Crain's Detroit Business "Relative Advantage: Better communication, streamlined management, agility--small business owners find keeping it all in the family works"
By Nancy Kaffer
CRAIN'S DETROIT BUSINESS
When Intellitrends President and CEO Marlene Stone wants to bounce ideas off her business partner, she doesn't have far to travel--husband Keith Stone is COO and executive vice president of the Clarkston-based market research firm.
And that makes it easier to do business, she says.
"In a typical company, decisions that have to be approved and discussed can take a long time," Marlene Stone said. "We talk about things at home, on vacation. ... If we get an amazing idea, we talk about it instead of the idea getting diluted through the approval process." Streamlined management is one reason the Stones say their business is thriving, despite the moribund economy, with 20 percent month-over-month growth in 2009.
Family-owned businesses, experts say, are well-positioned to weather the region's economic storm--and to snag a share of markets historically dominated by bigger business. That's because of agility and, in many cases, a management style where principals can talk frankly with each other about challenges and opportunities.
"It's the wave of the future," said Sandy Gohlke, principal in Troy-based Rehmann Group, a financial services firm. "The high level of service is lacking with a lot of large companies, and that's something family-owned business can offer: To be able to react quickly to needs, turn products around and turn services around fast is what clients are going to be looking for, and I think it is hard to get with these larger organizations that can't move as quickly or aren't as nimble as smaller, family-owned businesses. People like the personal services."
Keith Stone, whose background is in the high-tech corporate world, said Intellitrends' low overhead and compact management structure means the company is nimble, able to tailor services to client needs. Outsourcing components of the job that don't have to be done in-house lets the company shape its offerings more precisely.
"We can give the client exactly what they want," he said. "And we can give them a senior adviser, not a junior staff member." Keith Stone said Intellitrends, with about 10 employees, had revenue of $1.8 million to $2 million in 2008.
National companies' woes can become a local or regional business' boon, said Andrew Curoe, a partner at Troy-based Bodman L.L.P. and co-founder of the Family Business Think Tank, a coalition of attorneys, accountants and investment advisers who consult with family-owned businesses.
"I'm seeing that, especially in this economy, family-owned businesses are able to move in quickly to fill the void left by failing competitors," he said. "Other competitors are getting forced out of the marketplace, and larger competitors don't see them as a threat. They may not be going toe-to-toe, but they can keep the supply chain moving."
Curoe said that for family-owned businesses hoping to prosper in the current climate, it's important to keep lines of communication open, the management structure streamlined and to talk to clients.
"See where they're getting stressed, where they need niches filled," he said. "Many of the companies they're dealing with now, through layoffs or attrition, have fewer people doing more, and it's hard to do everything."
A recent project for Clarkston State Bank saw the Stones research and brand a new service designed to help the bank serve the growing health care market.
"We did the whole thing from A to Z," Marlene Stone said. "The preliminary assessment, the market research; we worked with the internal team, the follow on, developing new marketing materials, and tools on the back end to go back around and measure success.
"We're not afraid to think out of the box at all," Keith Stone added.
Family-owned businesses may also benefit from common values or priorities.
"We're able not only to turn quickly and make decisions... the biggest advantage we've had is we know the importance of having a values set that is consistent with mine and my brother's," said Hale Walker, senior vice president of First Preferred Mortgage. Founded in 1992 in Port Huron as a mortgage brokerage, the company is now a mortgage bank with a call center in Southfield and a wholesale operation based in Bingham Farms.
The company is licensed in 20 states and is in the process of expanding into four new states in an effort to grow its market share.
Walker said that helped his company, which is owned by Walker and brother Mark Walker, survive the mortgage market crash.
"What the public typically understands about the mortgage meltdown is subprime loans," Walker said. "What happened is with so many larger companies, the product set was out there. It didn't make a hell of a lot of sense to people, but they decided to go with it. We decided that it didn't make sense, and we didn't want to pursue it."
That company instead moved toward U.S. Federal Housing Administration-backed loans, forgoing some of the dramatic close rates some other brokerages experienced, but it was a decision that paid off.
"You can say we were lucky... or that we made a good decision in directing business toward the FHA early on," he said.
The Stones say familiarity makes the decision-making process easier.
"We know how each other behaves, if that's not a business we want to do or how we want to approach it," Keith Stone said. "We can talk turkey with each other, we can be a bull in a china shop with each other."
And when trouble comes, a family connection may provide incentive to keep things going.
The Walkers' business didn't escape the mortgage crisis unscathed--the group's wholesale business, which purchases mortgages from brokerages and small banks, took a hit in 2007 when the housing market began to tank.
"We got hit pretty hard," Walker said. "We made mistakes, and we had losses we had to buy back. But we had the reserves, saved the money, so we were able to take care of it and settle on those losses. And we had to make a change in some management. Some people made poor judgments."
Despite those troubles, Walker said, he and Mark Walker didn't consider throwing in the towel--and now the company is on track to close $1 billion in loans this year, with $650 million in loans closed last year.
"Here's what it did for me personally: If it wasn't a family business, we may not have hung in there," he said. "But we had not only individuals' jobs on the line, we have people who are prime breadwinners for families. So that played a big role in it for us in making it work. We felt morally obligated."
Nancy Kaffer: (313) 446-0412, nkaffer@crain.com.
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