Episode 16: SCORE Mentor Art Klebba: Essential Startup Advice for Entrepreneurs

Join Dr. Jeffrey Ricken in conversation with Art Klebba, a seasoned SCORE mentor with 40+ years of business experience. Art shares invaluable insights on starting and growing successful businesses, including funding strategies, partnership best practices, and exit planning.

Key Topics: ✓ Why you don't need a college degree to start a business ✓ The power of sweat equity and long-term thinking ✓ How to avoid under-capitalization (the #1 cause of business failure) ✓ Partnership agreements: why 50/50 splits don't work ✓ Building lasting customer relationships that span decades ✓ Market research essentials before launching ✓ Exit strategies and business valuation ✓ Free SCORE resources for aspiring entrepreneurs

Art successfully built and sold multiple healthcare companies and now dedicates his retirement to mentoring the next generation of business owners through SCORE—a nonprofit partner of the U.S. Small Business Administration.

Here are three excellent quotes from Art Klebba:

1. On Partnership Structure: > "Probably the most important thing in any partnership is having a written document that really outlines the partnership. A 50-50 partnership is really not always the best way because if there's a final decision that needs to be made, someone has to make that. There has to be a final decision maker."

2. On The Power of Listening: > "One of the most important skills in any business is a listening skill. You have to not be talking. You have to hear what the customer's saying. Listen, listen, listen."

3. On Understanding Your Market: > "Know your market. Know your customer. Who is your customer? And specifically, what value will you bring to that customer with your product or service? You have to give solid reasons, not just because you're a nice person, but because that doesn't sell anything. You have to have value of the product or service that you're offering."

Give your comments at https://scorehoustonpodcast.blogspot.com or write to pv.bala@scorevolunteer.org. Let us know what you like of this episode and suggest subjects on which you wish to know more. 

Transcript

SPEAKER_00 0:02

Welcome to Mentor Conversations at Score Houston, where we bring you insights and stories from our mentors. You'll hear from senior executives, entrepreneurs, and professionals who volunteer their time to guide small businesses. In Houston, we provide free, confidential mentoring and education to help entrepreneurs start, grow, and succeed. Now, let's dive into today's mentor conversation.

unknown 0:43

Mr.

SPEAKER_01 0:44

Rod Kleba is a successful business owner, a regional manager and Salesforce trainer for multiple firms he has started with his partners and successfully sold to other companies over the decades of his life. He is an Army Reserve veteran, attended college, studying management in the county, and started at Procter ⁇ Gamble, where he learned on-the-job sales skills to complement his college education. He pivoted to the healthcare industry, selling products and services which involved training doctors and nurses in the use of his firm's unique systems, and had the honor to work even with Houston Medical Center legends like doctors DeBakey and Dr. Denton Cooley. He then went on to develop a company which marketed versatile and specialized medical custom procedure trays, again involving a good deal of training both for his sales force and the medical staff. The company was successfully sold to a larger farm and profitably, and he moved on again to becoming a regional vice president at Maxim Medical Incorporated. This later led to his developing with his former partners a clever mobile surgical instrument repair company. Another firm, IMS, bought their company and he stayed on as vice president until his retirement in 2013. He consulted with IMS for the next 12 months, working with the sales management team to share his knowledge and experience developing an IMS sales team that generated 23% of the revenue of the company. IMS was sold subsequently to a national healthcare company, which ended his consulting engagement with IMS. Two years later, he became a certified SCORE volunteer, which leads us to honor to meet Art Kleba for our interview today. Welcome, Art, to our SCORE podcast. Thank you, Jeff. Good to be here. All right. Well, we are really impressed with your credentials, and you certainly must be a credit to your uh people who come to SCORE for volunteer guidance when they start their new business. All right. Well, thank you so much for coming to the podcast and for all your years of service in uh to so many of our mentees who have benefited from your diverse and lengthy experience in the business of management, training, and to so many staff employees at several national firms. You are an Army Reserve veteran and attended college to learn management and accounting skills. Do all of your scores mentees need college training for creating their new businesses like you did.

SPEAKER_02 3:39

They do not, Jeff. That's something that they have a passion, a desire to see a market made. That's an opportunity to create a business. They do not need a college degree.

SPEAKER_01 3:50

Right. And so uh that is not a prerequisite. Uh it may have been available to some in the beginning, but it's not necessarily a uh brick wall to those that want to start a business. Yeah. Uh I see from your business history that you have managed the training of technical skills to uh healthcare sales representatives and taught them to train medical staff in ambulatory surgical centers and hospitals on how to utilize very important methods of sterile surgical procedure trays. Do you use these teaching talents as a score volunteer as well?

SPEAKER_02 4:30

Yes, they definitely do, because if you look at it, everyone sells something. I don't mean that in a bad way. It's whether you be a parent selling to your kids or you're selling to your spouse of something that you want to get accomplished or they want to get accomplished, you have to be able to help them guide them in the process of whatever you're working with them on. And it happened to be in the operating room where we were draping surgical patients for surgical procedures, whether that be orthopedic, vascular, neuro, that's what we did. So we had to train them on the process of the surgical drapes that they were using.

SPEAKER_01 5:08

Sure. So teaching skills are one of the things we uh bring to SCORE. And SCORE has been in business since the mid-1960s. And uh we have over 10,000 volunteers like ourselves, and a lot of it is teaching. I I practice medicine, so I was teaching my patients, you know, how to prevent uh bad health issues from developing later. And I use those skills, you know, with my uh uh people that I work with, and it's a partnership really. We're not just you know teaching facts and facts and facts, and I'm sure we're there to help inspire young people and benefit from our 30 and 40 years of work experience. You have owned and operated multiple businesses of your decades of work, and I've noticed, and uh several uh have been bought out by other companies after you your success. How did you determine the valuation of your company along with your partners? And did you negotiate the transfers profitably, or did you need legal assistance?

SPEAKER_02 6:14

Jeff, we had legal assistance, and also the CEO that I reported to was a partner from ARPS and the healthcare sector. And between his skill set, he was a county trade originally, and our legal that's who really worked out the financial packages that we use to sell that business.

SPEAKER_01 6:37

Yeah, I have a lot of, you know, uh our people who come and ask us for help. Uh, when we volunteer advice, some of the advice is, you know, I get into this business now. What do I do when I want to get out of it? Is it going to be worth something so I can leave it to my spouse? To uh can I leave it to my children? Is this a business that I can sell if I need to? How do I value my practice? And we at SCORE, we do have accountants, uh, lots of people with MBAs, and we do have attorneys who can look over the work uh when it comes to negotiating and selling uh a practice. It's uh it's it's an interesting question. And lately I've been getting a lot of those answers. People asking for an exit strategy.

unknown 7:21

Correct.

SPEAKER_01 7:22

Well, let me ask you this. What was it like to have partnerships like you had uh with uh several different companies? Uh were there differences of opinions from each often as uh an issue, or uh what did you do to advise your score mentees regarding the pros and cons of partnering with friends or other colleagues?

SPEAKER_02 7:43

Yeah, probably the most important of any partnership is having a written document that really outlines the partnership. Uh whether the and just a 50-50 partnership is really not always, in my opinion, a our business that we had was the best way because if there's a decision that needs to be made, someone has to make that. So we definitely had written documents that outlined our responsibilities and it helped us work through that.

SPEAKER_01 8:16

So, in other words, uh it's like to have a captain of the ship, there has to be a final decision maker. Absolutely, yes. So, this just because you have a couple of good old friends, uh, my experience with partnerships, it's it's kind of like a marriage and maybe a little more challenging, believe it or not, because you're fighting over money, uh policy, protocol, how to do things, and it's a way of life. You wind up spending, you know, 40, 50 hours a week with that partner. You know, you get to know them maybe a little too well, and somebody's got to make the hard decisions. So, yeah, I I can I could feel what you're saying. Uh, how did you finance your initial firms after college? You probably had some debt now, being a veteran, maybe had some benefits, but most people coming out of college are really shouldered with a lot of debt. Were there challenges to uh securing the funding you needed? And how did you overcome them? What determined which companies were more successful than others, now that you look back in retrospect?

SPEAKER_02 9:17

Well, Jeff, I I will say the first company that I, whenever I left Corporate America and joined uh the other three partners, it was really a sweat equity deal for me. I I met gentleman I went into partnership with through a mutual friend who had worked with uh the CEO at Hurts. So that was my really introduction to it. And I had to put in some money, it wasn't a great deal, but basically it was sweat equity. I took a 50% reduction from the corporate world to join this organization, and from there we built a thriving business.

SPEAKER_01 9:57

Yeah, you know, it's an interesting approach. You know, when you say sweat equity, you mean you're gonna kind of maybe reduce some of your income, but for the long haul, you're going to wind up maybe there's an incentive where you can be paid in stock if the company becomes successful. That would certainly motivate me.

SPEAKER_02 10:14

And that might be what it was.

SPEAKER_01 10:16

Yeah, I always encourage the people I work with who come to score. Uh, the mentees are always saying, Oh, I want to borrow this and that. I say, Tron, let's keep this overhead really low because it's easier to show a profit on a lower overhead company than on a fancy office and a big factory. So try to, you know, keep the expenses down. It's amazing how that works. All right, let me ask you this. Uh how have uh did you have the benefit of a role model or a mentor? You know, someone we do like like what we do at SCORE as volunteers. We uh guide you. Who did you have somebody to guide you along on your journey towards successful business ownership and financial independence? I did, Jeff.

SPEAKER_02 11:00

And this gentleman really made me realize the importance of the business relationships and the personal relationship with uh not only the people I was working with, but also the customers that I was calling on. And really that helped guide me remembering how important it was to have those relationships for the long haul. Because being in healthcare for 40 years, a lot of the customers I began with when I first got in healthcare, I was still working with after 40 years.

SPEAKER_01 11:33

Wow. So you kept those relationships, absolutely.

SPEAKER_02 11:36

That was very, very important in my success and in the healthcare industry.

SPEAKER_01 11:43

So good uh interpersonal relationships and skills are essential. In fact, I always tell the people I work with as uh their mentor, I always tell them, you know, you in this digital world, sometimes we're not learning how to uh interact socially with others or carry on a conversation. We're so busy watching the screen, the iPad, TV. It's it's hard to teach younger people, I find, how to carry on an intelligent conversation and maintain it. And it's you're really selling yourself when you ask and validate somebody about asking about them. Don't talk about yourself. I've taught teenagers, and I always found they they just want to talk about themselves. And, you know, I always tell my students, you know, if you want to bore people, talk about yourself. So uh the one book I always tell everyone to read or who I work with is an 85-year-old book by Dale Carnegie, How to Win Friends and Influence People. Influence People. That is correct. Exactly. It's now you can you can it's a$10 book you can get at Amazon or an audio book, but it's an$1,100 course you can take. And I just don't think the course is going to be any better than reading the uh 10, 12 things he has to teach in that book to teach it a you know, you're selling yourself before you ever sell your product or service. So uh good relationships, hard to teach these days with the digital uh world.

SPEAKER_02 13:08

One of the most important skills in any business is a listens to you. Absolutely. You have to keep bucking, you have to hear what the customers say. Exactly.

SPEAKER_01 13:19

Listen, listen, listen. It's I always tell my uh my uh students shut up and listen. Absolutely validate them, yeah, and remember their name. That's the best uh pat on the back. That's the best way to esteem somebody is uh listen and remember their name. Oh, how are you feeling? Uh, were you a little scared when you started uh your first independent business? And absolutely. Yeah, yeah. I think we all, you know, I was shaking in my boots, and I'm sure you were too. But how did you mitigate your fears and minimize your financial exposure to loss?

SPEAKER_02 13:52

Well, one of the things my wife and I did whenever we started this journey is we lay down a budget. We knew what our expenses were by month, by category, and we really made a decision on what we could live with and without. And from there, we really moved forward. It was one of those things that it was it was scary. First thing she said when I came in and we had the discussion about what else we're gonna do, and I told her about the compensation reduction, she said, are you sure we want to do this? And and I kind of laughed. I said, Not absolutely, but I think so. Yeah. Every best decision we ever made.

SPEAKER_01 14:35

So there's going to be some sacrifice along the way. There's going to be some risk involved. And as long as you face it maybe with your partner or even alone, uh, write down what the risks are, write down what your exposure is. That's what I tell them. Let's let's write down what your fears are. Let's put it in perspective. And if your credit is not good, we're going to talk to you about repairing some of your credit. We have funding sources that are good, even if your, you know, your your FICO, your credit score is down in the mid-600s. We can help with that, but you're going to get very good deals if you be conscious about how important it is to keep your uh credit history as clean as possible, and we can help you clean it up if necessary. Yeah. So what do you think are the biggest challenges uh to starting a new business in our current economic climate? And I know there's several questions here. Uh, what special cautions do you offer to your score mentees when starting up their business uh challenges?

SPEAKER_02 15:40

I think the biggest is know your market. Know your customer. Who is your customer? And specifically, what value will you bring to that customer with your product or service? Are there me to's out there? If there are me twos, what sets you apart from those me to's? Why should I buy from A me instead of B? You have to give solid reasons just because you're a nice person, because that doesn't sell anything.

SPEAKER_01 16:15

Yeah. What problems are you solving? What are your solutions? And uh so we're talking about market research. So we have our uh folks watch uh do a business plan. And one of the parts of it is you've got to go do market research. If there's no need for your business, why waste your time? Correct. Yeah, so uh yeah, that's that's advice well given. So before you go into a market, make sure there's people who can afford what you're selling, look at your competition, visit your competition, find out what their services are, what their price structure is, and can you compete uh on an uh even basis or a better basis than the uh service they're performing? So, yeah, that's uh advice well taken. We can save our mentees so much money. We can. Yeah, and I think you know over the years you've probably saved tens of thousands of dollars of foolish mistakes that it's so easy for beginners to make.

SPEAKER_02 17:12

Well, I'm I want to give you an example of uh I guess you I would consider it a henna uh mentee that came to me and was looking to buy a dude ranch in the hill country, and she wanted her plans to take her total 401k and invest that in the dude ranch. Also, uh I said, what number one, you never invest your whole 401k because what happens if it fails if you have no money left in for your retirement plan? And number two is the family would not cheer the books. I said, that's flag number two. And was able, she made the I said, it's your business, your business decision, but she made the decision not to move through with that deal. So as far as I was concerned, I accomplished what I needed to do working with that client. And she made her business decision.

SPEAKER_01 18:07

Yeah, we may be older, but we are experienced and we've seen the mines in the minefield. Yes, that's why that business plan is so important. Do that market research. And if somebody's hesitant to show you really what the books are, tax returns, yes, you know, that's I hear alarms going off right away, right? Immediate, the red flag all over the place. All right. Well, we actually already talked about this already, but for score mentees with a weak credit history, what do you do to assist them in finding funding? What is score's relationship with uh the small business administration, and what are CDFIs for our mentees to understand?

SPEAKER_02 18:47

We have a number of resources, and I always tell people when they're looking for funding is one, the business plan is the key, but there are a number of banks out there that do work with small businesses. And the one thing the banks are really concerned about how I'm gonna get my money back. What how will you repay me for what I'm and the other thing you want to always make sure of is the amount you're asking for is not just to cover what you want to just your startup. It has you have to have more than that because they want to know if you reach a point you need more money. They would rather you borrow more up front than have to come back and look at borrowing again. And you know, we have we've had backers come to us and to talk to us on working with small businesses on funding that have uh sh shorter credit ratings, and have referred multiple people to those banks through the years, and they've been able to help.

SPEAKER_01 19:50

Yeah, and uh these kind of banks we're talking about, they're they have people there, you know, on the phone who will just talk to you and look at your business plan, your financial statement, your credit score, uh, your bank statements, and and kind of see how responsible you are, what efforts you're making to uh uh be responsible in paying your bills uh over the years. And uh that plays a role, and obviously you'll get a you know, a better break. And I should mention here that you know research has shown that the one hand, uh you want to minimize your exposure and risk involved. On the other, you don't want to undercapitalize the business because that's the number one cause for business failure. Half of the businesses go down because they didn't borrow enough. So it is nice to have a score member uh be able to uh guide you through what's reasonable. Uh I've had uh a couple of uh people tell me they want to borrow a million and a half dollars for this dream business. But at that point, the banks are going to ask you, you know, what have you got to pledge to kind of you know collateralize this kind of loan? Uh can you uh put up 20% of it? Then we'll talk to you. Well, you know, a lot of people can't put up$300,000. Uh, that's why they're going to the bank. So dream big, but uh finance as little as you can, but keep it comfortable. So maybe for at least a year you can stay in business.

unknown 21:16

Correct.

SPEAKER_01 21:16

All right, let me ask you this. Uh, do you find being a score volunteer for all these years has been a fulfilling service and experience for you in your retirement?

SPEAKER_02 21:26

Jeff, it has been. It's I I think I've probably learned as much from the clients through these years as as I've been able to impart to them. I worked with businesses that I never thought about were out there. Uh and it it's really made a difference. I I get excited about the successes. I don't care how small they are, or the people I've had opportunity to work with. It's uh whether it's just a a small sale or just a new product that they developed and put in the market, it's it's exciting because they didn't. Enthusiastic enthusiasm helps feed our conversations and it's helped really helps them grow their business as well.

SPEAKER_01 22:08

Yeah, you know, and I'm retired also, and a lot of our members are, but we've had 30, 40, some of us 50 years of experience uh making a lot of mistakes and hopefully having a lot of successes. And that's why we share that uh with it. And for those who are listening who uh want to become a score volunteer, uh we are an extremely uh recognized organization nationally for let's see, so for about six years. 60 years. Yeah, 50 years now. We're having our 50th anniversary. 60 years. We just had an anniversary. But who's but who's counting at this point? Yeah. At 60 years, uh we are a uh really like a non-government organization. Uh we are the uh resource of the small business administration. Our offices are in uh the small business administration in Houston, at least, uh down on uh 59 and uh Gessner. Uh we are uh happy to do the work we do because we we have success stories. And if we uh you know, if we get somebody, you know, just maybe with one service or product and it wets their appetite and they pivot and maybe now they got three products. Once they get a little entrepreneurship, I think they're never going to go looking for another job again because they like that financial independence. So yeah, I find it very rewarding. And a lot of these people are very talented. They've got a a side gig, uh, maybe an artist or a coin collector, they can monetize that and we can show them how. So it's a side gig that uh they can keep their day job until they start making some real money of their own. And they become their own boss. Let me ask you this if there is a mentee uh requesting a specific assistance that you cannot provide from your education and experience, what alternatives do you have to help this mentee get the best advice that they can for your score?

SPEAKER_02 24:04

Jeff, that's that's a great question. And the one thing that and I'm speaks specifically to Houston's chapter, and this is true across the country. We have the ability to do a literally search of our mentors in the Houston chapter and across the country for a specific need that I may not have. And one thing I've learned early on in this business of working with clients is that I never do just an individual mentoring. There's generally two of us at least and read their profile sheet when I get it, and I try to put together a team of score mentors that matches what their deeds are and what their requests are, and that way we start off from the beginning on the right path to get to where they want to go.

SPEAKER_01 24:54

That's uh great advice, and it's nice to know we have such a diversified group of talented individuals in our uh chapter, 135 people now, and you know, whether it's accountants, bookkeepers, doctors, lawyers, managers, uh people who've been in so many different uh businesses, skill sets, levels of education, we can bring them in and bring them to bear on your business. And we're all volunteers, we're glad to do it. There is no hesitation in bringing others in. So uh you've got the uh virtues of uh specialists, no matter what you're going into. Now, a lot of people who are getting into a certain business and have no experience in it, besides helping them with their business, the first thing I tell them to do is go get a job working in this business for somebody else, learn the business, do an internship, and I can help them, you know, maybe even find some jobs. Because we've got a lot of people who know a lot of people, so we can network with you. And and I did, and then I found some jobs in Austin and San Antonio even for these folks who were trying to start businesses. So we can get national assistance, national networking guidance. And that's the nice thing about SCORE. We are a national organization. We have a very strict code of ethics, and while we can't profit or invest in your company, we can give you the advice and the skill set, the uh templates to help you uh build the documents you need to help you get the funding and uh guidance that you need. All right, well, thank you so much for your help, Art. We are grateful for your time and expertise with your extensive business ownership and management and training skills that you bring to SCORE as one of our most valued uh volunteers. I know your applicants uh for assistance in their own startups or business expansions, but they must be so grateful for your wise counsel. I know we at SCORE are proud of your years of service and unique competency in so many critical areas of business ownership, sales management of large U.S. or regions of the United States, and successfully accomplishing all you have over all these years. Again, thank you for sharing your time, your knowledge so generously and selflessly with so many as a volunteer for SCORE. And those of you who wish to become a volunteer or seek uh our uh volunteers' guidance and experience, we do it all as a volunteer basis. There is never a fee, and you've simply got to go to our website, score.org. Log in, and you have access to all of our resources or libraries. So uh look into Score one day. It's a national organization, and wherever you live in the country, we've got a chapter near you. Thank you so much for your time. Art, it's been a pleasure as always. Bye. Bye now.

SPEAKER_00 27:55

Thanks for listening to Mentor Conversations at Score Houston. If you're an entrepreneur or small business owner, we'd love to support your journey. You can reach us at 713-487-6565, or visit us at 8701-South Gestner, suite 1200, Houston, Texas, 77074. Our office is open Monday through Friday, 10 a.m. to 2 p.m., except for federal holidays. Walk-ins are always welcome. To learn more, to request free mentoring, or to register for workshops, visit us online at score.org slash Tuesday. Until next time, keep learning, keep growing, and remember, at Score, we're here to help you thrive.