One way to virtually ensure superior service from companies charged with solving business problems — service providers — is to stress your shop’s high-growth company characteristics. (That’s not a stretch for most high-tech and telecom companies.) Why? Because service providers are bending over backwards to retain the business of such players in the hope they’re still clients when it’s time to list their shares on the Big Board.
What’s more, many service providers enjoy – if not prefer – working with gazelle organizations, because they approach the marketplace and their organizational challenges nimbly, with little tolerance for bureaucratic wrangling in the decision-making process. Gazelles are savvy, and they move quickly. For the service provider, that means there’s never a dull moment.
David Birch, president of Cognetics, an economic research company in Cambridge, Mass., defines a gazelle as an organization that doubles its size in under four years, assuming a minimum revenue base of $100,000. Others think of them as companies investing dramatically in hiring people and/or acquiring significant real estate assets for manufacturing or product distribution.
“Defining a gazelle means defining a gray area; intuition plays a big role,” says F. Craig Morris, managing director, corporate services group at Grubb & Ellis, in Newport Beach, Calif. But he knows one when he sees one. “I’m less concerned with revenues than with business growth plans, because that’s what drives all of their real estate. “We look for new IPOs, groups that are not real estate asset owners and up-and-comers that seem to be in a niche with a lot of room for growth and has the interest of the venture capitalist community,” he relates. Other candidates are subsidiaries that fall outside the core business of a parent family and have no in-house real estate staff.
“In the case of the telecoms, it’s how much money they can spend,” quips Don Rodie, a director in Cushman & Wakefield’s Phoenix, Ariz., office. Rodie works almost exclusively with telecom companies, helping solve their real estate and related business issues.
Familiarity with telecom and the industry’s key players goes a long way towards making the relationship effective, Rodie asserts. Early on, clients need to know where existing fiber optic networks and other communications systems are located, so that they can maximize their business planning efforts. “Clients also expect an understanding of the type of buildings they require,” he adds. “There are very specific technical requirements that must be present in a building before they’ll even consider it for occupancy.”
Above right: F. Craig Morris, managing director, Corporate Services Group at Grubb & Ellis
Suite of Services
Large service providers have the advantage of bringing to the table a suite of services, or at least resources, that can complement original service agreements. Says Rodie: “Our strategic advisory services people are doing a lot of work with US West, for example, to analyze their lease-hold portfolio to help them consolidate some of their operations and get the biggest bang for their occupancy buck.”
Lease-hold portfolio administration is a key service in the telecom arena, says Rodie. Building access license agreements, which are required to bring service into a building, should be catalogued with leases where applicable, or at least organized in such a way that the paperwork can be accessed and managed effectively. And service providers in this sector should even be prepared to assist in the client’s strategic planning process. Anticipating and managing future growth depends on gathering key insights from internal and external parties and building a strategy based on the most solid assumptions.
“The high-tech industry is in its infancy from a historical perspective, particularly telecom, the Internet and broad-band capacity, which are in their very early stages,” says Eric Schmidt, vice president, market development at NEXTLINK, a Bellevue, Wash.-based telecom provider. “We rely on Cushman & Wakefield to help us plan for that so we’re not always going back to the well for more square feet.”
Above right: Rick Libermann, a Grubb & Ellis executive specializing in high-growth clients.
Service Requirements
Gazelles expect certain qualities in their service provider relationships, according to those on the front lines. Citing a high-tech client currently in super-growth mode, Rick Liebermann, a Grubb & Ellis executive, says honesty really is the best policy. “This client desperately needs a service provider they can trust, who will tell them the good and the bad. Increasingly, clients don’t like service providers who just give them the good news. They want to work with someone with whom they can develop a close working relationship, someone who becomes an extension of their entity. That’s an overused clich?, but it’s true.”
Liebermann’s not-yet-a-year-old client is most interested in process, reporting and communication, as well as research, he reports. “They’re not yet sure how big they want to be, and they want operating flexibility,” says Liebermann. “This is very typical of high-growth companies. If they fulfill what’s in their business plan, they will not need leases or assets in real estate that are much longer than two or three years.”
As the business quickly grows, so too does the demand for answers on the part of the business leaders at the helm. They can’t wait days or weeks for information pertaining to rapidly changing conditions.
For example, Grubb & Ellis routinely runs cost analysis for gazelle clients that looks at the costs associated with various lease terms. “If you can quantify the cost savings for going to a longer term, then the client has a much easier decision to make,” says Morris.
Another sought-after quality is flexibility. Service providers must be able to demonstrate that they can change course in their thinking about a client’s issues as rapidly as the business itself changes. Liebermann recalls working with a classic gazelle client in the electronics industry that at one time was in the midst of shedding real estate assets because of a downturn in the industry sector’s business cycle. About 10 months later, the situation had reversed. “That sector turned dramatically and is growing like wildfire,” he relates.
“Demand is up for the client’s products, and they’re scrambling for space. Their business plan a year ago called for getting rid of real estate. Obviously, most companies’ strategic plans cover a period of time longer than six months or a year.”
Unless service providers can react to such shifting realities, they will not remain business partners with their clients for long.
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