Photos by David Butler II
LAURA BERNSTEIN AND BOB Varady were unlikely business partners. She was just beginning her career; he had launched and sold companies. She had always been an employee; he had been his own boss. She was 34; he was 62. She worked to pay the bills; he worked to learn new skills. She owned little; he owned office buildings. Nevertheless, in 1999, Laura Bernstein and Bob Varady became 50-50 partners in a new venture called Cost Recovery Associates Inc.
To seal the deal, each put in $1,000. The gesture was significant on two counts: The first was to balance the power in the partnership. Less obviously, the second was to eliminate the presumption of success. “This way we had to make it work,” Varady says.
And it has worked. Eight years later the Holyoke, Mass.-based company, now called CRA Telecom, has five employees, “hundreds” of customers and designs on replicating its unique model of telecom management outsourcing in other markets. The company represents about 25 service providers through direct agreements or subagency relationships.
The seeds for the Bernstein/Varady partnership were forged in the mid-’90s when the pair worked at Brooks Fiber where they were sales reps for the Massachusetts-based CLEC. While Bernstein was on her third sales job (her second in telecom), Varady viewed the assignment as a classroom for learning the telecom business. As one of the first UniDial (now Lightyear) affiliates, Varady already had experienced success selling long-distance, but sensed an impending market shift. “I could see what was going to happen with all the people coming into LD, that the prices and margins would go down,” he says, and decided he needed to sell stickier local and networking services to stay in the game.
Working for Brooks Fiber was only the beginning of Varady’s education. After Brooks Fiber was sold to MCI WorldCom in 1997, he went to work for Total Communications, a Verizon agency. Bernstein followed. Then, they both went on to sell for rival agency Eastern Telecom. Varady also did a stint with ChoiceOne Communications (now One Communications) – all the while preparing for a solo venture.
No stranger to entrepreneurship, Varady was as eager to return to it as Bernstein was fearful. “We would have lunch when we were back at Brooks and I would say, ‘Do you always want to do this – working for somebody, having to report some place? You’ve got all the stuff from what I see?’” he says, describing Bernstein as an effective salesperson. “She’d say, ‘I’d like to but I can’t afford to go out and do this.’ At some point in time, she changed her mind.”
CRA opened shop auditing telecom invoices for SMBs. “We quickly found that was woefully inadequate; their needs were so much greater,” says Bernstein, explaining that after a year, the partners decided to provide a more complete telecom management service rather than simply recovering overcharges on a one-off basis. “The relationship with the customer needs to be ongoing.”
Becoming a constant for the customer also proved to be a better business model, says Varady. “Auditing is not a commitment from the customer,” he says.
While Varady’s base from the UniDial days was folded into CRA, the consulting business was built “excruciatingly” slowly, says Bernstein describing a process wherein new accounts would be set up with network services until all the kinks were worked out. Often months would go by before they would tackle the next account. “Residuals for selling services kept us afloat,” she concedes.
Philosophically, CRA’s principals don’t believe in making commitments to carriers. “At one point, it was our goal to get no commissions from carriers. We thought it would compromise the advice we give our clients, but it doesn’t,” Bernstein says, noting a fiduciary relationship with the carriers also provides CRA with greater access to personnel and promotional information that it would have as a noncommissioned consultant. “[Carriers] viewing us in an adversarial role is not good for the client.”
That said, CRA seeks revenue neutrality and diversity. For example, it discounts management fees when it receives commissions on services. Only 20 percent of the company’s revenue comes from commissions; the rest is from management fees. The company has lead referral relationships with interconnects and others allied to the field, but none is commissioned. “We keep it honest and above board,” says Varady.
CRA still provides one-off project consulting and auditing, but its bread and butter is ongoing network telecom management. This includes creating a blueprint of telecom services at each business location; monthly auditing of carrier invoices; responding to service interruptions; negotiating carrier contracts; matching carrier networks and plans to client needs; accepting and evaluating solicitation calls; and facilitating adds, changes and disconnects.
“It would have been easier not to create a new model,” says Bernstein. “I would have more carrier revenue and I would make more money.” However, she says she and Varady did not want to be dependent on carriers for their revenue and they wanted to own some assets – two oft-cited drawbacks of being an agent. “I don’t want to be in the agent business,” says Bernstein, citing commission losses to carrier bankruptcies and program changes. “It just scares me personally and professionally.”
Instead, CRA has diversified its revenue and sought to control costs in other ways. Based on Varady’s experience in real estate, for example, the company bought and developed the 8,000-square-foot building where its office now resides. It leases extra space and has room to expand its operations.
The company has matured in many other ways. Varady, now 70, has moved out of the selling role and primarily serves in a strategic business advisory role, leaving Bernstein to manage day-to-day operations. Other employees are focused on particular jobs. “One person does auditing; that’s all they do,” Bernstein says by way of an example.
CRA, she says, has grown methodically (primarily through referrals) since its inception in an effort to maintain the level of quality it delivers to its clients. “Until last year, we made little effort to bring in more business,” says Bernstein. “I’m interested in doing it right.” Doing it right, Bernstein says, translates to a hands-on, personal approach. “We definitely are in the hospitality business,” she explains, citing the requirements to anticipate and fulfill customer needs. “We strive to do it in ways that are better.”
This philosophy is practiced in tasks ranging from proactive calls before contracted rates expire to phone etiquette. “We never transfer a call to voice mail within our company without first knowing if the person is at their desk, not on another call and ready to answer the phone,” Bernstein says.
She says 98 percent of CRA’s clients sign a three-year management contract. “We give them a four-month out, but they don’t leave,” she says, claiming CRA has lost only one customer to date for reasons other than going out of business.
Longtime customer Scott Wilson says, “After all the years, I don’t see any change in the level of service.” Wilson is the controller at Long View RV Superstore, an RV dealer with stores in West Hatfield, Mass.; Windsor, Conn.; and a new location in Tampa, Fla. Wilson is new to his present post, but worked with CRA for eight years while he was CFO at Berkshire Westwood Graphics Group, an art supplies distributor with offices in Arizona, California, Florida and Massachusetts. After just a few weeks on the job at Long View RV, Wilson brought CRA in to help with a move from temporary trailers to the new facility in Tampa. “I could spend a day on the phone or just call [Bernstein] and I know it’s going to get done,” he says, describing CRA’s president as thorough and assertive. He also says she is dependable and accessible. “With CRA, my experience is that you can get [Bernstein] anytime,” says Wilson, noting this was not the case with Long View RV’s previous vendor. “I was used to that. Not getting a response was unacceptable.”
Owning its office building is a part of CRA’s strategy to take greater control over its revenue and costs.
Wilson’s experience with CRA is not unique. Deborah Osienski, vice president of administration and finance for HR Unlimited, also is a second-time customer. Her earlier experience with CRA was while CEO at another mental health clinic. After she switched jobs, she found herself renegotiating the company’s telecom contracts last spring. “I realized I had absolutely no idea if it was a good price,” she says, adding she knew to call CRA.
“We have upgraded our telecom services in every site for about the same price we were paying,” she says, reporting the results of her most recent dealings with CRA.
“[Bernstein] has proven herself in two instances for me. No matter where I go, I will user her,” says Osienski. But Osienski wasn’t an instant convert. CRA had to make several visits to Osienski’s clinic before they convinced her to give their service a try. “[Bernstein] approaches the job with a tremendous knowledge base that the general public is unaware there’s a need for, I think,” she says. “I didn’t even realize how much I didn’t know. ... She had to educate me that I needed her services.”
Varady says this is a common story. “Every single day, we talk to customers that don’t know anything about telecommunications. And why should they know?” he says, adding because of this lack of knowledge, “they take the word of the salesman who is not always looking at what’s best for the customer.”
In contrast, Bernstein says, “I have clients who only spend $200 on telecom services and pay me $50, and they are happy to pay it to make sure the bill is right and to have someone to call.”
She adds, “Where there is pain and confusion, there’s profit.”
Up Close & Personal
Owners: Laura Bernstein, president, and Robert Varady, vice president
Company: CRA Inc.
Headquarters: Holyoke, Mass.
Employees: Five, including the owners
Mission: “Eliminating enormous service gaps between telecom carriers and small to mid-size business customers.”
Greatest Challenge: Developing the vendor contact database. “The credit goes to Laura for that; she has found all the right ways to get to the right party,” Varady says.
Greatest Strength: “We are able to guide the customers to the right company and the right service for the right price,” Varady says.
Past Jobs: Varady was a police officer in Northampton, Mass., for 20 years, and psychology major Bernstein was employed in social services.
Best Advice: “Agents need to get into customer service and hospitality service like what we do and not rely on margins from the telcos because those are going to keep going down,” Varady says.
Secret Weapon: In addition to a landline and cell phone, Bernstein wears a Beepwear wrist watch pager to make sure she doesn’t miss a client call.
|CRA Inc. www.cratelecom.com|