From failure to success: founding Northwestern Communications

Autobiography

I have heard it said that life beings at 40, and considering that I am near 40 and embarking on a new stage in my life, I can see how people have come to that conclusion, since 40 seems to be the age where people have that combination of wisdom, experience, and energy that makes embarking on new adventures exciting, rather than intimidating. For me, however, my current life began more than 20 years ago, not with my first taste of success, which came shortly thereafter, but with my first crushing failure; I did not succeed in my first attempt at higher education. I graduated from high school in 1990 and enrolled at Illinois State University. However, I was too immature for college at that time and did not give my studies the attention that they deserved. I did not make the grades that I needed to make, and I left the University after a single year.

To some people, failing to achieve as they expected might have tempted them to resign themselves to underachieving, but I did not respond in that manner. I left the University, not because I was afraid that I would not be able to achieve success there; I knew that if I devoted the time to my studies that I should have done from the beginning, I could do very well. Instead, I left the University because I was very angry with myself. I grew up in a home with a focused work ethic, and failing to excel was oftentimes equated with failure. I was furious with myself that I had failed to excel at a goal that I set for myself, and I was determined to, not only achieve, but excel, at my next chosen venture.

In 1991, along with my brother, I founded Northwestern Communications, Inc. In Schaumburg, Illinois. The company worked similar to a vending route and consisted of payphones in a specific service area. As difficult as it is to imagine in an era when pay phones are all-but obsolete, the business filled a void at that time and provided me with my first real taste of business success. My brother and I started the company with 30 phones, and, by the time we sold the business in 2003, we had grown it to 2500 phones in a 4 state area. Founding and growing a start-up company gave me my first real experience with success, although it provided challenges for me as well. I learned, from trial and error, how to engage in corporate business plan development and execution, strategic planning, obtain financing, analyze the market, schedule operations, handle marketing, handle sales, determine acquisitions, and manage the interior workings of an office environment.

I think that, for me personally, it would be impossible to overstate the role that Northwestern Communications, Inc. played in my development as a business person. Through that experience, I learned so many aspects of business that are best-learned through experience. Furthermore, by having hands-on involvement in the day-to-day operations of the business, I was able to experience all aspects of a business. Perhaps most beneficial was the fact that I honed my skills as a negotiator while learning how to negotiate for Northwestern Communications, Inc.; I was responsible for negotiations with major established telecommunications service providers, such as AT&T, SBC, and Illinois Bell, and was able to negotiate in such a way as to maximize profit. In addition, as the company grew, I had to learn how to transition from a hands-on owner to a successful manager, learning the delicate balance between failing to utilize employee talent to its fullest and giving employees responsibility without the adequate training and decision-making authority to meet those responsibilities. Eventually, I managed a team of over 35 service technicians and two office managers.

However, as one might expect, despite our tremendous success, my brother and I were constantly watching the evolution of the market and we began to realize that the proliferation of cellular phones meant that the payphone model would not continue to provide increasing returns, as it had since the inception of the company. We made the decision to sell the company while we could maximize profit. At the time of its sale, the company was valued at $7.5 million, which, to me, established my success as a business owner.

Having seen the writing on the wall in the telecommunications industry, I decided to pursue another career. Rather than try to recreate success in the telecommunications industry, I decided that I would change industries, and I entered real estate. Given that I had financial resources from my last venture, I could have gone into real estate investing, but I felt like, in order to be a success in property acquisition, I needed to have a better understanding of the real estate market. Therefore, I decided to become a real estate broker. I began my career as a real estate broker at Starck Realtors, Inc., where I worked with both buyers and sellers on the sale and purchase of single family homes, investment properties, and commercial real estate. I found that my experience as a salesperson was invaluable to my experience as a real estate broker, and in 2002 I was named the Rookie of the year, and I was a multi-million dollar producer for two consecutive years. I feel like this experience provided me with the background I needed to transition to the next phase in my real estate career.

My practical real estate experience provided a foundation for me in real estate investing, and I did that while, at the same time acting as the general manager for NCI Holdings, LLC, a property management company. In my position at that company, I was involved in all aspects of commercial property management. I was responsible for researching and identifying properties that were available for acquisition. My position as a broker put me in an ideal position to locate distressed, foreclosed, and bank-owned properties, and also gave me a good understanding of competitive pricing for these types of acquisitions. However, my position went far beyond acquisition; once the properties were obtained, I handled renovations for the properties, and then the rental and sale of the properties. I was responsible for a portfolio of 20 properties with a combined value of approximately $15 million.

In 2003, I moved to ERA Northwestern Realty, because I saw the opportunity for upward mobility at that real estate company, which did not exist at my prior brokerage firm. I began working at the firm as a managing broker. In addition to sales, I was responsible for managing a team of real estate professionals. This involved not only locating talent, but also training and hiring that talent. I continued to engage in real estate transactions, but I also began transitioning my focus to short and distressed asset sales. While I was primarily working with asset managers with these distressed sales, it is important to keep in mind that I also focused on working with homeowners in distress. Foreclosure is rarely, if ever, the best option for a homeowner facing difficulties, and I worked with homeowners to explore all of their options, including foreclosure. In my role as a manager, it was my responsibility to help the other real estate professionals develop and meet their goals, handle monthly meetings, and handle training and feedback meetings for the staff as well. Eventually, I transitioned from a managing broker to a broker-owner.

Not all of my business ventures have been as successful as my real-estate and telecommunications ventures. For example, in 2010, I decided to add insurance professional to my resume, and began working with American Income Life Company as an insurance producer. In many ways, the position was a familiar one. I was in charge of a sales team with responsibility for enrolling union members in supplemental insurance benefits packages. I was also responsible for handling training as well as daily reports for the company. While I was successful in this position, I found that it did not hold my interest. It was not an issue of not believing in the product; I would never have taken the position if I did not believe that supplemental insurance could provide significant benefits for people. However, I did not feel a passion for the business and left after about a year. I thought about omitting this part from my autobiography, but I realized that doing so would be dishonest. After all, the failure to excel in a particular business is part of my experience, and has helped shape me into the person that I am today.

The person that I am today is a successful real estate professional who is the managing owner/broker at ERA Northwestern Realty. However, as my story suggests, I am not one to rest on past accomplishments. I am a high-energy person who has always thrived in challenging environments. Real estate no longer provides the types of challenges that I think I need in order to continue to grow. Real estate will always be a passion of mine, but I feel like, in order to continue evolving as a business person, I need to gain more knowledge about different types of businesses.

In addition, despite my successes, I feel as if I have not achieved one of the hallmarks of the successful professional in modern America: a college education. To many, a college education is a means to higher earning power. It is not for me; I have been able to achieve significant earning power without a college education, and have sufficient real-life experience in a broad variety of areas that I do not feel as if my lack of a degree would serve as a barrier in any professional ventures. Instead, the goal is a personal one. I have always considered a higher education a means of attaining a well-rounded, balanced educational experience, and I am ready to have that experience. So, perhaps those people are correct after all, and life does begin, if not at 40, at least in one's 40's.

Entrepreneurship

I was barely more than a kid when I began my first business venture; I believe that my youth was an asset for several reasons. First, as such a young man, I did not have the commitments and obligations that prevent many older people from starting their own businesses, because the consequences of failure are too great. For me, because the consequences of failure were not overwhelming, I did not think of failure as a possibility. Instead, I committed myself to the idea that my first business would be a success, and with that commitment, I developed a set of skills that I believe is critical to any entrepreneur: be an expert in your field, respect the company, manage the money, plan growth carefully, be customer-focused, constantly self-promote, hire the best team you can afford, be accountable for all of the business's decisions, and protect your business's reputation.

When my brother and I began the telecommunications company, it is fair to say that were not experts in the field. We had researched various start-up opportunities and found one where we recognized a significant potential for growth and a relatively low-barrier entry point, so, in many ways, we had made ourselves experts in available small business opportunities. However, to be successful in the industry, we had to become experts in pay-phone telecommunications, and we had to develop that expertise quickly. Both of us studied everything available about our product before making our first sales call. If a customer had a question about the product, whether it was about technology or service, we had an answer. Even more important, we had an answer about competitor's products as well, and we gave the honest answer. We quickly became experts in the field, so that, even if someone chose to go with a competitor, we had established ourselves as honest, reliable, and knowledgeable people in the telecommunications industry.

The next thing I observed as an emerging small business owner was that many small business owners seemed embarrassed or apologetic about their businesses. Because their businesses were small, they did not respect the business. This struck me as odd at the time; how could they inspire confidence and respect in their employees if they did not have confidence and respect in the business? To me, respecting the business had several different facets. First, my brother and I committed to working the business like we would any other full-time job. When we initially began, the actual work commitment that we had was far less than the 80-120 hours that would equal to two men working full time jobs. However, we still put in those hours on sales, marketing, customer service, and educational opportunities. We respected our business and treated it like it would continue to grow and become successful, and gave it the attention that we would have given any full-time professional job at a major corporation. We also spoke respectfully about the business. Neither of us would engage in negative talk or doubts about the business, and we did not use dismissive language such as "we just have four phones." When we had four phones, we gave those four customers the best possible customer-service, showing them respect by respecting ourselves.

Of course, one of the more difficult aspects of being an entrepreneur is money management, because most start-up companies struggle with owner-operators who are trying to survive on their proceeds and still have the money to grow the business. This links back to the idea that I began the business when I had few responsibilities. That is not to say that entrepreneurs cannot begin businesses at different life stages, but they should be realistic about their financial needs and the needs of the business, and separate the two. My brother and I established the salaries that we had to make from the business in order to survive, and we put the rest of the money back into the business. Initially, that meant that, for personal financial reasons, one or the both of us would be working side jobs in order to increase our personal finances, but we absolutely committed to not taking more from the business than our salaries. We kept the money separate, so that we could grow the business. Of course, as the business expanded, we reevaluated salary availability, but always kept the total of salaries at or below a certain percentage of revenue.

Another skill we had to master was planning for growth, appropriately. When you start a business, you think that the growth will occur in a sequential manner, building slowly. However, we quickly discovered that growth does not proceed in a sequential manner. Instead, growth opportunities can appear at unexpected times. For the beginning business owner, it may seem dangerous to avoid any opportunities for growth. However, we quickly discovered that expanding too quickly can put a business in jeopardy. Early on, we had an opportunity to double the number of phones in our business, but did not have the adequate support personnel to manage those phones. We decided to take the opportunity, and it almost ruined the business. We did not have the personnel to meet customer service expectations, so that there was a real decline in the customer-service experience. This could have proven fatal for a new business. We were able to borrow money to pay to hire an additional technician, averting a customer-service disaster, but, while borrowing to finance an emerging business can be a good idea, having to borrow in order to cover expenses that have already been incurred is a horrible idea. It made us realize that being ready for growth means having the employees, technology, and infrastructure in place to handle new clients from the first day of service.

In fact, focusing on customer needs is another significant component to being a successful entrepreneur. It may be difficult to imagine payphones as a necessity in this era of easy mobile phone access, but when we began our business, few people carried mobile phones, and even those that did often experienced service-related issues with their phones. In emergency scenarios, the payphone was an indispensable tool. Furthermore, for business owners, having a payphone available did two things: it provided an income stream to the business owners, who received a percentage of money used in the payphones, and it enabled them to provide phone service for their customers without tying up business lines. Being customer-oriented meant meeting with potential customers to assess their need for a payphone, their maintenance needs, and how many phones that they would need. For example, a gas station may have required a single payphone, while a shopping center might need a bank of multiple payphones. However, the business was also focused on end-user customers. We continually checked service at the phones, repairing or replacing broken phones within 48 hours, and responding promptly to customer complaints about telephones that had "eaten" their money without providing service with refunds. We tried to ensure that our end-user and mid-level customers were always satisfied with the service that we provided, and, when they were not, do what was in our power to make things right. The most memorable experience with customer service-related issues was linked to a gas station that was not getting the receipts it anticipated from a payphone. Because the customer was not happy with the service provided, we allowed for an early contract termination, not because it was in our financial best-interest, but because it was the best decision for customer service.

Perhaps one of the most difficult things to do as an entrepreneur is to learn how to self-promote. We are taught to be modest and downplay our achievements, but an emerging business owner who is modest will miss many business opportunities. My brother and I had a set of professional business cards printed and we carried cards with us at all times. If, in the course of a conversation, it became apparent that someone might have a need for one of our phones, we would be sure to tell them a bit about the business and give them a business card, along with an offer to buy them lunch if they were interested in learning more about the business. We did not monopolize personal events with talk about business, but did use them as a means of introducing the business to potential customers.

As the business expanded, we began to see a profit potential that, frankly, went beyond our initial projections. If we had paid technicians the industry average for our area, we would have seen even more profit. However, after experimenting with several different hiring plans, we began to realize that when one pays the industry average, one gets the industry average. We did not want average employees; we wanted exceptional employees so that we could feel confident that our customers were getting the same level of customer service from our employees that they would get from either of us. We began to pay our employees at the top of the industry average ranges, and we were able to recruit technicians that had years of experience and were the best in the field. This allowed us to continue to grow the business's reputation, and probably saved money because we did not have high turnover rates or high training expenses.

No matter how carefully hiring decisions are made, and how top-notch the team, the reality is that there are going to be errors from time-to-time. Another skill I learned was that a business owner has to be accountable for all of a business's decisions. It erodes customer confidence to be confronted by a business owner who fails to take personal responsibility for any failures that the company encounters. I may not have always been able to immediately provide an answer to a customer's question, but I always made it my responsibility to find the answers and made sure that customers were aware that I was making a personal commitment to them.

All of the above skills contribute to what I think is penultimate skill for an entrepreneur: protecting the business's reputation. When I was growing my first business, reputation was important, but was also more elusive; a business could do more to control its perceived reputation. In this day of expansive social media, a single bad review can damage a business's reputation. As a result, I carefully guard what my business does, not only in its interactions with customers, but also in other business decisions, like charitable giving. We do not donate to any organizations unless I have personally vetted them to determine if the organization meets my standards and complies with the prevailing community standards. Furthermore, when confronted by the occasional negative review, I always offer the customers the opportunity to resolve the issue, and make the offer both publicly in whatever venue was the source of the complaint, as well as privately, but refrain from having a debate about the issue in a public forum. It never looks good for a business to go after a customer in a public forum, even if the customer is wrong. In those ways, I look after the company's reputation, understanding that customers always have a choice.

Real Estate

I began my real estate career in 2001, when real estate was still doing very well, housing prices were on the rise nation-wide, and it was easy, in fact too easy, for people to get mortgages to buy properties. Then the real estate bubble burst, and a growth industry retracted. I do not have to explain the consequences of the fall in the real estate market and the ripples that the housing crash sent through the rest of the economy; those are well-understood. However, I have to say that my experience during this time helped me learn two critical factors about the real estate market. The first is that a real estate professional has earning opportunities regardless of the prevailing economic climate. The second is that, I believe, real estate professionals have a moral duty, if not a professional ethical duty, to discuss the financial impact of potential purchases and sales with their clients. Because I have learned and embrace the second principle, I do not feel guilty about being able to make profits even when the real estate market is in distress.

When I entered the real estate market, the economy was booming and real estate property values were not only high, they were actually rising. Moreover, I entered real estate in two distinct areas: as a broker and as the manager of a property investment group. My approach to earning money was distinct in each area, but I was able to capitalize on market conditions in both capacities. The first thing that I realized was that property values could not continue to climb like they were. Although my area did not see the meteoric rise in property values that was evident in other areas, the rise we did experience was not precedented by resent real estate market trends. To me, this was indicative of a bubble, which suggested caution, not only in my personal investments, but also in my advice to clients.

Even before the housing market bubble officially burst, people in the industry were beginning to see some of the impact of the bad lending practices. People were beginning to experience foreclosures and be threatened with home loss. This provided me with opportunities in one of my roles, which was to purchase distressed real estate, with the intention of either flipping the real estate or using it as rental property. However, I had to watch the market carefully in order to evaluate whether property would be improved and resold (flipped) or used for rental property. When the market was thriving, buying a distressed property for the purposes of resale was still a very profitable venture, especially if the distressed property was in a desired area. Flipping such real estate could result in significant profit opportunities, and, furthermore, was relatively low risk because a brisk market ensured that the property owner would be able to find a buyer within a reasonable time period. However, as the market began to slow, the earlier assurances of a buyer for every improved property no longer existed. Instead, it was not uncommon for properties to sit vacant for extended periods of time, which had the potential of eating up profits from any flipping project.

The slowing of the market in terms of sales was not necessarily a bad thing for real estate in general. Regardless of the conditions of the housing market, people need to have a place to live. Therefore, when home sales are down, it can be expected that rental properties will be in higher demand. Transitioning assets away from a resale focused orientation and examining the idea of rental property was an adaptive position in my role as property manager. In addition, as the market continued to decline, the opportunities to maximize profits when purchasing distressed properties increased, as long as there was no impetus to find immediate resale opportunities. Not only did this benefit me as a property manager with a rental portfolio, but also as a broker assisting buyers looking for the distressed properties.

Furthermore, it helped me as a broker selling property for buyers. Many people found that they were in mortgage scenarios that were simply untenable and some of those people realized that they needed to sell before becoming overwhelmed by their debt responsibilities. For some people, these realizations came as the economy contracted and a home and house payment that had previously been comfortably within their budget was no longer affordable. However, for many buyers, these homes were never affordable. They may have managed to get homes with favorable loan-to-value ratios because of schemes that permitted borrowing of down-payments and lax income proof requirements, but they did not have the income necessary to support those loans.

In some ways, people may find it morally difficult to profit off of the misfortune of others and a naive view of distressed property sales may see it as something predatory. However, that point-of-view is very naive and does not reflect an understanding of mortgages, liens, and the foreclosure process. If a buyer can purchase a distressed property from a seller prior to the foreclosure process, the buyer can often arrange for the seller to salvage some value from the home, or, if that is not possible, at least help the seller retain some creditworthiness. Both of these factors are substantial when considering the long-term impact of a forced sale on creditworthiness of the property owners. Even when that is not the case and a property is subjected to foreclosure, buyers who are willing to pay substantial value for a property make it more likely that the buyer might salvage value from the sale, since the bank's lien on the property is for the value of the loan and associated costs; surplus, when it occurs, goes to the property owner.

Of course, it is impossible to discuss the recent housing crash without examining the impact that it had on many property owners. Repeatedly, I witnessed property owners who had taken adjustable rate mortgages (ARM) with the belief that they would continue to be able to get low-interest-rate financing after the terms of their ARMs expired. In fact, many of them seemed as if they did not understand that the ARM was not a fixed-rate mortgage. Some of the people I worked with had multiple mortgages on the same property, all obtained at the time they received their original loans on the property. One of the common refrains that I heard was that they did not believe that they were over-leveraging themselves because of a belief that the banks would not make loans that they did not think could be covered. Few of them seemed to consider that, absent the dramatic type of burst seen on both of the coasts, most banks would be able to recover the losses they found in the home market in the event of default by a borrower. Instead, they seemed to believe that banks would only lend them money if they seemed as if they could repay it. They also failed to understand that they might not be receiving the best interest rates available.

In fact, prior to becoming a real-estate broker, I also failed to truly understand that people applying for mortgages might not receive the best interest rate. I naively assumed that a mortgage broker would work with applicants to find the best loan with the lowest rates available for the borrowers. I did not understand the concept of the yield spread premium, and the notion that lenders actually provided financial rewards to brokers who sell their borrowers loans with higher interest rates. While mortgage brokers are required to disclose those premiums to borrowers, the fact is that many borrowers were not sophisticated and did not understand what that meant. They went into purchases ill-informed, and some of those decisions helped contribute to the housing market crash.

As a result, in my practice, I determined that I would not engage in any activities I deemed morally unacceptable, even if those activities did not violate ethical norms. When working with potential buyers, I would discuss their financial situation with them and see if they numbers they had in mind were feasible for their personal financial situations. I determined that I would rather sell more homes at a lower profit on each home, then help move someone into a property that he or she ultimately could not afford. I urged the buyers with whom I worked to go to banks directly or recommended that they work with a select group of mortgage brokers, whom I knew did not engage in practices I found ethically troubling. When a client did work with a mortgage broker, I would help them go through paperwork and point out the broker rebates in the proposed contracts. I would not provide them with legal advice, but I would ask them if they understood what those terms meant and what type of impact it would have on their obligation under the loan, both short-term and long-term. Likewise, I would refer them to information about points and how they impacted mortgages, closing costs, and tax obligations, to be sure that they understood exactly what they were getting with the mortgages. In this way, I ensured that I was not helping create a future financial crisis for my clients, but truly helping people find their homes.

Being a real estate professional during the tumultuous first decade of the 21st century has been an important learning experience for me. As a businessman, I learned that a negative surrounding economy does not eliminate the possibility of profits in a particular segment; instead, I was not only able to make substantial personal profits during a crashing housing market, but also able to make profits as a result of the economic crash. While not all segments of the economy would provide the same opportunities for profit in contracting economies, it did serve as a reminder that the surrounding economic climate may inform, but does not dictate, individual profits or success. However, I also learned many negatives about human behavior during this time period, as I repeatedly witnessed people who had been victimized by predatory lenders or mortgage brokers. I not only found that I could make a profit without engaging in those predatory behaviors, but that, actually, by being not only ethical, but also moral, I increased the number of referrals that I received from customers. They understood that I did my job in order to get a profit, but they also understood that it was not my goal to profit at their expense.