National Gyp-Chipper's most enthusiastic and aggressive commitment to a global strategy, however, came when it entered into an agreement with The WestBank Co., an international marketing company. Formed by a commercial banker, Gene Finley, and an international marketer in Austin, Virgil Simmons, WestBank was a known quantity to National Gyp-Chipper: Turner had known Simmons for years.
WestBank was another partner that put a big chunk of money into the company at a time when it was desperately seeking cash. The infusion of a little less than $100,000 was bankrolled by a private Israeli investor who had been seeking U.S. investment opportunities through WestBank. In exchange WestBank got a specific cash amount on each machine sold and foreign marketing rights -- which amounts to another cut on machines sold abroad through its contacts.
Unlike its relationships with Domtar and Nelson King, National Gyp-Chipper is not relying on WestBank to make individual sales; instead, WestBank has become a consultant for finding, evaluating, and negotiating with foreign distributors.
"There are several ways of hiring," says Turner. "If we had to come in here and hire those people [from WestBank] at $75,000 to $100,000 a year, we couldn't afford it. To hire them the way we did, on commission per year sales, with first right of refusal for sales in other parts of the world, both of us are getting a good deal. In my estimation, that's the only way to go for us."
Turner, Mallory, and Lott all figure that the marketers at WestBank and their own lawyers advising them on patents, copyrights, and trademarks will keep the company covered. Not that they've abdicated control completely. "WestBank handles the shipping, the funding, that side of it," says Turner, "but they're not calling the shots at all. Basically, they're a broker."
National Gyp-Chipper works with WestBank on reviewing standard due diligence on potential foreign distributors: they look at financial statements of companies for the past two or three years and talk to references who have worked with the distributors before. "They have a certain set of rules they have to play by," says Turner. "But the major decisions -- if it's going to be three years or four years, or 200 machines or 500 machines -- we'll still make."
In each of its partnerships, National Gyp-Chipper has followed the simple strategy of contracting out for the expertise it did not have. "I'm just a little old country boy who goes out and gets someone else to help me," says Mallory, only somewhat facetiously. What that approach absolutely requires, however, is partnerships with people who are known and trusted -- both at home and overseas.
WestBank's Virgil Simmons, who spent 16 years at the large public corporation Tracor Inc., selling defense and electronics equipment internationally, puts it this way: "Doing business in the international market is no different from doing business here. People choose to do business with their friends and with people with whom they feel secure. It's that simple."
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What Are the Risks?
What the folks in Pflugerville are most anxious about is having their ideas stolen. While that would be a risk even if they didn't go abroad, ask them their primary concern about heading overseas and they respond, Patent, patent, patent.
"Would you consider trying to send something to Japan without a lot of protection?" asks Turner, leaning forward. "The scary side of it is, Will they copy it? Will they try to bring it back into the United States? Will they make it cheaper?" Mallory echoes, "You face a threat everywhere." The advice they're buying from three lawyers, they hope, will do the job. "The only way to know if we've done it right is to gamble," says Turner. "But compared with what other people we've talked to have done, we're about as good as you can get."
An obvious risk is that outside distributors might fail to sell enough machines to justify the relationship. National Gyp-Chipper's solution to that is simple: the distributors in both Britain and Japan have to sell a minimum number of machines annually (50 in Britain, 50 to 100 in Japan) in order to keep their exclusive rights.
Still another concern is one of those wouldn't-it-be-terrible-ifs: demand outpacing production capacity. According to Allen Williams, a former race-car mechanic who heads up National Gyp-Chipper's garagelike assembly shop, it takes 34 hours to build each machine, and the plant is equipped to build one a day. However, there already are plans to subcontract out more work, cutting the time spent to build each machine by a third. Williams is confident he could triple production by using outside contractors.
Ultimately, and maybe sooner than expected, National Gyp-Chipper will have to consider overseas manufacturing. The company has already been approached about setting up foreign plants, but "it's down the road from being any sort of necessity," Mallory says.
What's the downside to National Gyp-Chipper's already-growing preoccupation with global sales? The time and energy they divert from domestic business. Turner, for instance, recently had to end a trip to Vermont early, cutting back his work on developing the first White Gold plant site to return to Texas and review papers for a possible German distribution deal. But Mallory and Turner feel strongly that at this point in their company's development, it's the foreign business that won't wait. "We've had two years to prepare ourselves for what we feel certain is coming," Mallory says. "All this hasn't just happened."
