on Mississippi, Alabama, Georgia and the Carolinas.
The company provides what they call high-threat/close proximity safety and security services, primarily for nuclear power plants. The company is now expanding into other related markets such as coal-based energy generation plants, new plant construction sites (such as Duke’s new Lee Nuclear Station in Cherokee County, S.C.), and their latest focus, government nuclear lab facilities.
While the services provided are still primarily staffing-based services, Halres says it’s a very different business than providing accountants or administrative assistants. Most of their security specialists come from the U.S. military, law enforcement agencies and government security services. Many have special operations backgrounds.
“It’s certainly a very different world than what I had been dealing with, but our staffing skill sets still transferred,” admits Halres. “It was just different because nuclear security is so regulated. The Nuclear Regulatory Commission (NRC) governs a lot of it, and there are specific fit-for-duty requirements, BMI index requirements, and many other things.”
In this male-dominated profession, TPS is working hard to recruit more women into the security field. But since women tend to have smaller hands and weigh less, some of the weapons present issue with both size and recoil. Nevertheless, TPS has been successful in working a limited number of women into their workforce.
Each client defines the skill sets needed for each position based on the NRC regulations and their own internal requirements. For example, there are several layers of security at a nuclear plant, ranging from the outside perimeter to deeper within the more highly restricted “protected areas” inside the plant itself. Each layer has different requirements and different skill sets.
“Usually at the perimeter points you have the officers who greet visitors, so they need to be friendly and efficient, but firm,” explains Halres. “It is behavior-based security. It requires being alert while still getting people in and out in a timely manner. That skill set is a little less intensive, but it’s very mentally engaging.”
As you move further into each facility though, the required skill sets change dramatically and the security techniques use both seen and unseen protection strategies.
“The deeper, more sensitive, highly-protected areas of the facility are where you will find our more highly qualified personnel,” she continues. “We have a lot of ex-military, special operations types with very specialized skill sets—even some 007 type of stuff. We also have to ensure that these officers can demonstrate proficiency with whatever weapons of choice our clients choose to employ.”
TPS can staff their own security force at a client site or they can provide hiring services for a client’s in-house force. But often, TPS will augment an existing in-house force, as they do for Duke Energy. When they supplement this in-house security, the TPS force becomes a qualified feeder pool of trained security professionals. This allows the client to “try before they buy.”
In a typical environment, the TPS force may represent about 20 percent of the total security at the plant. TPS hires and trains each officer to the client’s requirements, usually right there at the client site. That way, the client doesn’t have to advertise for the position and doesn’t have to devote valuable management time to provide the specialized training that TPS offers.
Then, as attrition occurs within the client’s proprietary in-house force due to retirements, transfers or military call-ups, the client can select already-trained professionals from the TPS force. TPS then hires and trains replacements and the cycle starts all over again. The client always has a pool of properly trained professionals to pull from.
Building a Quality Workforce
“Perhaps the thing that troubles me the most about this business is the workforce I know to be out there protecting many of our nuclear plants in this country,” says Halres. “We took over the security at one plant where a large security company had been doing it for a number of years. They had not performed well and when we took it over we found out that half the workforce didn’t have high school diplomas. How can you protect a nuclear plant if you can’t read and write? We need to upgrade the skills of this profession.”
To address this skills shortage, TPS has launched a new security training academy initiative. While TPS has been training to client requirements at each client site on a 24/7 basis to accommodate various work shifts, this new initiative will focus on creating a pool of qualified security workers within a given region.
The first academy is now in the initial planning stages and will be located in southern Mississippi near Gulfport. TPS hopes to develop the academy in conjunction with a lignite coal power plant being built by Southern Company. The project has the support of the Department of Energy, the Obama Administration and Southern Company.
Instead of just providing custom training for clients, the academy will become a resource for the entire community, providing the Gulf Coast with a well-trained workforce ready to be hired by the region’s broader energy industry. The academy will not only benefit Southern Company’s new lignite coal plant, it will also benefit the Gulf region’s numerous chemical plants, as well as Entergy, the second largest nuclear power generator in the nation.
And with Gulfport’s proximity to offshore Gulf of Mexico oil platforms, one would imagine that industry could also benefit from a workforce of trained security professionals.
The facility TPS hopes to build will be, to some extent, modeled after the U.S.-funded King Abdullah Special Operations Training Center (KASOTC) in Jordan. That facility was designed to help train Iraqi and other regional security forces to protect their own key facilities in that dangerous part of the world.
While the Mississippi center will not need to go to the extremes that the Jordan facility does, it has been used as an example of what the academy might look like.
“We have acquired a lot of knowledge and skills in our company within the nuclear security space,” states Halres. “There is such a big need for training and skills development. These jobs are here now, and only going to increase in the future. The big gap is the workforce. So the question is how to prepare the workforce to get those good jobs.”
The academy will focus on the “soft” skills needed to provide protection to critical national infrastructure, instead of the tactical and weapons skills many of the applicants already have from their experience in the armed forces or law enforcement. This will be behavior-based situational-based training where the students have to think, and instructors will teach it with experience gained in special operations and similar fields.
“After 9/11, you really have to think,” explains Halres. “Security professionals must be very alert and aware of their surroundings and they must learn certain behaviors that help them make the right decisions. Some of the military folks that come in from Afghanistan are literally trained to kill, so you have to dial those folks back a bit. They have to make a mental shift; we make it clear to them that they may sit in one place and stare at the same wall for an entire shift, except when they go on break. Then we ask them, ‘Is this job right for you?’”
Halres says one of the community resources they also hope to leverage is the older senior workforce. These are the folks who retire from their security job, but who are not really ready to leave the workforce. They still want to work, so TPS will take them in to help train the new staff.
“Turnover in our industry is about 46 percent overall and that’s pretty sad,” concedes Halres. “But our turnover at TPS is only about 2 percent. So as an industry, we need a fundamental change in how we recruit, hire and train.”
Giving Back to the Community
TPS is planning to open a second academy location in Charlotte to help bolster the workforce that feeds their sizable Carolinas site base. But Halres has even bigger plans for that facility with a recently conceived initiative to be offered through the auspices of a non-profit organization she also leads, The Coach Tate Foundation.
The Foundation was established in 2010, in memory of her father, Johnny “Coach” Tate of Burke County, N.C. The primary mission of the Foundation is to provide scholarships, leadership development and character building for student athletes in Burke and surrounding counties, but she also sees another way the Foundation can give back to the community.
“I want to create a program here in Charlotte for families to teach some of the same situational awareness and behavioral skills that we will teach in our regular security training academy,” explains Halres.
“I want people to feel they can be safe and protect their family, but not have to feel like they need to go out and buy guns and bullets. How do you react? What do you do when you see a gun?
“You don’t run and scream. There are certain things that you do that are not outwardly expressed, but you are quiet and you maneuver and you conquer a situation.
“We need a better way,” Halres acknowledges. “I’ve learned a lot in the nuclear industry about how to protect these facilities, so I would be remiss not to share that knowledge in a safe and limited way to help our greater community.”
Americans invented the solar cell, wind turbine and lithium battery. Not a bad start in the highly competitive, alternative energy marketplace. While the U.S. earns points for genius, our impact on society has been tepid at best. For example: solar power. It is a free, renewable, clean and seemingly inexhaustible resource. Why isn’t the sun America’s primary source of power?
The poet T.S. Eliot knew the answer. “Between the idea and the reality, between the motion and the act,” he said, “there falls a shadow.”
An enormous portion of the solar shadow is cost. A few years ago real estate agent Binnie Orrell investigated running his Charlotte home entirely on solar power. He received an estimate of $25,000 to install a single photovoltaic (PV) solar panel on the roof. “It was absurd,” comments Orrell.
“Prices for photovoltaic systems that generate electricity have dropped dramatically in the past few years,” says solar energy engineer Tommy Cleveland of the North Carolina Solar Center. “A quote today would be half of what it was three to four years ago.”
Part of the reason for the price reduction is the Chinese government. When they decided to subsidize solar panel production, other manufacturers like Bosch Solar in Mooresville, quickly dropped their prices.
Tommy Cleveland adds another solar fact of life: “It costs more to retrofit a house for solar than new construction.”
Making Solar Work
But it’s more than cost that deters homeowners and businesses from taking advantage of free energy. There are many other factors to consider before Americans will demand a house that transforms solar potential into solar power.
In fact, the Department of Energy has defined them as the ability to deliver on a set of 10 criteria: Architecture, Market Appeal, Engineering, Communications, Affordability, Comfort Zone, Hot Water, Appliances, Home Entertainment, Energy Balance.
That challenge to meet those criteria is the impetus behind their biennial Solar Decathlon competition, to design, build and operate the smartest solar home on the planet.
For the past 10 years teams from colleges and universities from the United States, Canada, Spain, Puerto Rico, Belgium, China, Germany and New Zealand have vied for trophies—one for each solar criteria—plus the mega trophy for the overall best-of-show house. Similar to their counterparts in the Olympics, these engineering, architecture and business students refer to themselves as “decathletes.”
This is the second time the University of North Carolina at Charlotte has been selected to compete in the Solar Decathlon. Their first solar house was built for the 2002 competition where the Charlotte decathletes finished 13th out of 14 teams.
“We made rookie errors,” says Benjamin Futrell, project manager for the 2013 Solar Decathlon. “We expect to do much better this time.”
The only other North Carolina team that has ever participated was Appalachian State University in 2011. They accumulated 832 points out of 1,000 and came in 11th out of 20 teams.
Solar Decathlon Director Richard King visited UNC Charlotte for the symbolic groundbreaking for Urban Eden, the school’s entry in the 2013 competition. King, who works in Washington, D.C., has great affection for UNC Charlotte. He views the 49ers as pioneers, joining the Solar Decathlon in its inaugural year at a time when King wondered if any university would accept his challenging and expensive invitation.
Of the 20 teams in the 2013 Solar Decathlon competition, six are repeat players including UNC Charlotte. With five appearances, Missouri University of Science and Technology from Rolla has the most Solar Decathlon experience. But the Rolla team has never finished in the top three. The toughest competitors are expected to come from four California schools. Santa Clara University has taken third place twice in its three appearances. The Broncos are itching for first in 2013.
The team of Southern California Institute of Architecture (known as Sci-ARC) and California Institute of Technology have been to two competitions and never finished in the top three, but they head Futrell’s list of teams to beat. Rounding out the West Coast roster are Stanford University and the University of Southern California, both rookies.
The California schools come to the competition from a solar friendly culture. California is the nation’s largest solar energy market by far and has effective state initiatives that promote the industry.
Solar Decathlon homes use state-of-the-art photovoltaic panels or modules to generate their own electricity. The panels coupled with energy-saving construction materials are enough to power lights, stove, entertainment system, heating and air conditioning, as well as a washer and dryer.
The goal is for each home to generate all the energy it needs during the 10-day competition. Solar engineers call this net metering and it garners points for the Energy Balance criteria.
The homes also use passive solar systems, typically for winter space-heating. They include collectors, absorbers, a thermal mass to store heat, ducts to move the heat, and controllers such as a roof overhang to reduce heat. Passive solar shuns all active features; there are no blowers or fans to circulate the air.
In between these two extremes are solar systems used only for heating hot water. This is a far more limited use of solar power than PV or passive. Chinamay be the world’s leader in solar water heaters, producing the most efficient, inexpensive and widely-adopted units.
Contrary to earlier competitions, the 2013 Solar Decathlon homes are not stand-alone solar systems. They are designed to be connected to the Village Grid, a mini-electrical system paid for by the Department of Energy and set up just for the decathlon.
That was not the case in the first three decathlons. For 2002, 2005 and 2007, the homes included battery packs to store electricity for nighttime use. These homes were independent of the utility company and truly “off the grid.”
That arrangement changed for 2009 and thereafter because, says King, “Ninety-nine percent of solar homes built today are tied to the grid.”
Grid-tied homes have become popular. Even with state-of-the-art photovoltaic panels and a save-the-environment outlook, solar enthusiasts want the grid as a nighttime backup. The grid also helps when the home creates more energy than it needs. Equipped with a bidirectional meter, consumers get credit for electricity they put on the grid, i.e. when the meter runs backwards. Like the rest of us, when the meter runs forward, they pay for the energy they take off the grid.
In a perfect world and with a smart-sized house, the result would be net metering. This perfect state is what earns decathletes 100 points for Energy Balance.
All homes in the decathlon have something else in common: a target audience. Each team identifies a group in its locale that could most benefit from a solar house. Choosing the target audience helps frame and focus the design.
For the Czech team, its inhabitants are a 50+ years older couple looking for a weekend escape to the country. Team Texas designed its home for the modern desert dweller. Team Alberta envisioned modular housing for mining teams in remote areas of Canada. The schools from the District of Columbia are designing a home for returning disabled veterans.
UNC Charlotte’s team has two Charlotte couples in mind: “empty nesters” and a two-income professional couple with no children or DINKS, double income—no kids. They imagine Urban Eden as an infill house on one of Charlotte’s vacant lots, in older neighborhoods or in redevelopment areas. That’s the urban part. A peaceful outdoor garden that connects to the indoor space serves as its Eden.
The Secret Weapon
A few teams have what they tout as a secret weapon—a design component that raises the bar, advances the field and wins points. For Santa Clara, it’s bamboo. The entire structure of their Radiant House will be made from this sustainable plant. The UNC Charlotte house has a double-barreled secret weapon built right into its walls.
“This is likely going to be the first geopolymer cement concrete house ever constructed,” boasts Dr. Brett Tempest of UNC Charlotte’s Civil and Environmental Engineering Department. This alternative form of concrete is made with fly ash, a waste product created when coal is burned. When hardened it has a similar mechanical characteristics to the widely used Portland cement, an ingredient in concrete.
“Manufacturing Portland cement accounts for approximately 10 percent of global greenhouse gas emissions,” says Tempest. “Geopolymer completely replaces the need for Portland cement in the concrete for the house and that decreases the carbon associated with traditional concrete manufacturing by 90 percent. This new material has uniformity, consistency and durability.”
Additionally it repurposes fly ash, a byproduct of coal power production. If fly ash were not used as a new building material, this residue would end up in a landfill.
“Replacing Portland cement with geopolymers is really just a plug-and-play thing. It’s not like you have to do any major conceptual or technical changes to the way you implement the concerete. We just solved a major problem in the world by implementing this one thing,” says Clark Snell, the student project manager for Urban Eden.
The second part of Urban Eden’s one-two punch is derived from a network of capillary tubes embedded into the fly ash concrete. “This blue plastic mesh allows us to control the heat that is built up in the walls of the house,” explains Futrell. Using a pump, the heated water is transported from the walls to the roof where it is dissipated into the night air.
In a traditional passive solar system, a thermal mass, such as water or bricks, cools on its own at night. The combination of tubing, water pump and roof membrane is the real secret weapon. “It revolutionizes passive solar heating and cooling,” says Snell.
Making It Possible
Although it is only one of the 10 Solar Decathlon criteria, student builders work hard to keep the total construction cost of their homes at or under $250,000. That is the magic number for the affordability criteria and it’s a new upper limit for the 2013 competition. This year, teams lose points by going over $250,000.
“If the house costs over $600,000, no points are awarded for affordability,” says King, adding, “It is easier to be innovative, but harder to be cost effective.”
Affordability is a juried competition. Construction experts estimate the cost of each component as well as total construction expense.
UNC Charlotte expects that the entire project from focus groups and student stipends to building, transporting and reassembling the home in Irvine, Calif., will be in the neighborhood of $1.2 million. The Department of Energy gave each 2013 team $100,000 and UNC Charlotte contributed another $375,000. That leaves a sizable chunk for the team’s sponsors.
Ingersoll Rand, Bosch Solar, Electrolux, Edifice, Intus Windows and SteelFab made up the shortfall with cash and in-kind donations. Electrolux will be supplying the washer and dryer while the refrigerator comes from Blomberg, a German manufacturer with multiple minimum energy consumption awards. For Urban Eden’s sliding roof, Bosch Solar will donate a complete array of 255-watt photovoltaic monocrystalline solar panels. Each of the 36 German-manufactured panels retails for $300.
Construction of Urban Eden began in mid-February inside the massive EPIC Building at the Charlotte Research Institute. As the weather warms and Urban Eden expands, it will be brought outside. When complete it will be disassembled and shipped to Orange County Great Park, where it will be reassembled as part of the Solar Decathlon village.
The California site is another first for the 2013 Decathlon. In previous years the village was constructed on the National Mall in Washington, D.C., between the Lincoln Memorial and the United States Capitol. This year it’s halfway between Los Angeles and San Diego on the site of the former El Toro Air Station. As the original 49ers said, “California, here we come!”
The competition runs from October 3 to 13 and is open to the public for eight of its 10 days. The overall winner is announced during closing ceremonies.
The Solar Decathlon serves to bring the best of education and industry together for the common goal of sustainability, inspiring innovation and efficiency and well as engendering camaraderie and health competition. Its byproducts spur scientists, production specialists, grid engineers, municipal planners, and countless others to focus on using nature’s free energy inexpensively and efficiently.
Together, academia and business acumen combine to bring new discoveries and innovation to the commercial marketplace. It is precisely this type of synergy that creates wealth and opportunity, including job creation, helping us to compete in the global marketplace.
Perhaps the greatest benefit of Urban Eden will occur after it returns to the UNC Charlotte campus for public viewing. Perhaps a couple of empty nesters or DINKS will see it and decide to replicate it on a Charlotte vacant lot. If they invest $250,000 in their new home, in the course of the next 30 years they’ll save an average of $72,000 in utility bills. Some of that time, their electrical meter will run forward and they will pay for electricity. But on sunny days, their meter will run backwards to the future.
If your company makes or sells products, some amount of inventory is needed, and funding inventory requires cash. Purchasing and holding raw materials, building finished goods, or buying completed products from vendors that are held for resale, demand some portion of a company’s cash.
For a manufacturer or distributor, the cash required to fund inventory can be significant. If sales are seasonal or the production cycle is long, even more cash is needed. Unfortunately, owners and managers sometimes forget that INVENTORY = CASH.
Accounts receivable and inventory are current assets, so one expects both to be converted to cash within a year. The problem is that companies often focus on how quickly receivables get converted to cash but not how quickly inventory is turned to cash. When a small business’s cash flow gets tight, focusing on accounts receivable can provide an immediate solution. Collecting a few large, past due invoices can quickly generate additional cash. In fact, prompt collections are so important that business owners and managers generate accounts receivable aging reports, which are reviewed and shared with others to ensure collections remain current.
Unfortunately, many small businesses do not have access to similar reports showing the length of time inventory is held. One may have reports showing current inventory dollars and quantities by item, out of stock inventory, or vendor costs by item, but an inventory aging or an inventory turnover report may not exist. If companies do not measure the number of days that inventory is held, inventory turns can slow, which requires more cash.
A financial ratio called Days Inventory Outstanding (DIO) can be used to calculate how long inventory is being held. With this ratio, a company can determine how many days it currently holds inventory for comparison with past periods. If DIO increases, more cash is needed to fund inventory. If DIO decreases, less cash is needed. Below is the formula used to calculate Days Inventory Outstanding and some suggestions about how it can be used to better manage a business’s cash flow.
Days Inventory Outstanding = (Average Inventory / Cost of Goods) x Number of Days in the calculation period
- Calculate DIO for current and past periods and compare—There is no single, correct DIO figure for all companies and industries. DIO is a ratio used to show trends, so it should be calculated for current and past periods and then compared.
- Initially, calculate a single DIO ratio for all inventory—Calculate a company-wide DIO figure that includes all inventory. If inventory is being held too long, then research to determine the cause.
- The calculation does not have to be perfect—Include only inventory-related cost in the cost of goods figure, if possible. If your inventory value includes only material and freight costs, then try to include only those in your cost of goods figure. If separating inventory-related costs from all other cost of goods is too difficult, then use total cost of goods. Calculating the ratio consistently over each period is more important than being perfect.
- Later, calculate DIO for specific inventory categories or product lines—If you sell hotdogs and sodas, try to calculate a DIO ratio for hotdogs and a DIO for sodas. Hotdog inventory may turn very quickly while soda inventory turns slowly. You can then focus on improving the slow turning inventory.
- Focus on selling old inventory and over-stocked inventory—Having $500 in cash now is better than having $700 in pumpkin-flavored soda sitting in inventory for three years. Identify old and over-stocked inventory and convert that inventory to cash. This reduces total inventory and improves DIO.
Cash that is used to fund and hold inventory is cash that a company does not have available elsewhere. Using a financial ratio such as Days Inventory Outstanding can help managers identify when inventory is being held longer than targeted or expected. With this knowledge, managers can then work to reduce days outstanding to squeeze extra cash out of inventory.
Content contributed by Potter & Company, a local certified public accounting firm offering core services of tax, audit, business consulting and financial analysis. Content written by Michael Waddell, Financial and Management Consultant. For more information, contact him or John Kapelar, CPA, Partner, at 704-283-8189 or visit www.GoToPotter.com.
Part One: Are You “Personally Ready” to Sell?
The personal decision to sell your business is usually based upon some combination of the following:
Ø A desire to “take the chips off the table.” Your tolerance for risk just isn’t what it used to be.
Ø The joy of going to work each day is fading. Not only has the fire in your belly gone out, but it’s been replaced by the desire to do “something else,” known or unknown.
Ø Your chosen “Successor” doesn’t work out. Neither child nor employee is able and/or willing to fill your shoes.
Ø You realize that now is the time to sell because you can attain financial security.
Ø There are a lot of activities other than running a company that you still want to experience.
Let’s look at the first two personal motives that can influence your timeline of cashing out of your business today and moving on to the next stage of your life.
Taking Chips Off the Table
As we age, our tolerance for risk diminishes and our desire for safety and security increases. Owning and operating a business places the majority of your assets at risk. These risks normally include:
Ø Competitive Risks—from competitors with more money than you;
Ø Financial Risks—the need to continuously invest money in the business to sustain growth;
Ø Personal Health Risks—owners are not immune from health issues that can (and do) pop up without warning;
Ø Liability Risks—there are hundreds of thousands of practicing lawyers in this country looking for someone to sue;
Ø Business Conditions—key employees may leave or your industry may ultimately become irrelevant; and
Ø The Economy—when it cycles down will it take your business with it?
For most owners, there is a point at which these risks become overly burdensome—especially when the business itself has become valuable. You no longer want to expose your most valuable asset to constant risk. When all of your eggs are in one basket and the basket is now worth a lot of money, it makes sense to lower the risk of losing that basket.
The only way to eliminate the risks inherent in owning a private business interest is to sell it—for cash, if at all possible. Doing so not only takes chips off the table by converting an “illiquid” asset to cash, but it also allows you to eliminate personal guarantees, reduce liability exposure and remove personal collateral (used for business purposes) that was at risk.
No Fire in the Belly
Few owners reading this article are as energetic and enthusiastic about their businesses as they were when they started. Owners tend to continue in business beyond an “optimum departure date” because they don’t know what else to do with their time. They continue on and spend months or years in their businesses long after the passion has died.
First, once lost, owners typically don’t regain their enthusiasm for and excitement about their businesses. The reason is pretty straightforward—entrepreneurs like to create. Once a business has a life of its own, it is left to wreak havoc or to succeed. Making money and all of the other byproducts of a successful business are nice, but it is the act of creating, of successfully meeting the challenges, that brings satisfaction to the entrepreneur.
The “fire in the belly” is the passion that gives birth to and nurtures your business. Once the business no longer needs you, it is time to move on to the next challenge, the next call for your passion and creativity. It is at this point that many owners begin searching for the exit door in order to find the next passion.
Second, one of the few solutions to the loss of fire is to sell the business and get out. Your business will move to the next level under new ownership for whom moving to the next level provides ample stimulation and challenge.
If one, or both, of these personal motives resonate with you, then the time may be NOW to discuss with your advisors the path that needs to be taken to prepare your business for your exit. Your advisors should have experience guiding business owners like yourself through the process of reviewing the factors associated with exiting a business and creating a comprehensive exit plan that addresses both 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 Robert.Norris@wnhplaw.com.
On March 23, 2010, President Obama signed into law the Affordable Care Act (ACA). On June 28, 2012, the United States Supreme Court ruled 5 to 4 that the law was constitutional, “permissible under Congress’s taxing authority.” In that ruling, the Supreme Court struck down the ability of the federal government to withhold Medicaid funds from states choosing not to participate in the ACA.
The most important element of the ACA is the individual requirement to obtain health care coverage which does not take full effect until 2014. In preparation to implement that requirement, states all across the country have begun choosing to participate or not participate in the ACA by setting up health care exchanges and expanding Medicaid funding to the uninsured.
As of February 26, 2013, 23 states and the District of Columbia have chosen to participate, three states are leaning towards participation, 13 states have decided to not participate, five states are leaning in the direction of not participating, and eight states are undecided. The map below indicates where the states stand at that date.
On February 12, 2013, Governor McCrory announced that the North Carolina Medicaid program was broken and that North Carolina was not prepared to participate in an expansion of Medicaid. He indicated that more study was necessary before any actions would be taken. In stating his opposition to the expansion of Medicaid, one of the factors Governor McCrory cited was a projected increase of $830 million in costs associated with that expansion over six years.
While that projected estimate may be accurate, there is ample evidence that those costs would be outpaced by cost savings from the reduction of uncompensated medical care that has been projected to reach between $1 and $2 billion between 2014 and 2019. Furthermore, having fewer uninsured residents and an overall healthier population will also affect costs.
Had North Carolina chosen to participate in the ACA, it was estimated by the Budget and Tax Center that the expansion of Medicaid alone would extend coverage to 488,867 uninsured citizens in 2014, out of the approximately 1,300,000 uninsured in this state.
Current law provides that states provide roughly 35 percent of the cost of those covered under Medicaid. Under the Affordable Care Act, the federal government will pay for 100 percent of newly eligible beneficiaries through 2019 and 90 percent thereafter. The additional cost to North Carolina is likely to be about $70.5 million in 2014 due to greater enrollment by those who are currently eligible under existing programs.
Fully $5.1 billion in new federal spending on health care would follow the Medicaid expansion under the ACA to North Carolina. Most of that funding would go directly to health care providers to pay for medical care. Over the six years from 2014 to 2019, the expansion of Medicaid would cost $16.3 billion with $15.5 billion coming from the federal government or 94.9 percent, while the state would contribute 5.1 percent or the $830 million.
It is important to know that people go to our health care system every day and they get care, and if they can’t afford it, they still get care but it is uncompensated care. Uncompensated care actually gets passed along to those who can pay. It’s called cost shifting and it’s been happening for a very long time…over 30 years.
This cost shifting has found its way into the base rates of health insurance for small businesses all across the country. That cost is shifted to a shrinking group of people (business owners) who struggle to pay for their own health insurance coverage.
As the Budget and Tax Center points out, “Having roughly one in five Americans uninsured is a drain on the American workforce and the American economy. The Medicaid expansion directly addresses this problem by extending insurance coverage to nearly 17 million Americans, more than half a million of whom live in North Carolina.”
Implementing the Medicaid expansion quickly, effectively and responsibly will not only improve the lives of hundreds of thousands of struggling North Carolinians through greater access to coordinated care, it will also save the state, and its taxpayers—including business owners, millions of dollars in the process.