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The Rady School Blog

  • Deck the Malls

    December 18, 2014
    by Martin Staubus

    Previously posted on the Beyster Institute Blog by Martin Staubus.

    Several years into a career with a large financial company, Jeff Lopez came to the realization that the corporate life just wasn't for him. He was ready to leave the bureaucracy behind and strike out on his own, as his own boss. He was all set to go into business for himself, except for one detail: he had no idea what his new business might be.

    But when you're truly in a state of mind to be open to new ideas, they can come from anywhere. Says Jeff, "I was sitting around with my roommate and a guy comes on CNN promoting a Christmas lighting business. 'Work just three months a year and make enough money to take the rest of the year off!' claims the guy." That sounded good to Jeff. So he tracked down the TV fellow via CNN and discovered he was based not far from where Jeff Lived in Orange County, Calif. Before long Jeff had become the fellow's first franchisee – the guinea pig for an untested business idea.

    The customer pitch was that, for just $135, Jeff's "company" would install Christmas lights on the front roofline of your home – and best of all, they would provide the lights "free" for the customer's use over the holidays. With clipboard in hand, Jeff donned a coat and tie and went house to house as the sales representative of his new venture. Once a customer had thumbed through Jeff's little product list and made a selection, Jeff assured the customer that "my brother, who handles the installation side of our business," would be back later that day to install the lights. Jeff then went home, changed out of his coat and tie, and returned in workman's coveralls to handle the light installation.

    It was a great pitch, and the money seemed good at the time. But try as he might, Jeff couldn't generate enough revenue over the holiday season to support himself for the entire year. As Jeff puts it, "Great pitch, lots of customers, lost all my money the first two years." So much for TV claims. There just wasn't enough money in the residential market to make a true year-round business of Christmas lighting.

    But the entrepreneur in Jeff wasn't done. He bought out the failed franchisor and took the holiday decorating idea to the commercial real estate market, providing sales and installation services to shopping centers and cities (ever wonder who puts up all those decorations along Main Street every holiday season?) Within a year or two he dropped the residential market entirely, and in 1994 he incorporated his business as "Dekra-Lite," which today is one of the most reputable and successful providers of commercial holiday decorations in the U.S. Still located in Orange County, Calif., Dekra-Lite is a leader in commercial Christmas decorating. Bringing a fresh and innovative approach to holiday lighting, they provide the holiday decorations for hundreds of commercial properties, theme parks and cities across the country. Deck the malls indeed!

    Of course, Jeff has always recognized that he hasn't accomplished all of this by himself (or with the help of his "brother"). Dekra-Lite today is a team of 60 people (swelling to more than twice that number this time of year as seasonal installers come on board). So, over the last couple of years, as Jeff contemplated his own path to retirement, he gave a good deal of thought to his true-blue team, many of whom have been with him for 20 years or more. When he learned that an arrangement known as an ESOP might provide a way for Jeff to sell his company to his team, so that they would have the opportunity to keep the business going when he was ready to exit, he knew that was something worth seriously considering.

    When a local attorney he knew told Jeff about the Beyster Institute, Jeff asked the attorney to set up a meeting. Following the meeting he engaged the Institute to guide him through the process of investigating and then designing and implementing a well-tailored ESOP.

    As it turned out, Jeff faced a pair of challenges that are very typical of business owners in this situation. First, there was the matter of how much of the company he should sell to the ESOP, and the valuation of that interest by a professional business appraiser. By law, an ESOP cannot pay more than fair market value for any interest it may buy, as established by an independent business appraiser who advises the ESOP trustee. If Jeff sold less than 50 percent of the company, the pricing of the sale would be subject to a "minority interest discount." If he were to sell more than 50 percent (but less than 100 percent), he would get a full, undiscounted price for that sale, but if he later decided to sell the balance of his stock to the ESOP, he would once again face the prospect of a minority interest discount on that sale.

    The second challenge he faced concerned the question of senior leadership and management if and when Jeff were to retire and leave the company. While he knew he had loyal employees, who were generally smart and capable, none of them had experience in taking full responsibility for leading and managing a business like Dekra-Lite. The company's senior group certainly had the potential, but they would need some further training and experience before they would be ready to run the company without Jeff.

    The solution to both the challenges was to develop the Dekra-Lite "five-year plan." Step one of the plans would be for Jeff to sell exactly 50 percent of his shares in Dekra-Lite to the ESOP.  Since 50 percent is by definition not a "minority" of the ownership, and assures the ESOP that no major changes can be made without the ESOP's approval, the minority interest discount dropped dramatically.

    Step one was completed on November 1, 2014. Now, Jeff and his company are focusing on two tasks. First, they are applying themselves so that Dekra-Lite can earn the income that will enable it to fund the ESOP – so that the ESOP can in turn pay off the debt it incurred in buying the stock from Jeff. Second, they are working to provide the senior management group with the mentoring, training, and experience needed to prepare them so that they will be able to run the company on their own in five years – when Jeff expects to sell the remaining 50 percent of the company to the ESOP and retire from the business.

    If you ask Jeff, he'll tell you "it's a wonderful life." And of course, being the entrepreneur he is, he will also remind you that Dekra-Lite offers a full range of services including an in-house design team, year-round installation, and an in-house printing department. Their staff of installers is ready to handle any job year round. In addition to design, installation, and removal services, they provide storage facilities to keep the property owner's items properly packed, clean, and safely stored. So if your local mall is looking a little drab this season, send them to Dekra-Lite. The elves there are now employee owners, and they'll make any facility twinkle!

    The Beyster Institute at UC San Diego’s Rady School of Management works to advance the understanding and practice of employee ownership as an effective and responsible business model. It focuses on education, research and consulting to promote employee ownership and the creation of effective ownership cultures. The institute serves companies interested in the employee ownership business strategy, business owners looking to transition out of their companies and professional advisers who want to better serve their clients by gaining employee ownership knowledge.

  • Impressions of Rady from the New Director of Graduate Admissions and Recruitment

    December 16, 2014
    by Jay Bryant

    Most of us in our professional lives have the opportunity to take on brand new positions in new organizations. This time can be extremely stressful and exciting at the same time.
  • Past and Current StartR Groups Shine at 2nd Annual FOUNDER.org Kickoff

    December 12, 2014
    by Lauren Herr

    Over one hundred Rady School MBA and UCSD undergraduate students came together to celebrate UCSD’s second annual FOUNDER.org kick-off event this week in the Fung Auditorium.
  • Staying the Course for Entrepreneurs: Part I

    December 10, 2014
    by Lauren Herr

    Rady alumni Royan Kamyar’s successful journey staying the course while founding Owaves, now recognized as one of the best lifestyle apps on the market
  • Rady Alumni Support Future Rady Students for Giving Tuesday

    December 4, 2014
    by Ashley Dittmar

    We have a day for giving thanks. We have two for getting deals. Now, we have Giving Tuesday, a global day dedicated to giving back. On Tuesday, December 2, 2014, charities, families, businesses, community centers, and students around the world came together for one common purpose: to celebrate generosity and to give.
  • December Update: Rady Rises in Top Rankings, Posts First Instagram Selfie and Celebrates Giving Tuesday

    December 2, 2014
    by Lauren Herr

    The Rady School of Management at UC San Diego received a boost in recent rankings of full-time MBA programs in the United States from Poet & Quants as well as appeared for the first time in Bloomberg Businessweek’s rankings. Highlights of Rady School’s rankings include:
  • mystartupXX: Empowering Next-Gen Female Technology Entrepreneurs

    November 25, 2014
    by Lauren Herr

    Earlier this month the Rady School and von Liebig Center for Entrepreneurism and Technology Advancement at the Jacobs School of Engineering mystartupXX program directors traveled to Washington, D.C. to celebrate the winners of the SBA Growth Accelerator Fund national grant winners. During the event, mystartupXX was recognized as one of the top accelerators in the nation and SBA administrator Maria Contreras-Sweet spoke extensively about mystartupXX's “startup” story in her welcome speech (read her blog post here).
  • Rick Vogt, Rady Alum and Author of The Stargazer Journal and Crosshairs

    November 4, 2014
    by Rick Vogt

    Earning my MBA at Rady provided the much-needed perspective on how to achieve my professional aspirations. When I finished the full-time program in 2008, I knew it would take years for my aspirations to become realities, so I used my business expertise to help other entrepreneurs...
  • 4 Ways Leaders can Foster Inclusion in Diverse Groups and Organizations

    October 28, 2014
    by Bernardo M. Ferdman

    You may very well already understand how diversity is important and useful to your work groups and to your organization. After all, research indicates that we can derive many benefits from social diversity, including more creativity, more diligence, and harder work, among others. But how can you actually make this happen?
  • Kill the Cup, Oktoberfest, and Fantasy Football

    October 21, 2014
    by Drew Beal

    Hey there! I’m Drew Beal, a Full-Time MBA 2013 alum. I’m one of those guys that stuck around San Diego after graduation, working on his Lab to Market project. In fact, I’m writing to you from a co-working club in University Heights, 3rdspace, where I spend most of my days...
  • Looking Back at the 6th Annual Rady Golf Classic

    October 14, 2014
    by Ashley Dittmar

    The 6th Annual Rady Golf Classic, on October 6, 2014, was a success due to our many sponsors, participants, volunteers and the La Jolla Country Club. Thank you to everyone who made this day fun and memorable.
  • 3 Ways to Build More Self-Sufficient Employees

    October 7, 2014
    by Joanie Connell

    One of the complaints I’ve been hearing from leaders lately is that they have to spend so much time managing their employees that they don’t have enough time to get the rest of their work done. This is particularly true for Millennial employees who tend to want more direction and feedback than other generations of employees. Leaders, here are three simple ways to develop your employees...
  • Day at the Movies Inspires Business Incubator for Women

    September 30, 2014
    by Maria Contreras-Sweet

    Four years ago, after a marathon grant-writing session at University of California at San Diego, scientists Lada Rasochova and Rosibel Ochoa decided they needed a break and went to the movies. Playing at their local theater was...
  • Here's to the Next 10 Years!

    September 18, 2014
    by Dean Sullivan

    The entrepreneurial spirit is alive and well at Rady! It thrives through our StartR Accelerator Program, which will graduate its second class...
  • This is Pablo, Signing Off

    September 11, 2014
    by Pablo Valdivia

    It’s been nearly a year since my first Rady blog post reflecting on my first month as an intern, and I am sad to say this will be my last.
  • Getting Real about Leadership

    September 9, 2014
    by Bill Treasurer

    There are some differences between the leadership theories and ideals that you learn in college or graduate school and the actual practice of leading in the workplace.
  • You’ve Got Mail: 10 Tips to Conquer Emails

    September 2, 2014
    by Pablo Valdivia

    According to the McKinsey Global Institute, we spend an average of 13 hours—28 percent of our workweek—reading, deleting, sorting and sending emails. As cumbersome as it may seem, emailing is a necessary evil in the professional world...
  • Please Follow the Highlighted Route

    August 26, 2014
    by Pete Major

    Please Follow the Highlighted Route
  • Bay Area or Bust!

    August 21, 2014
    by Keri Robbins

    Bay Area or Bust!
  • Lumena Pharmaceuticals: A Rady Success Story

    July 17, 2014
    by Niall O’Donnell

    Lumena Pharmaceuticals: A Rady Success Story