TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Good evening, everyone,
and welcome to this special edition of NIGHTLY BUSINESS REPORT. I`m Tyler
Mathisen. Sue Herera has the evening off.
Tonight, we will examine the entrepreneurial spirit. The journey usually
starts with a bright idea. That may be the easy part, by the way. Then
comes the truly hard work. But, of course, it can all pay off, and before
you know it, that bright idea can turn into a billion-dollar venture.
And we begin tonight with two New York City entrepreneurs who had the
bright idea to change what may seem like a dull concept — office space.
Both with tech backgrounds, they wanted to shake up the way leases work.
And they`re not only increasing flexibility for renters, but for building
owners as well.
MATHISEN: When Arnol Sarva and Edward Shenderovich began renting out their
extra New York City office space a few years ago they didn`t think it would
turn into a business called Knotel.
ARNOL SARVA, KNOTEL CEO: Knotel started by accident. We were sitting on
top of an explosively powerful business.
MATHISEN: Powerful? Sarva says Knotel brought in about $10 million, but
starting it meant taking on multinational multibillion dollar company.
EDWARD SHENDEROVICH, KNOTEL CHAIRMAN: We started looking at their numbers
and trying to understand what we actually have something unique to offer.
MATHISEN: Two of the big boys renting office space are We Work and Regis
Six-year-old We Work develops co-working spaces mostly for smaller startups
and individuals looking to share the cost of kitchen, social space, Wi-Fi,
even group health insurance.
Regis (NYSE:RGS), in business for more than 25 years, used to target big
businesses. Now, it`s aiming for other segments as well with 3,000
locations across 120 countries.
But Sarva and Shenderovich believe there`s a giant underserved market,
newer, faster growing companies with 20, 30, maybe 50 employees.
SARVA: Less than percent of the office market is the co-working types
stuff. Ninety-nine percent is companies that need a headquarters.
MATHISEN: Startups tend to begin life as nomads. Five-year-old Venuebook,
an event space booker, is in its seventh office.
KELSEY RECHT, VENUEBOOK FOUNDER AND CEO: We have our first sign.
MATHISEN: Brand identity is a plus but Kelsey Recht says Knotel`s flexible
one-year lease allows Venuebook to move again if necessary. Knotel says
space for 20 runs about $10,000 a month in New York City.
RECHT: We didn`t want to sign a really large least and then have to sublet
to another company.
MATHISEN: To Knotel, leases are the enemy.
SARVA: Leases are what you thought was the only way to do business, up
until someone showed you a different way.
MATHISEN: Sarva and Shenderovich say long-term lease, five, seven 10
years, hurt small businesses and landlords. If average rents rise during
the lease, landlords can`t cash in. Knotel helps landlords turn over their
spaces more often, letting the market dictates the price the same way
hotels change room rates day-to-day.
Knotel shares the risk with landlords and collects the marching off the
NORMAN KURLAN, BUILDING OWNER: That was really a problem for building
owner because you can`t really run a building with your leases turning over
after six months, and I think Knotel took care of that.
MATHISEN: Thirty-year commercial real estate veteran Norman Kurlan is the
landlord who first pushed Sarva and Shenderovich to fill extra space they
were renting from him.
KURLAN: It`s not really a traditional sublease operation. It`s more of a
moving around the companies as they needed space.
MATHISEN: Sarva and Shenderovich also believe their tech background will
help landlords adapt into the future. Who knows what the conference room
will look like in 10 or 20 years.
SHENDEROVICH: What we`ll provide them is a service that alleviates the
necessity for them to become experts in technology. And for residents,
we`ll alleviate the necessity for them to become experts in real estate.
SARVA: You have to coordinate different people who needs over time that
change. Now that we have technology, we can coordinate the needs and put
MATHISEN: Knotel expects to expand outside of New York to about 40
locations by year end. It has already expanded beyond tech start-ups. The
client list now includes media, finance, fashion, and retail companies.
Well, another pair of entrepreneurs got the bright idea to simplify the
process health insurers use to decide whether they`ll pay for some drugs.
The company CoverMyMeds makes software used by doctors and pharmacists to
get quicker approvals. Now, their bright idea paid off and how.
CoverMyMeds recently sold for more than $1 billion to the wholesale drug
king McKesson (NYSE:MCK). We reported on them before the acquisition.
And tonight, we show you how they bring the drug approval process into the
PETER D`APRILE, PHARMACIST: Kent Station Pharmacy, this is Peter.
MATHISEN: Even a small town pharmacist like Peter in Kent, Connecticut,
sees it happen. Prescription placed on hold, requiring prior
authorizations or P.A.s, before insurance companies will pay for medication
D`APRILE: All of the time, every day. There`s at least one every day, if
not five every day.
MATHISEN: Prior authorizations force doctors to decide whether to
prescribe something else, or ask an insurance company for an approval.
That used to mean phone calls, forms to fill out, and faxes to be sent.
D`APRILE: It could be a week or two type of situation. And, you know,
sometimes patients don`t need medication anymore.
MATHISEN: Enter CoverMyMeds. It`s software that supplies the forms, then
auto-populates them with patient records. Once D`Aprile hits send, it
helps put pharmacist, doctors and insurances companies all on the same
Now headquartered in Columbus, Ohio, CoverMyMeds was created by a former
pharmacist and software developer.
MATT SCANTLAND, COVERMYMEDS CO-FOUNDER & CEO: That`s what patients said
when they`re frustrated with a process. Why won`t they just CoverMyMeds?
MATHISEN: Columbus native Matt Scantland was building software and
websites before he teamed with one of his top customers, Sam Rajan, back in
2007. At the time, Rajan was helping to run a successful pharmacy benefits
SAM RAJAN, COVERMYMEDS CO-FOUNDER: The “aha” moment for us is when we
decided to put a prior authorization on multiple sclerosis drugs. We found
that 40 percent of our patients never went on the drug.
MATHISEN: He learned that most feared they couldn`t afford to pay for the
drug without coverage. It became imperative then to simplify and speed up
the approval process. Instead of sending patients off to fend for
themselves, Rajan and Scantland wanted to tell patients, OK, we`ve got this
RAJAN: When a doc has an all-drug, all-payer solution, that`s when the
adoption and viral adoption model really came about.
UNIDENTIFIED MALE: We now helped 42 million people.
MATHISEN: CoverMyMeds is free for patients and a half million prescribers
who use it. It`s also free for the 47,000 pharmacies using it.
It`s paying customers are insurance companies and those pharmacy benefits
managers who hope that CoverMyMeds can help reduce the costs that build
when patients don`t take their medicine.
CoverMyMeds won`t discuss exactly what it charges, saying only that it cuts
the average cost of each prior authorization request from roughly $40 to
less than $10.
SCANTLAND: We picked a problem that can be solved in a way where everyone
wins. The insurance companies are very important customer for us. They`re
really the way that all of this has to work.
MATHISEN: It`s been working and selling, too. CoverMyMeds doesn`t quibble
with reports that last year`s sales were roughly $100 million. By the end
of 2016, they`ll have more than 500 employees, and with insurance companies
requiring approval on more and more drugs, an even higher purpose.
SCANTLAND: This company can become quite large, because we`re solving a
problem that is daily life.
MATHISEN: CoverMyMeds agreed to be acquired by McKesson (NYSE:MCK) back in
January. Rajan and Scantland are staying on for now to run CoverMyMeds for
For more than 67 million people bowled at least one time last year, more
than a third of them at a place run by Tom Shannon. He`s an entrepreneur
who has turned run-down alleys into an international brand that`s become
the largest player in the $6 billion U.S. bowling industry.
Here`s a story about how he made his millions.
MATHISEN: I haven`t got a chance. Maybe I do.
Don`t let that first ball fool you.
TOM SHANNON, BOWLMOR AMF: That was pretty abysmal.
MATHISEN: Tom Shannon knows how to strike it rich, in bowling.
MATHISEN: How many total bowling centers do you run?
SHANNON: Now, 308 and about 9,000 employees.
MATHISEN: His ten-pin empire, known broadly as Bowlmor AMF, racks up about
$550 million in annual revenue and hosts plenty of celebrities.
SHANNON: Al Pacino, the Kardashians.
MATHISEN: The Kardashians were here? You`re kidding me!
SHANNON: I taught Kim how to bowl.
MATHISEN: I`ll bet you did.
It all started with a lot less glamour and a single location. Bowlmor
Lanes, a New York City institution that Shannon walked into in 1984, more
than half a century after it opened.
SHANNON: It was very run down, probably no investment in it in at least
MATHISEN: But the Darden Business School graduate saw potential for a
revamped bowling experience.
SHANNON: Business was financed with a combination of $3,000 in equity,
which is all I had, and $2 million borrowed.
MATHISEN: From whom?
SHANNON: About two-thirds of it was a seller note. I borrowed from SBIC,
Small Business Investment Corps, at 17.5 percent interest.
MATHISEN: Then, he went to work, adding new technology, updating the
decor, improving the music and the menu and transforming the tired bowling
alley into a hip, nighttime destination.
SHANNON: We used to renovate during the day, clean up and open for
business at 5:00.
MATHISEN: And it worked. Shannon says by 1999, the Union Square location
was the highest grossing bowling alley in the country. Two years later, he
tried the same trick in suburban Maryland with a similar result.
SHANNON: And so, I thought, well, it`s working in Manhattan and it`s
working in Bethesda, we have a model that will work.
MATHISEN: Soon, he saw customers rolling through the doors of six Bowlmor
Centers at a time when thousands of alleys were closing shop, including
AMF, the biggest player in bowling at the time.
For Shannon, it was an entry angle to big-league bowling.
SHANNON: I partnered up with a private equity firm, and we managed to buy
AMF out of bankruptcy for $300 million. So, overnight, I went from six
bowling alleys to 272.
MATHISEN: Then, there`s another acquisition. You get even bigger.
SHANNON: Yes. So, this was, I would have to say, a little bit audacious.
MATHISEN: The newly combined Bowlmor/AMF spent more than $270 million to
score 85 additional centers from Brunswick (NYSE:BC) in 2014. The company
currently operates under four brand names — Bowlmor, AMF, Brunswick
(NYSE:BC) Zone, and Bowlero, and it spares no expense on renovation.
Do you work with like theatrical stage and set designers to do this?
SHANNON: We do it all in-house. For me, maybe the funniest part of the
business is that I get to create this crazy spectacle in which you can
bowl, and it actually has an economic return.
MATHISEN: A healthy one at that. In 2015, the annual revenue hit higher
than half a billion dollars and welcomed more than 25 million visitors to
SHANNON: I view this as a long-term play. And I don`t know where the
limit is. I expect at some point we`ll be a multibillion dollar,
diversified entertainment company.
SHANNON: Well done.
MATHISEN: Once in a lifetime.
Shannon has no plans to take the company public anytime soon, but he`s
looking to expand his empire outside the bowling industry. Stay tuned.
By using an old fashioned stick-to-itiveness, a group of working moms
created a niche business and tapped into a multibillion dollar global label
market which is expected to reach — get this — more than $43 billion by
the year 2020. Their unconventional struggle from startup to brand name is
how they made their millions.
JULIE COLE, MABEL`S LABELS CO-FOUNDER: Rise and shine. Time get ready for
MATHISEN: To keep track of her kids` stuff —
COLE: Let`s go.
MATHISEN: Julie Cole puts their names on almost everything.
COLE: Give me your water bottles, dudes.
MATHISEN: A formidable task for all six of them. It helps that she is a
co-founder of the multi-billion dollar company Mabel`s Labels based in
Ontario, Canada. A business idea born in the early 2000s when Cole and her
sister, and another mom, frustrated that their toddlers kept losing things
couldn`t find durable labels.
COLE: We saw masking tape, we saw permanent marker. And we just kind of
thought, you know what, there`s got to be a better solution.
MATHISEN: So, they reached out to Tricia Mumby, a friend who worked in
TRICIA MUMBY, MABEL`S LABELS CO-FOUNDER: I thought this is ridiculous.
Tell your kids not to lose their stuff. Until you are in this parenting
situation, you don`t realize this is a problem.
MATHISEN: Even before she became a mom herself, Mumby agreed to help, and
the four spent about two years researching how to make sticky labels.
MUMBY: That would go through the dishwasher, the microwave, be UV
MATHISEN: And they did it while working full time and raising families.
MUMBY: My partners were persistent about it. They really want it. Just
try something on their own, really just as an add-on business.
MATHISEN: All they really needed was a workspace, some printing machines
and money. But they decided against outside investors.
COLE: We were 100 percent cool with being like, hey, you have to help us
out. We`re doing a start-up.
MUMBY: We did a lot of bartering for things, like our website was built
and trade for a foosball table.
COLE: And run our production was out of my sister`s basement.
MATHISEN: In 2003, Mabel`s Labels launched online, selling packs of 45
durables, personalized labels for about $21 each. They received about 10
to 15 orders a day, and then out of blue, hundreds at one time.
MUMBY: So, I called the foosball guys/website developer, and said, “We
have a virus. What`s going on?” And he looked at and he said that there`s
no virus, those are orders.
MATHISEN: It turns out, their product had been featured in an e-mail
newsletter and things really started to stick.
MUMBY: I remember making myself count to five and then it and five for
refresh. And more order would come in, it was crazy. And we had to call
on sick to our day jobs and days and days afterwards to make these labels.
MATHISEN: Within four years, this part time business became a full-time
job for all of them. They moved out of basement and into these 14,000
square foot facility. And by 2016, Mabel`s Labels had 40 employees and
sales of about $9.5 million Canadian. That`s nearly $7.25 million U.S.
It caught the attention of one of the largest specialty packing and label
companies in the world, CCL Industries, which made them an offer.
COLE: They really understood our brand. They`ve been watching us for a
long time. So, we sold the company for $12 million.
MATHISEN: That`s more than US$9 million.
Cole has continued to run public relations, while Mumby became general
manager. But their two co-founders cashed out.
Now, the business pumps out hundreds to thousands of label packs a day,
depending on the season, and it runs almost 24/7.
MUMBY: There is something really special about starting this and building
it and it selling it and knowing you did it all without a single loan.
I really do love to make labels.
MATHISEN: Mabel`s Labels can be used on practically anything, from sports
gear, and luggage, to shoes, and phone skins, even include bar code
technology, some do. So, in case you lose it, it can be tracked back to
Well, still ahead, thinking about retiring? Why the new retirement is not
to retire at all.
MATHISEN: So maybe you didn`t make your millions, but you did work hard
your entire life, and now it`s time to think about retiring. But as Jane
Wells reports, many Americans don`t want to retire in the traditional
JASON ROBERTS, ASSISTANT DIRECTOR: I may bring in the camera close right
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Veteran assistant
director Jason Roberts is giving a class to aspiring background actors at
Burbank`s legendary Central Casting. One of his students is 67-year-old
ABE ROGLAND, SEEKING HIS SECOND ACT: It`s fascinating beyond set.
WELLS: Rogland used to own a logistics company but that went south in the
recession. Now, he`s pursuing his love of acting full-time, partly because
he needs the money and says he`s not the only one on the set who does.
ROGLAND: A lot of them is cash out, they are resurrecting. A lot of them
are working now because they have to pay the rent. Social Security is just
not making it.
WELLS: The Employment Benefit Research Institute found that forty-two
percent of people working for pay after retirement need the money to get
by, but at the same time, almost all of them also do it for fun.
WALTER KRAKOWIECKI, RETIRED AT 60: I get bored.
WELLS: Seventy-seven-year-old Walt Krakowiecki retired at age 60 from a
career in food services management at Universal (NYSE:UVV) Studios. Now,
he picks up odd jobs at the background actor, not for money but to keep
busy. He even did a scene with Cameron Diaz for “Bad Teacher” where she
washed his Cadillac.
KRAKOWIECKI: Yes, she washed my car. I didn`t wash my car for about two
months after that.
WELLS: The fact is, we`re living longer, healthier and more active lives.
That`s why the Mizell Senior Center here in Palm Springs is a hive of
activity. The EBRI Survey says at least half of Americans expect to live
to at least age 85, and more of us are retiring earlier than expected, but
we`re not sitting around.
People like Sherry Goodloe.
SHERRY GOODLOE, RETIRED AT 62: I had breast cancer six years ago, and I
looked at between 62 and 65, and I thought, do I really want to stay there
another few years or do I want to start really living?
WELLS: Goodloe run the numbers, realized that with a little downsizing,
she had enough retirement to, quote, “start living”. Now, through a
website called Trusted House Sitters, she house sits and pet sits around
the world for free.
GOODLOE: I plan to do this as long as I can. I love it.
WELLS: Retiring is a lot less retiring than it used to be.
For NIGHTLY BUSINESS REPORT, Jane Wells, Palm Springs.
MATHISEN: While some are coming up with second acts in their retirement
years, there are others who simply can`t wait to really retire to start
living life as they expected it to be. And they`re doing it well before
65. But what are the pitfalls of early retirement?
Diahann Lassus is president of Lassus Wherley, and she`s here to discuss.
Diahann, welcome. Good to see you again?
DIAHANN LASSUS, LASSUS WHERLEY PRESIDENT: Good to see you.
MATHISEN: How have you been?
All right. So, let`s say I have a mind that I`d like to retire at 62 or 59
or whatever. How do I know if I`m a good candidate to do that?
LASSUS: You really need to think about all the pitfalls that are out
there. And do you have enough dollars to stretch and let you do everything
that you want to do? So, you need to think about a couple of things. What
is it you want to do in retirement? What`s that going to cost if you want
to travel, if you want to do all those things? So, there are many things
MATHISEN: Do you have a baseline life expectancy when you work with
clients? Do you say it`s 90? Do you say it`s 95, what?
LASSUS: We use 100.
MATHISEN: Use 100.
LASSUS: Yes, because we have clients —
MATHISEN: You`re an optimist!
LASSUS: We have clients in their 90s and still going strong. So, you
know, the odds are pretty good, we`re going to have a lot of people reach
MATHISEN: I`ve worked with several financial advisers over the years, and
most of them, I say, no, you got this wrong, they tell me, don`t expect to
spend less when you retire than you do in your working years. Is that —
are they right?
LASSUS: They`re exactly right. In fact —
LASSUS: Because you replace all that free time — you know, you used to
spend money working, now people say, oh, you retire, you spend less. The
reality is you don`t. You spend more on entertainment. You spend more on
eating out, travel, golf, tennis, whatever the things are.
MATHISEN: And you probably spend a lot more on health care, I would guess.
LASSUS: You definitely, possibly do.
MATHISEN: So, what are those pitfalls that let`s say I am getting ready to
retire a little bit early, let`s say it`s 62 or whatever it is. What do I
need to avoid, most importantly?
LASSUS: You need to make sure you have dollars in taxable accounts.
MATHISEN: In taxable accounts? Why?
LASSUS: That`s so when you need dollars, when you need to draw dollars
out, you don`t have to tap those retirement accounts so soon and take early
MATHISEN: Well, early would be before 59 1/2, right?
LASSUS: Well, early would be a lot further out than that, because those
dollars have to last.
MATHISEN: Should I wait to begin receiving my Social Security benefits?
LASSUS: Depends on your situation. But most people should think about
extending that or delaying that time, because they get extra earnings every
year by delaying that.
MATHISEN: And how do I factor in the possibility that my health care costs
may go up because I have more — I consume more medical services or other
LASSUS: Well, health care will — if you retire and you`re not Medicare
qualified yet, there`s a major gap, and that can be super expensive. So,
you have to go out and look at the market. See what you might have to pay.
Could be many thousands.
MATHISEN: Do you have any clients who have retired early and then realized
they`ve got to go back to work?
LASSUS: I have many clients who have retired early and gone back to work,
either because they got bored, or because they need —
MATHISEN: They needed to fill the gaps.
Diahann, great as always to see you.
LASSUS: Great to see you.
MATHISEN: It`s been a while. Good to have you back. Diahann Lassus.
LASSUS: Thank you.
MATHISEN: All right. Coming up, keeping active. Now you can do a
boutique fitness workout in the privacy of your own home.
MATHISEN: Well, perhaps you went away for spring break and overindulged
just a bit. Now is the time to get back on track and back into the gym.
But if you`d rather work out at home, tech companies are making it a whole
Diana Olick, the fittest person I know, has the latest edition of “Sweat
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Did you ever want to
work out in one of those elite boutique Manhattan fitness studios, but you
live here? Or here?
Well, now, you can. Kind of.
LAUREN FOUNDOS, FORTE CEO: When I started to realize the power of these
OLICK: Lauren Foundos was a Wall Street bond trader who trade in finance
for fitness, and launched Forte, really a tech company that`s putting live
cameras in the corners of boutique studio classes.
FOUNDOS: These studios operate on a militant schedule. They are very
professional. When these trainers put their mikes on, they`re doing a
OLICK: And that performance streams out live across Forte`s web platform.
For $39 a month or $288 a year, anyone, anywhere, can stream any class.
FOUNDOS: Over the course of two years now, the pitch has become very
simple, right? Everybody wants to be streaming. So, my job has become a
OLICK: The studios get a cut of the subscription fees, but they also get
something else very valuable.
MICHAEL OLAJIDE, AEROSPACE HIGH PERFORMANCE CTR. OWNERS: I think,
obviously from the streaming, that`s income, that`s always great. But I
think the exposure to the Aero brand and what we do is, for us, number one.
OLICK: These are live streaming classes. But they`re also live-paying
clients. And not everybody wants their sweat streaming on the Internet.
That`s why each class has a dead zone.
If you`re over here, you`re not online.
But if you`re in the class, you`re not censored either, which adds a
certain amount of risk to the reps.
What are you most worried about is going to happen in a live class?
FOUNDOS: Yes, I think we`re not worried about that much actually.
OLICK: How can you not be?
FOUNDOS: That`s the beauty of what we want to see, right, this raw,
unedited footage. We want to see the one person that doesn`t do a pushup
the entire time. We want to see the two friends talking.
OLICK: Which, of course, adds an aspect to the reality show to the
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in New York.
MATHISEN: And thank you so much for watching the special edition of
NIGHTLY BUSINESS REPORT. I`m Tyler Mathisen. Have a great weekend,
everybody, and we`ll see you back here on Monday.
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