 |
Paul Gartlan '81
2010 Entrepreneur of the Year |
 |
Remarks delivered by Paul V. Gartlan, ‘81
To the R-MC Macon Connections breakfast
The Jefferson Hotel, Richmond, Virginia
November 12, 2010
“Entrepreneurship Beyond Borders”
Being here at the Jefferson Hotel with my son Paul brings back a lot of good memories. The last time we were here was almost 11 years ago when we came with my family to celebrate my father’s retirement from the Virginia State Senate after 28 years in office. It was a great occasion, and thinking about my father reminds me of a conversation we had almost 30 years ago, right after I graduated from Randolph-Macon and decided to accept an offer to play professional basketball in Chile.
As I was about to leave for the airport in Washington to fly to Chile, my father stopped me with a series of very brief questions. Where are you going, he asked? "Santiago, Chile," I replied. Who is waiting for you there? Pulling a piece of paper from my pocket, I said, "Enrique Lopez!" Who is he, he asked? "A taxi driver hired by the team I’m going to play for!" What are you going to do if he is not there? "I don't know!" Do you have his phone number? "No!" How much money do you have? Pulling my life savings out of my pocket, I counted: "$341." How much is a return ticket if nobody is there? "Well, the roundtrip price on the ticket says $1,200, so I guess half of that, or about $600." He looked me straight in the eye and said "Son, have a great trip and good luck!"
Well, it has been a great trip and I have been blessed with a lot of good luck. Getting on that plane to pursue my dream—my love of basketball—led me to the love of my life, my wife Gilda, and set me on the path many years later to become an international entrepreneur. Of course, there were lots of twists and turns along the way—some successes, some failures—but I would have walked to Chile that day and getting on that plane in 1981 taught me you have to be a risk-taker and sometimes just follow your dreams; the combination of the two can be very powerful!
We have somewhat of a mixed audience today so I'll try to make this interesting for both the current students and young professionals, as well as the rest of us who may have a real interest in entrepreneurship and doing business internationally.
As an introduction to my comments on this morning’s topic, I would like to tell you three quick stories.
1) As many of you know, at Randolph-Macon, there is a foreign language requirement; I chose Spanish. Don't ask me why but I did and I was so poor at it that it almost kept me from graduating. In truth, I had very little interest in a foreign language because I never thought I would have any use for it. Well, as I mentioned, just two weeks after graduation, I was off to play professional basketball in Chile. After one month of eating ham and cheese sandwiches and drinking ginger ale morning, noon and night, how much do you think I wished I had taken Spanish a little more seriously? In the ensuing months, I found that Spanish came very easy to me, in part because I met the woman who is now my wife (ha-ha), and it has probably been the single most important contribution to my ability to survive in the international business environment.
The moral of this story: You just never know when, or in what form, an opportunity will present itself!
2) While I was working with Exxon in Chile, in the mid ’80s, I was trying out my entrepreneurial skills by exporting golden raisins by the truckload through the Andes Mountains to Brazil. That was until a giant snow storm cut off every mountain pass in the Andes through Argentina and we had to donate about 5,000 kilos of raisins to local charities!
Also, during my time with Exxon in Chile, I was exporting lemons to the U.S. until our third shipment was deemed Category 2 by U.S. FDA port inspectors in Philadelphia, even though the U.S. FDA inspectors in Chile had certified them as Category 1. The difference in categories meant a significant price cut and I had to scramble just to get salvage value. I had taken vacation to be at the docks in Philadelphia the day the lemons arrived and you can imagine the sickness in my stomach as I was arranging for truck delivery of the lemons to the fruit and vegetable market in the Bronx. That was a bad day!
The moral of this story: When life gives you Category 2 lemons, try to make lemonade. Sometimes you learn more from your failures than your successes.
3) Lastly, I recently asked a friend who just returned from the World Cup soccer championship, in South Africa, about his trip. He related a story about the game between Argentina and South Korea. The 25,000 Argentine fans, most of them without shirts, were screaming and jumping up and down the entire match. The 200 South Korean fans sat in their seats the entire 90 minutes and, at best, raised some clappers to express their appreciation for a good play.
The moral of the story: You can’t do business the same way in every country? You have to adapt!
I am sure that potential entrepreneurs can be taught to improve their chances of entrepreneurial success but I’m NOT sure if education can make you an entrepreneur! I believe there is a certain DNA, a feeling of independence and high tolerance for risk that is common in all entrepreneurs. When I look back, neither of my parents, or my siblings, were entrepreneurs, but there really was no other road for me and I knew it at a very early age.
I got my first Washington Post paper route at the age of 10 and I learned very quickly the tipping value of leaving the paper inside the screen door. I cut grass, shoveled snow, raked leaves, washed windows, pumped gas and was a Junior Achievement member throughout high school. I remember saving my first $100 and asking my mother take me to the bank so I could get a 100 dollar bill. I still have that 100 dollar bill and all the great memories of what it took to get it!
Coming out of high school, I visited Randolph-Macon and after meeting with Coach Hal Nunnally for about an hour, I knew this was the place for me! The size of the campus and the family atmosphere just seemed like the right fit for me and Coach Nunnally gave me the chance to play.
While at the college, one of my roommates and entrepreneurial sidekick, Bill Schermerhorn, and I sold homemade sub sandwiches to pay for our spring breaks, in Florida, and we were the first to sell plastic college beer cups on campus. A funny note on those beer cups: the manufacturer erroneously printed our first 2,000-cup order with the R-MC Woman’s College logo. So, while Billy and I waited for our free replacement order to arrive, we loaded up our car and headed for you know where? To R-MC Woman’s College where we went room to room selling the cups! We got stopped on I-64 that night and I don’t think that State Trooper will ever forget the sight of our car filled from floor to ceiling with those yellow plastic cups! Oh well!
We were also in the recycling business. We went door-to-door to all the farms in the area asking for donations of their horse manure so we could sell it to others in the neighborhood as fertilizer – it was a great business! Billy and I waited tables and shingled roofs and, of course, we charged by the bundle and not by the hour! I graduated from Randolph-Macon in 1981 with an econ/business degree.
Several weeks ago, I was reading the press release of William Franz’ appointment to provost of the college and I was struck by a comment he made about his time at Randolph-Macon. He said, "It has been my honor and my privilege to work with the talented, gifted, and dedicated cadre of teacher-scholars that comprise the Randolph-Macon faculty. Because of them and everyone else in our community, this college changes lives.”
For a variety of reasons, Randolph-Macon has also changed my life and I am very grateful for that! As you will hear, that one decision to attend R-MC ended up taking me to Chile, to a beautiful wife and family, to setting up a foundation for under-privileged children in Chile whose primary fundraiser is a basketball tournament in which Randolph-Macon has played four times in the last 15 years, and finally to my own businesses where both my biggest customer and my biggest supplier to this day is Lan Airlines! As they say, the world is round but it really is flat!
I spent the first 10 years of my professional career with Exxon Mobil, the largest multi-national corporation in the world. I worked for Exxon in Chile, Argentina and Miami. Being an expatriate employee in a large U.S. company in a foreign country was both a challenging and rewarding experience. For the most part, foreign employees in a company like Exxon, albeit in their own country, are much more concerned with fitting into our corporate culture. Being a U.S. citizen working in a foreign corporation is another animal! You are the outsider and you are the one looking to fit in. Fitting in is much easier with the language but still requires significant interpersonal and political skills.
I refer to those years with Exxon as my 10-year MBA! I held positions in internal audit, shipping and logistics, finance, treasury and downstream oil and gas marketing, and it was the best possible corporate training I could have ever had. I would highly recommend to all of you young professionals, regardless of your career plans, that you spend several years in a large corporate environment. What I learned from the financial discipline and internal controls with which that company is run has been my guiding light ever since!
After Exxon, I spent four years with the Lan Chile Airlines Group, two years as the General Manager for the U.S. and Canada of Ladeco Airlines, a wholly-owned subsidiary of Lan, and two years as the director of international affairs for Lan Chile USA. I spent the majority of those last two years traveling to Japan, South Korea and China to establish a sales agent network for the Company. Working for the Lan Chile Airlines group was also a very rewarding, but a much different experience!
In 1994, one year before I joined Lan, the company was privatized by the Chilean government for $120M. In its 60-year history under government ownership, the company NEVER made a profit. Just to give you an idea of this enormous success story, the new owners brought in a corporate culture that was very dynamic and entrepreneurial and in just 16 years, the company has grown its fleet from 16 to 100 aircraft, its annual revenues from $450M to over $6B and has turned their $120M investment into a current market cap today of more than $9B!
While Exxon could survive for years solely on its corporate inertia, at Lan Chile I learned the fundamentals of what it took to compete in a very competitive international and entrepreneurial marketplace. I had hands-on experience with barriers to entry to new businesses and markets. I learned the real-world importance of economies of scale and, most importantly, the critical role of defining your business structure and niche with the objective of providing a service that would be difficult for competitors to match. And most importantly, how to leverage that competitive structural advantage once you’ve created it!
In summary, I had two unbelievable corporate experiences that changed my life and I wouldn’t give up either of those experiences for anything. On the other hand, there wasn’t a day gone by in those 14 years that I wasn’t dreaming of owning my own company!
After 14 years of working for others, I left the corporate world to pursue my life-long dream of owning my own business. Today, and by all comparisons, we are a small company but quite diverse. My current business ventures fall into two areas:
• Professional Aviation Management is a professional employer organization, or more commonly known as an employee leasing company. We provide outsourced personnel services to the U.S. offices of several Hispanic aviation companies. We currently have more than 1,000 employees in 13 states across the country. We are contracted to recruit, hire, pay the salaries and administer the benefits for our clients’ employees. We currently hire close to 500 employees per year, from warehouse operators to regional sales managers. As the saying goes in our industry, "we allow our clients to dedicate their time and resources to the business of their business and not the business of employment." To do this, we review 15,000 résumés and perform personal interviews and psychological testing for roughly 3,000 candidates per year. We focus our management, professional & technical recruiting on bilingual, civil and industrial engineering students from several college campuses including Carnegie Mellon, Cornell, Georgia Tech, Texas A&M, Purdue, Virginia Tech and Penn State; MBA students from the Chicago School of Business, Kellogg, the University of Miami, the University of California at Berkeley,Wharton and The McCombs School of Business at the University of Texas at Austin; and the international MBA programs at Babson College and the University of South Carolina. Our largest customers are the Lan Airlines group, from Chile, and Iberia Airlines, from Spain. Both companies are in the top 10 in market cap of all airlines worldwide and will become even bigger as their recently announced mergers, LAN with TAM from Brazil, and Iberia with British Airways, are approved. Both mergers are awaiting regulatory reviews from their respective countries, the United States and the European Union. We expect both mergers to be very good for our business model.
SkyBOX, Skynet and All Carrier are three separate companies all in the third- party logistics and air freight distribution business.
• The most unique of the three is SkyBOX, which we refer to a cross-border shopping facilitator. If you live in any foreign country and you want to buy from a U.S. retailer, you will find that most retailers do not ship overseas, or if they do it is very expensive and you will have to do your own customs clearence! Our membership fee model provides a physical U.S. shipping address, overseas air freight, in-country customs clearance and home delivery services. We have more than 250,000 individual customers, mostly in Latin America and Europe, and we have co-branded e-marketing agreements with almost every major bank, airline and search engine in Latin America. Our recently announced partnership with Visa International for all of Latin America has been a tremendous success and achievement in our industry. Our search engine optimization is the best of our competitors and we typically have between 15 – 20,000 clicks per day on our Web site. Our top 10 markets are BR, CL, VE, PY, ES, PE, AR, MX, EC and CO, which includes a total population of more than 500 million, and our Web site is available in three languages; English, Spanish and Portuguese!
• Skynet is a worldwide courier network through which we provide third-party logistics and distribution services. As owners of Skynet USA, we have the licensing rights for the United States and Latin America. This is not a franchise arrangement but it does allow us to control the quality of our partners who operate under our trademark! We have more than 100 corporate clients, mostly in the U.S. and Latin America, including HP, Visa Int'l., Whirlpool, the Chinese Postal System, Latin American airlines TAM, AeroMexico and LAN, as well as Christian Dior, Alamo and Sony. In 2009, we shipped approximately 2,000 tons of air freight to 52 countries and currently have wholly-owned operating companies in Brazil, Chile and Venezuela, and majority-owned ventures in Costa Rica and Peru. We are an FAA certified Indirect Air Carrier, as well as a certified TSA screening facility.
• All Carrier is an air freight consolidator with 35-40 customers. We consolidate the freight from other “box” and “courier” companies, enabling these customers to avoid airline weight minimums, and we margin on that consolidation. All Carrier is also very active in the valuables transportation business. This is mostly bank notes, gold bars and other metals. SkyBOX consolidates its freight with All Carrier and Skynet and ships through Skynet’s worldwide network. This is a perfect example of vertical integration to minimize our operating costs! We have three separate companies, in three niche industries with a single warehouse and administrative structure that also provides valuable synergies.
I hope this helps you understand all the complexities and the international nature of our business, as well as the extensive footprint we have to have to go beyond our borders as entrepreneurs!
“Entrepreneurship beyond borders” is a wide-ranging topic and since the majority of my experience has been in Latin America, that region will be the focus of my comments. At first glance, and in many statistical categories, starting a business in the U.S. versus Chile, Argentina or Brazil doesn’t appear much different. According to a World Bank study, between 10 - 12% of the adult population in these countries between 18 and 64 years of age is involved in entrepreneurial activities. This is very similar to the U.S. at 12%.
The number of men vs. women involved in entrepreneurial activities in the same countries is also very similar: two out of every three are men.
Where the numbers begin to differ significantly is 1) in those countries whose gross annual per capita income is below $15K, which is almost all of Latin America, and 2) in the regulatory and legal frameworks in which entrepreneurs have to survive. For example, in the case of Chile, known as one of the most robust and developing economies in the world and boasting a +6% growth rate this year, opening a business requires nine separate legal procedures and about 27 days. In Argentina, it requires 15 procedures and 29 days. In the U.S., opening a new business requires six procedures and six days, and with a minimal filing fee you are up and running!
To collect a commercial debt via the legal system in Chile requires 36 different procedures, approximately 480 days and costs about 29% of the amount collected. In Argentina, it requires 36 procedures, 590 days and costs about 26% of the amount collected. In the U.S., it requires 32 procedures, 300 days and a cost of 14%.
And finally, the bankruptcy laws are so far more complex in these countries and this also stifles entrepreneurial activity.
These statistics illustrate how inefficient entrepreneurship beyond our borders really is! Given that roughly 60% of the job creation in the U.S. is from small and medium-size companies, developing countries could unleash great economic growth and employment opportunities just by providing the legal and regulatory framework that entrepreneurs need!
I often ask myself, how did we get here? Whether it be the language, management of political and economic risk, foreign-exchange management, cultural differences, local customs, Internet penetration or legal and business practices, to be successful outside the U.S. is very challenging! With the exception of Brazil, no market in Latin America is big enough to concentrate your entrepreneurial efforts in just one or two countries. Nor is it a good idea to concentrate your venture in just a few countries in such a volatile region. As well, getting into international ventures is hard, getting out is even more difficult. Due diligence on foreign companies and markets requires even greater market intelligence and you must also have a clear understanding of your own personal imperatives, both in the short and long term!
On the other hand, and since not many have the patience for all these complexities, if you can work across countries and cultures there are great opportunities for entrepreneurship beyond our borders. As you can see from the outline of our business ventures, we are diversified both geographically and by market niche! For example, due to the current political and currency risks in Venezuela we suffered a 15% Y-T-D decrease in revenue but we’ve been able to shift our e-marketing investment and have overcome that loss with revenue increases in other countries! Due to a shake-up in the banking industry our valuables business is off 50% but our third-party logistics business in Skynet has more than offset the decline. This has been a savior, especially with the downturn in the U.S. economy over the last few years. While Latin America has the same real estate and banking issues as the U.S., the depth of the overall downturn has not been that extreme and the recovery has been much quicker!
Doing business overseas also provides tremendous personal insight and educational opportunities. Seeing first-hand how other countries manage such critical issues as health care, retirement and social security, income and value added taxes, as well as their impact on business and economic growth, provides tremendous insight to some of our own challenges here at home.
In closing, I would like to address the current students who are here today. I look at your college years as the building of one big toolbox. I tell young people all the time to just keep pushing to fill up that toolbox with tools of all shapes and sizes. If we get you in an interview, I want to know what’s in your toolbox and what have you done with those tools. In today’s “résumés for dummies” world, anybody can sign up for the Chinese Club, put it on their résumé and think an employer will value that experience. In our companies, we hire approximately 500 new employees per year for our clients. We recruit at many of the best universities and MBA programs. As long as you don’t cut and paste the wrong company name in your cover letter and you get by our “résumés for dummies” filter to the interview stage of your job search, you'll have about five minutes to make your initial, only and lasting impression. You better be able to talk about every tool in that box and how it has impacted your life. There are no wrong answers in a job interview but you have to create life experiences that give you a platform from which you can tell your story and that will allow you to engage your interviewer. You have to be prepared for each and every interview, be passionate about what you want to do with your life and you have to demonstrate what I call a “big motor.” Good grades, a high level of emotional intelligence and a good résumé are a good start but a “big motor” will set you apart!
Statistics show that your generation, on average, will change jobs nine times in your career. And in today’s economic environment you may have to take a chance on something you may not otherwise consider. I know a young man who recently went to a job fair at Florida International University in Miami. He interviewed with a very small company with whom he really had no interest. Nevertheless, he still took it very seriously and made a great impression. That recruiter was so impressed that she called a colleague with a much larger company who wasn’t even at the job fair and said, “You have to see this kid.” After being flown to five interviews across the country, he just started in GE’s two-year management training program in Atlanta. If he completes the program, Georgia Tech automatically accepts the program as satisfaction of the first year of their two-year MBA. Companies look for winners and difference-makers with that “big motor” and you never know who might be watching! If you go international, be ethical! In some countries, that is very difficult at times but there are no shortcuts. Remember, you are ambassadors for our great country and HOW you conduct your business will be far more profitable, in the long run, than any single transaction you'll ever make!
As I believe my story indicates, you don’t have to start an entrepreneurial venture right out of college. In fact, I would recommend that you don’t! I was absolutely positive that one day I would own my own company, but I needed to learn so many things. I needed to export lemons, and raisins, and I needed to lose money at both to understand the internal and external risks of owning my own business. And I also needed to get on an oil tanker off the coast of Argentina to verify inventories and validate internal controls! Go get some real-world experience, build your family and friends network and search for opportunities under every rock. Opportunities are out there, albeit much more competitive than just 20 years ago, but they are there! Surround yourselves with good people and never forget those words of Hall of Fame golfer Gary Player, who said, “The harder you work, the luckier you get!”
I’ve had the good fortune to have great friends, some who are here today. I was also very lucky to have a mother and father who were my role models in their unique and respective ways, and being one of six children, all control freaks, brought a lot of independent thinking. As I mentioned earlier, I had the extraordinary blessing to have played basketball at Randolph-Macon for legendary coach Hal Nunnally. Both my father and Coach Nunnally were extremely smart, led by example, had huge hearts and had lots of drive! While they were very different men, both were great mentors in my life. Whether in your personal or professional lives, mentors are special individuals who will be very valuable to your development! They are game changers! If you don’t have a mentor, find one! If you are not a mentor to others, you should strive to be one! Young people need mentors more than ever and there is no greater satisfaction in life than changing a young person’s destiny by providing him or her with the same opportunities that someone provided you!