Now that Family Business Radio has broadcast nearly a dozen interviews (all available for download here), one undeniable fact has emerged from our weekly conversations: there is no one personality type that goes out, starts a business and makes a success of it. This observation holds up as hosts Meredith Moore and Pat Romboletti welcome this week’s guests—Ray Pagano, founder of VideoAlarm, who sold his 33-year-old business in 2009 to a Fortune 100 company and Gary Anderson, who currently serves as Chair for three executive groups with Vistage, the world’s foremost CEO leadership organization.
Ray followed his own individualistic and thoughtful route to entrepreneurial achievement. Along the way, he gives credit to a host of people for helping him make his dream come true, including Gary, who advised Ray in the sell process, a journey that took many twists and turns, much planning and preparation.
VideoAlarm experienced slow early growth. (In fact, it sounded like during those early days, the most valuable employee was the shop dog!) The company was developing new technology and Ray ran into his share of nay-sayers. But “I didn’t know enough and being stubborn, I carried on,” he said.
Over time, the business flourished. When it became evident that no family members were going to take over the business, Ray turned to Vistage for personal and professional connections, outlets and advice. “They were an amazing help to the company and to me,” he said.
From his vantage point, Gary has seen the ups and downs, overs and unders of family-owned businesses, CEOs and key employees. He cited the four cycles of the typical family business:
• Blunder. Where the founder stumbles along, trying to figure out what’s next.
• Wonder. When you have a steady stream of months when you make the payroll (wow!), when you get your first line of credit (wow!).
• Thunder. The years where the company gains real traction, the years of making money and having fun.
• Plunder. This is the point when the entrepreneur is less willing to take risk, when the pilot light of the company gets dim or goes out altogether. Gary said, “This is the point where you need to re-calibrate or sell.”
Gary also pointed out that it’s an important step for the founder/entrepreneur to move from quarterback to coach and it usually happens “when 24 hours is just not enough time to get everything done.” He encourages his clients to delegate, to quit measuring employees’ behavior and instead focus on outcome. He tells them, “People will do things differently than you, but if a project gets done, is on time and on budget—then that’s OK.”
Once Ray made the decision to sell VideoAlarm, a fascinating seven-year story started to unfold. Upon the advice of his Vistage group, Ray issued phantom stock to his employees, telling them that the company was worth X and if they stayed with him and stayed productive, then they would get any appreciation from then until the time that the business sold. Additionally, he started monthly meetings with employees to educate them on the balance sheet and other aspects of ownership. And he initiated an outreach to the families of employees, sending out newsletters and hosting product demonstrations for them. In other words, he took serious steps to get serious buy-in.
Next came the ramp-up. Once again, Ray heeded the wisdom of trusted advisors. He gathered his supervisors at a three-day, off-site conference to develop the next steps for the company. The employees also got to air their grievances. “I really took a beating. A lot of hidden agendas got flushed out,” he confessed. But in the end, they walked out with 30 projects to be implemented and managed by the employees—not by Ray. It took five years, but the company grew and thrived. Ray said, “It was an amazing transformation from the first meeting to the end of that five-year period.”
When it came time to actively start looking for buyers, Ray was coached by his Vistage group to avoid getting caught up in the fever of the hunt. They urged him to stay focused on growing the business. “They pointed out that buyers actually want you to get distracted by the sell process because, if your business falls off, then they can get a better price,” Ray said.
By this time, the economy had crashed, but still VideoAlarm was able to get the deal done. The day before he signed the papers, Ray called his employees together and held up that long-ago phantom stock certificate—“do you remember this?” Needless to say, he made some people very happy that day. (One assembly-line employee used her bonus money to build a home for her mother in Mexico.) “It was a good way to do it,” Ray said modestly, “They helped me attain my dream for all those years, so they deserved it.”
Gary concluded by recommending a book that closely parallels Ray’s approach, “The Great Game of Business” by Jack Stack.
Please download our podcast and get the hour-long discussion with Ray and Gary. You are guaranteed to have plenty of “Aha!” and “Why didn’t I think if that?” moments. As Gary so succinctly put it, “One of us isn’t as smart as all of us.”
Gary Anderson, Master Chair, Vistage – Telephone: 404-520-0069 Email: firstname.lastname@example.org
Ray Pagano, Founder, VideoAlarm