Their strategy for E & A ran counter to the lessons of business school, too. Starting in 1977 with $40,000 in pooled capital, they went looking to buy a small company in a fragmented market and a static industry. Their plan was to develop a proprietary product and take it national. "We'd been taught at Harvard to get into a growing industry, then ride it to the top," Hubbard remembers. "But our hope was to pick an industry in which our management skills could pay off, an industry that didn't usually attract very dynamic people."
What they found was Marvel Product Co., an automotive-polish distributor -- and an entrepreneur's education. While Hubbard watched the shop, Klink loaded the product in the backseat of his station wagon and hit the road, looking for potential distributors. His target was the small "after market" -- distributors who sell to auto reconditioners and new- and used-car shops -- rather than the public. There was only one problem, Klink says: "We didn't have any products that worked." It made for a rather shaky launch.
Like good M.B.A.s, they started with a plan, this one projecting $500,000 in sales, or an 800% increase in the first year alone. It turned out to be a tad optimistic. Revenues that first year barely edged over $100,000, after thousands of dollars were returned to customers dissatisfied with the product.
It was two years before they turned a profit. Only after trying two different company chemists and five different polishes did they finally hit on Car Brite, today's national brand leader. Having a good product helped. Building a reputation for customer service has helped even more.
"I felt from the start that they were different," remembers Ed Friddle of Big E Enterprises, a distributor in Anderson, Ind. "They take a genuine interest in their customers." Delivery is on time, the price is right, and satisfaction is guaranteed, he says. "They've always stood behind their product. If there is a problem, they never hedge; they want it straightened out right away."
Hubbard and Klink, however, had bigger ambitions than running a small polish company. By 1982, they'd put a management team in place, with incentive bonus programs based on quality control, profits, and growth. Now, they were eager to test their counter-intuitive strategy again. In 1983, they bought Apex Corp., a local precision-machine shop supplying $2 million in aircraft-engine parts to large customers, such as General Motors and the U.S. Air Force.
"Apex had a good reputation as a supplier, but for 10 years, it had never gone after any new business," Klink explains. "So we started selling aggressively, going out and telling customers we could deliver quality products on time at a good price." Within a year, sales at Apex had more than doubled, outstripping production capacity, so the partners brought in a former TRW Inc. executive to oversee the expansion and manage the operation day-to-day. It was 1984 and time to go shopping again.
This time, it was Broulin & Co., a 50-year-old manufacturer of industrial chemicals and cleaners. Broulin was by far the duo's most ambitious acquisition. With its $24 million in sales, it was four times larger than its new parent. And while E & A had had 110 employees at two small operations, both in Indianapolis, Broulin added 275 employees spread among factories and warehouses at seven locations from New Jersey to Washington State.
Inside, the problems were even more daunting. Quality control and customer service were untested concepts. There were no set hours for management or office staff, and a 40-hour workweek was considered hard duty.A television had been set up in an employee lounge, and most of the production staff spent the afternoon watching soap operas.
The new partners went back to basics. They started the company's first performance reviews and tied all employees' pay to them. They took out the TV and put in a time clock -- at the request of employees. Sales and marketing efforts were expanded.
In this era of mergers and acquisitions, it is perhaps not surprising that a couple of fellows from Harvard Business School have made their way buying up companies, amassing a $35-million conglomerate for themselves.What distinguishes these two M.B.A.s is not simply their ability to spot a bargain, however, but the shirt-sleeve-and-shoe-leather know-how to turn these bargains into cash cows.
Is there any limit to where this strategy could take them? Apparently not. "We're certainly not satisfied with what we've done so far," Klink demurs, the INC. 500 plaques hanging on the walls around him. "And we don't have the time to sit back and look at what we've accomplished."
5 YEARS ON THE INC. 500
METRO INFORMATION SERVICES INC. VIRGINIA BEACH, VA. COMPUTER CONSULTANTS
Some companies grow by adding new layers to the organization. Others do it by acquisition. Still others, by franchising. But John Fain and Chris Crumley had a different idea for Metro Information Services (#261): cloning.
They started out as two partners working out of a spare room in Crumley's Virginia Beach house -- Fain the technical expert, Crumley the marketer. Their business was hiring out employees to do systems analysis and programming for large banks and manufacturing organizations. Their challenge was to develop loyalty from employees and customers in a business thought of by both as strictly short-term.
Fourteen years later, with $5 million in revenues and 125 employees in six cities, Fain and Crumley have it down to a formula. About 80% of their business at Metro Information Services comes from repeat customers. And in an industry known for turnover rates of 50%, theirs is 16%.
