Cleveland Enterprise Magazine
Foundation Systems, Inc. by Pete Nofel Fred Ode has gone from traveling the country and sleeping in his car in college campus parking lots to the majority owner of a software company included in the 1996 Weatherhead 100, a listing of the 100 fastest growing companies in Northeastern Ohio. Ode's business, Foundation Software, Inc., Strongsville, OH, writes and sells construction accounting software modules. Quite a leap from his start as a junior high and high school teacher after graduating from Ohio University. An energetic baby boomer, Ode grew restless with teaching classes in math and business. In the mid-1970s, he pulled the passenger seat out of his Pinto to create a sleeping space and with $400 in his pocket began a trek around the U.S. When he ran out of money in Texas, he found work in the oil fields. The oil-field work bankrolled his itchy feet and an odyssey through Europe and Africa. Eventually he was drawn back to Northeast Ohio where he worked once again as a teacher in the late 1970s. In 1980 he started taking graduate courses at Cleveland State University with the goal of getting a Master's degree in business administration. Then he had his epiphany – he discovered computer programming. "I'd been like a fish living on the land suddenly thrown back into the water. Computer programming felt like being at home and so I decided to become a programmer," Ode says. His got his first job in programming in June, 1981. After learning the accounting software field and determining that he could write a better package than that used in construction accounting, he went out on his own and formed Foundation Software in the last week of 1984. During the two years he took to write what would become the Foundation Accounting System, he supported his endeavor by providing computer support for Karl Koch Erecting Co., the firm that put up the steel for the World Trade Center, Giant's Stadium, and the New York Convention Center. Today, Foundation's accounting software is sold in modules. The core accounting system includes job costing, general ledger, payroll, accounts payable and accounts receivable. Job costing differentiates Foundation's system from other accounting systems software, Ode says. "It's just fully integrated into all of the other accounting areas." Besides the software, Foundation provides installation, customization, and training for its software. Depending upon the complexity of installation, the number of users, the amount of training, and other factors, Foundation's construction accounting software can run from a low end of $7,000 to more than $50,000 for a large network installation with lots of modules and customization. Cracking the vertical market of construction software was very difficult, Ode says. Marketing was done through mass-mailings and follow-up phone calls. It took a lot of sales effort to persuade construction companies to buy an electronic accounting system to replace what seemed to be an adequate on-paper method. It took a lot to convince a company that it needed accounting software instead of a new backhoe. But Ode's sales acumen and the quality of his product brought in sales, slowly at first. Ode signed his first client, Reliance Mechanical, in 1987. "I hired my first employee around 1988 and over the next few years we signed on seven or eight clients. For the first five years there were two employees and nine or 10 clients." The original Foundation software was written for Wang minicomputers. In the late 1980s, Ode and his firm converted the computer code over to the MS-DOS environment. It was later migrated over to the Microsoft Windows operating system. "Our move to personal computers is when we really started to take off. I'd say the time around 1991 was our turning point. In 1990-91 we had three employees. It took a year or two for the PC product to catch on. We've grown from three employees in '91 to about 30 right now. "In '91 we had about 15 clients. Today we have about 525 clients in 17 states." Like many entrepreneurs, Ode, who bears a bit of resemblance to Geraldo Rivera, filled nearly every role in his company, from programmer to salesman, to marketer, to administrator. "I am very good on the creative end," Ode says. "I have an extremely good sense for the marketing, product sales, and determining client needs, but Foundation got too big for me to run effectively, that's when I brought Matt Baumgartner." Baumgartner, who is a CPA with a law degree, is Foundation's chief operations officer. He was treasurer for the construction firm Reliance Mechanical before joining Foundation. Baumgartner worked for KPMG Peat Marwick, LLP, prior to Reliance. "There is a whole history of businesses that have had a big success at first by the person who has created the firm, and then got into trouble because the founder never really learned when to let go of the management and bring in a professional," Baumgartner says. The rise and decline of Steven Jobs and Apple Computers is a classic example of the founder holding the corporate reins too long. Along with his construction accounting expertise, Baumgartner says he brought the know-how needed to run a fast-growing company: people management skills, the ability to control overhead, the financial savvy needed to secure lines of credit and bank financing for expansion, and other operations acumen. Structurally, Foundation Systems, Inc. is a privately held corporation with Ode owning 75 percent of the stock. He had a silent minority partner when the firm was first created who lent some financial and operations support who has since been bought out. Baumgartner is scheduled to become a minority partner in the near future. Ode says he expects Foundation's revenues to be about $1.8 million this year, up from the $1.2 million of the last fiscal period. Prior to that, income was about $800,000. "We've been growing at a rate of about 50 percent each year and have been profitable every year," Ode says. "Nothing excessive, and I've always put the money back into the company one way the other. If there's a lot of profit, I hire people. Cash flow has generally been pretty good too." In fact, the business has been doing well enough to open a satellite office in Philadelphia in February, 1997. "We're watching things carefully," Baumgartner says. "We design our organization to meet what we think the sales goals will be. We're really trying to match growth with revenue." Making the Weatherhead 100 was quite a coup for Foundation and Ode credits his success to several factors. "Beyond founding the company," Ode says, "my best starting decision was to write an accounting package from scratch and not tailor it to any specific company. A lot of software firms like mine got started in the vertical accounting market and geared their products to a single construction company. Their software literally didn't have a solid foundation. "Another correct decision was to build in a lot of flexibility into the software," Ode says, "a lot of flags and switches so that the software can be customized for different clients. It took me two years and more than a million lines of computer code to make sure the software would have the performance and flexibility it needed to be a success." Ode also credits his philosophy of service with his firm's success. "It's a matter of doing whatever it takes." In fact, the commitment to service highlights some of the missteps taken by Ode during Foundation's creation. "Some early mistakes were sales that didn't quite work," Ode says. "I underestimated what it would take to make the fit right. We don't do that anymore. Now we work on qualifying the customer to make sure there is a good fit and we can have a good relationship. "In retrospect there were several early sales that I should not have made. I underestimated what it would take to make our package work for the customer," Ode says. "Some of these companies are still clients, and we're supporting them even though it is a tremendous burden. But if you make a commitment you have to stick with it. We'd be a little further ahead if I hadn't been eager to make those sales." The firm's name, Foundation, and its logo, a pyramid, typify Ode's intent to create not only a lasting product, but a lasting company. A legacy if you will. "I want my organization to transcend me. I want it to get to the point where it isn't the embodiment of Fred Ode. That's my goal. And it's beginning to happen. I can go on vacation and not have to call in." Perhaps someday that vacation may include traveling around the U.S. again in a car where the passenger seat's been converted to a bed. - 30 - |
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