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The Team Approach
COMPANIES by Janet Leiser | Senior Editor
Chief Executive Officer Tom Wallace knows it's a cliche, but he learned an important lesson in building successful companies: It takes a team to build a profitable, dynamic company.
"It's not just about me," says the RedVector.com CEO. "This is a team. I play a part, but there are other people who play equally important, if not more important, parts."
When Wallace, a veteran entrepreneur and co-founder of the Tampa Bay Technology Forum, joined RedVector.com in February 2004, the company struggled to make payroll.
"The first thing we had to do was stabilize the company," he says.
Company founder David Chitester, an engineer and CEO of Chitester Management Consulting, had asked Wallace to invest in the Tampa firm, an online provider of continuing education for engineers, architects and others in the construction trades.
But Wallace found problems during due diligence.
"I was having a lot of trouble with the numbers," Wallace says. "The accounting was not clean. I was not getting answers on my questions about the accounting. I was not getting a confident feeling the numbers were even accurate."
He told Chitester he wasn't willing to put his money into the company. Chitester, who wasn't involved in the daily operations of RedVector, asked Wallace, who has twice built up companies before selling, to turn around the company.
Two years later, Wallace, 47, is the company's largest shareholder, followed by Bob Lang, who owns a Brandon environmental consulting company, and Chitester. Earlier this year, Stonehenge Capital invested $2 million. All but $75,000 was used to buy back stock from Chitester and other small shareholders, Wallace says.
Annual revenue of $3.5 million in 2003 hit $5.5 million in 2004, Wallace's first year at RedVector. In 2005, it climbed to $6.1 million. This year, the target is $8.3 million, but the stretch goal is $10 million.
Wallace declined to disclose the profit margin, except to say it's healthy.
It's the company's business model that attracted Wallace to RedVector, he says.
"Selling e-learning is very similar to the software business, which done right is a beautiful business," he adds. "Once you create a piece of software, you sell it a few times and pay for it. Then the profit margins get extremely high. That's why Bill Gates and Larry Ellison are two of the richest guys in the world."
The company offers more than 800 courses, some it owns and others are by experts who receive about 15% in royalties, he says.
Getting control
One of the first things Wallace did to stabilize the firm was to bring in Joe Price, a chief financial officer he knows well. He trimmed a few positions before setting out to change the culture of the company.
"That is absolutely the biggest thing we did," Wallace says. He declined to discuss the previous culture, except to say: "We had to make massive changes to a more professional environment."
Mike Vandall, a vice president with RedVector, describes the new culture as high-energy, entrepreneurial, bottom-line driven and friendly. He says Wallace is focused, decisive and relies on his team to help make decisions, but he's not a consensus builder: He's willing to make unpopular decisions.
The culture prior to Wallace was entrepreneurial, too, Vandall says. "But it was more like lets throw money here, lets throw money there and see if it works."
Wallace immediately put metrics into place to track the company's financials, Vandall says. Money is only spent if there's a well-thought out plan in place. Yet Wallace is not a micromanager.
"He gives me autonomy to go out and do things," Vandall says. "If I didn't have that autonomy we wouldn't be coming up with new things."
Posters of characters from the Austin Powers movie, such as Mini-me, Dr. Evil and Foxy Cleopatra, hang throughout the seventh-floor office at Two Urban Centre in Tampa's Westshore Business District. "I want you to make 10 million dollars," they read.
"We work hard, but we like to play hard," say Wallace, who rewards employees with steak and egg breakfasts he cooks on a George Foreman grill, monthly happy hours, picnics and Super Bowl parties. If the company hits its stretch goal of $10 million, all the employees will go on a cruise.
Wallace also rewards employees with bonuses and stock options, Vandall says. "If they come in and perform, they're rewarded," he adds. "But no one gets a fat salary for doing nothing."
Smart Growth
Soon after joining RedVector, Wallace gave Vandall, who was then in marketing, a tough assignment.
"I told him, 'We need someone to call on companies - the sky is the limit. Here's the ball you run with it. If you're successful, you can hire people underneath you, you can build a team, you can build a business within this business. If you're not successful within 90 days, you're going to be out of a job.' "
Vandall, who had a sales background, squirmed at first. "I thought, 'Oh great.' Three or four people had tried to do it before me and none were successful," he says.
But he gave it his best shot.
"I was in a marketing role and the company wasn't doing well financially," he says. "I was carrying a little bit of higher overhead on me with no direct contribution to the bottom line."
RedVector had directly targeted professionals in need of continuing education credits since it was founded in 1999. To expand sales opportunities and increase revenue, Wallace wanted the company to approach firms and enterprises about providing employee training.
In 2004, the same year Wallace took over RedVector and issued the challenge, Vandall's division brought in annual revenue of $500,000. Last year, it hit $1.2 million. In this year's first quarter, the division had revenue of $500,000.
"Tom gave me a lot of latitude to go figure this out," Vandall says. "At the end of the day it was about being honest with clients as to what we could and couldn't do for them, trying not to make them think we were something that we weren't."
It was also about changing to meet the customers' needs.
More and more companies have asked for an in-house university with all the bells and whistles, Vandall says. But RedVector wasn't set up to provide the technological infrastructure for those projects.
In the early part of 2005, RedVector hired an IT director to move the company in that direction. Vandall's 6-member team is helping fund the IT group, headed by Frank Hewitt.
"By getting additional customers, we've been able to fund additional growth in that group," Vandall says "It has been intelligent growth as opposed to 'we think we can sell $500,000 worth of content, lets go hire some people,' which is how the previous regime approached things."
Wallace says, "It gives us the enterprise ability to go to clients and do all sorts of things. 'You want an e-learning portal for all your employees?' Employees can take courses. Some of them can be ours. Some of them can be content provided by company and converted or they can be third-party courses."
The goal? To double the enterprise services division's revenue each year over the next three years.
Expanding the customer base
Wallace also decided to grow the customer base from construction trades to other fields, including real estate. The firm has customers in all 50 states.
"Sales is always a challenge in any business," he says. "We want to grow faster. We want to grow bigger. If you're not growing, you're going backwards."
There are about 1.5 million Realtors in the United States, he says. So the company has taken a 20-year-old program, called Sweathogs, that agents take to improve their sales ability and converted it into an 8-week online class. Unlike most of RedVector's offerings, it's not a required continued education class. The company has an agreement with RealNet Learning that owns Sweathogs.
"I believe this is very novel because there's not a lot of sales training online," Wallace says. "The reason being is people believe to have sales training, you have to have role playing, peer interaction and accountability."
To make the experience more like a live class, the course offers chatrooms and a message board. To participate in a live discussion, users dial into a conference call and visit the Web site. Kick-off for that program is June.
Where does Wallace expect RedVector to be in three to five years?
"We're putting together a plan to see if we can get the company to $40 to $50 million," Wallace says, adding the plan is still coming together.
If Wallace's history is any indication of what will happen at RedVector, the company will pass $75 million and have more than 300 employees before it's bought by a public company.
Tom Wallace
Age: 47
Education: Indiana University of Pennsylvania
Personal: Pittsburgh native; married with a 9-year-old daughter
Started first company: Age 23
Community Service: Co-founder and past president of Tampa Bay Technology Forum, a booming organization that supports the area's tech industry; past chair of Tampa Chapter of the Council of CEOs; and member of executive committee of the Boys and Girls Club of Tampa Bay.
Professional accomplishments: When he was 30, he sold a company he'd started seven years earlier. Because of a non-compete agreement, he moved to Tampa and started the Waldec Group, a network integration company. The Waldec Group made the Inc. 500's list of the fastest growing privately held companies in America three consecutive years. In 1997, The Waldec Group had grown to over $75 million in sales and 350 employees in six offices, including Pittsburgh, when it was sold to IKON Office Solutions, a Fortune 500 company. He then started his third company, vCommunity Inc., now known as Cramsession.com, which was backed by ex-Danka founder Dan Doyle. He joined RedVector.com as CEO/majority owner in 2004.
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