Until 1986, Borne operated AME, which that year posted $2.5 million in sales, out of his living room. It was informal, to say the least. His "office" housed a parrot that repeated "Bill's the Boss" so loudly it was hard to carry on a phone conversation. Around the same time he moved, he launched his first affiliate, AME Texas Inc.; after six months it had $1 million in volume. AME has since added 24 other offices. Borne expects sales of $13 million this fiscal year, with aftertax profits of 5%.
Originally, Borne set out to copy Hession's affiliate strategy in his regional offices. But, says Borne, "we wanted to grow faster than we could if we waited to find that rare, entrepreneurial bird." Now, his regional offices are subsidiaries, wholly owned by AME.
As AME grew -- from $2.5 million in 1986 to nearly $4 million in 1987 -- it was inevitable that Borne's ambition would lead him to confront Hession about selling out. Rationally, Hession approved of Borne distributing equity to his top managers. "But still," he recalls, "I quarreled and quarreled with myself over it."
For starters, Hession agreed to sell 24% of his shares for $72,000 -- an admirable deal, considering that stock was worth $360 just three years earlier. Then last year, having no regrets over the decision and figuring the stock had appreciated, Hession told Borne he was willing to sell another 14% of his shares.
At times, negotiations got ugly. "We were shouting at each other and slamming drinks down," recalls Hession. "It's a position I didn't want to be in." Stalled at just $5,000 apart, Borne finally suggested they go into another room and settle it like men. Hession, at his wit's end, was happy to go along. Their lawyers shrugged. When they reappeared a few minutes later, Borne was beaming. His estimable arm-wrestling skills had won out. Hession still walked away with $168,000.
The stock's impressive appreciation wasn't just a result of AME's growth. Borne had begun grooming his own set of entrepreneurs. AME's regional offices stayed subsidiaries, but as Borne saw opportunities outside staffing -- or even health care -- he knew just how he wanted to pursue them. During the winter of 1987, he suggested to Larry Miller, whom he had met through Hession, that they set up a company providing anesthetics to doctors and hospitals. He gave Miller 40% of the stock, and 30% to a physician. Miller predicts revenues of about $1 million this year, with pretax profits in the 5% range.
By far the most out-of-character affiliate in either Hession's or Borne's empire is Cajun-A-La-Carte Inc., a catering and frozen-foods company that Borne inadvertently launched in 1987. To entertain 5,000 critical-care nurses at a convention in New Orleans, he bought two used circus big-top tents and a barbecue pit, and designed a stainless-steel boiling rig. The affair went so well -- and showed such profit potential -- that Borne set it up as a separate company. Aside from catering, the $1-million business, which is run by a Borne recruit, has also expanded into frozen foods.
Borne isn't alone among Hession's entrepreneurs in practicing trickle-down entrepreneurship. Lirette, who launched Key-Cardio Respiratory Services in September 1988, recently resuscitated an idea he had for a medical supply business. Now, he splits his week between his $200,000-a-year affiliate and the new venture. He expects Key Medical Supply Inc. to see profits in early 1990. If Hession has any say in it, Gilbert may be next to spawn an affiliate. He has some ideas for her. But Gilbert, whose company now posts revenues of about $6 million, isn't exactly pleading for his guidance. "Matt gave birth to an idea at the right time," she says. "But now, we do our own thing."
Hession doesn't work shifts as a nurse anymore, but he still makes his rounds. Up to Baton Rouge to see Borne, stopping to say hello to the people at Cajun-A-La-Carte. "These are my grandchildren, though I had nothing to do with them," he says.
The affiliate system has given Hession an odd combination of freedom and responsibility. It has allowed him time to take piano lessons with his kids, perfect his piloting skills, learn to play tennis, write poems, and research other business ideas. Not to mention the money he has made. "I've shown you can be something of an amateur venture capitalist and make nice returns," he says.
More than that, the affiliate system has afforded Hession the luxury of focusing on the part of business he likes best: starting up. "I enjoy working with the affiliates much more than managing a business," he admits. So much so that Hession hopes to sell the original Key Nursing within the next couple of years -- ironically, perhaps to AME. Given Hession's preoccupations, it's not surprising that company sales have stalled at $1.5 million over the past two years. Roughly $75,000 of those revenues come from the fees affiliates pay to have Key handle their office functions. "The affiliates are where the growth is," says Hession, whose wife and father-in-law handle daily operations at the original Key Nursing. "Right now, I need the cash it generates to live on and to finance affiliates."
Hession's only frequent meetings these days are with Lirette. Lirette needs him most; after all, he is struggling with two infant-age ventures. Should we attend this trade show? What kind of deal do we strike with this salesperson? Hession offers some answers and some simple advice. Don't run up your loans before you get contracts. Don't take the rejection personally. Lirette, 49, is visibly pleased. "When things go bad sometimes the boss gets down on you," he says. "But not Matt. He always encourages."
In a year, most likely, he won't need Hession at all.
