We had three hours to close a deal that would bring us $28 million in revenues. Our first bid had already been rejected. After we crunched the numbers, bids were submitted, rejected, and resubmitted in a charged environment of heated negotiations. If time expired, the consequences would be dire. Already a sufferer of performance anxiety, I’d have to explain to my class why we didn’t get the contract. You see, I was elected to lead the sales team for Zenith Fixtures Inc., a fictitious manufacturing company of high-priced, high-quality commercial kitchen appliances.
It sounds like an exercise from The Apprentice, but this training took place near the upper valley of the Connecticut River and the foothills of New Hampshire’s White Mountains in an executive training program tailored specifically for minority entrepreneurs. Held at the Tuck School of Business at Dartmouth College, the Advanced Minority Business Executive Program (AMBEP) is a crash course on business and finance in which participants attend intense 10-hour classes taught daily by Ivy League professors. Last November, some 50 entrepreneurs, senior executives, and one journalist, me, spent the better part of a grueling week analyzing case studies, poring over complicated balance sheets, and performing cash-flow analyses. Themed “Growing the Minority Business to Scale,” the fast-paced program is designed to teach entrepreneurs how to grow their businesses through acquisitions, strategic alliances, and expansion of existing operations.
Think of it as business boot camp: Breakfast is served at 7 a.m. Classes begin at 8 a.m. sharp and end after 6 p.m. Tutoring, which many of us attended, was available until 11 p.m. And then there was homework, studying, and required reading of dense financial material. I started my day at 5 a.m. so that I could complete assignments. AMBEP is designed for owners and executives of minority-owned companies who have five to 10 years of senior management experience, are graduates of Tuck’s core MBEP or similar programs at other business schools, or have acquired equivalent business education.
The idea behind the program was simple. According to Leonard Greenhalgh, professor of management and director of the program, most minority-owned businesses fail due to mismanagement. The program is designed to give minority entrepreneurs the skills and know-how to succeed in any business environment. That’s why it’s important for all professionals and executives to enroll in programs like AMBEP. They can sharpen their skills, make new contacts and, most importantly, find innovative ways to boost their company’s revenues and market share. (See sidebar, “Basic Training” for similar programs for minorities.)
Each day focused on various aspects of business development. Monday: growing businesses by merger or partnership. Tuesday: marketing and balance sheet and cash-flow analysis. Wednesday: process improvement, running a lean business, and methods used to value a business. Thursday: finance theory, negotiating with customers and suppliers, and forming alliances. Friday: a discourse on acquisitions, a program wrap-up, and graduation. There were also guest speakers from NASA and Royal Ahold, a $70 million international supermarket operator.
Much of the instruction is interactive and assignments are handled through collaborative learning groups, a pre-assigned cadre of five or six participants with various business backgrounds and expertise. Participants remain in the same learning group throughout the week and must analyze and solve case studies that depict certain business dilemmas.
Scores of BE 100s companies have sent top executives through the program. Among the larger companies are the Bing Group (No. 8 on the BE INDUSTRIAL/SERVICE 100 list with $372 million in revenues), SET Enterprises Inc. (No. 17 on the BE INDUSTRIAL/SERVICE 100 list with $212 million in revenues), Mays Chemical Co. (No. 25 on the BE INDUSTRIAL/SERVICE 100 list with $159 million in revenues), and the Specialized Packaging Group Inc. (No. 29 on the BE INDUSTRIAL/SERVICE 100 list with $128.8 million in revenues).
BUILDING BUSINESSES THROUGH THE CLASSROOM
Among my classmates was Kevin E. Thorne, the 45-year-old president and chief operating officer of Kinston, North Carolina-based Best Diamond Packaging L.L.C., a manufacturer of paper napkins for the fast-food industry that has grown into a $20 million business in just three years. Thorne, who started the company with his partner, former McDonald’s executive Robert Beavers, admits such growth presents its share of challenges. To meet growing demand, Best Diamond had to purchase four processing machines to handle the cutting, folding, and embossing of the paper products. It wasn’t a minor expense; each machine cost roughly $2 million. “They’re a very big investment,” he maintains. “You need a lot of volume and a lot of time to pay them off.”
Their second concern has been product and customer diversification. Presently, McDonald’s represents the lion’s share of the company’s revenues.
Thorne says he expects to employ several of the strategies he learned over the week. “It gives you a framework as to how to think about your business, how to think about your customers, and how to approach what it is you do every day,” he reflects. In particular, Thorne found the financial analysis classes extremely helpful and plans to perform a valuation on his business annually.
In the 1970s, the Small Business Administration realized that its 8(a) program for socially and economically disadvantaged business owners was a mixed success. While in the program, companies were prospering. But after graduating from the eight-year program, most firms folded. Without the government set-asides, a number of entrepreneurs didn’t know how to compete against larger companies within their space.
To reverse this decade-long trend, the SBA did two things. First, it made sure that 8(a) businesses gained an increasingly greater percentage of their contracts from businesses and agencies outside of the set-aside program. Using this approach helped stabilize businesses as they emerged from the program.
At the same time, the SBA recognized that the only thing that was going to make a real change was education. So Milton Wilson, who at the time was the director of Office of Capital Ownership Development, suggested the development of AMBEP. Tuck received SBA funding and launched the program in 1980. After the money dried up — particularly during the post-9/11 era — the institution turned to corporate and private sponsors.
VALUABLE BUSINESS LESSONS
The Zenith exercise was a class highlight. The class was broken up into four teams, drawing from lessons learned throughout the week on cost analysis, profit margins, forming alliances, marketing, and negotiation. Two teams worked for competing electrical appliance vendors: Zenith and our competitor, Ace Fixtures, a low-cost manufacturer that could undercut our prices but couldn’t match our quality. The other two teams headed up restaurant chains that were opening 2,000 new locations. The object was for the vendors to secure a contract ensuring the growth of their business, while the purchasers sought the best quality items at the lowest price.
There were heated debates — even arguments — as students scrambled to achieve their objectives through back-room
dealings (some deemed illegal), non-compete agreements, and strategic alliances. Our team analyzed potential customers to determine their needs and calculate the price at which we could deliver. We worked at a feverish pace to do the math, set the prices, hammer out the contract, and meet the deadline. At the last minute, our team landed one of the two contracts and formed a joint venture with our competitor to manufacture a line of revolutionary high-tech dishwashers, for which they had the manufacturing and distribution rights but not the production capabilities. Our firm would keep 90% of future profits. We also maintained all sales and distribution rights for the dishwashers and used that as a selling point when we approached the customers. By the way, this winning strategy was my idea.
One enlightening experience came during the final exercise of the week. The class was broken into groups of two. One person had to negotiate the maximum price possible for a factory; the other, the purchaser, was attempting to buy low. Details on the operations were provided, including reasons for buying and selling. As the seller, I partnered with Pamela McCauley-Bell, president and CEO of Tech Solutions Inc., an Orlando, Florida-based provider of industrial engineering services. We sat down and immediately began haggling. I was looking to sell the operations for $18 million and settled on $15 million (I merely added up the value of the equipment and the real estate to come up with that figure and tacked on a few million for good measure). In fact, the entire class sold the factory for $14 million to $18 million.
Once the exercise had been completed, Greenhalgh pointed out that virtually every seller neglected to ask the purchaser a simple question: Why were the purchasers looking to buy the factory? A few questions and simple financial analysis based on information in the two-page handouts given to each team (purchasers and sellers were given different information) showed that the purchaser would have actually spent much more for the operations.
It was a most valuable lesson for the entrepreneurs and a business writer like me who covers transactions on a regular basis. There’s often a fine line between entrepreneurial success and failure. The proper education can make all the difference.
BASIC
TRAININGExecutive education programs are important tools whether you’re a professional in a monolithic corporation or an entrepreneur managing a startup. There are a even a few programs designed specifically for minority groups linked to major colleges and universities. These are among what’s available:
The Minority Business Executive Program (MBEP) and Advanced Minority Business Executive Program (AMBEP) at the Tuck School of Business at Dartmouth College
This is a one-week course designed to help entrepreneurs sustain and grow businesses. Emphasis is placed on financial analysis, operations, and structuring acquisitions and partnerships.
Fee: $4,500, which includes tuition, course materials, lodging, meals, and a certificate of participation.
Contact: Paula Graves, program development manager; 603-646-3740; exec.tuck.dartmouth.edu/
Advanced Management Education Program (AMEP) at Kellogg School of Management, Northwestern University
This is a custom executive program, in conjunction with the National Minority Supplier Development Council Inc., designed exclusively for NMSDC-certified minority businesses. The four-day program is designed to provide entrepreneurs with the tools and skills needed to achieve and sustain accelerated growth. Courses cover mergers and acquisitions, business strategy, and successful marketing.
Fee: $4,800, which includes tuition, class materials, lodging, and meals.
Contact: Steve Sims, vice president of programs and field operations for the National Minority Supplier Development Council; 202-955-0036; www.nmsdcus.org/
The Darden Minority Business Executive Program (DMBEP) at Darden School of Business, University of Virginia
This program is tailored to meet the individual needs of each entrepreneur, placing no restriction on the number of years its participants have owned or operated a business. Courses include basic financial concepts, negotiating strategies, and leadership skills.
Fee: $4,000, which includes tuition, course materials, lodging, meals, and a certificate of participation.
Contact: Donald W. Jones, founder; 434-924-6246
The African American Leadership Institute at Anderson School of Management, UCLA
This program brings together executive participants and academic and corporate leaders to identify critical paths to success. The five-day program addresses key personal, interpersonal, and organizational issues that blacks face as they climb the corporate ladder. Topics include issues of leadership and managing change, workplace trust, mentorship and personal development, and organizational culture specific to the African American manager.
Fee: $5,250, which includes tuition, books, educational materials, refreshment breaks, receptions, and most meals.
Contact: Anderson Graduate School of Management; 310-825-2001; www.anderson.ucla.edu/ — Tykisha Lundy