Stephen M. Vereb is a Managing Member of the Northern Virginia based Small Batch, LLC, and a multi-unit franchise entrepreneur. We sat down to ask him a few questions about life and business.
Ceterus: Did you always know you were an entrepreneur or was there a moment that inspired you?
Stephen: “I never knew, really. I was in Corporate America working as a Business Development Director and one of my buddies challenged me. He said something like, “You’re not a corporate rank and file guy. You are a leader. Go find something, and lead.”
About the same time, a colleague asked me if I read. I told her I limited my leisure reading to Sports Illustrated or the Sporting News. She gave me two books she said she thought I’d enjoy, The Instant Millionaire and Rich Dad, Poor Dad.
I tore through them on my next plane ride to Dallas and I was instantly hooked. The way through life I had been following up to that point was the philosophy of my parents: get into a good college, get a good education, settle in with a good company, start contributing as much as possible to a 401K, be a good employee, retire at 60-65 if you invest early, and always live within your means.
Those books were revelations to me, though, especially Rich Dad, Poor Dad. The author had faced a lot of the same advice I had growing up, except he had an entrepreneur mentor, too. I had not…until I read his story.
Prior to that book, [for me] life was about playing it safe, about working at a “secure job with a secure paycheck,” but the message I heard from the book was loud and clear. I didn’t want to be the guy who watched life pass me by wishing I had taken a shot.”
Ceterus: What helped you get from the idea of starting something to actually taking action?
Stephen: “Until I read Rich Dad, Poor Dad, I really had no idea about franchising. I was already interested in the kind of passive cash flow that real estate could provide, but that was going to take longer than I wanted to accumulate enough properties to produce the amount I needed to leave my corporate job. Sometimes your brain is just not ready for certain topics; so, the more your read, combine it with real life scenarios, and read it again, it starts to resonate. So, I purchased more books on franchising, and started kicking the tires on some concepts.
I worked as a short-order cook in high school, so food concepts seemed to be a good match; quite honestly at that time and even now food concepts make up a majority of franchise opportunities. I looked into a Manhattan Bagel unit that was up for sale. Met with the owner, sampled the product, and asked about the numbers. I even spoke with the Corporate rep and asked more questions. That was a good experience learning what questions to ask.
During this time that I was studying different concepts here and there, I got a call from a colleague, Paul. He told me his brother-in-law, Henry, was looking into a franchise concept called Massage Envy and wanted him to invest on the deal. He knew I had been studying franchising, so he asked if I would analyze it for him.
It sounded like a lot more fun than doing my real job, so I agreed. After about a week sitting in on various calls with Regional Developers from the concept, taking a lot of notes, looking through and playing around with pro forma numbers, reading articles about massage therapy and the trends, I called Paul back. “You should do this,” I told him. “I think it’s going to be a winner.”
Paul told me he had a lot of other stuff going on and couldn’t commit. “But, if you think it’s a great idea,” he said, “You should talk to Henry about partnering up.”
I only knew Henry from a distance, and we did not know each other more than to say “How are you doing?” and shake hands in passing. But I called him up and we talked about the concept. I told him, “I’ve been at my corporate gig for about seven years and I need a change.”
I had already been interviewing at other companies, but I wasn’t sure I wanted to start all over again with sales. It was a transition point in my life and thought, ‘what the heck?’ At that time, I had saved up about two years of salary, so if things went poorly, I had a runaway to find something else.
To me, it was the perfect time to go for it. I felt like I had nothing to lose, and quite honestly, I really believed in the Massage Envy franchise concept. Everything just became so clear.”
Ceterus: What was the first major roadblock and how did you respond?
Stephen: “Quickly out of the gates, we were offered a second location, but we would have been really stretched both in terms of capital and time, so we partnered up with four other people who had franchising experience.
The first major roadblock arose when the partners refused to sign an operating agreement to define roles and responsibilities. It got messy and went downhill fast. We even had to sit down with a mediator to get out of the deal, but it was the best $5,000 Henry and I ever lost! It was worth it to cut our frustrations and to get out of the deal with such a small loss.
Ultimately, we’ve repaired our relationship with the former partners, but it was not an easy road to say the least.
Ceterus: What was your first major win?
Stephen: “That’s a tough one. I’d have to say it was finding our current lending partner.
We opened our first clinic in December 2007, right in the middle of the financial crisis. We were fortunate enough to secure SBA financing, which ultimately funded our first two locations. However, it cost a good amount in fees.
Our first two operations were performing well, though. So, I did some homework and interviewed local bankers about our situation. They gave me some very valuable coaching about presenting our deal moving forward.
So, I hit the phones and called 10-15 lenders in the area with very specific criteria for who we’d select to fund our next two locations. The lender would eventually have the opportunity to take over the loans on the first two locations, but in return, we would not go SBA and we would not put up any personal collateral. That was a deal a Regional Lender would never go for. I got laughed off of the phone by probably 80 percent of the people I called.
Out of the couple who said they wanted to meet, we found our current partner and closed the deal. Since then, we have developed a very close working relationship and can’t say enough positive about the effect it has had on our ability to focus on operations.”
Ceterus: What’s the most difficult part about what you do?
Stephen: “The most challenging part of what we do is continuing to find new ways to recruit, hire, develop, and retain the best and brightest people. Our people are what makes our business so successful, and we could not have continued to grow without them.”
Ceterus: What’s the best part about what you do?
Stephen: “Seeing someone who came to work for you while in high school or college and watching them develop into the person and leader they are today… It really makes you feel like you have paid it forward.
As I reflect on some of my mentors and know how much they cared to spend their time with me, being able to pass on those soft life skills and big brotherly/fatherly coaching is extremely rewarding.
But equally important, from a client perspective, to see someone come into your clinic in discomfort and trust your staff, and to witness their improvement in health and attitude…it makes everything worthwhile to know you had a hand in bringing that service to them.