By the end of 1998, Glenwood, Minn.-based American Solutions for Business (formerly American Business Forms Inc.) had grown to 300 sales associates and earned the No. 1 position among printing distributors with annual sales of $162.5 million. To continue to grow the company, its management team had its eye on technology.

To that end, American released ACES in 2000. It's a proprietary e-commerce technology that enables American's customers to conduct and control everyday business functions online. (The reason why the system is named ACES is American's president, Larry A. Zavadil, had been told that American was a "house of cards." His quick retort: "Yeah, but they're all aces.") Proprietary and flexible in design, ACES allows customers of any size to order products online and to implement specific e-commerce programs without incurring up-front investments.

ACES users enter their unique IDs and passwords to see a customized screen. Users can access a general company store that includes printed products, marketing brochures and other items. They also can view customized catalogs for office supplies, just-in-time apparel and other promotional products. If they need business cards, letterhead, stationery or envelopes, they can view proofs on screen.

"ACES is a great tool to show prospective associates," says Craig McLain, American's vice president of sales. "Technology is huge sinkhole for small and medium-sized distributors, but they realize it's a necessary evil. I can say I haven't had one sales associate come in and look at our technology and been disappointed by what they've seen."

For more information about ACES, call American at 320-634-5471.

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When Larry A. Zavadil launched Glenwood, Minn.-based American Solutions for Business (formerly American Business Forms Inc.) in 1981, his blueprint was simple: If everyone involved in a business proposition has his or her needs met, everyone wins. American's corporate priorities are 1) client, 2) sales associate and 3) manufacturing partner.

The third priority, though, remains critical to American's success, Zavadil says. After all, the company's vendors provide the products and services upon which its customers depend. "By aligning with some of the industry's best suppliers, American is able to continue its commitment to provide unparalleled quality, service, innovation and competitive pricing for our customers," he says. "As partners in this commitment, our businesses can continue to grow and prosper for years to come."

In 2000, American began a vendor program called Partners for Progress. To be considered as one of the company's preferred vendors (and thereby reach more than 615 sales associates), vendors must meet product quality, customer service and competitive price standards. Then, the program entails four participation levels based on the amount of prompt-pay discounts and rebates offered by vendors. The levels, from lowest to highest participation, are Red (2 percent prompt-pay discount and rebate contribution), White (3 percent), Blue (4 percent) and Patriot (5 percent and higher). Members agree not to solicit American's sales associates directly and to send all invoices to the company's headquarters in Glenwood (never to associates themselves).

Patriot-level members receive the highest savings when attending American's two annual sales conferences and trade shows. They also receive priority listing in the company's vendor directory and web page, priority response to sourcing requests from sales associates, technology integration with American's ACES system, the opportunity to send five mailings to associates annually, receipt of the firm's monthly newsletter, regular updates to American's list of associates, a free chance to host educational seminars and workshops at the conferences and trade shows, and more. Patriot-level vendors are encouraged to place new-product announcements, success stories and multimedia presentations on American's online Employee Resource Center.

"The best things about our Patriot-level partners are their credibility and integrity," says Wayne Martin, American's director of vendor relations. "They're very interested in reaching our associates, and they realize they can most effectively accomplish that by having the utmost participation in our program. Working as true partners is how American and its vendors grow each other's business together."

"American's reps wanted access to our capabilities," says Tom Lawrence, vice president of sales of the Documents division of PrintXcel, a manufacturer based in Englewood, Colo. "Participating in their Partners for Progress program has given us access to a wide range of distributors who can rely on our complete capabilities."

The more volume American's sales associates drive to Patriot-level vendors, the more money the company saves from prompt-pay discounts and other rebates-and the more money American's employees earn because of the firm's Employee Stock Ownership Plan (ESOP) structure. (See the online exclusive, "6 Steps to Setting Up an ESOP.") Of American's top 100 vendors based on volume, 43 are part of the Partners for Progress program, compared with 24 in 2001.

For more information about Partners for Progress, call American at 320-634-5471.

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6 Steps to Setting Up an ESOP
On July 1, 2000, American Solutions for Business (formerly American Business Forms Inc.), a network of distributorships based in Glenwood, Minn., became an employee-owned company through the formation of an optional ESOP (Employee Stock Ownership Plan). An ESOP is an employee-benefit plan operating through a trust that accepts tax-deductible contributions from the company to accumulate company stock. The stock is allocated to accounts for individual participants. ESOPs have unique features compared with other employee-benefit plans.

After spending an estimated $300,000 to set up an ESOP, Larry Zavadil, American's president, advises other companies to approach ESOPs in a 2-step process: "First, get the best external support as possible in the form of consultants, ESOP attorneys, accountants and appraisers," he says. "Second, truly look at your corporate structure to determine whether an ESOP is going to work with the internal management and operations of your corporation."

ESOP experts offer this advice:

• Determine if all owners are agreeable. This sounds obvious, but some companies waste time going through the steps below before finding out if all owners are willing to sell. If you co-own the company with others, make sure they are willing to consider an ESOP.
  
  
• Investigate the ESOP concept. Simply put, an ESOP is an employee benefit plan operating through a trust that accepts tax-deductible contributions from the company to accumulate company stock, which is then allocated to accounts for individual participants. But companies create ESOPs for a variety of reasons: as an employee retirement plan, for purposes of business continuity, as a financing tool, as a method of motivating employees or any combination of these.
  
  If you're interested in the ESOP concept, gather as much information as possible. Two groups that offer extensive data on ESOPs are The ESOP Association (www.the-esop-emplowner.org) and The National Center for Employee Ownership (www.nceo.org). As part of its investigation into ESOPs, American's management team also met with several ESOP corporations.
  
  
• Perform a feasibility study. This may be as simple as a careful business plan performed in-house or a full-scale feasibility study conducted by an outside consultant. American hired consultants to assist in the implementation process. Whether you rely on consultants or handle the analysis in-house, there are numerous issues to consider. "We spent a considerable amount of time completing extensive research and analyzing the overall impact of an ESOP and how it should be structured," Zavadil says.
  
  According to The ESOP Association and The National Center for Employee Ownership, a feasibility study should address the following questions:
  
  How much extra cash flow does the company have available to devote to the ESOP?
  Is the cash flow adequate for the purposes for which the ESOP is intended?
  Does the company have sufficient payroll for ESOP participants to make the ESOP contributions deductible?
  Who will participate in the plan?
  How will stock be allocated to participants?
  What vesting schedule will be adopted?
  How will distributions of ESOP accounts be handled?
  How will voting rights be handled?
  What will the repurchase obligation be, and how will the company handle it?
  
  
• Conduct a valuation. Feasibility reports rely on estimates of the value of stock to calculate the adequacy of cash and payroll. These estimates are fairly accurate for public companies because they can be based on past performance. For private firms, however, these estimates are more speculative. It's critical for private companies to conduct a valuation: If the value is too low, owners may not want to sell. Conversely, the price of shares may be too high for the business to afford.
  
  American hired an independent appraiser to do an initial evaluation and provide the ESOP with an ongoing annual evaluation. Initial appraisals may take several weeks or longer. Valuation consultants look at a variety of factors, including cash flow, profits, market conditions, assets, comparable company values, goodwill and overall economic factors.
  
  
• Retain an ESOP attorney. After you've researched ESOPs and settled on a basic structure, it's time to hire an ESOP attorney. Like many distributorships, American retains corporate counsel. However, Zavadil says the company also enlisted the services of one of the top ESOP attorneys in the nation. One of the main tasks of an ESOP attorney is to prepare a formal plan detailing the specific terms and features of the ESOP.
  
  The plan addresses the ESOPs purpose and operation, eligibility requirements, participation requirements, company contributions, investment of plan assets, account allocation formulas, vesting and forfeitures, voting rights and fiduciary responsibilities, distribution rules and put options, and so on. This plan must be submitted to the IRS, which then issues a "letter of determination" on your plan.
  
  American also relied on its accounting firm. "Our CPA firm worked closely with the ESOP attorneys to ensure that we took full advantage of all the tax benefits available to us during the transition to and the ongoing operation as an ESOP," Zavadil says.
  
  
• Devise a process to run the plan. Once an ESOP is in place, the work is not over: there are day-to-day operations. First, a trustee must oversee the plan and have fiduciary responsibility for the plan's assets. Some private companies rely on an employee, however, many hire an outside trustee.

ESOP committees usually direct the trustee. American has two steering committees: The sales steering committee is comprised of sales associates, and the operations steering committee is made up of staff and support employees. The committees provide feedback to American's management team and its board of directors, which develop the strategic direction of the distributorship.

Finally, someone must administer the ESOP-maintain all the individual records of the plan, track the current participants, monitor participant vesting, oversee the content and value of each participant's account and so on.

Although setting up an ESOP can be complicated, the task is manageable and the end result may be advantageous for your firm. Zavadil calls the ESOP a "win-win situation for the employees and me."

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