Tony has identified a gap in the book business and built a thriving company. Let’s learn the how, what, and why of it.
Sramana Mitra: Tell us a bit about yourself. Where are you from? Where were you born and raised?
Tony DiCostanzo: I was born in Anchorage, Alaska. Shortly after turning two, I moved up to Nome, Alaska – from a small city to an even smaller village of 3,000 people. We lived there through the sixth grade and then moved back to Anchorage through most of high school. I ended up spending a couple of years in Washington State but found that California was more of my natural habitat. I came down to go to school at Pepperdine University and met my wife who was from southern California. It was a natural fit to stay here and be close to her family. That was what drove us to the Orange County area.
Sramana Mitra: When did you finish university?
Tony DiCostanzo: That was 1994 for an undergraduate business degree from Pepperdine. I went on to UCI for my MBA from 1997 to 2000.
Sramana Mitra: What did you do after you came out of university?
Tony DiCostanzo: I was in an unfortunate circumstance that was actually beneficial to me. I wasn’t one of the kids that had everything covered by their parents. I had to work during school. In my second year, I wound up getting a much better job at a consulting firm. It was an entrepreneurial business providing mostly teen and leadership development consulting to major corporations in the Los Angeles market. It was an amazing side education for me. We grew the business from a couple of hundred thousand dollars to a couple of million dollars over a three year period while I was in school. I actually stayed for a year afterwards doing consulting work.
At the same time, I knew that while I enjoyed that small business and the growth aspects of the company, I also felt like I wanted a more solid corporate background as well to give me a better solidification of why all of these companies were dysfunctional and why they were paying us a lot of money to come in and help them. I wound up getting a corporate finance job at Coldwell Banker, which got merged into SCM. I rose up in the ranks a little bit and then went on to strategic planning and finance management at Disneyland Anaheim where we did a lot of analysis and major park overhaul analysis to determine which entertainment and ride offerings were going to drive attendance and help make some of those key strategic decisions. I stayed there for about six years.
A friend of mine got pulled into a company as part of a turnaround project. There had been three or four CEOs and a number of leadership challenges at this other company and he convinced me that I was being under-utilized at Disney. In hindsight, I think I was. When you’re in a large company, you can provide decision support, but the decision making is at the senior executive level. Coming into this new firm, it was a head-to-the-fire situation of having to make a lot of rapid decisions in terms of cost-cutting, restructuring, and personnel decisions. We had to do quite a few layoffs and had divested a couple of different divisions of the business. As the CFO, I had to get the company brought up to speed on Sarbanes-Oxley and compliance with SEC filing because there had some delays in the previous management. We engaged Deloitte and got all the audit work done. We pulled in some additional investor funds and closed some significant business including a multi-year contract with Pfizer.
While we felt that things were finally on the right path, it ultimately did not work for us. One of the accounts that we had had for a number of years decided that all the chaos that had happened over the years was a bit too much. They brought some of these healthcare programs that we were providing in-house. It became very stressful. I was traveling three to four days a week to different parts of the country. I had two young kids at home and just decided that three years was enough. I left.
The company had additional client challenges after I left and they shut down. It created an opportunity in the space having solidified three years of experience of surviving a chaotic environment of cash flow issues and dealing with legal challenges. Two of the previous CEOs had vacated a space on LaSalle Avenue in Chicago. They moved out of a 30,000 square feet in the middle of the night and of course, the landlord didn’t like that. There were those kinds of lawsuit issues that we were trying to deal with. Ultimately, it was a pretty substantial burn on the company.
The core business of promotional health programs was actually a sound business idea. We were going to large employers providing health questionnaires to their staff. These large employers usually have over 5,000 employees. They were self-insured. They would have Blue Cross United providing claims administration. Ultimately, if somebody had a health issue like a heart attack, those claims were paid out of the company’s reserves. If we could educate the employees, make them healthier, and make better lifestyle decisions, those improvements would translate to savings to the company.