What would happen, my colleague John Case wondered aloud, if you took the INC. 100 list and stripped off all the obvious hyper-growth companies? Say you cleaned out all the running-shoe, computer, high-tech, biotech, health-care, fast-food, and communications businesses. Say you eliminated companies that trade on their locations in economic hot spots -- Austin, Atlanta, or San Diego, for instance. How many companies, he wondered, would there be left?
ROBERT SAULS: MOBILE HOMES
Robert Sauls told me he read somewhere that raising the brain temperature one degree doubles one's thinking efficiency. So he gets the shower water as hot as he can stand it and runs it on his face and then on the back of his head. "I got to thinking about things so dang hard the other morning," he says in his brand-new Tampa office, "that I stayed in there for 36 minutes." Then he gets out and records any ideas he's had on a tiny dictating machine. "The good ideas you get," he says, "are so simple, it's hard to think of them again."
Sauls's down-home business -- selling low-end mobile homes to rural southerners -- has grown as fast as the kudzu vine to be the first or second largest of its kind in the country, depending on who's doing the counting. But it hasn't gotten any fancier, a lesson he picked up at the first trailer lot he opened. People kept driving through. "Finally I hollered at one. 'Hey,' I said, 'how come you don't stop?' The fella said he didn't think he could afford anything. That taught me a lesson: don't make it too fancy; just keep it neat."
Unsophisticated? Oh, yeah. Like when he bought a small manufacturer of mobile homes to back up his regular suppliers. He paid $856,000 for the plant, which produced pretax income of $800,000 the next year. "If I ain't mistaken," he offers, "it returned near 100% on our investment." Not bad for an orphan boy who never got through high school.
The company, Manufactured Homes Inc. (#89), is Sauls's second. The first, also a mobile-home retailer, he started in 1967, sold in '70, and stayed on to manage for the next three years. Then, idled by a noncompete clause, he spent two years planning his comeback. The difference, he says, is that he took the second company public. "A private company in this business can't get enough cash money to sustain it. Otherwise," he says, "there ain't nothin' changed." Same product, same market, same selling proposition.
Who's his market? "People who were born and raised in a farmhouse, hell, they think one of those mobile homes is a damn mansion." Sauls sells fully furnished and applianced mobile homes, strictly in the Southeast, and mostly to people who can't afford anything else. "I have found that it don't never change. In good times, these products sell along with others. In bad times, they're the only ones that sell."
Which means he's not plagued by repossessions. "Dealers forget," says Sauls, "that you got to live with those [financing deals] for 15 years, and in 15 years chances are you're going to get an economic downturn. Then people start looking around to see where they can move to save money. When they're in my [mobile homes], they find they are already there. They can't live cheaper anywhere else."
Why just the Southeast? Because five states there account for 37% of the entire national mobile-home market. Other retailers that have "gone runnin' off out yonder just because it's a hot market" -- to Texas, for instance, when oil was booming -- end up with a lot of used merchandise on their lots and no buyers when the hot market suddenly turns cool.
You can make a lot of money selling cheap trailers if you sell a lot of them, as Sauls does. "So," he says, "I can take a company that was just making a tad of profit and [by bringing it under the Manufactured Homes umbrella] make it a real profit center." Discounts for volume purchases help Sauls reduce the acquiree's cost of goods sold. His volume and reputation enable his dealers to command a larger cut of the bank's financing profit.
Sauls also insists that his dealers finance most of what they sell with recourse loans, which means that if the buyer defaults, the dealer gets the trailer back. It means he gets a lot more loans approved by the bank than if he were looking for non-recourse protection. And if a unit does come back, it's going to be pretty easy to resell. "There's two things we don't do," Sauls says. "We don't sign recourse on double-wides or on any mobile home with payments more than $300 a month." Why? Because the disassembly and reassembly makes repossessing a double-wide expensive, and because he doesn't want the high-priced homes coming back. The average factory worker in the Southeast, he says, makes about $310 a week. "Those are our people. If a big mobile home comes back, I'm out of my marketplace. The majority of my people couldn't afford it."
The growth? It's mostly through acquisition. A mobile-home lot, like an auto lot, can serve only a limited local market. "After about six years," he claims, "it's doing all the business it's going to do." To start a new site from scratch, raise it to profitability, and then recoup the start-up losses takes, Sauls says, about a year. Better to buy a going operation -- but not until the seller is good and ready to sell. He started talking to the owner of a chain of Florida sales sites a year and a half before the deal closed. "We don't pester people. We decide what we want to pay and either we do it or not. . . . The first time, the man told me what he'd take for it. . . . This last time, he asked me what I'd give him," Sauls recalls. "That put a different light on it."
Sauls buys management, not just the lot. "So far as employees are concerned," he says, "that man still runs the company. That's the only way it'll work." There's a five-year earnout period, the details of which he doesn't want to discuss.
And there's the five-to-one management structure, which he also doesn't want to talk about. "The secrets to success are so damn simple that people just don't see 'em. So I don't want to tell the competition the simple things."
Elaborate management mechanisms confound him. "You can control lots of things without controlling 'em," he says. Meaning? Meaning, for instance, he doesn't have any fancy rules for how many times managers should turn over their inventory. He promises them a 10% bonus for every annual turn of over three and a half.
Suited up, Sauls, 58, could be a banker, lawyer, or doctor in any small southern town. He's got the thinning gray hair, the soft white hands. The new office in a Tampa high rise is Sauls's attempt, undertaken with some reluctance, to distance himself from the new management he's installed in the Winston-Salem, N.C., corporate headquarters. "I've been there so damn long, people have a problem accepting other people's authority while I'm still there. The only way for me to solve that is to get out."
Freed of routine responsibilities, Sauls can play the chairman's role -- like considering new opportunities. He's thinking about mobile-home developments, for example. But he's got a one-button speed dialer on his telephone so no one back in Winston-Salem gets to feeling too important. "An individual who thinks he's a real wheel just disgusts the hell out of me. A wheel is something for a dog to cock his leg up at." Or tries to get too fancy. "I tell 'em you can make money off some of the people all of the time. . . . I understand these people because I been one of them all my life. . . . I was brought up real hard, worked all my life, and never had nothin'. . . . There's more people in that category than in any other in the country."
