Rebounding From The B2C Meltdown
GRAND RAPIDS — It was a jump-in-feet-first kind of deal. There wasn’t any doing it halfway.
They simply had an idea, rounded up a little bit of money to get going, worried about the rest later and started their own version of the next e-commerce wonder story.
One company that believed in the dream and began a Web-based business was iBelieve.com. The site, aimed to inform, entertain, encourage and enlighten the Christian community, made its debut in January of 2000.
Unfortunately, however, the start-up came just at the time time when a large bath of very cold water was starting to swamp the e-commerce world.
By the following November, iBelieve fell from surfers’ reach.
“We just ran out of money,” said Jef Fite, former president of iBelieve.com and now vice president of Family Christian Stores. “And we had bad timing.”
iBelieve.com had secured enough funding to get started and run for a while until it reached a positive cash flow. Unfortunately, when the company went back to seek a second round of capital, no one was there to hand it out.
“When we approached businesses, individuals and even venture capital funds, there just wasn’t any money. No one had any of their own and they certainly weren’t going to give it to us,” Fite said.
This situation is something that marchFIRST, the Chicago-based consulting firm, faced this spring when it filed for Chapter 11 bankruptcy. The Internet consulting firm formed last year when USWeb/CKS merged with Whittman-Hart Inc. Experts say the collapse was due not only to the sharp downturn in demand for consulting services, but to a poorly conceived and executed merger.
The announcement came after months of rough weather for the company and ended a rapid downward spiral during which the firm laid off thousands of employees and scrambled to raise enough money to pay creditors by selling off its business units, including the sale of its European operations. The firm also has a presence in Grand Rapids.
Unfortunately the company was not able to break for restructuring and to regroup — instead it sold pieces of the company to various outside parties.
Regrouping is, however, something Fite and Family Christian Stores are beginning to do now.
“We will be developing a new project here; however, we will focus more on commerce and enter the market where the opportunity is,” said Fite. The Christian consumer is still very interested, Fite noted, and therefore there is a demand for the type of site Family Christian Stores looks to create.
According to Fite it will be a virtual connection to the brick and mortar version of Family Christian Stores. Surfers will be able to purchase items, receive Christian counsel, pray and talk with other visitors.
One of the greatest losses in the deterioration or failure of many IT companies is the loss of jobs.
Fite said several key players formerly involved with iBelieve.com now have homes with Family Christian Stores. “We had a large number of talented people. That was never a problem. Being able to combine them here and have them work on our new project can only mean good things for Family,” Fite said.
EVINCI Inc., a Grand Rapids-based e-security infrastructure firm, is another company that saw regrouping as a way to preserve the company. It cut back on job positions and employees earlier this year in order to stay afloat. EVINCI did not return calls to the Business Journal to comment on its situation.
A relatively new web site, which matches information technology professionals with information technology jobs, looks to help in the area of joblessness. JobCircle.com provides regional employment opportunities, resume submission, career development, monthly columns, discussion databases, tech news, regional IT events, and much, much more to a community of over 36750 technology and eBusiness professionals.
JobCircle was formed in early January 1998 by three senior level consultants. The owners of JobCircle felt that there was an absence of an online employment center that was truly geared towards the IT Professional. They felt most of the resources available on the web were confusing, cluttered with advertising, and only set up as a medium to earn advertising dollars. The owners of JobCircle wanted to make a positive impact on the IT profession. So far no local companies have been using the service but it is slowly making its way west.
Another development in the industry was documented in a study conducted by Janco Associates Inc., which showed an overall decrease in benchmark salaries paid to IT professionals in the first six months of 2000. A benchmark salary is considered the compensation that a company would need to pay to attract the best performers in a given IT position, including a base salary along with bonuses and benefits. The study reported this was the first widespread drop-off in benchmark salaries since 1985.
The study also reported that some of the highest paid have been the hardest hit, with the top five paying positions in IT companies seeing anywhere between a half percent and 37 percent decrease in benchmark salaries during the first six months of this year.
Chief information officers’ salaries dropped the fastest, down 37 percent to $317,699 from $434,416 during the last half of 2000. One reason the top positions have been hurt the most is because companies are increasingly paying their CIOs on compensation models, where a large chunk of compensation is based on company performance.
Hindsight being 20/20, Fite can now use his past experience to his own advantage — and to advise others. He suggests when starting an IT business venture, capital resources must be in place.
“Don’t just secure enough to put yourself in the positive, have enough to get you through good and bad because if you try to go back, it might be too late,” Fite advised.
A second idea he believes in is a good business model.
“You need to have one to lay it all out and get you through tough times. Be prepared for anything, because you never know what may be thrown at you.”