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Ideas and Insights for Wealth Managers                       Volume 21, No. 11 • November 2011




www.onwallstreet.com
               th




anniversary
                                                     UBS Boosts Small
                                                     Business Owners




The Unfaithful Client p.11
REITs: The Best
Game in Town? p.34
Life Stories with
John Thiel p.64




Kenny Lao, owner of Rickshaw Dumpling
Bar, left, and his advisor, Peter J. Klein, right,
of UBS Wealth Management Americas
Cover Story




UBS And
The Small
Business
Owner
Challenge
UBS financial adviSorS take on
10 emerging entrepreneUrS
By lorie konish / photography by matt furman




R
                ichelieu Dennis is in the eye of the hurricane.
                That’s what Holly Hendrix thinks when she looks
                at the recent growth of Dennis’ natural personal
                care products company, Sundial Creations. “Don’t   Sundial creations
                micromanage it. Go with it,” Hendrix, a UBS        founder and
                                                                   ceo richelieu
financial advisor told Dennis, her client of only a few months.    dennis (left)
                                                                   and UBS Svp of
“Ride the wave. Try not to lose any important pieces along the     investments and
                                                                   Wealth advisor
path, and then at the end you’ll clean up the mess and you’ll be   Holly Hendrix

wherever you are, which is bigger.”
top: Sinu founder
and chief technology
officer larry velez
(left) and UBS
managing director
and private Wealth
advisor Jason m. katz.
Bottom: rickshaw
dumpling Bar co-
founder kenny lao
(left) and UBS Svp of
investments peter
J. klein
Cover Story


    Hendrix and Dennis began their professional relationship following       “All of a sudden we got it and it was kind of like running at full speed.”
the July kick off of a six-month pilot program between UBS Wealth            The new kiosk is scheduled to open on Broadway between 42nd and
Management Americas and the William J. Clinton Foundation. In this           43rd Streets this month. It will be a hybrid of Rickshaw Dumpling
philanthropic endeavor, UBS and the foundation have created 10 teams         Bar’s two New York restaurants and four food trucks. “It’s literally
in the New York City area. Each team consists of an entrepreneur,            an old shipping container that we bought from New Jersey, and we’re
a financial advisor and a mentor (who is also a UBS client) who are          shoving a truck into that,” Lao says.
matched up by UBS and the Clinton Economic Opportunity Initia-                   Establishing a new relationship with UBS financial advisor Peter
tive (CEO), a group within the Clinton Foundation. The program is            J. Klein, senior vice president of investments, and Klein’s client
aimed at providing the nascent businesses with more sophisticated            Peter Furth, chief executive of FFF Associates Inc., a consulting
resources and advice than they could obtain on their own. By helping         company for the food, spice and agri-chemical industries, came at
the companies grow, the program aims to help them create more jobs.          just the right time, Lao says. “To have some help from these guys
And, the financial advisors give their advice for free.                      in thinking out the bigger issues and looking at the cash issues was
    The project is one facet of UBS Wealth Management America’s              really, really cool,” Lao says. Lao co-founded Rickshaw Dumpling
Revitalizing America initiative designed to foster strategies to             Bar in 2005 after having worked as a special projects director for
stimulate the U.S. economy. “We wanted to have an opportunity                high-end restaurants in New York that allowed him to sample the
to do something a bit more hands on,” Lori Feinsilver, head of the           city’s finest restaurants.
CEO-UBS small business advisory program at UBS, says of the pilot                The menu includes chicken and Thai basil dumplings with spicy
program. The firm’s meetings with the Clinton Foundation resulted            peanut sate dip and vegetarian edamame dumplings with lemon-san-
in an instantaneous recognition of how UBS could “really put the             sho dip (Editor’s note: They are delicious!) The recipes were created
great work our financial advisors were doing with their clients to           with prominent New York chef Anita Lo.
use for the broader good,” she says.                                             Lao’s inspiration for the business came from the dumpling dinner
    The pilot program requires that the teams commit to working              nights he enjoyed as a child. As the only child of a single mother, who
together for six months and check in with each other at least once a         has since married, dumpling night was the one night another family
month. UBS hosts two workshops during that time on topics relevant           would come over for dinner. “This is what it’s like to have dinner every
to all of the companies, including balance sheet management and              night with a family,’” Lao says of the group dinners, which required
marketing. UBS has also provided the teams with a list of partners
in their home office that they can consult on various topics and areas
of expertise.
    “The program has exceeded our expectations,” Feinsilver says.
“I think the small businesses are learning a lot, but I wouldn’t
underestimate how much the clients and our [financial advisors]
are learning.”
    The pilot program will finish in February, and plans are already in
place for a national roll out starting in April in Chicago and California,
focusing on either Los Angeles or San Francisco. The next program
will include about the same number of teams, Feinsilver says, but
may narrow the current $2 million to $26 million-revenue range of
the participating companies. The ten participating companies had
$8.44 million in average annual revenue in 2010 and altogether had
400 employees as of the end of last year.
    Including Sundial, the personal care products company, and
its advisors, On Wall Street sat down with five of the participating
teams, including a construction company, a dumpling restaurant, a
high-tech firm and an educational materials company to examine
how the partnerships are working out.



RICkShaw DUmpLInG BaR
When Rickshaw Dumpling Bar submitted an application to several
new kiosks in Times Square, co-founder Kenny Lao did not neces-                                             from left, UBS Svp
                                                                                                              of investments
sarily think his business would win. “We were like, ‘Let’s throw in                                            peter J. klein,
                                                                                                            rickshaw dumpling
                                                                                                              Bar co-founder
this application and then figure it out,’” Lao says.                                                        kenny lao, and fff
                                                                                                              associates ceo
                                                                                                                peter furth
a lot of manpower to wrap and cook the dumplings. “It was so social
and so awesome, and I think a lot of memories aren’t just about the
food. It’s about the people you’re with and the environment and the
time in your life.”
    But the path to growth has not always been as smooth, Lao says.
Rickshaw Dumpling Bar, which has funded itself through individual
investors, opened a large store in the New York University neighbor-
hood, following a “big fat” fundraise at the height of the market in
2006, Lao says. That location turned out to be too big for the business,
and they shuttered it.
    “It cost a lot of money and almost took the company down and it
was really scary,” Lao says. In order to get his mind off that failure,
Lao started the food trucks.
    Now, as the company prepares for growth again, Lao has learned
some lessons. As he eyes new markets, perhaps Boston or Washington,
D.C., Lao says he would introduce the brand with trucks first. And
to save money, Lao says he would love to open a commissary down
the road so that the company can save money by also manufacturing
their own dumplings.
    Klein and Furth are working with Lao to help him work towards
those goals, including how to access capital the company will need.
Furth, whose business has been in his family for three generations,        from left, UBS Svp
                                                                           of investments
                                                                           Holly Hendrix,
hopes to see Lao retain most of the ownership. “You want to have           Sundial creations
                                                                           founder and ceo
the rewards of saying, ‘This is my business,’” Furth says. “You don’t      richelieu dennis,
                                                                           and retired retail
want your investors turning on you, or saying ‘I want out,’ and then       industry executive
                                                                           and consultant
how are you going to buy them out?”                                        carol greer

    Klein compares the work they are doing to coming in and skiing         flourish, and also consider how his relationship with his business
along Lao when he comes to a black diamond trail. The opportunity          partners needs to evolve.
to candidly learn about Lao’s business and watch him grow has been              Those realizations, Dennis says, would not have happened without
very rewarding, Klein says. “We’re going to be a triumvirate for many      his participation in the program, as he typically focuses all of his
years to come. As [Lao] grows, there might be new challenges that          time on all aspects of Sundial’s business, including filling orders for
come up,” Klein says. “But he can reach out to Peter and Peter and         retailers such as Target, Walgreens and Whole Foods.
say, ‘Here’s what’s going on. How can you help me?’ We’ll always be             “We end up making decisions in a vacuum that are reactionary
there for him.”                                                            to where the business is versus where it needs to be,” Dennis says.
                                                                           “Just that in itself is a value that will help all of the people that are
                                                                           participating in this make fewer mistakes.”
SUnDIaL CREaTIonS                                                               Sundial’s product line was inspired by the owner’s grandmother,
When you walk into Sundial, located in a former ambulance depot            who used to make and sell her own products in Sierra Leone. When
in Amityville, N.Y., you’re immediately struck by the large yellow         Dennis graduated from college in the United States and could not
sheets posted on the wall opposite Richelieu Dennis’s desk. The notes      return to his native Liberia because a civil war had broken out, he
reflect Dennis’s initial efforts after four or five meetings and weekly    began making similar products and selling them on city streets. Most
phone calls with Holly Hendrix, senior vice president of investments       of Sundial’s natural skin and hair care products have some concentra-
at UBS, and her client, Carol Greer, who will serve as a mentor to         tion of the shea butter Dennis’s grandmother first sold.
Dennis during the six-month program. Greer is a former department               Though his relationships with Hendrix and Greer were established
store executive whose previous roles include having served president       just recently, they already have a familial feel. “It’s not my business,
and chief executive of the specialty footwear and apparel division at      it’s not [Greer’s] business,” Hendrix says, “but I have to say, sometimes
Foot Locker Inc., formerly Woolworth Co.                                   when we’re talking to him, we’re talking to him like it is.”
    “All of what you see on my wall there is what’s in my head,” Den-           That extends to the entrepreneur’s real business family, which
nis says. “Now we are putting it into a form, and in the long run I        includes his mother, sister and best friend, who have all been involved
think it will make everybody’s life a lot easier and it will take away     with the company since it first started developing and selling the
a lot of complexities.” His work with Hendrix and Greer has helped         products from Queens in 1992.
him set new goals to create a more stable culture for employees to              Today, Sundial has about 35 employees. Dennis says he hopes
Cover Story


to grow the business to five times its current size. Since he teamed         she hopes will be more robust than previous versions her company
up with Hendrix and Greer, Dennis has been hit with a series of              offered. Like those other apps, this one will have photographic im-
positive events. The company has won back-to-back accolades for its          ages for children to identify, while also adding different levels and a
products from Allure, Esquire and Natural Health magazines. The              rewards system to encourage a child to progress.
momentum Dennis is experiencing in his business was more than                   That app is also aimed at generating more revenue than previous
Hendrix says she expected. Together, they plan to make sure Den-             versions, which the company has mostly offered for free. The new
nis is prepared to fully capture current opportunities and establish         app would first debut at $4.99 for the iPad and iPhone, while later,
a five-year business plan.                                                   simplified versions could go for $.99 to $1.99.
    Eventually, Hendrix says, that could mean taking some kind of               Different Roads to Learning has been able to draw on more ex-
outside funding. “[Dennis] is at a place where he really needs to sit        pertise with this app, Azuma says, from various technology experts
back and strategically think through how he is going to prepare the          at UBS, who have also recommended vendors, and Butte, whose
company for the growth he is about to have,” Greer says. “It takes           company also has an app.
an awful lot of thinking, and it also takes a lot of understanding of           Sager is also planning to help put together a five-year business
how his role is going to change.”                                            plan for Different Roads to Learning, while also reaching out to
                                                                             UBS departments that may provide concrete referrals to help the
                                                                             company improve its sales. And, the lessons learned are not neces-
DIffEREnT RoaDS To LEaRnInG                                                  sarily one-sided.
The first few months of Different Roads to Learning founder and                 “As I’ve been looking at the marketing plan and the business plan
Chief Executive Julie Azuma’s work with UBS private wealth advisor           overall, it makes me think, ‘Gee, maybe I should take a look at mine,’”
Sharon Sager and her client Amy Butte, founder and chief executive           Sager says of her financial advisory business. “It’s absolutely been a
of financial education company TILE Financial Inc., have led to some         wake-up call in terms of managing my practice.”
new lessons right away.
    That includes narrowing the scope of what Azuma plans to do and
more thoroughly considering their financial consequences.                    mZm ConSTRUCTIon & manaGEmEnT
    Azuma founded New York-based Different Roads to Learning 16              Marjorie Perry first realized that she wanted to be an entrepreneur
years ago, when here daughter first began showing developmental              as a teenager when she traveled from her hometown, Newark, N.J. ,
issues. “Nobody knew what it was, and when they found out she had            to cities including Atlanta, Chicago and Memphis as a power tumbler
these delays, they asked me to find certain materials and they were          for various gymnastics teams and a public speaker for her church.
impossible to find,” Azuma says of the special kinds of blocks and               In her role as president of Newark, N.J.-based construction and
images she was tasked with tracking down. “I hoped to create a place         transportation company MZM Construction & Management, she
where parents could find these materials.”                                   says her strong sales skills always shine through. “I could sell you
    Today, Different Roads to Learning sells educational materials           the Brooklyn Bridge and make you buy it again next week,” Perry
specifically targeted to autistic children. Its products include books,      says with a laugh. “That’s the gift that I have.”
manuals and flash cards, all designed to help autistic children learn            Perry co-founded MZM in 1992 through a three-way partnership.
through features like timers and rewards charts. The business, cur-          In 1994, Perry bought those partners out. Today, the company, which
rently with four full-time employees, has expanded with about 12%            focuses its work on Newark, N.J. and lower Manhattan, has a roster
growth per year. Most of the company’s business—about 85%—comes              of completed projects including the New Meadowlands Stadium and
from schools, districts and agencies, mostly in the U.S. and some also       New Jersey Performing Arts Center.
in Canada.                                                                       Now, Perry is working with UBS private wealth advisor and senior
    Azuma has already changed her thinking on how to prepare the             portfolio manager Russell Rabito and his client and brother-in-law
company for the future growth she hopes to see. That comes after             Walter Beal, general manager of Springline Corp., to strengthen
Butte, a former chief financial officer for the New York Stock Exchange      other areas of her business.
turned entrepreneur, walked her through a return on investments                  That will include meeting together to go through how MZM man-
statement. Sager and Butte also provided her with lessons on when            ages work and watches costs. Beal, whose talent is focusing on those
debt is necessary, and how to gauge the possible return on new               numbers, will also demonstrate the system he uses to track operations
projects by weighing both costs and projected revenue.                       and administration for his business. Once MZM installs that system
    “My staff, the people I work with, are always telling me that I should   and is trained on it in the next six months, Beal says, the company
be more focused and more patient about wanting to do everything at           can better track its costs. “Once we have our eye on exactly where
one time,” Azuma says. “And when Amy and Sharon said, ‘Can you               that bottom line is, then I can project that better on the next set of
just focus on a couple of things? We could really do these targeted          projects that I’m going to bring to the table,” Perry says.
things,’ I realized I was the one out of sync.”                                  Getting that financial organization in place can also eventually
    Now Azuma and her team are focusing on a new educational app             lead to hiring more employees to its 15-person staff. Perry says that
MZM could definitely use three to four additional people to manage
the field, office and internal operations.
    “The whole point is to get her margins up so she can actually
afford those people,” Beal says.
    The program should also better enable MZM to take its financial
records to a bank and prove how they can get a return from an invest-
ment, according to Perry. But the ultimate goal is to get MZM to a
point where it is financing all of its own projects without relying on
a line of credit or term loan.
    For that goal, she can turn to inspiration from Beal, who now
works with friends at Springline, a company formed in May that is
currently working on two hotel projects.
    “Walter is great to talk to because he is no nonsense. He can
look at me or give me a sound like, ‘Okay, Marj, rethink that,’”
Perry says. “I go back to the drawing board quickly when I hang
out with Walter.”



SInU – ThE TECh fIRm
When Larry Velez decided to create a company in 2004 around a                                                                          from left, Sinu
business plan he formed for an outsourced information technology                                                                         founder and
                                                                                                                                     cto larry velez;
                                                                                                                                        Sinu principal
department for small businesses, he had already had a taste of work-                                                             david owen; paltalk
                                                                                                                                    founder and ceo
ing for two startup companies.                                                                                                   Jason katz; and UBS
                                                                                                                                   managing director
    That included video streaming website company Pseudo Pro-                                                                           Jason m. katz

grams Inc., which closed in 2000, and another online video network       So we didn’t have to have uncomfortable conversations, like how can
company Alltrue Networks Inc., which failed to find follow-on            you give me a 20% discount?”
money after a 2001 fund raising event. “Pseudo was so crazy they             Now as Velez is looking to push the business further, he has UBS
made a video documentary about it,” Velez says of the film “We           advisor Jason M. Katz, founder and senior member of Katz Wealth
Live in Public,” which won a Grand Jury Prize for Documentary            Management, and his client Jason Katz, founder and chief executive
at the 2009 Sundance Film Festival. Velez wanted to leave less up        of Internet chat service provider Paltalk, to help him.
to chance with his new business. For that company, named Sinu,               Katz and Katz, who are not related, both grew up in Great Neck,
that meant relying on a revenue model rather than turning to the         N.Y. They connected in their hometown, where they shared similar
venture capital funding that those previous companies had fed on         interests including basketball, and have extended that relationship
prior to the dot-com bust.                                               as professionals. “We’re forever explaining the other Jason Katz,”
    “Raising venture money is like strapping a rocket to your back,”     Paltalk’s Katz says. (Katz of UBS made On Wall Street’s Top 40 Under
Velez says. “You will go somewhere. You might land where you want        40 ranking in 2009.)
to go, you might not. But you’re going somewhere.”                           Sinu’s growth plans include converting its hardware to a service
    Sinu started out by taking space in an incubator called SoBRO in     in addition to its overall information technology services. Ideally,
the South Bronx and taking a loan from a seed support organization       Velez says, that would mean refreshing equipment like computers
to help it start generating operating revenue.                           and servers provided to customers every few years like cell phones.
     Today, Manhattan-based Sinu provides outsourced technology          “There’s clearly a very valuable proposition they bring to the table,”
services to small professional organizations in industries includ-       UBS’s Katz says of Sinu’s plans. “Through a dialogue I had with
ing architecture and design, consulting, financial services, media,      Jason the client and Larry, we realized it was more of a scalability
nonprofits and real estate. Sinu’s clients typically have between five   issue.” To resolve that dilemma, UBS’s Katz plans to connect Sinu
to 250 employees.                                                        with UBS’s finance experts. Ultimately through the program, Velez
    Sinu’s model works by charging its clients about $125 per employee   hopes they can establish what the best way is for the company to buy
per month. With that, the businesses get email, security, data backup    the quantity of gear they need and buy it responsibly.
and network gear. About 90% of the company’s revenue is recurring            If successful, Paltalk’s Katz estimates that that plan could help
on a monthly basis.                                                      Sinu double or triple its business very quickly and create more jobs.
    “When things were really, really tight a couple of years ago, when   Velez has already seen some clients who signed up with 20 employees
the economy was collapsing, we shrank with our customers,” Velez         grow to 200- to 300-person force within one or two years. “We help
says. “As they let people go, their IT budget automatically shrank.      remove the friction of that growth,” Velez says. OWS
About the CEO-UBS Small Business Advisory Program
  On June 30, 2011, President Bill Clinton and Bob McCann announced the launch of the CEO-UBS Small
  Business Advisory Program at the Clinton Global Initiative (CGI) National Conference in Chicago. The
   objective of this philanthropic partnership between the William J. Clinton Foundation and UBS Wealth
Management Americas (UBS WMA) is simple: provide small business owners in underserved communities with
                   the knowledge and skills necessary to support expansion and job growth.
   The partnership began with a six-month pilot in the New York Metropolitan Area. Over the course of the
 program, entrepreneurs who currently run high-growth businesses with significant potential for job creation
are receiving pro bono, strategic financial and business advice from a UBS financial advisor and a dedicated
client from his or her corresponding network. Together, these financial advisor and client teams, with ongoing
support from UBS’s network of specialists and thought leaders, are providing each small business owner with
             the analytical expertise and business acumen necessary to achieve long-term success.
   The Small Business Advisory Program is the next step in UBS Wealth Management’s Revitalizing America
initiative, which brings together the business, government and nonprofit sectors to develop actionable solutions
                                            to revitalize our economy.
                                          About UBS Wealth Management Americas
UBS Wealth Management Americas provides advice-based relationships through financial advisors who deliver
a fully integrated set of products, services and solutions specifically designed to address the needs of ultra high
 net worth and high net worth individuals and families. It includes the Wealth Management U.S. business, the
             domestic Canadian business and the international business booked in the United States.




                                         For more information please contact:
                                        UBS                                       CEO Initiative
                                   Lori Feinsilver                                 Julie Wang
                             lori.feinsilver@ubs.com                        jwang@clintonfoundation.org




   ©2011 SourceMedia, Inc. and On Wall Street. All rights reserved. SourceMedia, One State Street Plaza, New York, N.Y. 10004 (800) 367-3989

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1111 On Wall Street Article

  • 1. Ideas and Insights for Wealth Managers Volume 21, No. 11 • November 2011 www.onwallstreet.com th anniversary UBS Boosts Small Business Owners The Unfaithful Client p.11 REITs: The Best Game in Town? p.34 Life Stories with John Thiel p.64 Kenny Lao, owner of Rickshaw Dumpling Bar, left, and his advisor, Peter J. Klein, right, of UBS Wealth Management Americas
  • 2. Cover Story UBS And The Small Business Owner Challenge UBS financial adviSorS take on 10 emerging entrepreneUrS By lorie konish / photography by matt furman R ichelieu Dennis is in the eye of the hurricane. That’s what Holly Hendrix thinks when she looks at the recent growth of Dennis’ natural personal care products company, Sundial Creations. “Don’t Sundial creations micromanage it. Go with it,” Hendrix, a UBS founder and ceo richelieu financial advisor told Dennis, her client of only a few months. dennis (left) and UBS Svp of “Ride the wave. Try not to lose any important pieces along the investments and Wealth advisor path, and then at the end you’ll clean up the mess and you’ll be Holly Hendrix wherever you are, which is bigger.”
  • 3. top: Sinu founder and chief technology officer larry velez (left) and UBS managing director and private Wealth advisor Jason m. katz. Bottom: rickshaw dumpling Bar co- founder kenny lao (left) and UBS Svp of investments peter J. klein
  • 4. Cover Story Hendrix and Dennis began their professional relationship following “All of a sudden we got it and it was kind of like running at full speed.” the July kick off of a six-month pilot program between UBS Wealth The new kiosk is scheduled to open on Broadway between 42nd and Management Americas and the William J. Clinton Foundation. In this 43rd Streets this month. It will be a hybrid of Rickshaw Dumpling philanthropic endeavor, UBS and the foundation have created 10 teams Bar’s two New York restaurants and four food trucks. “It’s literally in the New York City area. Each team consists of an entrepreneur, an old shipping container that we bought from New Jersey, and we’re a financial advisor and a mentor (who is also a UBS client) who are shoving a truck into that,” Lao says. matched up by UBS and the Clinton Economic Opportunity Initia- Establishing a new relationship with UBS financial advisor Peter tive (CEO), a group within the Clinton Foundation. The program is J. Klein, senior vice president of investments, and Klein’s client aimed at providing the nascent businesses with more sophisticated Peter Furth, chief executive of FFF Associates Inc., a consulting resources and advice than they could obtain on their own. By helping company for the food, spice and agri-chemical industries, came at the companies grow, the program aims to help them create more jobs. just the right time, Lao says. “To have some help from these guys And, the financial advisors give their advice for free. in thinking out the bigger issues and looking at the cash issues was The project is one facet of UBS Wealth Management America’s really, really cool,” Lao says. Lao co-founded Rickshaw Dumpling Revitalizing America initiative designed to foster strategies to Bar in 2005 after having worked as a special projects director for stimulate the U.S. economy. “We wanted to have an opportunity high-end restaurants in New York that allowed him to sample the to do something a bit more hands on,” Lori Feinsilver, head of the city’s finest restaurants. CEO-UBS small business advisory program at UBS, says of the pilot The menu includes chicken and Thai basil dumplings with spicy program. The firm’s meetings with the Clinton Foundation resulted peanut sate dip and vegetarian edamame dumplings with lemon-san- in an instantaneous recognition of how UBS could “really put the sho dip (Editor’s note: They are delicious!) The recipes were created great work our financial advisors were doing with their clients to with prominent New York chef Anita Lo. use for the broader good,” she says. Lao’s inspiration for the business came from the dumpling dinner The pilot program requires that the teams commit to working nights he enjoyed as a child. As the only child of a single mother, who together for six months and check in with each other at least once a has since married, dumpling night was the one night another family month. UBS hosts two workshops during that time on topics relevant would come over for dinner. “This is what it’s like to have dinner every to all of the companies, including balance sheet management and night with a family,’” Lao says of the group dinners, which required marketing. UBS has also provided the teams with a list of partners in their home office that they can consult on various topics and areas of expertise. “The program has exceeded our expectations,” Feinsilver says. “I think the small businesses are learning a lot, but I wouldn’t underestimate how much the clients and our [financial advisors] are learning.” The pilot program will finish in February, and plans are already in place for a national roll out starting in April in Chicago and California, focusing on either Los Angeles or San Francisco. The next program will include about the same number of teams, Feinsilver says, but may narrow the current $2 million to $26 million-revenue range of the participating companies. The ten participating companies had $8.44 million in average annual revenue in 2010 and altogether had 400 employees as of the end of last year. Including Sundial, the personal care products company, and its advisors, On Wall Street sat down with five of the participating teams, including a construction company, a dumpling restaurant, a high-tech firm and an educational materials company to examine how the partnerships are working out. RICkShaw DUmpLInG BaR When Rickshaw Dumpling Bar submitted an application to several new kiosks in Times Square, co-founder Kenny Lao did not neces- from left, UBS Svp of investments sarily think his business would win. “We were like, ‘Let’s throw in peter J. klein, rickshaw dumpling Bar co-founder this application and then figure it out,’” Lao says. kenny lao, and fff associates ceo peter furth
  • 5. a lot of manpower to wrap and cook the dumplings. “It was so social and so awesome, and I think a lot of memories aren’t just about the food. It’s about the people you’re with and the environment and the time in your life.” But the path to growth has not always been as smooth, Lao says. Rickshaw Dumpling Bar, which has funded itself through individual investors, opened a large store in the New York University neighbor- hood, following a “big fat” fundraise at the height of the market in 2006, Lao says. That location turned out to be too big for the business, and they shuttered it. “It cost a lot of money and almost took the company down and it was really scary,” Lao says. In order to get his mind off that failure, Lao started the food trucks. Now, as the company prepares for growth again, Lao has learned some lessons. As he eyes new markets, perhaps Boston or Washington, D.C., Lao says he would introduce the brand with trucks first. And to save money, Lao says he would love to open a commissary down the road so that the company can save money by also manufacturing their own dumplings. Klein and Furth are working with Lao to help him work towards those goals, including how to access capital the company will need. Furth, whose business has been in his family for three generations, from left, UBS Svp of investments Holly Hendrix, hopes to see Lao retain most of the ownership. “You want to have Sundial creations founder and ceo the rewards of saying, ‘This is my business,’” Furth says. “You don’t richelieu dennis, and retired retail want your investors turning on you, or saying ‘I want out,’ and then industry executive and consultant how are you going to buy them out?” carol greer Klein compares the work they are doing to coming in and skiing flourish, and also consider how his relationship with his business along Lao when he comes to a black diamond trail. The opportunity partners needs to evolve. to candidly learn about Lao’s business and watch him grow has been Those realizations, Dennis says, would not have happened without very rewarding, Klein says. “We’re going to be a triumvirate for many his participation in the program, as he typically focuses all of his years to come. As [Lao] grows, there might be new challenges that time on all aspects of Sundial’s business, including filling orders for come up,” Klein says. “But he can reach out to Peter and Peter and retailers such as Target, Walgreens and Whole Foods. say, ‘Here’s what’s going on. How can you help me?’ We’ll always be “We end up making decisions in a vacuum that are reactionary there for him.” to where the business is versus where it needs to be,” Dennis says. “Just that in itself is a value that will help all of the people that are participating in this make fewer mistakes.” SUnDIaL CREaTIonS Sundial’s product line was inspired by the owner’s grandmother, When you walk into Sundial, located in a former ambulance depot who used to make and sell her own products in Sierra Leone. When in Amityville, N.Y., you’re immediately struck by the large yellow Dennis graduated from college in the United States and could not sheets posted on the wall opposite Richelieu Dennis’s desk. The notes return to his native Liberia because a civil war had broken out, he reflect Dennis’s initial efforts after four or five meetings and weekly began making similar products and selling them on city streets. Most phone calls with Holly Hendrix, senior vice president of investments of Sundial’s natural skin and hair care products have some concentra- at UBS, and her client, Carol Greer, who will serve as a mentor to tion of the shea butter Dennis’s grandmother first sold. Dennis during the six-month program. Greer is a former department Though his relationships with Hendrix and Greer were established store executive whose previous roles include having served president just recently, they already have a familial feel. “It’s not my business, and chief executive of the specialty footwear and apparel division at it’s not [Greer’s] business,” Hendrix says, “but I have to say, sometimes Foot Locker Inc., formerly Woolworth Co. when we’re talking to him, we’re talking to him like it is.” “All of what you see on my wall there is what’s in my head,” Den- That extends to the entrepreneur’s real business family, which nis says. “Now we are putting it into a form, and in the long run I includes his mother, sister and best friend, who have all been involved think it will make everybody’s life a lot easier and it will take away with the company since it first started developing and selling the a lot of complexities.” His work with Hendrix and Greer has helped products from Queens in 1992. him set new goals to create a more stable culture for employees to Today, Sundial has about 35 employees. Dennis says he hopes
  • 6. Cover Story to grow the business to five times its current size. Since he teamed she hopes will be more robust than previous versions her company up with Hendrix and Greer, Dennis has been hit with a series of offered. Like those other apps, this one will have photographic im- positive events. The company has won back-to-back accolades for its ages for children to identify, while also adding different levels and a products from Allure, Esquire and Natural Health magazines. The rewards system to encourage a child to progress. momentum Dennis is experiencing in his business was more than That app is also aimed at generating more revenue than previous Hendrix says she expected. Together, they plan to make sure Den- versions, which the company has mostly offered for free. The new nis is prepared to fully capture current opportunities and establish app would first debut at $4.99 for the iPad and iPhone, while later, a five-year business plan. simplified versions could go for $.99 to $1.99. Eventually, Hendrix says, that could mean taking some kind of Different Roads to Learning has been able to draw on more ex- outside funding. “[Dennis] is at a place where he really needs to sit pertise with this app, Azuma says, from various technology experts back and strategically think through how he is going to prepare the at UBS, who have also recommended vendors, and Butte, whose company for the growth he is about to have,” Greer says. “It takes company also has an app. an awful lot of thinking, and it also takes a lot of understanding of Sager is also planning to help put together a five-year business how his role is going to change.” plan for Different Roads to Learning, while also reaching out to UBS departments that may provide concrete referrals to help the company improve its sales. And, the lessons learned are not neces- DIffEREnT RoaDS To LEaRnInG sarily one-sided. The first few months of Different Roads to Learning founder and “As I’ve been looking at the marketing plan and the business plan Chief Executive Julie Azuma’s work with UBS private wealth advisor overall, it makes me think, ‘Gee, maybe I should take a look at mine,’” Sharon Sager and her client Amy Butte, founder and chief executive Sager says of her financial advisory business. “It’s absolutely been a of financial education company TILE Financial Inc., have led to some wake-up call in terms of managing my practice.” new lessons right away. That includes narrowing the scope of what Azuma plans to do and more thoroughly considering their financial consequences. mZm ConSTRUCTIon & manaGEmEnT Azuma founded New York-based Different Roads to Learning 16 Marjorie Perry first realized that she wanted to be an entrepreneur years ago, when here daughter first began showing developmental as a teenager when she traveled from her hometown, Newark, N.J. , issues. “Nobody knew what it was, and when they found out she had to cities including Atlanta, Chicago and Memphis as a power tumbler these delays, they asked me to find certain materials and they were for various gymnastics teams and a public speaker for her church. impossible to find,” Azuma says of the special kinds of blocks and In her role as president of Newark, N.J.-based construction and images she was tasked with tracking down. “I hoped to create a place transportation company MZM Construction & Management, she where parents could find these materials.” says her strong sales skills always shine through. “I could sell you Today, Different Roads to Learning sells educational materials the Brooklyn Bridge and make you buy it again next week,” Perry specifically targeted to autistic children. Its products include books, says with a laugh. “That’s the gift that I have.” manuals and flash cards, all designed to help autistic children learn Perry co-founded MZM in 1992 through a three-way partnership. through features like timers and rewards charts. The business, cur- In 1994, Perry bought those partners out. Today, the company, which rently with four full-time employees, has expanded with about 12% focuses its work on Newark, N.J. and lower Manhattan, has a roster growth per year. Most of the company’s business—about 85%—comes of completed projects including the New Meadowlands Stadium and from schools, districts and agencies, mostly in the U.S. and some also New Jersey Performing Arts Center. in Canada. Now, Perry is working with UBS private wealth advisor and senior Azuma has already changed her thinking on how to prepare the portfolio manager Russell Rabito and his client and brother-in-law company for the future growth she hopes to see. That comes after Walter Beal, general manager of Springline Corp., to strengthen Butte, a former chief financial officer for the New York Stock Exchange other areas of her business. turned entrepreneur, walked her through a return on investments That will include meeting together to go through how MZM man- statement. Sager and Butte also provided her with lessons on when ages work and watches costs. Beal, whose talent is focusing on those debt is necessary, and how to gauge the possible return on new numbers, will also demonstrate the system he uses to track operations projects by weighing both costs and projected revenue. and administration for his business. Once MZM installs that system “My staff, the people I work with, are always telling me that I should and is trained on it in the next six months, Beal says, the company be more focused and more patient about wanting to do everything at can better track its costs. “Once we have our eye on exactly where one time,” Azuma says. “And when Amy and Sharon said, ‘Can you that bottom line is, then I can project that better on the next set of just focus on a couple of things? We could really do these targeted projects that I’m going to bring to the table,” Perry says. things,’ I realized I was the one out of sync.” Getting that financial organization in place can also eventually Now Azuma and her team are focusing on a new educational app lead to hiring more employees to its 15-person staff. Perry says that
  • 7. MZM could definitely use three to four additional people to manage the field, office and internal operations. “The whole point is to get her margins up so she can actually afford those people,” Beal says. The program should also better enable MZM to take its financial records to a bank and prove how they can get a return from an invest- ment, according to Perry. But the ultimate goal is to get MZM to a point where it is financing all of its own projects without relying on a line of credit or term loan. For that goal, she can turn to inspiration from Beal, who now works with friends at Springline, a company formed in May that is currently working on two hotel projects. “Walter is great to talk to because he is no nonsense. He can look at me or give me a sound like, ‘Okay, Marj, rethink that,’” Perry says. “I go back to the drawing board quickly when I hang out with Walter.” SInU – ThE TECh fIRm When Larry Velez decided to create a company in 2004 around a from left, Sinu business plan he formed for an outsourced information technology founder and cto larry velez; Sinu principal department for small businesses, he had already had a taste of work- david owen; paltalk founder and ceo ing for two startup companies. Jason katz; and UBS managing director That included video streaming website company Pseudo Pro- Jason m. katz grams Inc., which closed in 2000, and another online video network So we didn’t have to have uncomfortable conversations, like how can company Alltrue Networks Inc., which failed to find follow-on you give me a 20% discount?” money after a 2001 fund raising event. “Pseudo was so crazy they Now as Velez is looking to push the business further, he has UBS made a video documentary about it,” Velez says of the film “We advisor Jason M. Katz, founder and senior member of Katz Wealth Live in Public,” which won a Grand Jury Prize for Documentary Management, and his client Jason Katz, founder and chief executive at the 2009 Sundance Film Festival. Velez wanted to leave less up of Internet chat service provider Paltalk, to help him. to chance with his new business. For that company, named Sinu, Katz and Katz, who are not related, both grew up in Great Neck, that meant relying on a revenue model rather than turning to the N.Y. They connected in their hometown, where they shared similar venture capital funding that those previous companies had fed on interests including basketball, and have extended that relationship prior to the dot-com bust. as professionals. “We’re forever explaining the other Jason Katz,” “Raising venture money is like strapping a rocket to your back,” Paltalk’s Katz says. (Katz of UBS made On Wall Street’s Top 40 Under Velez says. “You will go somewhere. You might land where you want 40 ranking in 2009.) to go, you might not. But you’re going somewhere.” Sinu’s growth plans include converting its hardware to a service Sinu started out by taking space in an incubator called SoBRO in in addition to its overall information technology services. Ideally, the South Bronx and taking a loan from a seed support organization Velez says, that would mean refreshing equipment like computers to help it start generating operating revenue. and servers provided to customers every few years like cell phones. Today, Manhattan-based Sinu provides outsourced technology “There’s clearly a very valuable proposition they bring to the table,” services to small professional organizations in industries includ- UBS’s Katz says of Sinu’s plans. “Through a dialogue I had with ing architecture and design, consulting, financial services, media, Jason the client and Larry, we realized it was more of a scalability nonprofits and real estate. Sinu’s clients typically have between five issue.” To resolve that dilemma, UBS’s Katz plans to connect Sinu to 250 employees. with UBS’s finance experts. Ultimately through the program, Velez Sinu’s model works by charging its clients about $125 per employee hopes they can establish what the best way is for the company to buy per month. With that, the businesses get email, security, data backup the quantity of gear they need and buy it responsibly. and network gear. About 90% of the company’s revenue is recurring If successful, Paltalk’s Katz estimates that that plan could help on a monthly basis. Sinu double or triple its business very quickly and create more jobs. “When things were really, really tight a couple of years ago, when Velez has already seen some clients who signed up with 20 employees the economy was collapsing, we shrank with our customers,” Velez grow to 200- to 300-person force within one or two years. “We help says. “As they let people go, their IT budget automatically shrank. remove the friction of that growth,” Velez says. OWS
  • 8. About the CEO-UBS Small Business Advisory Program On June 30, 2011, President Bill Clinton and Bob McCann announced the launch of the CEO-UBS Small Business Advisory Program at the Clinton Global Initiative (CGI) National Conference in Chicago. The objective of this philanthropic partnership between the William J. Clinton Foundation and UBS Wealth Management Americas (UBS WMA) is simple: provide small business owners in underserved communities with the knowledge and skills necessary to support expansion and job growth. The partnership began with a six-month pilot in the New York Metropolitan Area. Over the course of the program, entrepreneurs who currently run high-growth businesses with significant potential for job creation are receiving pro bono, strategic financial and business advice from a UBS financial advisor and a dedicated client from his or her corresponding network. Together, these financial advisor and client teams, with ongoing support from UBS’s network of specialists and thought leaders, are providing each small business owner with the analytical expertise and business acumen necessary to achieve long-term success. The Small Business Advisory Program is the next step in UBS Wealth Management’s Revitalizing America initiative, which brings together the business, government and nonprofit sectors to develop actionable solutions to revitalize our economy. About UBS Wealth Management Americas UBS Wealth Management Americas provides advice-based relationships through financial advisors who deliver a fully integrated set of products, services and solutions specifically designed to address the needs of ultra high net worth and high net worth individuals and families. It includes the Wealth Management U.S. business, the domestic Canadian business and the international business booked in the United States. For more information please contact: UBS CEO Initiative Lori Feinsilver Julie Wang lori.feinsilver@ubs.com jwang@clintonfoundation.org ©2011 SourceMedia, Inc. and On Wall Street. All rights reserved. SourceMedia, One State Street Plaza, New York, N.Y. 10004 (800) 367-3989