Turning Point

Even the most successful companies didn't start out that way. Here are four companies who have endured hard times.

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It's hard to imagine that companies growing between 97% and 317% a year for five straight years -- as the members of this year's Inc. 100 did -- have ever known hard times. Such companies must be blessed, we think. They must each have found the right market at the right time, and then exploited it in the right way. A graph of their monthly sales must look like one smooth, steep, blood-thinning ascent. But the truth is different. As sometime Inc. columnist and growth-company observer David L. Birch has pointed out, even the most successful companies don't climb uninterruptedly upward. They're volatile. Among their peaks are valleys. Sometimes the valleys are bad.

When Your Sales Staff Defects

Company: Tech Data Corp., Clearwater, Fla.

Rank: #68

Founded: 1974

Sales: $149.1 million

Profits: $4.2 million

Business: Distributes microcomputers and related peripheral products

CEO: Steven A. Raymund

Age: 33

It took place nearly seven years ago, but Steven Raymund remembers the scene as if it was yesterday. He chanced to come by the office one Saturday in late summer only to see the company's best salespeople huddled around the copying machines, working frantically. On a weekend? That's odd, he thought.

Then 26, having taken the title of operations manager only a month or so earlier, Raymund didn't ask any questions. "It never even occurred to me that they might be copying proprietary records of the corporation," he says. "But that's what they seemed to be doing: copying all the customer records and vendor information.'

When he came to work Monday, on his desk were letters of resignation from five of the company's eight salespeople, the backbone of the field force. Raymund came to think of this episode of corporate treachery as "the palace revolt." And he played the role of crown prince.

Tech Data Corp. was a distribution company, selling computer supplies to large end-users in central Florida -- hospitals, government agencies, and the like. Edward Raymund, Steve's father, started the company in 1974, and by 1982, the year of the rebellion, sales were running about $2 million a year.

Steve had gone off to the University of Oregon for an economics degree, following up at Georgetown University's School of Foreign Service. He then did a brief stint on the South American loan desk at Manufacturers Hanover Trust Co., in New York City. "I came back to Florida just to prepare a résumé," he says. "I wanted to get into international economic development. My father was getting interested in catalog sales, and he asked me to put together a catalog. That piqued my interest in the company, but I had no plans to work there indefinitely.'

Steve's appearance on the scene did not go unnoticed by the sales team. Ed Raymund, increasingly devoted to his other company, Tech Rep Associates, was spending about one day a week at Tech Data. The salesmen, Steve says, "had not unrealistic expectations that they might be able to purchase the business from my father." But as Steve moved deeper into the operation, publishing the catalog and gradually taking charge, the salesmen grew restive.

Seeing their buyout hopes eroding as the heir apparent eased into power, the five salesmen fled with copies of the files to a competitor in Tampa. "I could have been a saint, I think, and there would have been resentment," Raymund says. "I was an obstacle between them and their goals. I just had no idea how duplicitous some people can be. There had been no grumbling, as far as I knew, before they quit. We were caught broadside.'

It wasn't long before the company felt the impact. "Our customers suddenly weren't calling much anymore," Raymund says. He considered legal action against the traitors, but decided against it. "You need at least one deep pocket, and I don't think any of them had much money," he says. "Plus, I didn't think we had enough money to vigorously press a lawsuit.'

Nor did he have money to replace the sales force. "Field salespeople typically earn more, and cost the company more, than inside salespeople, and we couldn't afford to hire new ones," he goes on. "Their commissions were on the order of 40% of gross profit. That was part of the reason the business wasn't going anywhere -- it was being plundered by the salesmen.'

But the turncoats had left behind a more troublesome legacy. By 1980 personal computers had arrived on the scene. Ed Raymund tried to expand his two-person telemarketing team to handle microcomputer supplies. That effort had been sandbagged by the field sales force. "They viewed it as a threat that might eclipse their importance to the company," Steve Raymund says. "These were professional, charismatic people, and they ended up dictating the focus of the company: large institutional sales. They had a strong grip on the customers and in turn a strong grip on my father. When they left, the customers left with them.'

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