Another trucker who took advantage of deregulation is Charles Grindstaff, who set up G&H Transportation Inc. (#106) in Houston in 1979. Starting with a scant $4,000 in capital, Grindstaff secured temporary city-to-city hauling approval within four days following passage of the Motor Carrier Act. Later, G&H contracted with a shipping line to handle cargo in and out of the port of Houston, doubling its business overnight. What started as a husband-and-wife operation now employs more than 80 people and produced $4.4 million in sales last year.
A onetime distribution superintendent for Schlitz beer, Grindstaff says having worked the other side of the shipping business gave him an important insight: "There is no effective competition against good service." Like everybody else in the business, though, he thinks the handwriting is on the wall for the inexperienced and the overextended. "The weaker outfits are going to fall by the wayside in the next few years," he observes, loading up a classic business homily. "After all, that's the American way."
COMPUTERS A niche in time
Say "growth industry," and the business most likely to pop into your head has to be computers. And indeed, no other big industrial sector has evolved so rapidly during the past five years. In constant dollars, the total value of U.S.-produced computing equipment virtually doubled from 1979 to 1983. Large mainframe computers continue to be the dominant segment of the market, with sales last year almost equal to those of micro- and minicomputers combined. But the emergence of the microcomputer -- the market segment in which-most smaller companies are to be found -- is changing the mix. Peter Lowber, a senior analyst with The Yankee Group in Boston, estimates that sales of micros (or personal computers) will catch up this year with sales of minicomputers, with both hitting $18 billion. By 1988, Lowber says, microcomputers will be a $35-billion-a-year industry.
Despite the growth, microcomputers are a business riddled with risk. IBM now controls at least 50% of the total market and an even higher percentage of the corporate market. The export trade is depressed by the strong dollar, and lower-price imports are invading domestic shelves. With the possible exception of the so-called super-micro market, says Lowber, there are relatively few safe opportunities for small companies that want to manufacture personal computers.
Luckily, manufacturing is only part of the personal computer business -- and some of the other parts are rather more appealing. While only about 400 U.S. companies make microcomputer hardware and peripheral equipment, there are almost 5,000 companies writing software for that equipment, and about 3,700 retailers selling it to customers. With domestic sales of personal computers rising from 2.4 million units in 1983 to a projected 5 million this year, those markets can only increase.
Even now, they have spawned a lot of companies that have made the INC. 500. One of the winners this year is Computer-Land Inc., the giant retailing chain, with four franchises showing up on the list at #21, #36, #116, and #157. Among the others are Microware Distributors Inc. (#7), an Aloha, Ore., wholesale distributor of microcomputer hardware and software, and Central Data Corp. (#122) of Champaign, Ill., an original-equipment manufacturer supplying component boards to microcomputer makers. The latter pair illustrate some of the unusual niches successful small companies have carved for themselves in the personal computer industry.
Rick Terrell, himself a former computer retailer, founded Microware in 1979 with just $15,000, adding another $60,000 from investors the following year. Between then and 1983, his sales rocketed from $125,000 to more than $12 million.Microware is a "true distributor," Terrell says, in that the company buys a variety of equipment and software direct from manufacturers and sells it at a markup to retailers.
At least some of these vendors, Terrell figures, will have something the individual retailer wants. "When I go into a store in Spokane, I've got a big bag of tricks," he says. "I know I'm going to make money on the call. That doesn't necessarily happen when you've got just one product to sell."
Terrell's operating goal has been to build a well-entrenched business in the Pacific Northwest that can survive the inevitable weeding out of the industry's weaker players. He maintains particularly close credit control, he says, because of the precarious financial status of many retailers he works with.So far, the strategy has been successful. Although the attrition rate among the independent retailers he serves is high -- as many as one in four may have gone out of business in the past 12 months, Terrell estimates -- Microware's sales should be $18 million in 1984.
"We've looked at going national from time to time," Terrell says, "but our conclusion has always been that national distribution won't be viable in the future. Our local market is growing, so we just decided to concentrate on getting a bigger piece of our own pie." As for products, Terrell believes much of Microware's future sales lie in the areas of networking software and hardware, which link microcomputers into single systems, and with rapidly growing "system houses." System houses are small, independent suppliers of operating software packages for such specific applications as doctors' offices. Already they constitute about 50% of Microware's business.
"I've got one customer now who specializes in systems for tire stores," says Terrell. "We're talking about people with very little overhead and very small volumes. It's a great market niche that is going to stay with the small independents." Yankee's Peter Lowber agrees. "Software is where the opportunities for new vendors are," he says. "It's the glue that holds the systems together."
