When Ralph Della Ratta founded Western Reserve Partners LCC with four partners on Independence Day this year, the date wasn’t a coincidence.
Della Ratta, a veteran financier who previously ran the investment banking division of McDonald Investments, sought to establish independence by returning to a back-to-basics approach to investment banking.
“Clients have problems that are long-term in nature,” Della Ratta says. “There’s no quick fix.”
As a result, middle-market business owners need help to map out a strategy that takes into account company growth, long-range real estate considerations, merger and acquisitions opportunities, and succession planning.
“When defining moments come for the owners of privately held companies, such as the sale of the company, they want results,” he says. “They want to know what price they’re going to get and the terms and conditions of the sale. The answer to those two things will define that company and its principals for generations.”
All five of the company’s managing directors — as well as a number of the firm’s other staff members — previously worked for McDonald, a subsidiary of publicly held KeyCorp. Often, under this type of structure — in which an investment banking team works under the watchful eye of Wall Street — long-range strategy for middle-market business owners takes a back seat to shorter-term shareholder needs.
“In a public company, there’s a lot of pressure to declare quarter-by-quarter earnings,” Della Ratta says. “It took approximately $7 million in business at McDonald to create a penny a share increase at KeyCorp. But in an independent firm, there’s no pressure to do a certain amount of revenue in a certain amount of time. That puts us on a parallel direction to our clients and their long-range goals.”
In an era of massive consolidation in financial services industries, Western Reserve Partners is bucking national trends. But, says Mark Filippell, one of the partners, its strategy is simply a throwback to a philosophy that’s been proven to work.
“Twenty years ago, there were many investment banks serving the middle market,” he says. “Today, that’s not the case.”
When analyzing your business goals, it may not be necessary to start a new venture, but adopting a back-to-the-basics approach is worth considering, especially if your company, or the industry you compete it, is in need of a better focus.
Della Ratta saw this when he left McDonald in 2003 to co-found Max-Ventures LLC with OfficeMax founder Michael Feuer. So when his noncompete agreement with McDonald expired in mid-2004, he decided it was time to return to his roots.
Filippell, along with Victor Faris, Ken Hirsch and David Dunstan, left McDonald to join Della Ratta shortly thereafter. The opportunity to build a stripped-down investment banking house that, in some ways, is reminiscent of McDonald before it was acquired by Key, was hard to pass up.
“We have one agenda,” says Faris. “And that is, how do we help our clients? We don’t have to think about institutional issues.”
How to reach: Western Reserve Partners, (216) 589-0900 or www.wesrespartners.com
Simplicity rules
A back-to-basics approach doesn’t have to be complicated or force a complete restructuring of your company. But it does require a change in mindset.
Many businesses undertake projects such as Six Sigma or lean manufacturing, which help compartmentalize organizations and build structured systems, while others bring in consultants to help determine what it is they truly do best.
What’s most important, however, is that no matter what strategy you employ, you need a clear understanding of your goals. Here are four things to keep in mind when contemplating any change.
* Focus on your customers. Any alteration of your business practices should be with done with your clients in mind. If the changes make it harder for your clients to do business with you, or if they don’t improve how you deliver to your clients, it’s probably not wise to change.
* Don’t expand outside your sweet spots. You can’t be all things to all people. While there are some industries where the one-stop shop concept remains effective, consumers are willing to pay a premium for specialization, especially when it means better service for their business.
* Never change just for the sake of change. Unless the direction your company is headed isn’t yielding success, don’t make a move just to mix things up. That rarely results in success.
* Keep it simple. Building more complexity into your business increases the chances for disaster. Any back-to-the-basics approach requires breaking down your business to its most simplistic elements: Who are our customers? What are their needs? How do we deliver? Do we have ability to do so?
