JONATHAN PELLEGRIN is the author of The Art of Selling the Family Business. Formerly Chairman and Chief Executive Officer of Johnson Hill Press, Pellegrin launched his first magazine while a student at the University of Wisconsin. After graduation and completion of the executive training program at a major New York retailer, he returned to Wisconsin and joined Johnson Hill Press, a single-magazine publishing company founded by his father. He became CEO, a position he held for almost two decades, at which time PTN Publishing Company of New York acquired his family’s firm. Pellegrin led three catalog trade missions in markets served by the company’s publications for the US Department of Commerce in developing countries on the African continent. This earned him an invitation from the Secretary of Commerce Rogers Morton to come to Washington and discuss his successful business endeavors. Pellegrin attended the Owner/President Management program at Harvard Business School and received the distinguished alumni award from the School of Business at the University of Wisconsin Madison. This was followed by an invitation to become an executive in-residence at the International Institute for Management Development in Lausanne, Switzerland. Working with IMD, Pellegrin created the IMD Distinguished Family Business Award as well as lecturing MBA students about entrepreneurship and writing a case study on the value of high functioning independent boards of directors in family companies.
How did you get into the industry?
Growing up on a farm and living in the country, I have vivid memories of going to “work” with my dad on Saturday mornings. I preferred this to having friends over to play or going to friends’ homes. It was a time I had my dad all to myself driving back and forth to his office and then being able to “play” business sitting at a table in my dad’s office while he was working. Playing business was my favorite pastime…with my briefcase filled with ledger paper, yellow pads, graph paper, tracing paper, letterhead stationary from my dad’s company, and an assortment of tools—pens, pencils, rulers, and a compass tool for drawing perfect circles. My dad was a serial entrepreneur—some of his ventures failed and some succeeded. Necessity was the mother of invention when he had to close a business and therefore start a new one. I followed him with the same Saturday routine for years. After college, he had become a farmer, and other businesses were created to fill needs he had on the farm. He sold irrigation equipment, certified small grain seed (he became the largest grower in the county), crop protection chemicals, grain processing and storage…and finally he created financial management magazine for farmers when I was thirteen. I liked this one the best…and I was allowed to actually work in the business helping with publishing tasks.
From observing my dad, I learned a lot about the concept of publishing magazines. First, identifying a specific audience with specialized needs. Identifying an information need the audience had that was otherwise unavailable. And identifying suppliers who sold products and services to the specific audience, so, he could sell those suppliers ads that appeared in his magazine. I recognized what he was doing was ingenious, and I became interested in advertising. When I was in high school, I personally sold more advertising in our school’s athletic programs than had ever been sold. When I got to college I developed my own magazine called The Wisconsin Man. Its editorial was targeted to men only, was distributed to every man on campus, and carried advertising from local businesses that sold products for men. Think men’s stores, athletic stores, restaurants and entertainment venues, barber shops, motorcycle dealers—it was a long list.
In addition to publishing my magazine, I had an internship in the advertising department of the major newspaper publisher in Milwaukee, the largest city in Wisconsin. When I returned to Madison, I was able to get a job at the leading radio and television broadcasting company in Madison. My earnings as a student/entrepreneur dwarfed the starting salaries offered by the companies recruiting on campus. Nevertheless, I accepted a job with the most profitable department store in the country and I worked in its New York headquarters. It was only a year before my dad recruited me to join his company. He still had only one magazine after ten years, although it had grown significantly in circulation and revenue. My vision was to replicate the magazine my dad created in other market segments with similar characteristics. In the twenty-seven years I was with the company, I created more than thirty magazines that emulated the unique magazine he launched in 1957.
Any emerging industry trends?
Billions of dollars of value have been wiped out in the print publishing industry. That’s not to say there are no successful print products remaining, but most print properties have migrated to the internet. And the economics are different—significantly undermining the large margins newspaper, magazine and newsletter publishers once enjoyed. That said, there are major publishers that now give a portion of their content away at no charge, but if readers want more, they have to pay.
Any industry opportunities or challenges?
Barriers to entry once facing print publishers have vanished…along with the healthy margins. Therefore, it’s far easier to start a communications or business news venture with specialized content today. The only limitations are creativity and ingenuity and the ability to produce content people need and want. It costs very little to get into the on-line communications business…and failure costs are nowhere near what they traditionally were.
Inspiration for the business idea, and your vision for the Business?
At my age, I’m on the off-ramp of my life’s journey, so my answer to this question goes back to early in my career. From the time I was in junior high school, I watched the development of McDonald’s with more than a passing interest. I voraciously read about and followed the company. Remember, I had a perhaps abnormal interest in business at a very early age. The development of McDonald’s made complete sense to me. Ray Kroc didn’t invent the hamburger. Rather he created a rigorous system exploiting every aspect of the McDonald brothers’ business. The brothers had tried to replicate and expand their business but failed. Ray Kroc succeeded. At the time of his death his personal fortune exceeded $500 million, the company had 7,500 locations in 31 countries and was worth $8 billion. Today McDonalds is in more than 100 countries with nearly 40,000 outlets.
The nuggets I took with me from McDonalds were as follows:
• Narrow product line and laser-like focus
• Commitment to quality, cleanliness, service and value
• Commitment to education and training so they could achieve uniformity across their system
I was never confident that I could create a business from scratch, but I was brimming with confidence that I could put together a team that could exploit and expand a good, solid, sustainable business concept.
What's next for the Business in the near future?
My career in publishing is over and I feel like I’ve been there done that. I’ve embarked on a new educational venture.
Retiring baby boomer business owners will sell or bequeath $10 trillion worth of asset over the next two decades. These assets are held in more than 12 million privately owned businesses. More than 70 percent of these companies are expected to change hands.
Through my experience publishing business magazines in a number industries, I thought it was a tragedy whenever I saw a once successful and valuable company lose their way only to lose a fortune. I resolved that would never happen to me. Although in the print publishing business, I sold our company before I watched the aggregate values in our industry vaporize. I fundamentally knew that buyers had far more experience than sellers. It was not a level playing field, so when I was ready to sell, I assembled a team that could go toe to toe with the most successful buyers in our industry.
Your key initiatives for the success of the Business?
I was a student of all the merger and acquisition deals that had taken place in the publishing industry. I created hypotheses about the characteristics and elements of successful sales…and after selling my company I expanded my research and wrote a doctoral dissertation on the subject.
Typically, advisors to owner and family operated businesses have an axe to grind and will benefit handsomely from transaction fees and ongoing money management fees if they convince business owners to sell. Often, their advice is not objective or unbiased.
My experience is unique. I successfully sold our family business…and I subsequently studied the topic and have written a book about it. I have nothing to gain if a company is sold or not. My book, The Art of Selling the Family Business is a “wake-up call” as well as a guide for owners of private companies.
Now my mission is to educate business owners about the ins and outs of selling…and educate them about the four stages in the selling process: Exploration, Decision-Making, Execution, and Post Sale Aftershocks.
Your most difficult moment at the Business? (and what did you learn?)
My most difficult moments in the business were when I was faced with the decision of having to terminate the employment of a colleague or associate. Generally, I procrastinated and waited too long. However, I’ve learned over time that “it can be easier to change people than to change people.”
Ideal experience for a customer/client?
We classified all of our customers as:
1. Partnership accounts—mutual trust and there was not a question asked by either us or them that wouldn’t be answered.
2. Relationship accounts—mutual respect and our hope they could become partnership accounts.
3. Transaction accounts—one offs, with little or no relationship of any kind, marked by little loyalty.
The most important thing that must be done for customers and prospective customers is to adequately diagnose their needs and tailor your product or service to precisely meet them.
How do you motivate others?
The most effective motivation tools are education and training, followed by boots on the ground work with senior executives to prove the effective application of the education and training. Employees are reluctant to leave a true learning organization. We consistently preached: Learn your job; Improve your job; Teach your job. A company with that philosophy is a learning organization.
Career advice to those in your industry?
Always think of yourself as an “entrepreneur of one.” The idea is to increase your return on your time and talent. When the time comes that you are no longer needed or that you feel under-appreciated, you’ll have what you need to move on. That’s both job security and independence.