A refund to the government
Kenneth Borin
Industrial Bag & Specialties
Madison Heights, Mich.
Plenty of defense contractors struck it rich during World War II. As makers of industrial laundry bags and sports bags, the Borin family could have done likewise when their firm landed a government contract. Instead, Kenneth Borin relates, “My grandfather loved this country so much that when he realized he was making a bigger profit than he thought, he gave the government some money back.”
Kenneth, now 51, borrowed a leaf from his grandfather after taking over the company in 1980. For six years the business struggled, until Kenneth began making donations to charity. “It was so hard to write big checks at the time, and my father thought I was crazy,” acknowledges Kenneth, an observant Jew. But he attributes his company’s success to his charitable efforts. The more he gave away, the more the business prospered. “I’d send $300 to some charity and immediately get an order for $3,000.”
After the September 11 attacks, a supplier offered to sell Kenneth scarce rolls of American flag fabric. He bought enough for 500 three-by-five-foot flags. “But I don’t want to make money on the disaster,” he says. Instead, he’s sending the flags to his customers as gifts, with a note pointing out that “We’ve been in business through several wars, and we’re all in this together.”
Accentuate the positives
Patricia Smullin
California Oregon Broadcasting Inc.
Medford, Ore.
When Patricia Smullin heard President George W. Bush tell Americans to act normally, work hard and spend money, she immediately thought of her father. During World War II, when Americans were traumatized by visions of shortages and storm-troopers, radio entrepreneur William B. Smullin arranged for a new home to be built in 30 days. Then he covered its construction progress daily over one of the local radio stations owned by his broadcasting chain. He called it the “yardstick house” because the station reported every inch of construction. Builders would report live from the site, describing progress and costs.
“The yardstick was also a measure of our community’s growth,” says Patricia, 51, who runs four TV stations and a cable system and digital production company that now constitute California Oregon Broadcasting. “My father wanted to instill optimism in the economy and help people feel more secure about their ability to make things happen.”
William Smullin died in 1995, but the next generation has been seeking and finding silver linings long before the September 11 attacks on the World Trade Center and the Pentagon. Smullin’s media outlets—which evolved from a radio station the elder Smullin launched in 1932 to TV in the early 1950s, cable TV in the late 1950s, and microwave in the 1960s—focus on positive local news. “We don’t just report the positive,” says Patricia. “We make positive things happen.”
Right now she’s trying to think positively about her company’s advertising losses in the wake of the September 11 attacks. Its traditionally lean workforce is a help. The company’s 150 employees wear several hats, just as in the 1950s. Even Patricia sells ads and hosts a half-hour show on which she interviews national celebrities. This, too, is a family tradition: Her mother, Patricia D. “Rusty” Smullin, used to host the “Aunt Polly Show,” which celebrated local children’s birthdays with an on-air party.
When push came to shove
Leslie Fishbein
Kacey Fine Furniture
Denver
The year was 1989. Denver was sliding into what Leslie Fishbein calls a “rolling recession”—first the savings-and-loan debacle, then the oil bust and finally the real estate crash. At the same time, the city changed the expressway entrances and exits near her family’s flagship downtown furniture store. “You could only get to our store by burro or helicopter,” quips Leslie, whose father, Jack Barton, launched the first of their now seven retail stores in 1948. Worse, the company’s bank was taken over by another bank, which had to re-appraise the building and valued it at less than half the outstanding balance on the company’s $1.6 million note. Although the company had never missed a payment, the bank called the loan.
Leslie, now 49 and president, says her father taught her to be consistent and stand her ground. But when an angry woman from the bank came to their office demanding $600,000 on the spot, both Leslie’s father and her husband—CEO Sam Fishbein—left the room, leaving Leslie to confront the banker alone.
“She was screaming at me,” Leslie recalls. “I could not come up with the money, so I handed her the keys from my purse and told her, ‘If you think you can do a better job than I can, here are the keys.’ She backed down, and we ended up buying the building for $600,000.”
Leslie and her family subsequently instituted “personal intervention” policies to prevent a similar scenario as the $50 million chain faces new economic challenges today. For instance, to avoid one of the industry’s biggest problems—furniture returns—and improve customer satisfaction, Kacey’s salespeople take responsibility for results by measuring customers’ living rooms to make sure sofas and armoires will fit there.
“We’re involved in the consulting side of sales,” Leslie says. “And everyone, through our open-book management, watches our return ratio and cash flow numbers. It’s our competitive advantage to have lots of eyes watching our numbers.”
Dad’s Depression lessons
Marcia Slaminsky
Ben’s
Lee, Mass.
Ben Slaminsky opened an army-navy store with his brother in Lee, Mass., in 1932 because surplus goods were inexpensive and accessible during the Depression. The Depression also endowed Ben with a tight-fisted Yankee mentality that he transmitted to his daughters. “He used to wag a finger,” daughter Marcia recalls, “and say, ‘You get what you pay for. So buy the best, don’t compromise, and don’t charge a lot, because we live in this town and see everyone daily.’”
The store survived, but “my father was terribly poor,” recalls Marcia, 46. During World War II, Ben enlisted and turned the store over to his sister-in-law. Throughout those years, the family personally loaned the store money when it couldn’t pay its bills.
“We’d never go to the bank,” says Marcia. “My father taught us to save money and always pay our bills. If you can’t pay cash, you simply don’t buy it. You don’t take out a loan for anything but a house.”
But in 1970, the store’s landlord died. Ben Slaminsky had to purchase the building or go out of business. He bought the building and doubled the store’s space. His daughters, Marcia and Jane, co-owners today, quickly seized the opportunity to add a line of more fashionable clothes—like Indian madras pants and shirts and bell-bottoms. Ben, who died in 1985, didn’t object—in fact, during that period, he usually decked himself in polyester bell-bottoms and Wallabees with his shirt, tie and jacket.
When 65 designer outlet stores opened on the outskirts of town several years ago, two local clothing retailers folded. The Slaminsky sisters and their mother (who still works as the store’s bookkeeper) realized they couldn’t compete head-on in the fashion arena, so they largely reverted to Ben’s original business-work clothes, which tend to stay in fashion longer than bell-bottoms did.
“There’s not a whole lot of fluff in this store because my customer base knows what they want and need,” Marcia says. Incidentally, she adds, “We’re doing quite well.” But “if it wasn’t fun, I’d be out of this.”
When frugality is a family tradition
Elliott Gabay
Gabila’s Knishes
Brooklyn, N.Y.
Much has changed at Gabila’s Knishes since Bella and Elia Gabay started selling five-cent knishes (potato and onion pies fried in pastry dough) in Brooklyn in 1921. Under grandson Elliott Gabay, 54, the company has diversified into hors d’oeuvres and distributing pickles. The customer base has expanded from pushcart vendors and kosher delicatessens to supermarkets and stadiums around the country, and even some in Europe and Israel. The company has 50 employees and measures its revenues in millions of dollars rather than nickels.
But some things, like Gabila’s original recipes, remain unchanged. The founders’ Depression-era aversion to banks has also survived. As Elliott tells it, his grandfather once applied for a bank loan to buy equipment. “He had no collateral at the time, except his name. The bank wouldn’t do it, so he swore off banks. He borrowed money when he needed it from relatives. My father believed in that, also.” Gabay has also continued his family tradition of frugality. “Every penny and nickel was counted and put away for hard times.”
Elliott has financed all growth—including the purchase of his fleet of trucks, development of new products, automation and geographic expansion—from internal cash. “The money we make is put back into the business. We keep a tight reign on what’s going on in the business.”
The World Trade Center disaster destroyed some of Gabila’s pushcart and retail distributors, but the pinch for the company was more emotional than financial. The company’s bottom line, says Elliott, is its legacy: “You have to grab the broom in your hand and sweep the floor to see how it feels, so when you pass the broom on to the next person, you can direct them. You have to know every part of the business you’re running. Once you rely on other people, you’ll run into problems.”
Keeping liquid
Peter Baker
Crystal Rock Water Co.
Watertown, Conn.
The best way to keep your head above water—especially when that’s what you’re selling—is to be fiscally conservative. “That’s served us best through the war and Depression,” says Peter Baker, whose grandfather, Henry Baker Sr., founded Crystal Rock Water Co. in Stamford, Conn., in 1914. “We’ve always been cost-conscious, so that if we faced a downturn in the business, we would never get terribly hurt,” Peter says.
The fiscally conservative values his grandparents and parents imparted have affected him deeply. During Crystal Rock’s biggest growth spurt in the 1960s, the company relied entirely on internal cash to finance its diversification into snacks, freshly brewed coffee and vending machines, which it delivers (along with its water-cooler bottles) to business offices. Nor did it borrow when it added individually sized bottled water in response to the 1990s’ health consciousness. (Before five or ten years ago, most of the home market consisted of five-gallon plastic bottles.) Crystal Rock went to the bank only once: in 1988, to finance a new facility in Watertown, its current headquarters.
“We always grew within our means,” says Peter, 42 and now president. So even when a recession quickly followed, Crystal Rock’s sales didn’t spring a leak, although the growth rate sputtered from 10% to 15% in the late 1980s to 3% to 5% during the early 1990s.
In the wake of September 11, Crystal Rock has beefed up its security and reviewed its safety procedures. But its biggest current challenge is its recent $64.2 million merger with publicly owned Vermont Pure Holdings Ltd. The two companies consolidated all home and office segments into Crystal Rock, with Peter in charge, and kept the grocery and convenience-store products at Vermont Pure, where Peter’s brother, Jack, 47, is now executive vice president.
But the combined company has been on the acquisition trail, which means Peter will have to rely more on outside sources of capital. If he’s uncomfortable with that prospect, he doesn’t show it. “We have the confidence to stick with what we’re doing,” he says. “We’ve never over-extended ourselves before.”
Jayne A. Pearl, based in Amherst, Mass., is a regular contributor to Family Business. She is the author of Kids and Money: Giving Them the Savvy to Succeed Financially (www.kidsandmoney.com) and co-author of Keep or Sell Your Business: How to Make the Decision Every Private Company Faces.