Much attention is given to Olmsted’s creations on the Eastern Seaboard, including Central Park and Prospect Park in New York City, and the Emerald Necklace in Boston. But he is also responsible for public spaces elsewhere, most notably in the Midwest. Olmsted, ceaselessly creative, was much more than a designer of parks. He was constantly suggesting different kinds of landscapes to meet varied needs and demands.

Ever the reformer, he was also drawn to the notion that landscape architecture could serve various social engineering purposes, providing respite from teeming cities, say, or forcing people of varied backgrounds to mix and mingle. He once described his park work as a “democratic development of the highest significance.”

Here, then, is a look at some of his work in the Midwest — lesserknown than his most famous projects, but still life-changing for millions of Americans.

Jackson Park, Chicago

Recognizing that the pomp of the 1893 World’s Fair in Chicago had the potential to overwhelm visitors, Olmsted was intent on creating a landscape that would act as a soothing naturalistic counterpoint. First, he selected the fair’s site, singling out a parcel on the city’s South Side. Years earlier, Olmsted and Calvert Vaux — his collaborator on early works like Central Park — had designed a park for this very spot, but little of their plan had been executed.

Working solo, Olmsted set out to complete the park, which was by then chosen for fairgrounds. He created an intricate network of lagoons, so that visitors could travel through the fair on small boats. He also repurposed muck that was dredged to create the lagoons in order to bulk up a lonely little hillock into the 16-acre Wooded Island, which he planted with hemlock and other trees. During the fair, Teddy Roosevelt thought it was the ideal spot to set up his Boone and Crockett hunting club, but Olmsted said no to the future president and other exhibitors who wanted a piece of his island. He intended it, he wrote in a letter, as “a place of relief from all the splendor and glory and noise and human multitudinousness of the great surrounding Babylon.”

The famous White City — a collection of neo-Classical buildings lined with electric lights, a dazzling new invention at the time — is mostly long gone. But Olmsted’s fairgrounds, now known as Jackson Park, remain. Within its 600 acres, you can still find stretches of the original lagoons. The Wooded Island is still there, too, and it’s my favorite part of the park: an oasis of calm smack in the center of hectic Chicago.

Riverside, Ill.

Just nine miles outside Chicago is Riverside, one of America’s first true suburbs, designed in 1868 by Olmsted and Vaux. It’s a triumph of subtle social engineering, full of thoughtful design touches meant to foster a sense of community; any well-thought-out modern suburb owes a debt to Riverside. Mingling of residents is pretty much guaranteed, for example, thanks to the fact that half of the community’s 1,176 acres are set aside for commons and other green spaces. All the streets gently curve, an Olmsted signature, meant to promote “leisure, contemplativeness and happy tranquillity,” as he put it, and to provide a stark contrast to the angular street scheme and harried atmosphere of Chicago. Olmsted also named many of the roads, often to honor his literary heroes: Akenside, Carlyle, Shenstone.

Over the years, the Riverside design has also provided a canvas for houses designed by notable architects. There are two Frank Lloyd Wright houses, as well as gardener’s cottages and other structures. And there are works by modern masters, including a John Vinci-designed house from 1976. To experience fully the neighborhood and its prominent homes, arrange a tour through the Frederick Law Olmsted Society of Riverside (708-442-7675; olmstedsociety.org).

Milwaukee Park System

Not long after completing Central Park, Olmsted — restless, ambitious, brimming with outré ideas — began trying to reimagine the very concept of a park. He started seeking ways to furnish more green space to more neighborhoods, fostering more mixing of people and more democracy. His solution: the park system. In 1868, Olmsted and Vaux started work on the world’s first park system for Buffalo (it would take another 30 years to complete). By 1893, when Olmsted went to Milwaukee (decades after his partnership with Vaux had dissolved) he had perfected the concept, having designed systems in Louisville, Rochester and Boston. Olmsted’s execution was elegant: instead of a single park, he conceived a collection of them, each boasting different attractive landscape attributes.For Milwaukee, Olmsted designed a three-park system, made up of Lake, Riverside and Washington Parks.

On a recent sunny Sunday afternoon, I visited all three. Lake Park is the jewel of the bunch. I loved exploring its deep ravines, laced with walking paths that faithfully follow Olmsted’s winding courses. At certain points, clumps of trees block the view, a classic Olmsted trick. What’s in the distance, you naturally wonder? Soon enough, you encounter an intentional break in the foliage, opening up a vista. It’s only then that you realize you’re on a tall bluff, Lake Michigan spreading out endlessly before you.

In each park, people were everywhere. I paused in Washington Park to watch some hard-charging adults play soccer in a match that pitted a team called Palo Alto against one called San José. It turned out that this was an old-country rivalry; the team names were the towns in Mexico from which the players hailed.

On departing Riverside Park — untamed, rural feeling — I walked past a stand of Norway maples, some originally planted by Olmsted, and onto busy Oakland Avenue, a commercial strip that features Greek, Thai and Middle Eastern restaurants. It felt like an extension of Olmsted’s democratic vision.

Belle Isle Park, Detroit

Belle Isle is a large island park of almost 1,000 acres, situated in the Detroit River, a striking setting. Of all the parks I visited, it’s the most bittersweet for fans of Olmsted’s work: a beloved but hard-used space that retains scant traces of his original design. Over the years, various pursuits have been embraced, then forgotten, leaving behind elements frozen in time. An African animal menagerie from the 1970s now sits abandoned, its ersatz hutlike structures graffiti-tagged and in deep disrepair. In another spot, there’s an ugly parking lot, a vestige of Grand Prix auto races held, until recently, on the island.

One wonderful exception is a system of canals that runs through the park. In Olmsted’s original plan, he touted these as “highways of pleasure, in which boats would be used instead of carriages.” The canals, as built, never followed Olmsted’s exact blueprint, but they are certainly faithful to his intent, full of sinuous curves.

I took a boat tour of the canals, accompanied by Keith Flournoy, Belle Isle’s ever-resourceful park manager. (We were in a small, motorized launch, but you could get pretty much the same experience by renting a paddleboat.) We glided past weeping willows and under a series of wonderfully varied footbridges. “This is how Olmsted meant this park to be seen,” Mr. Flournoy said.

Presque Isle, Marquette, Mich.

Many people don’t realize that, in addition to his work creating parks and other urban spaces, Olmsted played a crucial role in the preservation of natural places like Yosemite and Niagara. In 1891, he traveled from Chicago, where he was working on the fairgrounds, to Marquette, then a tiny town in the wilds of Michigan’s Upper Peninsula.

Ostensibly, his purpose was to design the grounds surrounding the local millionaire mayor’s mansion, now long gone. While visiting Marquette, though, Olmsted was shown a beautiful piece of land just three miles outside town. He was asked to draw up a management plan, perhaps to suggest even how it might be turned into a proper park. Instead, he put on his environmentalist hat and wrote a letter praising the land and cautioning that it “should not be marred by the intrusion of artificial objects.” The letter was taken as gospel and to this day Presque Isle remains a slice of unsullied wilderness.

I was told to expect wildlife, so I arrived right at dawn. But I have to admit to what can be described only as a city slicker’s insecurity: What if I don’t see a single creature? Within moments of entering the park, my fears were put to rest. I saw a deer, then another and another. Soon I became aware of all kinds of chirps and squawks and trills. Apparently — I have no skills as a birder — Presque Isle, which is a peninsula that juts out into Lake Superior, is a major flyway for all kinds of winged creatures, including gnatcatchers, whippoorwills, even snowy owls.

But the most amazing thing about Presque Isle is its size: a mere 323 acres — a bite-size piece of wilderness, yet endlessly interesting. I remained there all day. The highlight was watching a sunset against a backdrop of Lake Superior, Huron Mountains in the distance and a sprawling sky.

The next day, I returned to civilization. On the way to the airport,though, I just couldn’t help myself, and took one last hike through tiny, unspoiled Presque Isle. In its final report, the Olmsted firm provided a recommendation for this lovely piece of land: “Preserve it, treasure it, as little altered as may be for all time.”

JUSTIN MARTIN is the author of “Genius of Place: The Life of Frederick Law Olmsted” (Da Capo Press).

But he was a restless, spirited man who engaged in a variety of endeavors. One of those — on the eve of the Civil War — involved Lawrence and the Bleeding Kansas struggles.

During the early 1850s, Olmsted made a name for himself as a journalist. He worked for a startup newspaper: The New York Daily Times (it would later drop the “Daily”). And he had an incredible assignment: Travel across the South, treating the region as a foreign correspondent would. Olmsted’s dispatches — penetrating, balanced, humane — were eagerly read by Northerners looking for a window into the Southern mindset and intentions. Along the way, given all that he witnessed, Olmsted became a fervent abolitionist.

In 1855, a man named James Abbott arranged a meeting with Olmsted. Abbott was one of the many people who had moved to Kansas under the aegis of the New England Emigrant Aid Co. This was an outfit that relocated farmers with free soil leanings, paying their passage to Kansas from states such as Connecticut and Maine. Abbott was now an officer with a militia, bent on making sure that if Kansas gained statehood it would be as a free state. Abbott was on a trip back East soliciting funds to purchase weapons for his militia.

During visits to Hartford, Conn., and Providence, R.I., Abbott had already raised enough money to buy 100 Sharps rifles, also known as Beecher’s Bibles. In New York, he connected with Olmsted and dubbed him acting commissioner of his free state activities. Olmsted raised more than $300 for Abbott’s cause from fellow Eastern abolitionists including Horace Greeley, editor of the New York Tribune and coiner of the term Bleeding Kansas.

Ever diligent, Olmsted decided to talk with an expert before purchasing weapons for Abbott’s militia. He consulted a veteran of European warfare, a man who had fought under Garibaldi during the turmoil that gripped Italy in 1848. In this expert’s opinion, Abbott’s militia already had enough Beecher’s Bibles and other assault weapons. What was needed was a defensive weapon to stave off attacks.

So Olmsted went to the New York State Arsenal and used the money he’d raised to purchase a mountain howitzer and ammunition. Olmsted recognized that he was involved in a dangerous activity. To keep Abbott apprised, Olmsted sent him a series of letters employing code (such as “H” for howitzer). Abbott referred to Olmsted as a “prompt and energetic friend of Kansas.”

Olmsted’s howitzer was mounted in front of the Free State Hotel, on the future site of the Eldridge Hotel. When Lawrence was sacked on May 21, 1856, (an attack that preceded Quantrill’s raid) the weapon was seized by a marauding band of South Carolinians. But the free-state militia got the cannon back as part of a prisoner exchange. It saw “prominent service” — in the words of one scholar — during the ensuing Civil War, and was ultimately retired to the collection of the Kansas State Historical Society.

That’s quite a tale for a howitzer. And it’s yet another fascinating episode in the life of Frederick Law Olmsted, landscape architect, journalist, abolitionist and friend of Kansas.

Justin Martin, who was raised in Lawrence and Overland Park, is author of “Genius of Place: The Life of Frederick Law Olmsted” (Da Capo). He lives in Forest Hills Gardens, N.Y. His father, Rex Martin, is an emeritus philosophy professor at Kansas University.

They also seem quintessentially modern, requiring not only technological know-how but also the ability to navigate a maze of conflicting interests — city councils, government regulators, commercial developers, and the public. And the notion of artificially returning a piece of land to its original state seems very much the product of a contemporary sensibility. It may come as a surprise, then, that the first wetlands restoration project happened more than a century ago — and it happened in the center of Boston.

Frederick Law Olmsted didn’t use the term “wetlands restoration” when he crafted a plan for the park now known as the Back Bay Fens. But just the same, that’s what he created. The history of this piece of land offers vital insight into our ever-thorny relationship with nature — and shows that the current thinking about how to reshape our urban landscape has far deeper roots than we imagine.

In Colonial times, the area now called the Fens was a salt marsh, a beloved staple of New England’s natural scenery. There’s even an old map of Boston where the area is labeled “salt meadow.” At high tide, the overflow from the Charles River washed across flats generously dotted with stands of salt grass. At low tide, the water’s flow reversed; away it ebbed in intricate rivulets. But as the city prospered, fresh land was needed to accommodate a growing population. As Boston spread out from its original tiny peninsula, whole neighborhoods such as the Back Bay and the South End were created by landfill.

Soon the city surrounded the salt marsh. Residents began tossing in garbage, and the marsh quickly transformed into a waste dump. Native plants such as sedge grass mostly died, and what was left behind was ugly, murky, swampy, and — on a hot summer day — olfactory torture. A 19th-century account describes it as “being without a single attractive feature. A body of water so foul that even clams and eels cannot live in it.”

To fix up this malodorous mess, the Boston park commission held a contest in 1878, soliciting proposals from the public. There were 23 entries. The less-than-impressive winning submission came from a florist, who suggested simply superimposing an ornamental garden onto the swampland. American Architect and Building News described the design as “childish.”

The city paid the florist the $500 prize he was due and sent him packing. It was time to call in Olmsted.

By this time, Olmsted was well established as the pioneering landscape architect behind Central Park, the US Capitol grounds, and dozens of other green spaces throughout America. Upon surveying this misbegotten stretch of the Back Bay, he quickly grasped what it had once been, and what it was capable of being again. This was a salt marsh — now a particularly vile specimen — but a salt marsh nonetheless. Turning this boggy land into a traditional park, he was sure, made no sense at all. Instead, Olmsted made a radical suggestion: Why not restore it to its original wetlands condition?

As innovative a thinker as he was, it’s hard not to see a bit of personal psychology at work here as well. This commission had come at a painful time for Olmsted, both personally and professionally. For most of the past three decades, he had been living in New York, but his projects in the city were drying up. A few years earlier, he had also lost his beloved father. He’d then engaged in a bruising estate battle with his mother-in-law. Returning to his native Hartford to live was simply out of the question.

Olmsted had vivid memories of salt marshes from boyhood “loitering journeys” he’d taken with his father through New England. This project, then, amounted to creating a sliver of landscape memory — his own and Colonial Boston’s — right in the middle of the city.

On Oct. 24, 1878, Olmsted presented his preliminary plan to the Boston park commissioners. They accepted it immediately. But Olmsted knew it would be more than a simple park project, and he requested a meeting with the city engineer. The city engineer brought along the superintendent of sewers, and the three men huddled for four hours. Olmsted had vast experience with landscape projects and, unlike the naive florist, he recognized this wasn’t as easy as planting flowers on top of the swamp. This was an engineering challenge. When he was convinced that the plan was technologically feasible, he agreed to move forward.

As a first step, intercepting sewers were built to catch refuse. Gates were installed to regulate the flow between the marshland and the Charles River, which was then still a tidal estuary where saltwater and freshwater mixed. Once the engineering infrastructure was worked out, Olmsted focused on wetlands restoration. He designed a creek, dredged out of muck, to following a meandering, sinuous path — more “natural” than nature. As for plantings, he experimented with dozens of salt-tolerant varieties to see what would take hold. The records are hazy, but it appears that he introduced plants such as tamarisk, a species native to Asia that made its first appearance in America during the 19th century. Olmsted — no native-plant purist — was more interested in capturing the essence of the salt marshes he fondly remembered from boyhood than in replicating nature down to the last detail.

As a final step, Olmsted insisted on naming his creation. The commissioners favored “Back Bay Park.” But Olmsted had taken pains to convey that this was not a park in any ordinary sense. True, he designed paths way up on embankments. But the idea was for visitors to view the salt marsh from a distance — to look, not touch. Olmsted owned a dictionary published in 1706, which he consulted when looking for suitably old-fangled terms. He suggested “fens,” an arcane word for a soupy piece of land. The name stuck, and today is spread throughout the vicinity — most prominently in the name of Fenway Park.

The Back Bay Fens was a smashing success. The commissioners asked Olmsted to design a whole series of interconnected parks, what became the Emerald Necklace. Flush with work, Olmsted finally felt comfortable leaving New York City, and moved to Brookline. He’d found a way to return to New England, after all. Olmsted would operate his landscape architecture firm out of Brookline for the rest of his life.

The Fens has changed greatly since Olmsted’s day. In 1910, the damming of the Charles River turned a salt marsh into a freshwater marsh, requiring a whole new planting scheme. More recently, Olmsted’s creek has grown choked with invasive phragmites, a tall reed that spreads like aquatic kudzu and crowds out other plants. In some places, those sinuous curves are no longer visible. But an $80 million project is about to begin that will eradicate the invasives, reshape and replant the shorelines, and attend to the serious flooding problems in some other waterways in the Emerald Necklace.

Like the modern restoration efforts that echo the idea he hatched more than a century ago, Olmsted’s project was an act of approximation. It’s impossible to return a once-wild place to a pristine state. And, as Olmsted’s twisting watercourse suggests, when humans intervene in a natural setting, it’s hard to resist the urge to subtly improve on the original. We can see the impulse in walking trails added to restored wetlands, or in plans for mosquito management. We want the wetlands, but we can do without their inconveniences.

In cre­ating the Back Bay Fens, Olmsted addressed this same issue — how true to nature should we be? — and drew his own highly personal conclusions. With the Fens set to undergo a multiyear, multimillion-dollar refurbishment, the issue is about to be addressed anew in a complex, 21st-century city. Once again, a great deal of high-tech intervention will be required — a natural environment sought through unnatural means — and the end result will be an approximation, as always. But it’s also sure to remind us that there’s real beauty in the human act of trying to reclaim what’s been lost.

Justin Martin is the author of a new biography, ”Genius of Place: The Life of Frederick Law Olmsted” (Da Capo).

Michael Dorf’s City Winery is trying to fill that void by arranging for fresh-off-the-vine grapes to be express-shipped to Manhattan from the Finger Lakes, California, Oregon, even Chile. Customers who purchase certain memberships can make an entire barrel of wine under the tutelage of a master vintner. City Winery is also an event space: It both hosts its own concerts and tastings, and rents out the venue for private parties, wedding receptions and the like.

Mr. Dorf, 49, is a veteran impresario. In 1987, he founded the Knitting Factory, a legendary downtown venue, now defunct, where hipsters swilled warm beer from plastic cups and caught acts like Sonic Youth and Yo La Tengo at the outset of their musical careers. But he resigned under pressure in 2003 after battling with investors over a variety of issues, such as the proper strategy for running the sideline record label. (The investors declined to comment.)

Mr. Dorf spent a few years licking his wounds and casting about for his next opportunity. By the time he hit his 40s, he was married with kids and he’d become a wine aficionado.

“I wanted to create something based on where my head was at,” he said, “and for a crowd that was a little older and more mature.”

As recently as 2002, fortified kosher wine was made on the Lower East Side, but Manhattan has no tradition of producing high-toned vintages. Mr. Dorf planned just such an operation. In 2008, he leased a 21,000-square-foot space at Hudson Square—but his timing was terrible.

One of the first events on his new business’s calendar was a holiday party for Lehman Brothers. By Christmas 2008, the company didn’t even exist anymore, a victim of the massive economic meltdown.

“My business plan was to sell barrels to bankers,” Mr. Dorf said, “but I was forced to re-evaluate everything.”

City Winery still sells its memberships to produce barrels of wine, which range from $5,000 to $15,000, depending on the type of wine and the process involved in making it. But the ever-resilient Mr. Dorf has also placed greater emphasis on holding concerts and selling wine by the glass.

His enterprise has turned out a bit like one of those bars that brews beer on premises, storing it in huge vats. In this case, customers can get wine fresh from the barrel. Offerings cost roughly $10 a glass and boast clever names, such as SoHo Vignon Blanc and NY City Cab. Not surprisingly, the 300-seat concert venue features acts for a mature, wine-quaffing crowd, such as Allen Toussaint and Rickie Lee Jones.

“It’s the Knitting Factory for grown-ups,” Mr. Dorf explained.

“Michael is not afraid to get knocked down,” said David Pakman, a partner at Manhattan venture capital firm Venrock, who has teamed up with Mr. Dorf for several ventures over the years. “He simply finds a fresh angle.”

Mr. Dorf is certain that City Winery—projected to post $10 million in revenues in 2011, a 25% gain—is a scalable business. He’s opening a location in Chicago, and he’s looking at Miami, London and other major cities where there are oenophiles but no nearby vineyards.

The entrepreneur gives heavily to charity. He donates about 8% of his product to auctions that raise money to help New York City public schools, battle diseases such as leukemia and assist other causes.

—Justin Martin

ARLINGTON, TEX. (Fortune Small Business) — Want to plunge into the modern American melting pot? Try the offices of Social Smoke, a hookah manufacturer in Arlington, Texas. Here a silk Persian rug and a piece of Arabic calligraphy, The 99 Names of Allah, share wall space with a signed photo of a Willie Nelson impersonator. There’s a Chinese green tea set in the conference room, and Mom’s homemade enchiladas are chilling in the fridge. Abrahim Nadimi, director of sales and marketing, is tapping a bobblehead doll of Dwight from the TV show The Office. “Welcome to the 21st century,” he says. No kidding.

Social Smoke is growing gangbusters, and its success says a lot about the new international, cross-cultural landscape of American small business. It is run by Abrahim’s father, Sayyid Nadimi, 51, who emigrated from Iran before the 1979 revolution, and his U.S.-born sons.The Nadimis are tapping into America’s deepening love affair with an ancient Middle Eastern tradition: hookah smoking. The company makes “authentic” Iranian and Egyptian hookahs in China, having tried and mostly failed to source them in the Middle East. Yet Sayyid is anxiously watching developments in Iran — and praying the U.S. government will soon let him sell his product back to his homeland.

Social Smoke is one of the largest and fastest-growing suppliers in the international hookah market. There is no trade group to track sales in the industry as a whole, but individual companies are reporting brisk growth. The first quarter of 2009 was Social Smoke’s best ever, with sales rising 28% from the same period a year earlier. Sayyid won’t disclose revenues but says the company is profitable. The family firm employs 11 people and sells in 15 countries.

Hookah business smokin’

Though Social Smoke sells hookahs and shisha (tobacco for use in water pipes) to consumers online, 90% of sales come from supplying wholesalers and hookah lounges. At a time when cigarette sales are in steep decline (20% of U.S. adults now smoke, the lowest percentage since the Centers for Disease Control started keeping statistics in 1965), hookah lounges are booming. There are now more than 400 in the U.S., up 400% since 1999, says Piergiorgio Maselli, who maintains a directory on his site HookahCrazy.com.

Several factors account for the hookah boom. The smoking bans that municipalities nationwide have imposed in the past decade affected restaurants and bars but not establishments dedicated exclusively to tobacco use. Unlike cigarette smoking, which has turned into something of a furtive activity, hookahs are inherently communal. Customers can get into a hookah lounge at age 18, three years before they are allowed in a bar in most states. (The largest number of new lounges are found in midwestern college towns such as Lawrence, Kans. and Madison, Wis.) And most important, hookah lounges are a very attractive business model.

Just ask Yis Tigay, 28, owner of the Shouk Lounge in Philadelphia and a Social Smoke customer. Patrons stay twice as long in the hookah bar as they do in the three conventional diners his family owns, he says. Everything about his establishment — the languid music, the dim lighting, the divans — is designed to impart an unhurried vibe. A table of four puffing at a leisurely pace consumes roughly $16 worth of shisha an hour, Tigay says — plus the food and drink frequently ordered. The cost of that shisha to him: $2. “It’s like putting a chain around people’s ankles,” he says. “They tend to stick around.”

There’s scant research on the health effects of hookah smoking. It tends to be a sporadic, ceremonial activity, and many people don’t inhale. Nevertheless, health experts warn that even such limited exposure to nicotine can spark addiction. “I worry because hookah use is so prevalent among young people,” says Donna Vallone, senior vice president of research and evaluation at the American Legacy Foundation, an anti-tobacco group based in Washington, D.C. “What starts out as innocent experimentation could become a lifelong struggle to quit.”

Social Smoke’s response? “Everyone knows smoking is bad for you,” says Abrahim, 30. “The alcohol and food served in a hookah lounge also have the potential to be dangerous. Moderation is the key, and a hookah by its very nature is a device that promotes moderation. You can’t get all fidgety, reach into your pocket and pull out a hookah.”

Social connections

Abrahim’s younger brother Ali, now 27, founded Social Smoke in 2003 while a student at the University of Texas at Arlington. As an observant Muslim, Ali does not drink alcohol, so he started taking a hookah to campus parties as a kind of social prop. “People asked a lot of questions,” says Ali, speaking in a curious blend of Tex-Mex twang and Farsi lilt. “Everyone wanted to try it. Then everyone wanted one.” Ali says he didn’t encounter any racist misconceptions about the device. Perhaps, he mused, there was money in hookahs.

Ali built a Web site for Social Smoke, bankrolled by his credit card. He bought $3,000 worth of hookahs from a U.S. distributor, Hookah Brothers of Los Angeles. At first he sold most wares at cost, hoping to establish himself in the market. But the business took off quickly. Within two months he was renting warehouse space and selling roughly $5,000 worth of hookahs a month, but still at cost. He was also supplying hookah lounges with shisha in exotic flavors such as citrus, cappuccino and strawberry margarita. Margins on shisha are thin, but the volume is high — tobacco has to be constantly replaced. It proved to be a modest profit center.

In 2004, Hookah Brothers went out of business. So Ali decided to forge direct trade ties with the Middle East. He figured he needed to buy direct if he was ever going to turn a profit and ordered $1,000 worth of hookahs from an Egyptian supplier. But they arrived weeks late and were poorly made. Stems didn’t fit into bases. Some units leaned; others were broken. Almost none were sellable. The supplier refused to return Ali’s money, saying the goods must have rattled around too much because Ali’s order was too small. He then had the gall to ask Ali to place a second, larger order.

The Nadimis united to save Ali’s business. At the time, Sayyid and Abrahim both worked as engineers at Bell Helicopter, one of the area’s largest employers. In 2005 father and son both quit their solid jobs for the wild ride of the international hookah trade. Sayyid now serves as CEO of Social Smoke. The matriarch of the clan — Iman Enciso (born Martha Alicia Enciso Barba in Guadalajara, Mexico) — became office manager. The youngest son, Mohammad, 18, runs the warehouse.

Sayyid decided to make some exploratory trips to Egypt and Jordan. Because of U.S. trade sanctions against Iran, he had to skip his homeland. “From time to time I return to Iran to visit family,” he says. “I’d like to go back as a businessman.”

Building a supply chain

After 30 years in the U.S. and a decade at Bell Helicopter, Sayyid had grown used to the breakneck pace of American business. He was amazed to find that Arab business dealings required three full days of social preliminaries before actual negotiations could begin. “They might take you sightseeing or invite you to their home and prepare six different kinds of food,” he says. “But it doesn’t mean anything. It’s all cosmetic. After days of this, you finally get down to business and argue over a $1-per-unit price difference.”

Misunderstandings were legion. One Egyptian prospect put Sayyid up in a hotel for a night. When Sayyid offered to pay him back, the man took offense. The language barrier made matters worse. (Sayyid is fluent in Farsi but speaks Arabic poorly.) On a drive through Cairo, Sayyid tried to patch things up with his host, who promptly pulled over to the side of the highway and berated him for 20 minutes.

Sayyid persevered and managed to sign up four hookah makers in Egypt and Jordan. Most Arab manufacturers required down payments of up to 40%. The balance was due — wired directly into the manufacturer’s bank account — when production was complete but before shipping. “There’s always a point when the other party has all your money and also all your products,” Sayyid says.

Worse, damaged goods appeared to be the norm. After much searching, he tapped a reputable Jordanian manufacturer who presented an array of attractive, well-made hookahs. Social Smoke placed a $70,000 order. But when they arrived, glass and ceramic parts were cracked, metal was rusted, and the stems were too long. The company is still trying to recover its money, but its entreaties have slowed to a trickle. The Nadimis were forced to combine undamaged parts — a stem here, a bowl there. Overall, only 80% of the hookahs that Social Smoke ordered in the Middle East were usable.

A new source

Like many American businessmen before him, Sayyid started researching Chinese factories online and teaching himself Mandarin. (He says he is now fluent in English, Farsi and Spanish and pretty good in Mandarin.) Visiting factories in Qingdao and Shanghai, he was impressed by Chinese standards of customer service. Unlike a past Egyptian supplier, who could communicate only by Arabic snail mail, the Chinese vendors all spoke some English and communicated promptly by e-mail.

Making hookahs in 10 Chinese factories is a far cry from having them handcrafted by Middle Eastern artisans. The job of manufacturing metal pieces such as stems went to a fabricator with experience making latches and doorknobs. A flowerpot factory produces ceramic bowls for the hookahs. But Sayyid can now have his hookahs built to spec. Social Smoke has been able to add shapes like cones and cylinders to its product line. It also festoons hookahs with intricate art, such as images of cobras and Anubis, a jackal-headed god of ancient Egypt.

Despite all that Chinese manufacturing expertise, Social Smoke has persisted in importing some hookahs from Egypt. This is key for selling to hookah bars in such Arab-American centers as Dearborn, Mich., which prize Egyptian hookahs, irregularities and all. Sayyid now has a point person in Cairo who sources hookah components separately — and packs them with care. “Communication isn’t great, and shipments still arrive late,” says Abrahim. “But this supplier is honest. That’s a big deal.”

Still, 75% of Social Smoke’s hookahs now come from China. Sayyid spends about a third of each year in the country and owns a condo in Guangzhou. “I feel like I’ve created the modern equivalent of the Silk Road, which once connected China and Persia,” he says.

And as Silk Road traders knew, supply can be fickle. In the three years since Social Smoke started doing business in China, the cost of making hookahs has gone up about 60% — and is now on par with Egyptian prices. Sayyid says he’s thinking about manufacturing in Vietnam or Latin America.

Finally, of course, there’s the Iranian market, where Sayyid is convinced his U.S.-brand hookahs would have cachet. Earlier this year, before that country’s contentious presidential election and the protests that followed, Sayyid contacted the U.S. Commerce Department to ask about the permits necessary to export to Iran. Filling out the forms, he was told, would be a waste of time.

That may soon change. Sayyid is heartened by the protests and demands for fair elections. He’s thrilled by the softer tone that President Obama has adopted toward the country. Discussing the possibility of setting up shop in Tehran, Sayyid and sons break into big grins. “That,” Sayyid says, “would be like coming full circle.”

Do you recognize this metal man? Elektro was one of the world’s first robots, seen by 3.7 million people at the 1939 World’s Fair. The curious lined up for hours to watch a performance in which he walked, talked, and smoked cigarettes. “Elektro was the marvel of his age,” says Andy Masich, president of the Heinz History Center in Pittsburgh, which just unveiled a replica of the robot as part of its permanent collection.

Elektro was originally built by Westinghouse, then the world leader in robotics thanks to its Televox unit which—with a twist on telephone technology—could convert a person’s voice into electronic pulses. By speaking into a telephone handset, it was possible to trigger any of Elektro’s 12 motors, thereby controlling him. A five-syllable command (Elektro, come here) prompted him to walk; one syllable (stop!), and he halted. Elektro’s speech drew from a small repertoire of sayings recorded on 78-rpm records. Still, to dazzled audiences Elektro appeared to possess near-human communication skills.

Following the fair, Elektro hit the road to promote Westinghouse dishwashers and fridges. The company envisioned Elektro as the ultimate appliance, a domestic helper. “If you treat me right, I will be your slave” was one of his canned 78-rpm messages. But the clumsy giant robot never made his way into the home. Fact is, at 7-feet-tall, Elektro was simply too unwieldy for most houses, let alone household chores, says Jeffrey Trinkle, a roboticist at Rensellaer Polytechnic Institute. “Smoking was a great party trick, but practical robotics [like factory arms in manufacturing plants] carried the day.”

After World War II, Elektro entered a period of decline. He did a stint promoting a California amusement park and appeared in the 1960 B-movie Sex Kittens Go to College opposite Mamie Van Doren. Then it was off to a Westinghouse plant in Mansfield, Ohio, where his head was removed and given to a company engineer as a retirement gift.

What is left of the original—the partly-functioning head and body—now resides at the Mansfield Memorial Museum. “He’s a piece of history,” says Scott Schaut, the museum’s curator.  “He’s not going anywhere.”

An entrepreneur lures aspiring miners to an old gold-rush town.

HAPPY CAMP, CALIF. (Fortune Small Business) — The northern California town of Happy Camp (pop. 1,000) was founded in 1850 when an estimated 15,000 people converged here, pitching tents and building rickety lean-tos. They came to work on a nearby stretch of the Klamath River dubbed the Million Dollar Mile because, legend has it, that was the value of the gold extracted on an average day.

While not every prospector struck it rich, Happy Camp earned its name from the variety of diversions available to both failed and successful miners: gambling, hookers, whiskey, and opium. What happened in Happy Camp stayed in Happy Camp.

Today the town features zero stoplights, only a few businesses (Bigfoot 24-Hour Towing is one), and a handful of houses, mostly hidden among the pines. I’m here to attend a beginner’s prospecting weekend, led by an enterprising former Navy SEAL named Dave McCracken.

I check into the Forest Lodge Motel on Friday evening. Early the next morning I present myself at the Lions Hall, the only room in town large enough for McCracken’s opening seminar on prospecting techniques. The roughly 100 attendees hail from as far away as Hawaii and Virginia. Among them are entrepreneurs, a railroad engineer, a computer programmer, several retirees, and a contingent of career gold diggers, mostly locals, some of whom work for one or more of McCracken’s prospecting enterprises.

The day after Christmas 1979, following a four-year tour of duty, McCracken succumbed to the gold bug. Along with two partners, he headed for the Klamath River in Northern California. The partners lasted just two months. McCracken stayed on, living in a tent for the next three years. On his best days he recovered a few pennyweights of gold (worth roughly $100 back then). For a while he subsisted on an annual income of less than $3,000 – and lots of beans. Over time he won the trust of some old-timers who still worked the region. They taught him their tricks.

Now 54, McCracken has built a Happy Camp mini-empire. He owns the town’s prospecting store, where shoppers can purchase anything from a tiny gold-display vial (50 cents) to a big, unwieldy piece of prospecting equipment called a dredge ($4,550).

He is the author of five books on prospecting and has produced three DVDs. He has also staked mineral claims along 70 miles of the Klamath. McCracken pays annual fees of about $50,000 to the U.S. Forest Service to maintain those rights. His stakes enable his biggest moneymaker, a prospecting club called the New 49′ers. For a one-time, $3,500 fee, members can prospect on McCracken’s claims, keeping any gold they find. He launched the New 49′ers in 1985 with 500 members and says he now has more than 2,000.

McCracken explains what we can expect during our prospecting initiation. After panning to find promising locations for gold, we’ll return to work them hard. The weekend will culminate in a split of the gold among all 100 participants. He stresses that although everyone will find some gold, it’s unlikely that anyone will find much. Still, McCracken has a tough time containing himself.

“Hardly anything compares to finding your first gold,” he says. “Even if it’s just a tiny fleck – it’s pure euphoria.”



Sifting sediment

At noon on Saturday our group heads over to Savage Rapids, on the Klamath River. The plan is to work a gravel bar in the flat plain between the water and the woods. It’s considered an ideal panning location because the river often deposits gold here when it overflows its banks.

Gold panning involves two steps, one land-based and the other water-based. McCracken demonstrates the technique, which hasn’t changed since 1849: Using a spade, he flicks away the top layer of gravel, then digs into the rich, wet silt underneath, filling his pan. He walks to the river’s edge and dips his pan in the water. Moving it around, he separates out liquid and lighter bits of sediment. After about five minutes he holds out his pan for us to inspect. There’s some water, a lot of iron-laden black sand, and a few tiny flecks of gold.

Panning proves a lot harder than McCracken makes it look. Squatting in the chilly Klamath, the pan heavy with dirt and water, I struggle to keep my balance. After 20 minutes of sloshing, I reach the bottom of the pan. To my amazement, I see two minute, glittering specks.

Saturday night we return to the Lions Hall for a potluck dinner of beef stew, corn bread, and potato salad. Country music twangs over the speakers. As the evening draws on, both visitors and locals relax. One after another, the seasoned prospectors reach into their dungaree pockets and show their treasures, special nuggets that they carry in grubby envelopes and little glassine bags. Each lump tells a story. Some are prized for their unusual shape, others for weight and purity.

On Sunday morning I return to the Klamath, where McCracken and his crew are setting up four gas-powered machines, known as high-bankers, in the most promising spots from the day before. These robotic gold pans process dirt much faster than humans can. Drawing river water through a long hose, the high-banker sorts and agitates, spitting out the lighter sediments. At the base of the machine, the heavy stuff (gold, black sand, bits of lead) comes to rest in a removable tray. This weighty yield is then run through a mechanism that separates gold from other heavy material. 



Nuggets and flakes

My job is to dig with a shovel and fill buckets with dirt. Other prospectors haul the buckets and dump the contents into the high-bankers to be filtered. We work in the grueling heat from 10 A.M. to noon, when McCracken announces we have processed enough soil. With much ceremony he withdraws the trays from the high-bankers. I can see numerous metallic glints, many of them golden. The next step is to run this yield through another machine that washes away the dross and leaves the gold.

Back at the Lions Hall, the entire day’s take is spread out on a single piece of letter-sized paper. McCracken passes a magnet over the sheet. It attracts iron-rich black sand, leaving behind the nonmagnetic gold.

He then pours the precious metal onto a scale. The room falls silent in anticipation. McCracken fiddles with the slider weights and then announces, “We got an ounce and a half of gold – not bad for two days’ work.” Our haul includes 13 small nuggets among the flakes and flecks. We draw numbered poker chips from a can. The first 13 people will get a nugget. I draw No. 86.

As I line up to claim my small share of gold dust, I run into fellow prospector Linda Wilkinson. Along with her husband, Wilkinson owns Jump Organics, a soap manufacturer in Albany, Ore. She examines her little vial, agitating some $13.50 in glittering flakes. “I won’t be retiring on this, but I had a blast,” she says, grinning. 

Forget NASA. The real future of America’s space program may well lie in a thriving desert town of entrepreneurs who aim at the stars.

MOJAVE, CALIF. (Fortune Small Business) — Outside Hangar 7, the desert and sky stretch as far as you can see, broken only by the distant Tehachapi Mountains and the occasional Joshua tree.

Inside the hangar the view is equally dramatic. A rocket, 30 feet long, lies on its side. Nearby sits a large capsule, looking like something out of the Apollo program. But this is the Neptune program – run not by NASA but by Roderick and Randa Milliron, a husband-and-wife rocketry company.

The Neptune sure looks convincing. But will it fly?

Welcome to Mojave, Calif., where “Will it fly?” is a constant question. The desert town is home to eight small rocket companies, twice the number of a decade ago. The town now boasts 4,000 residents, up from 2,700 five years ago, pursuing a galaxy of ambitious business models: space tourism, rocket-powered sports, and space-based experiments for corporations and scientists. Like any good business ecosystem, Mojave also has a growing cluster of companies that support the rocket firms: fabricators of exotic materials, parts suppliers, and even restaurants that cater to the space set.

Mojave can draw on a deep well of California aeronautics and engineering talent on the cheap. It is a 90-minute drive from Los Angeles, home to aerospace companies such as Lockheed Martin, and five hours from San Francisco. The pay at rocketry startups such as the Millirons’ can be as little as $16,500 a year. Yet these companies lure fresh hires with the promise of inspiring work and a bargain-basement cost of living.

On average a Mojave home goes for about $150,000, less than a third the average cost in L.A. Still, Mojave is clearly in the boonies. The town doesn’t even have a movie theater.

“Here it’s possible to test rockets in a very unpopulated area,” says Mike Massee, a board member of the local chamber of commerce. “If something blows up, you’re not going to take out an entire neighborhood.”

The space race

Another draw is Mojave’s 12,500-foot runway, longer than anything at Los Angeles International. During World War II, Mojave’s airport was used to train Marine pilots. After the war it became a private airfield favored by owners of vintage biplanes and decommissioned fighter jets. In 2004, Mojave’s airfield became the first inland facility to receive FAA approval for space traffic.

That same year saw the first small company reach space: Scaled Composites, then owned by Mojave entrepreneur and airplane designer Burt Rutan. His revolutionary SpaceShipOne became the first private craft to ascend 62 miles to the edge of suborbital space, twice over two weeks.

That netted him the $10 million Ansari X Prize, but even larger purses awaited. Last August, Northrop Grumman purchased Scaled Composites for an undisclosed sum. And Richard Branson commissioned Rutan to design and build the first batch of rockets for a space tourism business, Virgin Galactic.

This summer Rutan began testing SpaceShipTwo, which is twice the size of the original, in the nearby desert. Branson has taken $30 million in deposits from customers hoping to take a 2½-hour space flight. Virgin Galactic is hoping to launch in 2010, and has many would-be rivals.

“All the rocket pioneers in town want to be like Burt,” says Bill Deaver, editor and publisher of the Mojave Desert News. “The stakes are big, the money is big, the glory is huge.”

Most Mojave rocket startups, however, are still operating on a shoestring. Roderick and Randa Milliron, both 57, have been operating out of Hangar 7 since 1996. On a microscopic revenue stream ($150,000 in 2007) they’ve managed to keep their business going and in flush times have hired up to 25 employees.

To fund their dream, the Millirons seize any side project they can find. They consulted with the state of Texas about locating a spaceport like Mojave along the Gulf Coast. Hollywood studios have paid to record some of the engine tests that the Millirons have conducted out in the desert. Spaceship sound effects in movies such as War of the Worlds and Serenity are from their rocket engines.

“Rod and Randa are from another planet,” says test pilot Dick Rutan, brother of Burt. “But nobody knows what’s going to work. Lots of industries we now take for granted grew out of innovators trying things. We need a whole bunch of ideas – the weirder, the better.”

The Neptune, powered in part by a proprietary fuel that the Millirons identify only as Hydrocarbon X, certainly fits that bill. The Millirons are currently seeking funding for a series of test flights of their 90-foot multistage rocket next year. In the long run they plan to offer full space vacations for as many as six people at a time. After a month of training, passengers would spend a week in orbit before the capsule parachutes into the ocean.

Such a ride does not come cheap: The Millirons plan to charge $2.5 million a ticket, although the first ten Neptune passengers will get promotional fares of $250,000. (A Virgin Galactic ticket is set to cost $200,000.)

“We’re not interested in a short flight where you kiss the edge of space,” says Randa. “We want our passengers to circle the earth, experience orbital sunrises and sunsets, and get a privileged perspective from 250 miles up.”

Over in Building 25, you’ll find a very different dream in progress. Instead of high-end space tourists, Dave Masten wants to capture the market for low-end space science. Masten is a Silicon Valley refugee who cashed in his options and moved here in 2006 after Cisco bought a small company he worked for. For a second act Masten is hoping to offer an alternative to an expensive NASA rocket program.

NASA regularly launches rockets to conduct zero-gravity experiments in the earth’s upper atmosphere. You can place your payload aboard one of these rockets. But competition is fierce, and the cost can be more than $1 million.

Masten asked 250 recent users of NASA’s rockets, “If I could bring down the cost to around $25,000, would you conduct more experiments?” The response was overwhelmingly positive, and Masten feels he’s found a niche worth billions. For one thing, all computer chip makers need ever more precise crystals. In zero gravity, crystals can grow with almost no defects.

Masten, 40, has also identified the nation’s 58 million schoolchildren as a potential market. He plans to offer something called a SodaSat, a Coke-can-sized payload that for a $99 fee can be transported alongside larger corporate and academic payloads.

“A kid could send a seed into space to learn how it’s affected by microgravity,” he says. “Wouldn’t that be an amazing science project?”

To capture these markets Masten needs to build a craft capable of leaving the atmosphere, providing a few minutes of precious space time, and returning the payloads safely to earth. He has staked his hopes on the XA rocket, a squat, pyramid-like design. A prototype of the rocket sits in his hangar with a gaggle of exposed wires, tubes, and valves. So far Masten has conducted tests where the XA has risen only a few inches off the ground.

Revenues for Masten are even more scarce than for the Millirons. Masten and his four employees have burned through $1.25 million, which includes his Cisco proceeds, funding from an angel investor, and money invested by friends. Masten has pretty much maxed out his credit cards as well.

Still, he defiantly predicts better test results for the XA. “Ever since I was a little kid I wanted to build rockets,” he says. “I still intend to.”

Racing rockets

Not all Mojave companies are coasting on fumes. XCOR Aerospace is the most prosperous of the local rocket startups, and the one with the best prospect of being the next Scaled Composites. Headed by former Intel executive Jeff Greason, 41, XCOR makes rocket engines for clients that include NASA. XCOR, now nine years old, even managed to turn a small profit in 2006, though it lost money in 2007 on revenues of $3.6 million.

Greason’s most glamorous commission so far is developing the Rocket Racer, a light aircraft powered by rocket engines, for the Rocket Racing League. Think of it as NASCAR in the sky: As many as ten rocket planes race around a five-mile circuit, 1,750 feet in the air. There would be spectators, of course, but the RRL will be a truly made-for-TV sport. The planes will be mounted with cameras, and the track will be superimposed the way first-down lines are laid out in NFL broadcasts.

The RRL is the brainchild of Granger Whitelaw, an auto-racing investor who provided the financial backing for two winning Indy 500 teams, and Peter Diamandis, creator of the X Prize. Its first exhibition race takes place at an air show in August, and XCOR is one of two companies providing the Racers. The prototype, about the length of an SUV, is hidden behind a scrim in a corner of XCOR’s hangar.

Greason continues to sweat the Racer’s details. The Racer can fueled in less than ten minutes, says Greason, but because pit stops will be as vital in the RRL as they are in NASCAR, he’s working hard to pare that down.

Then there are the plane’s rocket flames. Whitelaw requested something visually dramatic, so Greason used a mixture of liquid oxygen and kerosene. The result “is enormously bright,” he says. “I’ve seen it from about 15 feet away in daylight, and it’s almost painful to behold.”

To keep his workers focused on vehicle safety, Greason has laid down an unusual management rule: Each of XCOR’s 25 employees, down to the receptionist, will eventually fly in one of the company’s creations. When asked if she’s looking forward to her flight, the receptionist nods and flashes a nervous smile.

Building Mojave

After XCOR, the most successful spacebound small business belongs to Marie Walker, 47. Her 40-employee company, Fiberst, makes lightweight rocket parts from composite materials and had revenues of $2.4 million in 2007. It is privately held and profitable, according to Walker.

With her pink nails, frizzy blond do, and folksy style, Walker is hardly what you would expect a rocket entrepreneur to be. Raised in a cash-strapped family in a nearby town, she took a job at Fred Jiran Glider Repairs, which made parts for mail-order kit planes. She married a co-worker, Jim Walker, a self-taught engineering whiz, and the couple left to found Fiberset in 1983.

The company built a client list that included aerospace companies and boat-makers. All that was threatened in 2003, when the pair went through a messy divorce, and Marie wound up with the company.

“I wasn’t sure I could run it,” she says. In fact, she not only held on to the client base but also expanded it to rocket companies, for which Fiberset makes nose cones and another parts.

Walker’s success prompted her to give back to Mojave, where she organizes a model-rocket competition at a local school. Entrants are required to come up with a marketing plan for a space business that would launch 25 years from now. “I want these kids to be exposed to the opportunities they’ll have right here in their own community,” she says.

You see a lot of long-term thinking at all levels of the Mojave ecosystem. Take Jim Miller, 39, who left a low-level telecom job in L.A. in 2001. His Mojave company, High Desert Wireless, provides Internet service to the hangar headquarters of rocket pioneers. Revenues have doubled each year and now stand at roughly $500,000, and the company is profitable, Miller says. But that’s not where his dream ends: Miller aims to create a “giant Wi-Fi hot spot in space,” so space tourists can send e-mails home.

Many of these plans are hatched at the Voyager Restaurant, the greasy spoon of choice for rocketeers. Unlike many of its customers, the Voyager boasts healthy revenues – $500,000 in 2007 – and double-digit profit growth, according to owner Marie Saady.

The Voyager is packed at breakfast time, and a palpable buzz travels through the room when eminences like Dick Rutan arrive. Mojave’s more confident entrepreneurs order the Perfect Landing (eggs, bacon, and sausage patties), while others seem better suited to the Crash Landing (the above, mixed up on a tortilla).

Either way, it seems a fair bet that space business will still be here when the town’s grammar school rocketeers are all grown up.

More entrepreneurs are embracing a simple metric that measures referrals – and helps boost profits.

(Fortune Small Business) — 63 is the number for Quickparts.

It appears in the annual report, gets discussed at meetings, and lest any employee forget, 63 periodically flashes on the flat screens that appear throughout the Atlanta headquarters of this fast-growing maker of custom parts for clients such as Intel and Whirlpool.

Back in 2006, Quickparts’ number was 48, which is none too shabby. But here’s the difference between 48 and 63, according to co-founder Ronald Hollis: a 25% increase in customer referrals. That helped drive record profits in 2007 on $23 million of revenues, up from $17.5 million in 2006. This year Quickparts is aiming for 65.

“We want to just keep driving the number up,” says Hollis, 41.

What exactly is this magical metric? It’s called a Net Promoter Score, and essentially it measures customer satisfaction and referrals. The score represents the proportion of customers who are promoters – those so delighted that they praise a product or service to all within earshot – minus the detractors.

Posting the score to employees, and encouraging them to boost it, can help a business owner focus her staff on customer service. And inquiring into the sources of customer enthusiasm and anger can help the owner and her staff identify and bolster their strengths, while addressing their shortcomings. Hollis, for example, learned from his NPS follow-up that customers seeking price quotes online wanted more customized quotes, which he now provides.

NPS has been adopted and praised by large corporations such as Allianz Group, Pitney Bowes, and Intuit. Dan Henson, the newly appointed CEO of GE Capital Solutions, describes NPS as “one of the most powerful tools we’ve ever employed at GE.” Now, facing a weak economy and intensified competition from larger companies, many entrepreneurs are smartly tapping in.

“NPS is really taking off with small businesses,” says John Jantsch, who writes a popular blog called Duct Tape Marketing. “I can’t tell you how many e-mails I’m getting from NPS adopters or those looking to get started.”

Devotees – including the owner of a chain of Texas tanning salons, a Colorado franchiser of memory-improvement centers, and the head of a Delaware answering service and call center – laud NPS for its simplicity, contribution to revenue growth, and ability to identify exactly what is exciting customers or exasperating them. To be sure, some detractors say that NPS is simple to a fault, and we will hear more from them in a moment. But first, let’s examine what NPS is and how it works.

NPS is the brainchild of Fred Reichheld, a partner at the Boston consulting firm Bain & Co. and a pioneer in the study of customer loyalty. He spent a decade searching for a simple way to measure those customers so gaga about a product or service that they’ll praise it to anyone who will listen. According to Bain’s research, a company’s promoters are responsible for 80% or more of new customer referrals, making this group a key to revenue growth.

Here’s how NPS is implemented. First, ask your customers to rate you on a scale of 0 to 10 based on the question, How likely is it that you would recommend this company to a friend or colleague? Then sort the responses into three groups: promoters (9′s and 10′s), passives (7′s and 8′s), and detractors (0′s through 6′s). The percentage of promoters minus the percentage of detractors equals your score. A company with 75% promoters and 15% detractors, for example, would have an NPS of 60.

What do you do with this number? Drive it up, of course. Relentlessly up. That is achieved by asking a couple of additional questions, beginning with: May I follow up with you at a later date?

The permission clause is a key to NPS, according to Reichheld. The goal is to get constructive criticism from willing customers. You then contact those who agree to talk and ask one final question: Why did you give us this rating? Some of the most useful feedback comes from detractors. The idea: Unhappy customers will give you an earful, perhaps revealing some serious shortcomings of your business. Cure what ails this tough crowd and convert detractors into promoters, and up climbs your NPS. But some companies also seek feedback from passives (the 7′s and 8′s, who can take you … or leave you) and promoters (the 9′s and 10′s, who love you almost as much as your mother does).

According to Reichheld, the average U.S. company has an NPS of about 15. This varies by industry, with some, such as the makers of consumer packaged goods (score 24), faring pretty well, while others, like telecom/cable (- 4), are real dogs. No matter what the industry, each tends to have some companies with NPS scores well above 15. As a rule of thumb, score above 50 and you’re a star.

Not everyone, however, believes in the predictive power of Reichheld’s numbers. His detractors contend that the metric’s simplicity is, well, simplistic. One such naysayer, Claes Fornell, a marketing professor at the University of Michigan’s business school, did a comparison of NPS and the American Customer Satisfaction Index, a highly regarded survey that he developed using multiple variables. Fornell’s finding: The ACSI has a margin of error of +/- 3.3%, while NPS has a margin of error of +/- 10%, meaning that an improvement of five points in your NPS, to 55, could in reality be no improvement at all.

“It’s pretty clear that the person who put this together has no statistical background,” he says dismissively.

For his part, Reichheld contends that he simply touched a nerve when he created a demystified metric that put all the complex-modeling guys on notice, threatening their livelihoods. But guess what? Reichheld also quietly gives ground on that issue of statistical accuracy. In The Ultimate Question, his 2006 book on NPS, he claimed that a 12-point increase in the metric leads, on average, to a doubling of a company’s rate of revenue growth. Reichheld and his colleagues at Bain have backed off that claim, now saying only that increases in NPS can lead to increases in revenue.

There’s no denying there are valid questions about NPS’s statistical accuracy. Equally undeniable: NPS has the force of a revolution, and many businesses swear by it. To research this story, FSB spoke with more than 20 small businesses, and none regretted adopting the metric. What follows are profiles of three business owners, all enthusiastic converts to NPS, but each citing different benefits.

Learn What the Client Really Wants

Tony Hartl, 40, is CEO of Planet Tan, which operates 13 stores around Dallas. The company is profitable, he says, and has roughly $10 million in annual revenue.

Hartl began using NPS in November 2007, hoping to better address a challenge that he has faced since founding the business 13 years ago.

“The success of tanning salons is heavily based on the customer experience,” explains Hartl. “That’s really the differentiator.”

Think about it. Would a customer ever choose one salon over another because it uses a particular brand of tanning bed? No one cares. But finding that service edge can be elusive. Tanning salons tend to be staffed by wet-behind-the-ears employees who aren’t always polished at customer relations. High employee turnover, endemic in this industry, adds to the problem. In the past Hartl tried to gauge customer satisfaction using a lengthy e-mail survey. It required roughly 30 minutes to complete and featured such questions as: How much are you willing to pay for a membership? What radio station do you listen to? Hartl sneaked in the questions, hoping to learn where to advertise to reach his target market. The response rate was a paltry 3%, yet his staff was overwhelmed by the feedback.

“All this raw data created paralysis,” says Hartl. “People were left wondering, How does this apply to customers anyway?”

He has since discontinued the offending survey in favor of NPS. Launching the new system was easy, he says. Training for his staff consisted of a half-hour PowerPoint presentation, developed in-house.

There was no need to retain Bain. Sure, the consultancy has a thriving NPS practice, serving the complex needs of large clients like GE. But the average entrepreneur can learn everything necessary to launch NPS by talking to peers, going to a conference, or simply reading The Ultimate Question, as Hartl did.

Last fall Planet Tan e-mailed that single question (“How likely is it that you would recommend this company to a friend or colleague?”) to 11,695 of its customers. The response rate was 11%. The various rankings, from 0 to 10, were tallied, and the company arrived at its NPS score: 66.

“Everyone just got it. Here’s a single number that can go up or down, depending on interactions with customers,” says Dawn Byers, 32, a Planet Tan executive who worked closely with Hartl to introduce the metric.

Next step: The company divvied up the detractors among the managers at its various locations. But implementing NPS required some effort. Sometimes it took Planet Tan managers three or four phone calls to reach a detractor.

“For small businesses with limited resources, going after all this data can be time-consuming,” says Vikas Mittal, a marketing professor at Rice University’s business school who specializes in customer-satisfaction issues.

“Sure, it takes some time,” allows Byers. “But the benefits so outweigh the time spent.”

The feedback proved illuminating, she says. For example, Planet Tan received complaints about the way its fee is structured. The company sells its customers credits, redeemable for tanning-bed time. Some said it was confusing, not unlike being on a cruise ship where you never know how much anything costs in actual dollars. As a consequence, Planet Tan now offers a simple monthly membership.

Survey detractors also said they were less than enthralled by the experience of leaving a Planet Tan salon. Sure, the staff was all smiles and chitchat when customers arrived. But following the tanning sessions, those same customers felt lucky to get a goodbye. The staff was totally focused on new arrivals.

That consistent beef led Hartl to introduce a new policy he terms “post-tan affirmation.” As someone exits, employees are now required to say things such as “You got some good color today” or “Can I offer you moisturizer?”

During the first months of 2008 same-store sales have risen more than 15% year-over-year, according to Hartl. This, in a tough economy. He attributes the results partly to various moves made in response to the NPS data. Planet Tan will be doing another NPS survey this summer. Hartl is hoping to hit 70.

Prevent Silent Attrition

During an average 24 hours, Appletree Answering Services takes 70,000 phone calls. The company (2007 revenue: $12 million), based in Wilmington, Del., operates 12 call centers, a bland appellation for a fiercely competitive business. Appletree’s customers include doctors and lawyers, for whom it provides messaging services, and companies such as Siemens, for which it provides after-hours help-line support.

“Our customers depend on our services every single day,” says CEO John Ratliff. “That puts us on a hyper track for good and bad experiences.”

Appletree conducted its first NPS survey in 2006 and scored a 26, a mediocre mark for its industry. Ratliff, 37, took the result as a wake-up call. To push the score higher and to get a better read on customers, he has taken a particularly rigorous approach to NPS. Each quarter, Appletree surveys its 5,600 customers and gets a consistent response rate of around 20%. Appletree doesn’t focus solely on detractors as some companies do, and finds that there’s also much to be learned from the other groups. Each department within Appletree is charged with following up with different sets of customers. For example, the call center managers contact the passives.

“This is our sweet spot,” says Ratliff. “The 7′s and 8′s are the silent-attrition group. Something is likely nagging at them, but they’re currently just satisfied enough not to complain. One day we’ll look up, and they’ll be gone.”

Feedback from that group has yielded some useful insights. For example, customers consistently expressed annoyance that it took several calls to resolve a billing issue. That surprised Ratliff. He had thought about Appletree mostly in terms of its core service: answering phones. Here was something ancillary to that core service – the billing process – but it was irritating customers. Ratliff responded by giving Appletree’s service reps more latitude to solve simple billing issues, such as the ability to waive certain computer-generated late fees.

Meanwhile, the company’s most enthusiastic customers are handled by the sales department. That’s right: Sales gets to make all the fun calls. But there’s a practical reason for it.

“It helps fire up the sales force,” says Ratliff. “It reminds them what customers like about us.”

The feedback also helps the sales team tailor its pitches. Appletree’s best customers, for example, particularly liked the way the company treated them when they first signed up for the service. An account manager always contacts new customers to go over options for handling each call. For a doctor, the service rep might suggest that the phone operator inquire whether the call is an emergency. Now when Appletree salespeople try to land a new account, they emphasize the customer “welcome experience.”

The 1′s are reserved for Ratliff, Appletree’s intrepid leader. He dismisses the feedback of cranks and loonies. But often, he says, people who’ve rated Appletree the lowest score have legitimate gripes.

“You tend to hear the same things over and over again, albeit loudly and with colorful language,” says Ratliff. “You can often learn more in a customer call than from an entire focus group.” One steamed customer complained that when Appletree takes a phone message, too much time elapses (generally several minutes) before an e-mail notification is sent out. That was an easy fix, says Ratliff. Appletree now offers an instant-notification option to customers.

Appletree gets feedback from a variety of customers. So how does the company keep track of it all? It maintains a database with brief summaries of each of those interactions. Type in a search term such as “billing problem” and find out how many complaints were registered and when.

For the latest survey, Appletree’s NPS rose to 56, evidently the result of responding to customers. But the clearest sign of progress: Customer referrals were up about 200% in 2007 vs. 2006, and profits climbed as well, according to Ratliff.

Link Pay to Customer Delight

Good customer service is a key to a healthy enterprise; on that, every business owner can agree. But customer service also tends to be relegated to the squishy bin, along with personnel development. When it comes to doling out cold cash, companies generally favor tying rewards to measurable targets such as profits. Because NPS assigns a hard number to customer service, some companies have found that they can tie this metric to compensation. The results have been impressive.

Ken Gibson, 63, is founder of LearningRx, a Colorado Springs company that helps clients improve their memory and concentration. LearningRx has 66 franchises in 24 states, a steep climb from just 15 in 2004. According to Gibson, the firm is profitable, with revenues of $30 million in 2007.

LearningRx is intensely customer focused. The key to its business is building successful relationships between the tutors and their students, which include kids with learning disabilities and patients with Alzheimer’s, among others. When Gibson first heard about NPS, a light bulb went off. Rather than tying bonuses to student test results, as he had in the past, he could tie them directly to customer satisfaction. In 2006, Gibson introduced NPS as what he calls a “reward and shame system.”

Here’s the drill. While LearningRx tracks NPS on a companywide basis, it also figures NPS for individual tutors. The scores then determine the size of each worker’s bonus. Tutors who achieve a score of 90 or better receive bonuses equal to 20% their base pay; those scoring 70 to 89 get as much as 10%. Below 70, they get nada. The system seems to be working. Since it started tracking NPS, LearningRx has seen its number improve from 70 to 72.

Given that money is at stake, you might wonder what prevents tutors from trying to influence what their pupils say about them. To head off this possibility, Gibson has made it clear that anyone caught gaming the system will be fired immediately. Just to be sure, he’s added a question to the follow-up interviews, which are conducted by the franchise managers: Were you in any way led or encouraged to give a higher rating?

And what about the “shame” part of Gibson’s system? Well, it’s also possible to calculate the NPS for each of LearningRx’s 66 franchise locations. For the annual convention this summer, the franchise owners will wear nametags that feature their NPS score. Just imagine:

Paul … 78 … So very nice to meet you!

Stu … 24 … Yeah, hi.

The NPS metric may not be appropriate for every small business. If you have only a handful of customers and know them well, there’s no need to set up a new system. But for business owners who want to keep in closer touch with their customers, this metric can provide valuable feedback that you can use to turn an unhappy client into one who will sing your praises. 

It can be a great way to protect your heirs – or a giant waste of your savings. Here’s how to tell which.

 (Money Magazine) — It’s not alarmist to think that you’ll need long-term care in your lifetime. Among Americans who reach their 65th birthday, 45% will have to pay for some kind of long-term-care services, according to the actuarial firm Milliman.

Yet the decision whether to buy a long-term-care insurance policy, which pays out for nursing-home and certain at-home care, is one of the toughest calls you’ll ever have to make. Insurance could preserve your estate for your heirs and save incredible heartache. On the other hand, it’s expensive and chances are you won’t need it.

Unlike most stories you’ll read in Money Magazine, this one won’t give you a definitive answer. But we’ll tell you what to consider as you weigh your comfort level with playing the odds.

Strictly by the numbers

There’s no question that years in a nursing home can decimate your savings. The average facility now costs $213 a day, according to a MetLife survey; based on last year’s 3% yearly price increase, by 2030 you can expect to pay $408 a day, or $148,967 a year. For a 2½-year average stay, the tab would be about $372,000.

The chances that you’ll need that much care, however, are small. Only 9% of 65-year-olds can expect a lengthy nursing-home stay, according to Milliman (another 18% will need long-term assisted-living care).

But even a long-term stay could be a matter of months, not years. Suppose you’re a healthy 58-year-old. You’d pay at least $1,000 a year for a policy with a $150 daily benefit that adjusts for inflation each year.

Invest that money instead and you’ll end up with $65,330 at age 80 (assuming 8% annual returns). While that wouldn’t even cover six months in a nursing home in 2030, it’s money you can spend or leave to your heirs if you never need long-term care.

But wait…

What if a debilitating illness runs in your family? In that case, your odds of needing expensive long-term care increase. Or perhaps you want the peace of mind of knowing that a lengthy nursing-home stay wouldn’t financially devastate your spouse or your kids.

Even if you feel that you’re a candidate for this insurance, you have to confront the policies’ expense. Don’t buy unless you can afford a premium hike of 10% to 20% and can continue to make payments for 30 or so years.

A good rule of thumb: Spend no more than 7% of your income on premiums. And keep in mind that the average $1,000-a-year policy pays $150 a day, only 70% of the typical cost of care today.

If you want to avoid a shortfall – or if nursing- home costs are high in your area – you may need a more expensive policy. And if you can’t pay at any point, you’ll likely be left with no coverage at all. Then the money would really have been wasted.

Keep in mind

If you want to purchase long-term-care insurance, get the maximum flexibility you can afford. To keep your premium down, pick a 90-day elimination period (the long-term-care version of a deductible). But opt for 5% yearly “compounding” inflation, which costs more but will ensure that your coverage keeps up with price hikes. And keep saving – even if you have insurance, you’ll wind up paying for a portion of your care.