Financially, the company remains as close to a cash-based business as the two partners can keep it. They have financed the company's growth almost exclusively from profits. The only contributed equity in the business is the $2,500 each invested in the first few months to buy fabric for their first collection. A close friend loaned them enough cash to finance Hewitt's first selling foray to Manhattan; they have never borrowed from a bank.
"Next spring," says Hino, "even if we sell nothing, we don't owe anybody anything."
No retailer, no matter how prestigious its name, gets a shipment from Hino & Malee until its credit is approved. At the cost of some lost sales, but in the interest of undamaged profit margins, this prudence in trade-credit approval has kept the company's bad debt rate at less than 1% of revenues. Even if a store's credit checks out, Hewitt sometimes persuades store buyers to order less than they think they can sell. He has urged some chains to limit the number of their stores carrying the Hino & Malee label, focusing only on those in urban centers where more fashion-conscious women shop. "When stores like I. Magnin start pushing us into remote locations," says Hewitt, "it makes us a little nervous. So we're saying, 'Why don't you just keep us in 3 or 4, not 15 or 20, of your stores?"
There are sound business reasons for Hewitt's caution: Not all sales are necessarily good sales when a tiny company depends on giant retailers for 60% of its business. Department stores routinely ask garment-makers to take back unsold goods at the end of a season. Or they ask manufacturers to contribute "markdown money," cash to compensate the retailer for the lower margins it gets in end-of-season sales. Both of these are bad for the manufacturer's bottom line, and the larger the manufacturer, the more likely the retailer is to seek help. As a tiny business, Hino & Malee can plead a lack of resources should the likes of Bonwit Teller, Bergdorf Goodman, or Lord & Taylor raise the issue.
Growth is also an issue that Hino and Malee are struggling to resolve for themselves: It is a personal as much as a business issue.
Hino, 42, came to this country from his native Japan in 1975 and got a job in Chicago working as a pattern maker for a manufacturer of uniforms for Las Vegas casino workers. Malee, a year younger, left Bangkok in 1969 and was a design assistant with a high-fashion apparel company in the same building. When she lost her job he quit his, and in March 1980 they created the company and began selling women's sportswear, designed by Hino and sewn by Malee, from a tiny boutique in the corner of an upscale Chicago beauty salon. Within a year, they had been introduced to Hewitt, who became their full-time rep and moved his showroom from Chicago to the Manhattan fashion capital. Hino's "architecturally" inspired designs began to be shown in Bloomingdale's and other department stores. Sales in fiscal 1982 climbed to $512,000; in 1983 to $1.3 million; and last year to $2.1 million.
Despite these sales figures, Hino & Malee is still almost a mom-and-pop operation. It has no management organization, no strategic planning, and no articulated goals. Hino and Malee themselves are amazed by their success in just four years, and are at the same time frightened by the size and the momentum of the business they have created. They have no experience -- in finance, marketing, personnel management, or cocktail-party protocol -- and no formal training, either. With their soft, inexpert English, sometimes difficult for the ear to capture, often they can only indicate, not explicate, complex thoughts -- as when, for example, Malee says of their business strategy, "We just use our sense."
The pair started the company primarily to give expression to their design ambitions, and Hino, especially, worries that he will become too busy running the business to do the designing. They may hire a president, someone to manage the company, or they could sell the business and stay on in their creative roles. At this point they don't know what they want. But in the meantime, they aren't going to jeopardize their options by trying to move the company beyond their own capabilities, beyond what "sense," as Malee puts it, can manage.
"We could all have smiles on our faces staying between $2 million and $3 million [in sales]," says Hewitt. "We don't have to grow to $6 million. The larger you get, the more vulnerable you are."
The managed-growth strategy that Hino and Malee arrived at by default would make sense to Dan McCartney: A similar strategy has been part of his plan from the outset. Healthcare Services Group, the firm McCartney and Mel Mason founded in 1977, has no direct competitors; it has more capital than it needs; and its market is both receptive and practically untapped. In fact, the main thing -- the only thing -- holding Healthcare's growth rate in check is McCartney's insistence that the firm stick to its plan, which, while it drives the firm's growth, also constrains it. In his view, the single biggest threat to Healthcare Services's long-term success would be impatience, the temptation to short-circuit the plan. McCartney has proved a patient man.
Healthcare is in the business of selling a solution to a problem. Neither the problem nor the solution is terribly complicated; you just have to see them and recognize the business opportunity, as McCartney and Mason did.
The problem they recognized is that, in most nursing homes, the worst-managed department is usually housekeeping -- the people who scrub, clean, and polish. The head nurse has prestige, the chief dietician has prestige, but the top janitor does not. Usually, says McCartney, he is a former floor man who is good with a bucket and mop but has no management experience or training. Housekeeping, consequently, is frequently inefficient and ineffective, and is a constant source of niggling problems to nursing-home administrators.
