Then Dr. Cho La Siea appeared. As Cashman tells the story, Siea represented an outfit called The Great Eastern Trading Co., which then was helping to equip new envelope factories in the Philippines and on the Chinese mainland. Siea proposed to help Pacific Envelope get bank financing for its modernization by pledging to buy up all of its old machinery. In return, Siea would need Cashman's help in finding additional machines to purchase from other U.S. envelope manufacturers.
Cashman was eager to take Siea up on his offer, and over the next six months in 1979, they traveled around the United States, buying up 24 envelope machines. Cashman was fascinated by his elegant and somewhat mysterious traveling companion. A microbiologist by training, Siea apparently had given up his academic career for business shortly after President Richard Nixon reopened the China trade. His family ties were said to reach into the inner circles of Beijing, and perhaps because of that, he never failed to conduct his affairs with discretion and self-confidence. Even today, Cashman loves to tell of their visit to a factory in Philadelphia, where unionized movers balked at the prospect of moving four 2,000-pound pieces of machinery down from a second-floor factory. Unfazed, the doctor made a single phone call, and the next morning, a crew of Chinese laborers arrived, picked up the machine parts on poles, and silently carried them down the stairs.
As for Cashman, he never did buy that new machine, instead picking up a used model with nearly similar capacity for only 60% of the cost. Almost immediately, business jumped 40%. Within six months, he bought a second used machine. Two years later, he added a third, and so on, until he had 11 high-efficiency machines in his factory.
The years that followed should have been the best of times for Cashman. Sales were virtually doubling every year as the market boomed. And Cashman felt he'd found a way to grow without risk. Every three years, he bought a new $100,000 machine, borrowing $80,000 and putting down the rest in cash. Within the first year, the tax code took care of his down payment: after taking his investment tax credit of $8,000 and his $14,000 in depreciation, he found himself about even. As for the borrowed $80,000 proceeds from the sale of paper scraps generated by the new machine matched exactly the monthly payment to the bank. Meanwhile, the machine was churning out $50,000 worth of envelopes each month at gross margins of 34%. Even the float was working in his favor: most of his customers paid within 30 days, while his paper supplier waited 15 days from the end of each month.
It was an unbeatable formula: little competition, a growing market, and capital investment that almost immediately paid for itself. There wasn't much for Cashman to do but sit back and watch it happen. In 1983, he'd bought a printing company that was being foreclosed, but Georgia was running that. For a while, volunteer work for the 1984 Olympics kept him busy. He finally built that backyard pool he had been promising his wife for years, and they took their first real vacation.
As 1986 drew around, Cashman found himself on the horns of a dilemma. With sales topping $10 million, he figured that Pacific Envelope had grown about as big as it could without getting bogged down in systems. Now the challenge was to preserve what he'd built. Where was the fun for him in that?
Cashman's solution was to start another company. But this one wouldn't be only Bob Cashman's baby; he wanted everyone at Pacific Envelope to be able to share the excitement of the start-up. He'd encourage them all to participate -- even, if necessary, lending them the money so they all could invest.
The obvious first question was what kind of company it would be. He wanted something that would be interesting enough to attract top-flight managers and eventually big enough to absorb both Pacific Envelope and Hallmark Litho Inc., his wife's printing house. He also wanted something that could be taken public in a way that would encourage key employees to stay, while allowing him to cash out easily. Another envelope company, the underwriters told him, would never fly in the market. A manufacturer of trash dumpsters didn't seem to have the necessary synergy.
Suddenly, the mysterious Siea reappeared with a solution: computers. And not just any computers -- IBM Personal Computer clones manufactured offshore. Pacific Envelope would enter into a joint venture with a Hong Kong manufacturer, to whom Cashman was introduced by Siea. They called it Crown Technology Inc. Cashman put up the first $50,000, and 20 employees invested an average of $1,000 each. Others are expected to sign up before the first computer is shipped early next year.
"We can sell them exactly the way we sell envelopes," Cashman insists. "We'll start here in California -- this is one of the two hottest markets for computers in the country. If we get just 1% of the market, that's 1,000 computers a month and $10 million in yearly sales."
It's all made Bob Cashman young again, setting up an office, hiring the new employees, scheming with his partners and dreaming of growth. "You'll never see Crown on the INC. 500," he promises. "If it takes off like we think it will, we'll take it public within the next two years."
5 YEARS ON THE INC. 500
