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You’re the Boss Blog: A Social Business Strikes a Deal With Big Tobacco

December 6, 2012 by Leave a Comment
Sustainable Profits

The challenges of a waste-recycling business.

A few months ago I wrote a blog post about TerraCycle’s intention to create a national recycling program for all waste, even including cigarette butts. As our programs have grown, we have had frequent internal debates about what kinds of companies we want to partner with to help them make their waste recyclable (which in turn makes their products greener).

We have come to understand that every industry has its issues. For example, the food industry has many debates around the use of refined sugar, corn and soy in its products. And the garment industry has issues involving the use of leather and fur, and the cosmetics industry has challenges concerning animal testing, which some retailers require. The list goes on, and I am becoming increasingly confident that there really is no perfect product, which we should all consider when buying stuff.

A month after that post, in mid-May, we introduced the a cigarette-recycling program in Canada. It has been a success with more than 400 collection locations registered and more than 180,000 butts already collected. Somewhat to my surprise, several Canadian media outlets wrote positively about the program. Already, if you search “cigarette recycling,” we rank prominently in the top 10 links that come up.

And now, we’ve started a similar program in the United States along with Santa Fe Tobacco, which is owned by R.J. Reynolds. We had more than 220 collection locations sign up in the first 24 hours and more than 400 within a few days. [Read more…]

Article source: http://boss.blogs.nytimes.com/2012/12/06/a-social-business-strikes-a-deal-with-big-tobacco/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

You’re the Boss Blog: Giving Employees a Stake in the Outcome

January 20, 2012 by Leave a Comment

Sustainable Profits

The challenges of a waste-recycling business.

Compensation is one of the most complex and challenging topics I have come across during my eight years as chief executive of TerraCycle. By definition, it is a highly personal topic that is charged with emotion for employees and can involve their personal aspirations, their sense of self worth and pressures they feel at home.

I have always been a proponent of offering employees a stake in the outcome. When I started TerraCycle, I couldn’t pay anyone. To get people to commit to full-time work, I gave them stock options. As a result, I succeeded in getting a lot of fine people to work for the company, and we ended up with lots of stock-option holders who are not involved with the company today (almost a decade later).

Stock options give employees the right to buy stock in the company at a set price but at a later point in time, presumably when the market price of the company’s stock has risen in value. Because TerraCycle is not a public company, the price of the stock options are determined by a 409A evaluation, which is done by an independent company. Once the stock is purchased, an employee can transfer or sell it if there is a liquidity event in the company, and they can earn dividends if they are declared.

A number of the early employees who were granted stock options have decided to exercise some of their options for stock. In other words, they paid the exercise price of the option and bought stock in TerraCycle, effectively giving them the same status as one of our traditional equity investors. In general, investors can gain a return through dividends (which we have not yet declared) and through a sale of their stock (so far TerraCycle has bought back about 3 percent of the business via stock-repurchase tenders).

While stock options allow companies to create incentives for employees that don’t involve cash, they also create a complicated and costly administrative burden. The law requires the company to engage a third party to run an annual analysis of the value of the shares. The company must also inform option holders when their stock options are about to expire and respond to requests for information. And if most of the option holders exercise their options, the company can end up with many small shareholders. If your company has too many, it automatically becomes a public company for regulatory purposes, subject to the rather costly and cumbersome burdens of Sarbanes-Oxley.

To put this administrative burden into perspective, TerraCycle has 100 employees and about 100 shareholders and our shareholder administration (employees and investors together) probably consumes the equivalent of two full-time employees plus five-figure annual legal fees.

If you give stock or options to large numbers of employees, as TerraCycle did, and have a large investor shareholder base (as TerraCycle does), you will eventually constrain the company’s ability to offer additional option packages to future employees who truly deserve a stake in the company. Each year, we  watch carefully as old options expire, which helps bring stock back to the business and reduces the list of potential shareholders. We are not anywhere near being at risk of being classified a public company, but we are constrained to the point where we can’t issue additional options to more than a few employees, and given that I want everyone at TerraCycle to have a stake in the outcome, that’s a problem.

That’s why I recently challenged my executive team to find an alternative solution that wouldn’t face these constraints, a way for TerraCycle to give all employees, now and in the future, the benefits of stock options without creating burdens and constraints for the company.

To offer a benefit that is similar to receiving dividends, we plan to implement a profit-sharing program in 2012 for all employees. To offer a stake in the outcome if and when the company is sold, we turned to an incentive plan called “phantom units” that gives employees the ability to participate in the sale of the company as if they are shareholders without actually being shareholders.

Phantom units are a contractual right the company gives an employee to participate in the sale of the company. Phantom unit holders don’t receive dividends or get to vote, but they do get a payment, equivalent to that of a common share, at the time of a change of control or sale of the company.

In lay terms, here is how our program will work: Employees will get a grant of phantom units proportional to their salary every year of their employment. Each unit will entitle them to receive a share of the company equivalent to what a common stockholder receives. If and when the company is sold, each unit of phantom stock will be equal to a common share. Financially, the employee doesn’t have to pay an exercise price for the phantom shares, but if the company is sold, the proceeds are taxed as ordinary income instead of as capital gains.

In other words, after eight years of figuring out how to give a stake in the outcome to all employees and creating a mess in the process, we have found a formula that gives employees the benefits of stock options with significantly fewer headaches.

Tom Szaky is the chief executive of TerraCycle, which is based in Trenton.

Article source: http://feeds.nytimes.com/click.phdo?i=6b6709e6b2a52a60b15747ba7432a8d6

Filed Under: Small Business Tagged With: , ,

You’re the Boss: Making Sense of Romance in the Office

October 19, 2011 by Leave a Comment

Sustainable Profits

The challenges of a waste-recycling business.

Can we still have fun?Courtesy of TerraCycle.Can we still have fun?

TerraCycle started as a project in my dorm room, a bunch of friends getting together every once in a while over a beer and talking about our first product, plant food made out of worm waste. I guess I was officially the chief executive and given that my friends didn’t get a salary — no one did back then — they were perhaps best described as interns.

Back then, no one would have thought twice about the chief executive having a romantic relationship with one of the “interns.” We were friends, we were the same age, and the company wasn’t even incorporated. Today, of course, I suspect the reaction would be very different if I were to have a similar relationship with an intern — even if we were friends and even if we were the same age (which, surprisingly, is still often the case).

Even when TerraCycle incorporated, we maintained a very liberal policy about romance in the workplace. In the early days, we used to throw these Friday night parties for our team and our friends that included hanging a big canvas and putting paints below it. As the party progressed and people finished painting the canvas, they would proceed to painting each other. Today we enjoy very civilized gatherings where we exchange gifts at the holidays and share pot-luck dinners.

But we’re all still human, and romance in the workplace remains an issue. As the company has matured and expanded into 19 countries and grown to 100 employees, some important questions have emerged: How should a company approach intra-office romance? Should relationships be discouraged or encouraged? What explicit policies should there be, if any? The challenge, obviously, is that there is serious legal risk when it comes to this topic. Sexual harassment in the workplace has created a never-ending supply of lawsuits (and a few great movies).

Sexual harassment is, of course, a very serious issue. Unscrupulous employers can hold tremendous power over the lives of young employees. And yet, I have also seen situations where accusers have been willing to lie in order to manipulate the system to extract a settlement. Because most companies carry insurance against such risks, there is often strong motivation for the company to settle these cases, regardless of the facts. These settlements can do terrible emotional damage to the falsely accused victims and their families.

So how does a company strike the right balance between canvas-painting parties and Puritanism while still maintaining a fun, dynamic, exciting work environment. Would it even be possible to remove romance from an office if you wanted to? If not, where do you draw the line?

Through the years, we’ve had lots of tricky situations. I remember  a number of years ago when two co-workers decided to date in the office, and unfortunately it created an awkward vibe that led to one leaving the company.  I know of another couple, also years ago, that had been dating for a few months and wanted to tell everyone but feared it would affect their relationships with co-workers. I only found this out later and wish that they hadn’t had to deal with such a burden. Currently, I know of two people who are interested in each other but are reluctant to pursue the romance because one works for TerraCycle and the other for one of our clients in Europe.

We continue to produce far more questions than answers. What if it’s a senior executive and an intern? What if the executive and the intern are close in age? What if they love each other? When should management get involved? Who wants to handle those conversations? I know there are companies that actually encourage office romances. How does that work? How do they handle the inevitable awkward situations? How much litigation insurance do they carry?

Because we continue to bring on a lot of interns, we decided to make a rule that no employee should have sexual relations with an intern. That said, we have never had to enforce the rule, and I don’t know what penalty we would levy if we did, which raises the question of whether it really is a rule. (Note to TerraCycle folks: don’t get any ideas!) Personally, I have been advised many times by my senior managers not to have relationships with employees. Given that I’m single and we happen to have an attractive work force, I have to concede that the thought has crossed my mind.

We continue to grapple with these questions over and over. I think I am coming to the conclusion that every situation, because it involves human beings and desire, is different. So I guess our answer to almost every situation, at least for now, is what the lawyers like to say: “It depends.”

Tom Szaky is the chief executive of TerraCycle, which is based in Trenton.

Article source: http://feeds.nytimes.com/click.phdo?i=45b992208998af1e61ca35e60fe86f6c

Filed Under: Small Business Tagged With: , ,

Sustainable Profits: How Willa Can Defend Against P.&G.’s I.P. Suit

October 5, 2011 by Leave a Comment

Sustainable Profits

The challenges of a waste-recycling business.

You may have seen a fascinating New York Times article about the lawsuit Procter Gamble has filed against a start-up called Willa, which produces a line of cosmetics that is sold in Target and in small boutiques. It turns out that P.G. has a line of cosmetics called Wella, a German hair care brand that the conglomerate acquired in 2003 for $7 billion. P.G. sued Willa over the name, claiming that it was confusingly similar to Wella.

The case resonated with me because TerraCycle went through a similar lawsuit a number of years ago. The settlement terms prohibit me from discussing the case, but it had a similar David vs. Goliath plot line. Intellectual property law generally requires the owner of a mark or patent to police it. For example, if we find someone using a logo similar to TerraCycle’s, we would have to do something — starting with a gentle request and moving on to legal action if necessary. Bottom line: use it or lose it. So before we come down too hard on the Goliaths who bring these cases, it is important to put these efforts in context: the big companies have little choice; it’s the way the system works.

But all is not lost for the Davids. Yes, a lawsuit like this can crush a small business — Willa, apparently, has already spent $750,000 in legal fees, a very big bill for a small company. But the money doesn’t have to go to waste. I believe that the best defense when a big company attacks a smaller company is to take the fight to the press. America loves the little guy. It goes back to the colonies and the Redcoats. It’s in our D.N.A.

So, Willa might do well to keep telling its story. I have seen this work for other companies (here’s an example involving Jennifer Lopez that wound up on the cover of Inc. magazine). The result can be a barrage of media that can create some major benefits: the small brand receives more attention, its consumers become more passionate, and the big brand is put on the defensive. Again, I am bound by the settlement agreement in the TerraCycle case not to disclose details of the case, but I can report that the year of the lawsuit our sales doubled from $1.5 million to $3.3 million.

This media strategy changes the game from one played in the courtroom to one played in the court of public opinion. The good news is that the court of public opinion favors the little guy and will overlook many details and even legal rights that may favor the big guy. This strategy is not for everyone, however. To prevail, one needs to have a great story, one that resonates with the public. So, one thing to remember is the value in your company’s story.

For many companies, the better strategy is to avoid these situations. I strongly recommend hiring a good I.P. lawyer and — just as important — buying liability insurance that will cover legal fees.

As to the specifics of the Willa case, in my disinterested opinion, I do think the names are confusingly similar. But, while I support P.G. on the merits, I, like most Americans, I suspect, will be rooting irrationally for Willa.

Tom Szaky is the chief executive of TerraCycle, which is based in Trenton.

Article source: http://feeds.nytimes.com/click.phdo?i=17170112e07c173c5aeb3844bb36b7f9

Filed Under: Small Business Tagged With: , ,

You’re the Boss: Top 10 Sales Tips

July 26, 2011 by Leave a Comment

Jo Opot, TerraCycle's vice president of business development.Courtesy of TerraCycle.Jo Opot, TerraCycle’s vice president of business development.

Sustainable Profits

The challenges of a waste-recycling business.

My biggest sales lesson came from a good friend who is now our head of Canadian business development (a fancy term for sales), Robin Tator. Robin taught me that sales is not about what you are selling, but about making friends and about getting someone to see the world the way you do. If you do that, everything else will take care of itself.

Sales can be a melancholy job. On one hand, many people (especially nonsales people) feel that it’s sleazy and lowbrow. On the other hand, it can be the most important function of a business. Until there’s a sale, there is no business. Personally, I’ve gone from thinking the former to believing the latter and honing my skills over a decade to where today I am effectively the chief sales officer of TerraCycle. I don’t know exactly when this transition happened, but it took me a few years to embrace the power of sales the way I do today.

I recently wrote a friend who is starting a nonprofit and suggested that the role of a company leader is to become the chief convincing officer. In the end these two titles are synonymous, because selling is really the art of convincing someone to believe and buy into your concept, whether by buying your product or service or by investing in your company or by working for your company.

Here are my top 10 sales tips, all of which have served me and our staff — including Jo Opot, pictured above — for years:

  1. You can sell only if you yourself are convinced: If you are not sold on the product or service, it will be an uphill battle to sell someone on else. Your lack of conviction will scream through.
  2. Be clear and direct: When pitching do not use complicated diction. Pride yourself instead on being able to explain the concept as quickly, clearly and simply as possible. This is important because the biggest problem in sales is client confusion. Confusion does not lead to a Yes.
  3. Pressure is an art: Creating FUD (Fear, Uncertainty and Doubt) in your client’s mind can be a good thing because it will lead to serious consideration of your concept. In the TerraCycle world, we award brand exclusivity by country and by category. I often need to tell potential clients that their competition is also talking with us. The trick is to mention this once and to NOT rub it in, which is likely to anger them. No one who is angered into saying Yes.
  4. Know your client: Make sure to research your potential clients, know their challenges and their needs. One size hardly ever fits all, and you look much stronger if you care about the business enough to invest in the research. I can’t tell you how many times I get cold calls from sales people who don’t even know what TerraCycle does.
  5. It’s all about the presentation: Building an amazing deck is critical to the sales process. Practice it, memorize it and be prepared to shift your emphasis based on how the energy changes when you give the presentation. Internally, we always ask ourselves: “Is the flow of this deck right? Will it convince?”
  6. Be passionate and exciting: Most presentations are BORING! So create a show and make it exciting. Excitement is contagious – just like a yawn.
  7. If you don’t know the answer, do not guess: People will ask you tough questions, and you may not always know the answer. The person asking you may be testing you, knowing the answer full well. And if you fumble, it’s very hard to rebuild credibility. Do not guess.

  8. Answer questions directly and clearly: If you are asked a question and you give a “politician’s answer” – in other words, if you don’t answer the question – your credibility will decline, and you will hurt your chances of making the sale.
  9. Humor is a great lubricator: Funny stories always break the ice. Instead of using business cards, everyone in our company uses stamps (see right) to leave our contact info. It’s eco-friendly, it never runs out and it makes for a nice ice-breaker at the beginning of every meeting.
  10. You can always be better: Sales is an art, not a science. Which means it’s never perfect and can always improve. TerraCycle has a standard sales deck most of our associates use. We’ve gone through 94 versions in the last three years and version 95 is around the corner.

    11. Bottom line: sales is a critical function that is more art than science, so hone your art. And please share any of the sales tips you’ve learned.

    Tom Szaky is the chief executive of TerraCycle, which is based in Trenton.

Article source: http://feeds.nytimes.com/click.phdo?i=da5ef6a896fd7f3ce3a3d578931eee30

Filed Under: Small Business Tagged With: , ,

You’re the Boss: My Top 10 Sales Tips

July 25, 2011 by Leave a Comment

Jo Opot, TerraCycle's vice president of business development.Courtesy of TerraCycle.Jo Opot, TerraCycle’s vice president of business development.

Sustainable Profits

The challenges of a waste-recycling business.

My biggest sales lesson came from a good friend who is now our head of Canadian business development (a fancy term for sales), Robin Tator. Robin taught me that sales is not about what you are selling, but about making friends and about getting someone to see the world the way you do. If you do that, everything else will take care of itself.

Sales can be a melancholy job. On one hand, many people (especially nonsales people) feel that it’s sleazy and lowbrow. On the other hand, it can be the most important function of a business. Until there’s a sale, there is no business. Personally, I’ve gone from thinking the former to believing the latter and honing my skills over a decade to where today I am effectively the chief sales officer of TerraCycle. I don’t know exactly when this transition happened, but it took me a few years to embrace the power of sales the way I do today.

I recently wrote a friend who is starting a nonprofit and suggested that the role of a company leader is to become the chief convincing officer. In the end these two titles are synonymous, because selling is really the art of convincing someone to believe and buy into your concept, whether by buying your product or service or by investing in your company or by working for your company.

Here are my top 10 sales tips, all of which have served me and our staff — including Jo Opot, pictured above — for years:

  1. You can sell only if you yourself are convinced: If you are not sold on the product or service, it will be an uphill battle to sell someone on else. Your lack of conviction will scream through.
  2. Be clear and direct: When pitching do not use complicated diction. Pride yourself instead on being able to explain the concept as quickly, clearly and simply as possible. This is important because the biggest problem in sales is client confusion. Confusion does not lead to a Yes.
  3. Pressure is an art: Creating FUD (Fear, Uncertainty and Doubt) in your client’s mind can be a good thing because it will lead to serious consideration of your concept. In the TerraCycle world, we award brand exclusivity by country and by category. I often need to tell potential clients that their competition is also talking with us. The trick is to mention this once and to NOT rub it in, which is likely to anger them. No one who is angered into saying Yes.
  4. Know your client: Make sure to research your potential clients, know their challenges and their needs. One size hardly ever fits all, and you look much stronger if you care about the business enough to invest in the research. I can’t tell you how many times I get cold calls from sales people who don’t even know what TerraCycle does.
  5. It’s all about the presentation: Building an amazing deck is critical to the sales process. Practice it, memorize it and be prepared to shift your emphasis based on how the energy changes when you give the presentation. Internally, we always ask ourselves: “Is the flow of this deck right? Will it convince?”
  6. Be passionate and exciting: Most presentations are BORING! So create a show and make it exciting. Excitement is contagious – just like a yawn.
  7. If you don’t know the answer, do not guess: People will ask you tough questions, and you may not always know the answer. The person asking you may be testing you, knowing the answer full well. And if you fumble, it’s very hard to rebuild credibility. Do not guess.

  8. Answer questions directly and clearly: If you are asked a question and you give a “politician’s answer” – in other words, if you don’t answer the question – your credibility will decline, and you will hurt your chances of making the sale.
  9. Humor is a great lubricator: Funny stories always break the ice. Instead of using business cards, everyone in our company uses stamps (see right) to leave our contact info. It’s eco-friendly, it never runs out and it makes for a nice ice-breaker at the beginning of every meeting.
  10. You can always be better: Sales is an art, not a science. Which means it’s never perfect and can always improve. TerraCycle has a standard sales deck most of our associates use. We’ve gone through 94 versions in the last three years and version 95 is around the corner.

    11. Bottom line: sales is a critical function that is more art than science, so hone your art. And please share any of the sales tips you’ve learned.

    Tom Szaky is the chief executive of TerraCycle, which is based in Trenton.

Article source: http://feeds.nytimes.com/click.phdo?i=da5ef6a896fd7f3ce3a3d578931eee30

Filed Under: Small Business Tagged With: , ,