Step into our Master Class, from Warren, Rhode Island, here's Ray.

(Voiceover) Coastal New England is a watery place. From Boston Harbor to Long Island to Block Island and then inland to Providence, you'll find lots of water, and lots of Ray DeSanto's work.

RAYMOND DeSANTO (Harbor Marine Corp.): (Voiceover) We're standing in front of the Providence River and the Port of Providence. The Providence River goes out to the Narragansett Bay and then further on to the ocean. There's a lot of shipping--oil, wood. It's an industrial port.

HATTIE: (Voiceover) Ray's company is Harbor Marine, and he and his crew of 40 do whatever needs to be done on the water.

RAY: We're dredging a channel all the way up to the Crawford Street Bridge because we've already dredged on the other side of the Crawford Street Bridge all the way up to Francis Street. These are the rigs here...

HATTIE: (Voiceover) Ray took us for a ride to show us completed jobs, work in progress and work he hopes to do in the future.

RAY: (Voiceover) At one time it was the fender system for the bridge. We recommend the removal of it and we see if the higher-ups will go along with it. We're gonna be spending a lot of dollars on the rehab of this bridge, and it's definitely necessary to take that eyesore out. And it is a navigable danger, really.

HATTIE: (Voiceover) And it'll make more room for navigation.

RAY: (Voiceover) That's right. That's right. Also, it'll make more work for us.

I started off in the building wrecking business. I was 19 or so, a few years ago.

HATTIE: Building wrecking?

RAY: Yes, that's right.

HATTIE: Now do you have one of those balls that you would knock...

RAY: That's the old word for it. Now they use demolition, but in those days they called it building wrecking. And I went on into road construction and building of bridges, and later on I purchased Harbor Marine in 1983.

HATTIE: Well, so have you always worked for yourself?

RAY: Yes, pretty much.

HATTIE: Since you were 19?

RAY: Since I was 19, right. What I did is, I got my own truck and we used to take buildings down by hand in those days.

HATTIE: And did it--it never occurred to you just to go and get a job working for somebody?

RAY: No, it never did. I guess I was young enough and foolish enough to want to go into building wrecking and...

HATTIE: But why--again, did your father work for himself?

RAY: Yes, he was. He was a tailor. My father was a tailor. Had his own successful dry cleaning place. I wanted to be like my father, putting the time in and accomplishing something. However, I didn't like my father's business, and I really wouldn't--didn't want to just sit down all day long and utilize my hands just for sewing purposes. I wanted to--I wanted the physical part of construction, basically.

HATTIE: So how did you get the money to buy your truck when you started, when you were 19?

RAY: Well, we borrowed some money from a small financial institution.

HATTIE: Did your dad go with you? What do you mean, `we'?

RAY: My dad went with me, yes, and introduced me to his friend, and moved forward at that point.

HATTIE: So the friend maybe gave you the loan because of your dad's reputation or relationship with him?

RAY: I believe that was part of it. However, they knew I was a worker 'cause I used to work part time all the way through high school. We would work during the week weekdays, and we would do as much demolition as possible, pile it all up, and on the weekend we'd hire a truck that would take the material to the proper dumping facilities.

HATTIE: How'd you get your job? How'd you get your first job? How'd you convince somebody, `Let me take that down, let me do that, and pay me'?

RAY: I believe it was a small addition to a building that had been burnt, and we were called in to see if we would remove the material. And it was in a neighborhood in which I lived.

HATTIE: Now did you advertise, or how did people know you were doing these things?

RAY: No, we didn't really advertise. Pretty much when I started, most of the people knew pretty much the people who were in business, or wanted to get into business, and it was more family-orientated as opposed to...

HATTIE: So sort of word of mouth?

RAY: That's exactly right...

HATTIE: Like, `Oh, Ray's gonna start tearing down stuff now. If you need something torn down, call him.'

RAY: Call him up. The handyman.

HATTIE: OK. Well, then, what's the next evolution? When did you move from demolition to construction?

RAY: Well, I started to do driveway work, and from there we just went on to building concrete walls and steps and it just--each job got larger and larger and more complex.

HATTIE: Why do you think you've been successful? I'm gonna guess you probably did good work, and somebody said, `That guy does good work, get him.'

RAY: That's pretty much--I was always concerned about my reputation. I still am. I always tell my people, `Business is 65 percent pride and 35 percent profit.'

HATTIE: So advice to people who are trying to build a company on the people side--how do you get the right people in the right place?

RAY: Well, it is a little difficult. However, I found that the more you actually work with the people on a daily basis, you never ask a person to do something that you couldn't do yourself, and it makes a better relationship.

HATTIE: (Voiceover) Matt Rossi is one of the people who gives Harbor Marine the ability to bid on all kinds of jobs.

MATT ROSSI (Employee): I run heavy equipment for this company cranes, loaders, excavators, all different kinds of machines.

HATTIE: All right, you're running this heavy equipment. What actually is getting done when you're running it? What are the kinds of things you do?

MATT: Well, sometimes we're building docks, we drive piles and sheathing, and just place things for everybody, just about anything that needs to be done on the water, anything, anything that needs to be done.

HATTIE: Did you grow up on the water?

MATT: Oh, yeah, I live on the water. Have all my life.

HATTIE: You live on a boat?

MATT: I live on an island.

RALPH LARSON (Employee): (Voiceover) We have to be versatile and jump around.

HATTIE: (Voiceover) Ralph Larson has worked on the water for 35 years.

RALPH: It's been good to me, good living and a lot of fun. I get paid for doing what I like to do anyway, so that's nice.

HATTIE: (Voiceover) Often, a business owner will have a key employee who can be relied on to make sure everything gets done.

JOHN SILVIA (Employee): Hello?

HATTIE: (Voiceover) For Harbor Marine, it's John Silvia.

How long have you been working for Ray?

JOHN SILVIA: Thirteen years.

HATTIE: And what--and tell me what you do around here.

JOHN SILVIA: You might say I'm a coordinator. Get my barges everywhere they're supposed to be, the boats, make sure everything's on.

RAY: We were looking for someone to take over and run our facility in Warren, and John happened to be the person that we thought was most qualified for that position because he had a lot of experience. He's run boats before, he had worked in some salvage yards, he's a very good mechanic. He has a lot of experience in a lot of fields, and since John's been here, about 12 or 14 years now--I'm forgetting how many--I am now moving him up into the field as a superintendent on numerous projects.

HATTIE: So he's been real close physically to you. Now, after 14 years, you're ready to let him go all by himself and get out there and do.

RAY: That's correct. We try to keep John in close contact with our engineers and he has a very, very good understanding of construction, which makes it easier for the engineer, who normally isn't in the field, to get his job done because he can consult with John, who has been in the field for so many years in different areas.

HATTIE: How do you motivate people?

RAY: Work along with them.

HATTIE: OK.

RAY: Show them what you can do and let them follow you.

We're very production-minded, and the more you can produce, the less you have to charge for a product and a job and, therefore, we can be very competitive.

HATTIE: (Voiceover) OK, do all the people that work for you understand how important their own individual productivity is?

RAY: Absolutely. Absolutely.

HATTIE: How do you make them understand that?

RAY: We make them understand it because they see everyone else around them working, working diligently, and they just pick up the same speed as they have. It just gets you moving, there's a lot of moving.

HATTIE: Do you think it's a corporate culture at Harbor Marine that we don't lie--we don't sit around?

RAY: That's pretty much it, yes, 'cause you look at our equipment, it's all maintained real well, it's pretty much all new equipment, the reason being we don't want to see breakdowns. Breakdowns don't do us any good because breakdowns create problems on the job. Jobs can't get completed on time, people lose interest in projects when they're not running smoothly, and it just keeps rolling. People just--they finish a job in a hurry, they're glad to start another job, and they can't wait to get through that job, and again because of diversifying--diversification of the company, and we do a lot of different types of work, especially on the water.

HATTIE: Is the diversification a key to your cash flow, because if you're only doing one thing, you can't get...

RAY: That's right. It's very, very important on your cash flow, and that's the reason why we do diversify in a lot of different areas. We do marine work, and we also do some work on land.

HATTIE: In the construction business, what are the secrets. I mean, how do you win a contract, for example? How do you get the business? What's the process of getting the business?

RAY: Well, most of our work today is all in the bid process. Plans and specifications are put out for all jobs, and it's competitive bidding. So we put our estimators to work and we review the contract drawings, and we try to come up with some type of an angle to do the work and perform it in a quicker manner.

HATTIE: How do you get that slight edge? What is an angle?

RAY: Well, basically, an angle is the way you see to complete a job on a fast track. And one of the ways is, if a normal--if normal construction is with a crane, if you could use a different type of piece of equipment to do the same work as a crane, however in a faster manner. Effective value engineering is very, very important. Value engineering is when you can take a set of drawings and specifications and go to the owner and show him where you can make a change using a different type of material, which could reduce the price for him, so you both would benefit.

HATTIE: Do you go after public funds for...

RAY: Pretty much. Our business is probably about 80 percent to 85 percent public government agency work.

HATTIE: How do you find out the jobs are coming up to bid and, again, you said 85 percent of the work is government type. It's the law, I guess, they have to put the bids out...

RAY: That's correct. There is a daily bulletin 'cause--the one we use is the Dodge Bulletin. It comes out on a daily basis, and it illustrates all of the projects and jobs that are coming out in your local area.

HATTIE: Does it scare you that 85 percent of your work comes from the government?

RAY: Not at all. We do a lot of government work because we found it is very fruitful for us.

HATTIE: Because you're fast?

RAY: No, because...

HATTIE: They pay--'cause they pay?

RAY: ...they pay, they pay. They pay, and they have a lot of qualified people working for them, that if we do have a question on the project or a set of specs or a plan, we can normally get a fast turnaround and get an answer and a decision out of them.

HATTIE: What advice would you give someone like me who's never done business with the government or for the government? How do I get started?

RAY: Well, I would consider the option of working for the government. I would just have to keep in mind that there are some budgetary problems, and make sure that you do have a strong enough financial back that you can pull through if there is some tight cash flow.

The Lightbulb

HATTIE: When we look closely at Ray and his business, we see no fancy tricks, no clever strategies, no high-falutin' power lunches, no getting rich quick. We see a man who knows his company is only as good as its last job. He has a reputation to uphold because that is his future. If customers say good things, there is more business to come. Every day he's asking himself, `Will we come in on or under bid?' And, `Will we complete the job on time to the standards agreed upon?' His depth of knowledge, conservative nature and experienced work force have served him well.

The media seems to give too much attention to the wheeling, dealing, fast-growth, high-tech, rolling-in-dough and even take-it-public-and cash-out type of business owner. Ray is the opposite. You can build a business without fanfare. Just give your customers quality. Give it to them for the price you promised, and meet or beat the deadline. That's what Ray has been doing for years.

RAY: We're making a major investment today. I don't think any one person can make that decision by himself, and you do need that professional advice before making that decision.

HATTIE: 'Cause, you know, a lot of start-ups, they just try to do everything by themselves, and they don't go for help.

RAY: Well, that could be costly and dangerous. And no one likes to pay a whole lot of money for professional advice, however, it is necessary many, many times.

BOB PADULA (Insurance Agent): And I think anyone who wants to be successful in business has to have good consultants around and...

HATTIE: (Voiceover) Bob Padula knows Ray and his business well. Bob has provided Harbor Marine's insurance for 25 years.

BOB: And then they have to have a good insurance agent, professional insurance agent, who can take care of their problems in that area. They should have a good CPA that handles their financial and accounting situations, and, certainly, a good attorney who can advise them on any contractual negotiations that they're entering into or any agreements that they might be signing. Those are three essential advisers that any small-business person really has to have.

HATTIE: When you have money as a small-business person, you need to buy equipment or invest in your business, not in your own personal lifestyle.

RAY: That's exactly right. You only get out of something what you put into it, so if you're making money, hold on to it.

HATTIE: And leave it in the company.

RAY: Put it back into the business.

HATTIE: OK. When you hit a bump in the road--for example, this cash flow thing--somebody doesn't pay you--somebody owes you a bunch of money and they don't pay you. How do you handle that? Do you go to your banker and say, `Guess what? I don't have any money to pay my payroll,' or how do you handle those...

RAY: Well, the first thing you must do is go back to the people who owe you the money right now, your receivables, see how old they are, see how quickly you can bring some in, reduce the balance for a quick turnover of cash, give that person a break, and they'll probably give you the money quicker.

HATTIE: Oh. So if somebody owes you $30,000 right now, you'd say, `If you'll give me $25,000 right now, I'll forget the $5,000.'

RAY: Well, I wouldn't say an exact number, but if you do reduce the number, I'm certain you'll bring in some dollars, yes.

HATTIE: OK. Have you tried that?

RAY: Yes, I have. I've done that in the past.

HATTIE: And it works.

RAY: Because sometimes turnaround--turnaround time going to a financial institution can be long, and they're waiting for financial statements or other paperwork that's necessary for them to make a decision to let you borrow money. So if you do--if you are owed money and you do have receivables on the books, if you have to reduce them, I think you're better off to get the quick cash. And you're not paying interest, so one way or the other, you're gonna be paying something.

HATTIE: That's a good idea. So do you have a line of credit?

RAY: Yes, I do.

HATTIE: And then when you--obviously, when you need to borrow--because you've got 30 years of good payback records, so you can borrow it.

RAY: Well, we have exhausted our line of credit in the past, and we've had to go back to the bank and request more, or to another financial institution. But in order to go to another financial institution, you're going to have to have some strength.

HATTIE: Right. You've got to have...

RAY: You've gotta have some strength.

HATTIE: Kind of like...

RAY: You have to have some assets, and in order to obtain assets, that means you have to save your money. And the assets normally should be part of your company.

HATTIE: Kind of like if you've got money, you can get money.

RAY: Pretty much. I've always maintained if you had X amount of dollars in the bank, you can get--borrow money to buy a suit, yes.

There's a certain time of the week in which you overlook your payroll checks, and you have to put your John Hancock on the bottom line, and it makes you feel good that you can sign these checks and these people can go home rewarded with a week's pay. Experience is the greatest teacher.

HATTIE: Right. And you can't learn that from a book.

RAY: Cannot learn that from a book.

HATTIE: If you were starting over today, what would you do different?

RAY: I wouldn't do anything different. I'd go right back doing the same thing. The only difference would be today construction is highly mobile. You have to pick up and travel and go out after your work. So that would mean you'd have to employ people pretty quick. It's hard to start by yourself and move on. You'd have to have a group of people, a nucleus, who can bid the work for you, estimate it for you, and you need that labor force to go and complete the job. It's probably very, very difficult to get into business today, in construction, very expensive, buying equipment, buying materials. However, I would not do anything different.

HATTIE: So if we wound the clock back and said, `Would you do it again?'...

RAY: I'd do it again, but I wouldn't start doing it by hand.

HATTIE: You mean, brick by brick by brick.

RAY: That's right.

HATTIE: You--I know, you'd buy a machine faster, right?

RAY: That's right.

HATTIE: OK.

Where does wealth come from, and what is wealth to you?

RAY: I think wealth comes from within. It's how good you feel when you get up in the morning and produce, and do a day's work, and when you get back at home at night and you had your dinner, and you can put your head on the pillow and go to sleep. To me, that's wealth.

HATTIE: What are the hard parts about running a business? When do your--do you wake up and say, `Oh, jeez, I'm just gonna go get a job.'

RAY: Almost every day.

HATTIE: Almost every day you wake up and say, `I'm just gonna go get a job'?

RAY: No, but it does cross your mind quite often.

HATTIE: So how do you counteract that? I mean, how do you counter--you know, You say, `Ah, I'll just go get a job,' but you haven't. In 30 years, you haven't.

RAY: No, I haven't. It's just the endurance that you have to put in your mind to just keep going and carry on until you get through that--over that hurdle that is, you know, making your mind unclear.

Show me a man without a dream, and I'll show you a dead one. So if you are thinking of starting a small business, try to develop it around what your dream is.

HATTIE: So your dream is to be outside and to build.

RAY: That's correct, and build things that pretty much other people don't like to do or don't want to do, and in areas where competition is light.

HATTIE: What haven't you told me about this business?

RAY: I haven't told you that it's very, very rewarding, especially in the marine business. Right now I don't own a pleasure boat, and the reason being is if you're near the water that much, six days a week, you don't have to be near it the seventh. But if you take a ride down, and you take a look at your yard, you still see the water, you enjoy the sun. If you can walk around and you can clear your head, it's not like being in some building five days a week. I just wouldn't be able to do that, couldn't handle it. Isn't it great?

P.S.

HATTIE: Marketing adviser John Wargo has advice on getting more bang for the buck out of direct-marketing pieces.

John, a couple of years ago we studiedMadison Park Greeting Cards, and the shops who sell their cards are very unique, boutiques. Now what we found out recently is--Guess what?--they're using more mail.

JOHN WARGO (Marketing Adviser): Oh, yeah?

HATTIE: They did one for themselves. Now we've found out that, in addition to doing her catalog and mailing to her database, she is now marketing other kinds--other card companies' products, producing their catalogs and sending it to her old database. So that's pretty smart, isn't it?

JOHN WARGO: Well, they have found a customer base that is looking for unique cards. By adding to the product line--OK?--what she's able to do is get creativity from a variety of different sources. So now the boutique is looking for creative cards, OK? She's got far more variety and far more creativity, so you're really adding value by getting these additional catalogs in the hands of the retailer.

HATTIE: See, Judy doesn't have to make these cards.

JOHN WARGO: Right. Right.

HATTIE: All she's doing is selling them.

JOHN WARGO: Right. Well, she's done two things. She's gotten into database management, OK? And she's got into fulfillment. Now, in the database management, what she has decided is, she has developed a relationship with customers that the demand that she has identified is far greater than she could supply. So now what she does is she gets additional card companies to satisfy that supply. So what she does, she expands her business by not expanding her catalog line, by letting somebody else do the catalogs, but by expanding and selling her knowledge in database management. Absolutely great business extension for a small-business person.

HATTIE: And that's what we all have to do. We have to leverage.

JOHN WARGO: Right. And she is leveraging her expertise in database management and relationship management based off the database, supplementing it with additional supply from other card companies. Phenomenal opportunity.

HATTIE: So, John, what can we really learn from Judy here?

JOHN WARGO: Every small business really has to be disciplined in address management, database management. You need to capture the right name, the right spelling, the right address, the right city, the right ZIP Code and even the right phone number. And any other information that they give you about themselves you should find someplace in your data field to put that information 'cause they're telling you something. Whatever that is, you might be able to use in order to customize your offering to that individual.

HATTIE: So Judy's pretty smart?

JOHN WARGO: She's brilliant. Database management is the absolute key to the success of most small businesses.

HATTIE: Want to get a government contract? The SBA can help. Come to our Web site, and Click on `SBA,' and on their page, you'll find Pro-Net. Good luck.

You don't need fancy tricks to make your business successful. Just like Ray, give your customers what they want, when they want it. We'll see you next time.

The Closing of this Show