By Boyd Rubin

How a small trade show exhibit builder in New Jersey developed, competitively, over 60 years into a four-department company active in trade shows, museums, retail and interactive technology and how their remarkable growth was brought about by changing the rules and an evolving business model.

From its inception in 1923 up until the mid 1980s, Art Guild, Inc. (Thorofare, NJ) remained a small company, moving from its early days in the sign and marquee business into the building of trade show exhibits, with a handful of employees and the bulk of its revenue often coming from a single client. Then, budget cuts by its biggest client forced management to face up to the company’s vulnerabilities. It was time to question the long-term viability of Art Guild’s business model. They had great products and services, but they needed staying power. And they wanted to remain independent. Many trade show exhibit builders were trying to grow and reduce risk through mergers and acquisitions of other exhibit builders in the same market. Art Guild’s partners - John Ricciuti, Doug Zegel, and Om Machhar - felt there was a better way, and they found it. They retained the company’s core offerings while diversifying its markets and honing its competitive edge in a variety of ways that have resulted in carefully managed growth and a well-balanced revenue structure.

As the “Me” decade progressed, the changing business climate made it clear that small exhibit builders were going to find it difficult just to stay viable in an environment that was becoming increasingly volatile and budget-oriented at the same time. Suppliers that had been accustomed to depending on a few big clients for most of their revenue, had to regroup as those clients became less reliable. At the same time they needed to become more efficient to stay competitive. Merging with other exhibit builders, or acquiring them, for the sake of the combined customer list and for the economies of scale seemed like the obvious answer.

But Machhar believed that simply getting bigger was a dangerous move that could ultimately leave companies more vulnerable, as inherent imbalances in the business model became more exaggerated. Keeping Art Guild in the driver’s seat (and the buyer’s seat) Machhar took the company down a very different road, placing the emphasis on bringing the business into balance and growing strategically.

No Matter What It Takes

Zegel and Machhar both became involved with Art Guild in the mid 1970s. Zegel was the first to come on board full time, in 1977. Machhar first encountered the company while working as a consultant for a small CPA firm, and joined Art Guild full time in the late 1980s. Even though by that time Machar’s relationship with the company dated back over ten years, “…it was another year and a half after I joined the company full time before I really understood the business,” he says, a remark that testifies to the high standards he sets for himself.

For both Zegel and Machhar, it was owner John Ricciuti’s craftsman’s mentality and complete commitment to his customers that attracted them to the company. Ricciuti, who retired in 2000, built the business around the principle that doing what was in the interest of the client was in the interest of Art Guild, no matter what it took. So when the serious challenges of the 1980s arose, the three principals sought to preserve Ricciuti’s culture of client advocacy while reinventing other aspects of the company. Ultimately it was Machhar’s strategies that would transform Art Guild into an agile, dynamic, multidimensional business that would not merely survive the turbulent years to come, but post remarkable growth and keep its soul.

The Golden Mean

Together, Machhar and Zegel constitute what seems a near-perfect balance of the strategic and the tactical. “Om knows what Art Guild needs, and I know how to get it,” Zegel says.

If Zegel is the master tactician, Machhar’s special talent is the ability to balance conservatism and change, taking care of today and preparing for the future. Proportion is at the heart of his growth strategy. As Zegel puts it, “Nobody understands the value of fundamentals better than Om. He keeps this company grounded. In a meeting once I acknowledged him as the man that says ‘no’ more than anybody. We are very conservative. Keep the expenses down. Keep the customer’s interest first. Follow the rules - and then change the rules, every day. You can’t just set a formula and follow it. The world changes.” The word “balance” comes up a lot in conversations with Machhar. “Balance is the watchword,” he is fond of saying.

Art Guild has grown through a combination of mergers and acquisitions supported by extending additional services to its existing client base, all the while assimilating new clients that have been acquired organically, mostly through word-of-mouth and through exposure to Art Guild’s work as well as participation in a few select trade shows. Under Machhar’s guidance, Art Guild has kept this growth controlled and deliberately paced. All of Art Guild’s expansions and acquisitions have been designed to create both synergy and stability.

Putting the Pieces Together

Machhar wanted to avoid the mistake that he felt some of his competitors were making: growing without addressing the issue of seasonality. For exhibit builders serving the trade show market alone, becoming larger incurs more overhead - overhead which needs to be supported over 12 months by a revenue stream that is concentrated over only about half of the year. Scaling up can make overhead difficult to manage. “Understanding the overhead structure is absolutely essential,” Machar points out. “Variable cost can be increased because it can be easily reduced. If you increase fixed cost you become more vulnerable.” Which is to say that those expenses that come due every month, regardless of business activity - such as the cost of occupying a facility or maintaining an accounting staff - can become problematic when revenues recede.

In order to create a business model that would spread revenue as evenly as possible over the year, and avoid seasonal or market-driven fluctuations, Art Guild began to move into new markets, eventually becoming a four-department company active in trade shows, museums, retail and interactive technology. In 1987, the company added its retail display division. This expanded the services they could offer to existing customers, and grew the revenue base without a large increase in overhead costs, because retail could share general and administrative costs with the trade show division. At the same time, because retail stays busy nearly the all year, it could keep resources productive all year long leading to greater stability.

Subsequently, Art Guild added a museum division, which allowed the company to extend its services to existing customers active in visitor attractions. This story begins in 1993, when trade show client Sega hired Art Guild to work on a permanent installation at Disney’s EPCOT. Impressed with the work they were doing for Sega, Disney contracted Art Guild to do several more permanent installations at EPCOT. In 2001 Disney again called on Art Guild, to help execute a design for the Boston Children’s Museum. This opened the door to more museum projects. To keep the door open, after completing the Boston project Art Guild brought on museum industry veteran George Mayer as Vice President of Museum Services. The division has grown over about a five-year period from a handful of employees to more than twenty.

In late 2005, Art Guild also created a separate Interactive Technology Division. Once again, the new division augmented services being provided to current customers by existing divisions, making the most of existing company resources without adding substantially to general and administrative expenses (i.e. overhead).

Together Under One Roof, But Separate

The four divisions that make up today’s Art Guild share many resources. Production, design, and engineering resources are scheduled so that each division has access when they need it. Facilities and staff are rarely idle. Divisions also share expertise. For instance, if the museum division has the expertise to solve a problem that the retail display division is not accustomed to facing, the former is only too happy to loan out some staff.

Though they all share a lot, each division operates on a different business model and each has different requirements and its own resources as well. As Machhar explains, “If everything is going through the same business structure, design, production etc., if one part becomes bogged down the whole business is bogged down.” To put it another way, if each division is dependent on the same design process and that process gets hung up on a single project, other projects can grind to a halt. Exhibit fabrication tends to be one-off while corporate booths for trade shows may call for mass production of multiple units. So that, for example, fabricating the exhibits for the George Washington Educational Center at Mount Vernon, VA requires a different mindset than creating and installing 800 of the modular pavilion booths Art Guild manufactures using Syma aluminum technology. For the latter, notes Machhar, “If you’re one click off on each booth there is going to be a meltdown.” Art Guild staffs each division separately. “Even the customer service is unique for the different divisions,” explains Zegel.  “Museum people don’t do retail. They stay in their lane.”

Managing what amounts to four separate businesses under one roof requires senior officers to stay deeply involved. When asked how they do it, Zegel keeps indicating Machhar. “We are able to pull it off because of Om’s uncanny ability to simplify.” Machhar and Zegel work closely with their staff, even down to the team level, on a daily basis. Even so, the pair allow staff plenty of headroom. As Zegel puts it, “We work more by example than by edict.”

Controlling Growth

Art Guild’s acquisitions are strategically sized. When Art Guild acquired National Display for its mass production woodworking capabilities, and Renaissance Display for its mass production metal fabrication, the fact that both companies were small was important. According to Machhar, “if the production facility is too big, companies design for the facility and not the client.” The smaller facilities allowed Art Guild to focus on the needs of clients, maintaining the culture of the parent company, rather than on feeding the maw of an oversized manufacturing operation.

Growing a complex organization requires a steady hand on the wheel. And bigger isn’t always better. Art Guild’s management is careful to keep sales growth and production capability matched and not to let either sales or operations lead.

Payoff Time: The Downturn That Wasn’t

The emphasis on balance combined with conservative financial management and a strict adherence to business fundamentals has spelled continued growth for Art Guild, even when times were tough. In 2000 Art Guild bought 30 acres. In 2001 they broke ground on a new 180,000 square foot headquarters. When after the September 11 attacks, their trade show business came to almost a complete stop, Zegel recalls people asking him what they planned to do with the facility, still under construction. His answer was “We’re going to complete it and move in.” In fact, with Art Guild’s other divisions able to take up some of the slack, the company was able to remain healthy and to post solid growth in the following years. Art Guild now has plans to expand the facility to 300,000 square feet to accommodate that growth.

Zegel explained where the growth came from in those difficult times. “We were doing retail displays in areas that were strong, such as home improvements. The jewelry trade shows, such as JCK in Las Vegas and JA in New York, [where Art Guild’s clients included the Hong Kong pavilion] continued to grow through those times.” And even though museum attendance was down, “the museums had projects on long funding cycles that were not affected because they were already in the pipeline. Trade shows represented a soft market, but our overhead did not depend only on trade shows or we would have felt it more. Our conservative business fundamentals paid off because we still had the means to expand.”

Changes in the overall business environment continue to challenge Art Guild. Clients, facing stiffer competition, are trying to squeeze the maximum from their budgets. As the climate for Art Guild’s various divisions evolves, the company finds itself dealing less with marketing departments and more with procurement departments - whose emphasis is on getting more for less. One of the ways in which Art Guild is meeting this challenge is by investing in technology to become more efficient. They have also begun outsourcing some of their point-of-purchase display manufacturing.

King Client, and The Future

“The way we see it right now,” Zegel says, “there will be just as much opportunity tomorrow as there is today. These markets will continue to exist. The markets may go through cycles. But retail, for instance, is in constant need of solutions. Manufacturing is now global, but service is still local and always will be.”

Good design remains the mainstay of the company. But, Zegel points out, that doesn’t stand alone anymore. It must be accompanied by efficiency, adaptability and good business practices. “Better engineering, understanding the unique needs of every client and continuing to develop the facilities to meet those needs are crucial,” he says.”Also crucial is seeing how much less we can do it for, because the condition of our survival is going to be to do all these things for fewer dollars. Our future is not just about getting the customers,” Zegel continues. “The future is more about our crew and how we respond and find ways to deliver results for fewer dollars, because that pressure is not going to go away.”

“Art Guild is not sales-driven, it is client-driven,” remarks Zegel, meaning that the company emphasizes client retention over client acquisition. The company takes the client-driven model to the extreme of forming teams on a client basis rather than a project basis. Each client enjoys the focus or a team of professionals and craftspeople who are focused on meeting their needs.

A client-driven, solution-oriented, whole-product approach and the ability to find opportunities in unlikely places make Art Guild particularly well-suited to the challenge of meeting customer needs in these lean times. Clients who have less budget for fabrication often have less budget for other things such as staff. Art Guild sees this as a signal to extend its services. “The idea of the package or the program is the right idea,” says Zegel. As examples, Art Guild, develops, designs, fabricates, manages and maintains Sega’s extensive trade show exhibit. Art Guild also creates the Hong Kong Pavilion for US jewelry trade shows. “We work with Hong Kong’s government representatives to design the overall look and feel,” according to Zegel. “We also work with all of the 140 exhibitors, each having their own unique display.”

“Our clients are short of people and because of this are requiring more and more,” comments Machar. “We tell them that we are here and they can depend on us in a cost-effective way. We can take the job from the beginning to end. Tell us what you expect and we can solve your problem.”

 “There are times when it’s clear what the customer is going to get out of it, and not so clear what we are going to get out of it, but it always works out for us in the long run,” says Zegel.

Boyd Rubin (rubin@phoenixws.net) is a financial analyst and trade journalist who enjoys writing about the attractions industry.

Image at top: Courtesy of Art Guild ; Liberty Science Center - Communication Gallery

Reprinted with kind permission of Exhibit Builder Magazine.