The Hottest Entrepreneurs in America
Who they are, how they got started, and what you can learn from them. Plus, profiles of the smartest start-up, the best turnaround, and other national winners
With all the headaches he had to deal with in running his young, fast-growing business, it's surprising that Paul Silvis would decide to take up teaching. But that's just what Silvis, president and founder of Restek Corp., in Bellefonte, Pa., found himself doing.
Admittedly, the subject was one near to Silvis's heart: Restek itself. He and Anthony Cepullio, the vice-president of the seven-year-old, $6.4-million manufacturer of gas chromatography products, decided their supervisors needed some training -- many were young people who had grown with the company to become managers for the first time. So Silvis and Cepullio sat down to share ideas, select readings, and cull through old class notes. From those sources they developed a seven-week course to cover what they thought was important about managing at Restek, everything from analyzing problems to comparing leadership styles. They split the supervisors into small groups -- each taking the other's subordinates, so people could talk more freely -- and held a breakfast class once a week before work.
Silvis says his supervisors have become much more effective since the training began, freeing up top managers. And, if the Entrepreneur of the Year winners are at all typical, more successful growth companies are trying this type of homegrown training. The degree of sophistication naturally varies with the size of the company: at Best Buy Co., a $930-million electronics retailer based in Minneapolis, salespeople must take computerized tests twice a month to show they have mastered the product knowledge required of them.
But no matter how elaborate or informal the training program, what's striking is that these companies are all fashioning training programs in-house to suit their own needs. Moreover, none of them view training as a luxury for small entrepreneurial companies. Instead, it's seen as a necessity to build the kind of work force they need. Silvis, for example, when asked why his fast-growing company puts all new employees through 16 weekly classes about their new company, seems puzzled. How can you grow fast unless people understand what the company does? he wonders. And he is quite confident of the results: "Training pays for itself many, many times."* * *
Ruth Fertel, who was divorced, had two sons approaching college age, and earned $400 a month as a lab technician, knew it was time to make a change. So she mortgaged her house to buy a steak house. Four months later a hurricane knocked out her electricity, and rather than watching $3,000 worth of meat rot, Fertel threw a massive barbecue for the storm's victims. "I just hate waste," she says. The impulse proved to be more than charitable: "I had a big spurt in my business after the hurricane," says the owner of Ruth U. Fertel Inc., now a 32-store, $70-million restaurant chain called Ruth's Chris Steak House, headquartered in New Orleans.
In 1967 Palmer "Pam" Reynolds landed a job as a bank secretary. At the time, she was 27, the mother of three daughters under 5, divorced, and on welfare. "I tell it loudly and proudly," she says of being on the dole, "because it enabled me to get on my own." In 1983 she was looking for work again, but this time she had 13 years of experience at a St. Louis textile company under her belt and had risen to become vice-president of sales and marketing. In the course of looking for a new job, it dawned on Reynolds: Why not start my own company? She found an angel who put up $250,000, and "literally on a handshake" Phoenix Textile Corp., in St. Louis, a $32-million company in 1991, was born.
Low Tech Goes High Tech
You wouldn't think of maternity clothing as a high-tech business -- unless you've talked to Rebecca Matthias. Matthias, 39, is founder and president of Mothers Work Inc., a Philadelphia-based retailer of upscale maternity clothing. After experimenting unsuccessfully with a mail-order catalog of maternity clothes for career women, she switched to retailing, with much better results. In 1991 her 53-store chain had sales of $14 million and had grown 76% in the previous two years.
Matthias's mail-order experiment taught her to think about retailing in a nontraditional way. She realized that a freestanding maternity store had to be small to justify its low traffic -- but it needed a wide selection because mothers-to-be make a lot of purchases at once. So Matthias's stores stock only one of each size of all but the best-selling items, saving space. Then Matthias uses a software package designed for mail-order businesses to track daily store sales by item -- and sends replacement inventory via UPS.
She developed her just-in-time inventory system to adapt to the economics of her industry, but it has an added benefit: quick response to customers. Today Mothers Work manufactures 75% of the items it sells, but it's never caught with huge amounts of excess inventory. Using a network of Philadelphia stitching contractors, Mothers Work can swiftly manufacture more of the items and colors that sell well. "It keeps us very close to our customer," Matthias says.
Mothers Work is typical of a number of this year's Entrepreneur of the Year regional winners who are using computers to gain a competitive edge in traditionally low-tech industries. Consider Charles "Chuck" Steinmetz. Steinmetz's $48-million company, All America Termite & Pest Control, based in Orlando, has become one of the nation's largest exterminating companies in just 10 years -- in part because his company is highly automated, tracking on-line everything from ad effectiveness to the scheduling of customers. "We never have to wait for the end of the week or the month for the information we need to make marketing decisions," Steinmetz notes. The lesson? Maybe there are no low-tech industries anymore, or at least there won't be for long. Steinmetz draws analogies between the Gulf War and the competitive business market. In both arenas his conclusion is the same: "In today's war, high tech wins."* * *
Watching the Cash
Bill Bindley may be a rich man today, but he got there by being cheap.
Maybe frugal is a nicer way of putting it. Or as Bindley likes to think of his management style and his company, "penny-wise." Whatever.
What's striking about Bindley is that he has been extraordinarily successful at what we at Inc. sometimes call bootstrapping -- growing a company with internal financing alone. Today Bill Bindley's company, Bindley Western Industries Inc., in Indianapolis, is one of the nation's largest pharmaceutical distributors, with 1991 sales of $2.4 billion. What's more, Bindley financed his company internally from its start-up, in 1968, to the time he took it public, in 1983, when it had sales of $480 million.
You don't grow a company that big on sweat equity without being a master of cash management. Here are a few of Bindley's secrets:
Use "vendor capital." Before he started out, Bindley decided the only way to finance his business was by getting paid before his own bills were due. That way, the more business he did, the more working capital he'd have. So he got ordinary 30-day terms from his pharmaceutical suppliers; in exchange for his extra service, he got his retail customers to agree to 10-day to 15-day terms. From the beginning, he grew his business on that spread.
Keep your promises. Bindley stresses the importance of always meeting whatever terms you agree to. (Another bootstrapper among this year's winners, semiconductor manufacturer Atmel Corp., even tried to pay small suppliers early, to get good credit references that would aid growth.) "The one main thing I preach and preach again is credibility," says Bindley. "You have to not only establish but maintain and maintain and maintain credibility." Once you slip, he points out, few people will give you a second chance.
Make every penny count. Better yet, obsess about every penny. At Atmel, chief executive and founder George Perlegos still signs most purchase orders, even though the company had 1991 sales of $120 million. And even when Bindley Western was a start-up operating out of a warehouse basement in Terre Haute, Ind., Bindley routinely placed his money in overnight investments at money-center banks to get as much mileage as possible out of those days of float.* * *
The Niche Picker
You've got to hand it to Bill Tobin. Now on his eighth company, he seems to have a pretty good knack for spotting a business niche -- at least judging from his latest start-up. PC Flowers Inc., in Stamford, Conn., and Oakton, Va., allows customers of videotex services like Prodigy to order flowers by computer. PC Flowers, a member of the FTD network of florists, then transmits the orders to other member florists and gets a share of the revenues. What makes that such a desirable niche? Well, for one thing, Tobin and his partner, Peter MacMurray, are able to run their highly profitable three-year-old company with just 10 full-time employees -- even though it had $3 million in 1991 sales. That probably has something to do with the fact that the company is primarily an order-taking machine: it has no inventory and gets paid immediately by its customers' credit cards. "I don't know anything about flowers," Tobin admits.
Pay for Performance
Years ago Lewis Smoot Sr. decided to run his family's construction company on an open-book basis, sharing his financial information with his employees. "I don't want a hidden agenda," he says. "Life is too short."
That's an unconventional approach in the construction industry, but it's working for Smoot: The Smoot Corp., based in Columbus, Ohio, grew by 32%, to $81 million, from 1989 to 1991. And the company has earned such respect in Columbus that the regional judges named him their area's Master Entrepreneur.
Like many of this year's regional winners, Smoot is a firm believer in tying employee compensation to company performance. The Smoot Corp. uses a two-tiered approach: there's a profit-sharing plan for employees' retirement, but to create a more immediate incentive, Smoot writes bonus checks to the involved employees after each successful job. Other Entrepreneur of the Year regional winners have different approaches, ranging from incentive pay to equity to everything in between, but the effect is the same. For example, UltraCare Products, of Marion, Ohio, one of the national finalists in the Emerging category, has a "gain-sharing" program that rewards plant employees with 50% of the savings each month that the diaper-manufacturing company keeps defects, downtime, and scrap below set standards. "I can't think of anything we've done that's had a more positive impact on the bottom line," says company president Randy Schaaf.
Smoot, too, is convinced of his plan's efficacy in creating loyal, dedicated employees. "If I put an advertisement for a job opening in the newspaper, I'd have a line around the block," he says. "It keeps us from constantly having to train new people, because people come here to stay. People come here to retire."* * *
Know Thy Customer
Bob Fletcher likes to joke that he sells something nobody wants or needs -- and charges an average price of almost $3,000 for it. Not only that, his market in the United States has shrunk more than 90% over the last 15 years.
We should all have such problems. From 1989 to 1991, Fletcher's business grew from $11 million to $20 million in sales, and, despite the recession, his 1991 pretax margins were 26%. What's even more unlikely, he gets those kinds of margins in a retail business.
Clearly, Fletcher Music Centers, based in Clearwater, Fla., is no ordinary retailer, although it used to be. Back in the mid-1980s, chairman and founder Fletcher had a chain of music stores in Florida malls, specializing in selling keyboard instruments, complete with free lessons. Unfortunately, profits were stagnant, he says, because the typical organ buyer -- a retiree who wanted to make music easily -- was turned off by the new high-tech organs coming from Japan. Despite declining sales, Fletcher knew organs were where his stores made the most money. So, in a risky move, he began eliminating his non-organ products while conducting focus groups with organ customers.
What he got was an earful. The knobs on the new organs were too small for arthritic fingers. The print was too tiny. The organs were too high-tech looking. Fletcher admits that he was surprised by just how emphatic his customers were about their dislike of the available organs. So Fletcher Music Centers acquired the name of an old organ manufacturer, Estey, and designed a retiree-friendly organ complete with oversize print and controls and an old-fashioned wooden appearance. Today Fletcher says he sells at least half the organs sold in the United States in his 21 Florida stores.
But there's more to Fletcher Music Centers' success than an appropriate product. Customers, many newly retired to Florida, are often lonely, and the free group lessons that the stores offer become a way for them to meet people with common interests. Fletcher Music salespeople push the lessons because they know that only if customers become proficient on their first organ model will they want to upgrade -- and, according to Fletcher, upgrades are where the company makes its money. As a result, Fletcher sees his business as creating a community of organ enthusiasts rather than just selling instruments. "These classes become social gatherings," he says. "We realized what a need there was and how thankful people were for the social atmosphere."* * *
Don't try to tell Barbara and Steve King how impossible it is to break into the Japanese market. The Kings' company, Landscape Structures Inc., in Delano, Minn., has been selling successfully in Japan for a decade now. Today, in fact, Japan is Landscape Structures' largest foreign market, and last year it accounted for approximately 10% of the company's $27 million in sales. What's more, entering the Japanese market was so painless for the Kings that it persuaded them to become serious about international business. Back in 1981 the Kings, whose company makes modular playground structures that can incorporate everything from slides to tunnels, got a call from a Japanese company interested in distributing a product like theirs. Representatives visited three U.S. companies, according to Steve, who is in charge of marketing, and chose Landscape Structures.
In fact, Landscape Structures does so well in quality and design -- key in the ultrafussy Japanese market -- that in 1989 it was one of the winners of the Good Design Prize awarded by Japan's Ministry of International Trade and Industry.
These days Landscape Structures distributes its product in other countries through independent dealers, just as it does domestically. It found those dealers through word of mouth in its small, specialized industry and by trading leads with a company with a related product. Then, too, Steve says, Landscape Structures benefited by commissioning some early market research from the exporting arm of a big bank; it was inexpensive and useful. (In general, he advises companies going international to use big banks, since they are often more experienced with the details of letters of credit.)
The Kings expect their industry to get more competitive as foreign companies enter the United States. But they also plan to continue to seek out new markets in any country that has enough prosperity to build modern playgrounds. The best kind of market? "A country that values its children."* * *
"A lot of people thought we'd just sit back and retire," recalls Jenny Craig. That was in 1982, after her husband, Sid, sold his chain of women's figure salons and signed a two-year noncompete agreement. Instead, the couple headed for Australia, invested $7 million, and grew their weight-loss chain into Australia's largest, with 96 centers. At the end of the two years they brought the concept back to the United States. Now based in Del Mar, Calif., their diet empire, Jenny Craig International, spans six countries, with 600 centers and 1991 revenues of $412 million.
By the Numbers
Paul Goldin is living proof that it pays to study the odds. A Drexel University professor of statistics and finance for nearly 30 years, Goldin decided to apply his academic expertise to his hobby: baseball cards. After studying the changes taking place in the industry in the early 1980s, Goldin started the Score Board Inc. in 1986 and raised $2.7 million in July 1987 through a penny-stock offering. Today the Cherry Hill, N.J., company, at $59 million in revenues, is the country's largest distributor of sports and entertainment memorabilia. "We've now graduated to Morgan Stanley," says Goldin. "A private placement this past August raised $7.5 million." -- Alessandra Bianchi
A Personal Search
Catherine "Kye" Anderson traces her origins as an entrepreneur to a personal tragedy -- and the abiding passion that grew out of it.
It took 10 years in business before Anderson ever consciously made the link between her company, $15-million Medical Graphics Corp., a St. Paul, Minn., maker of heart and lung diagnostic equipment, and her father's death. When Anderson was 13, her father suffered a massive coronary. Just days before he died, doctors had insisted his shortness of breath was unrelated to his heart. "I remember sitting on the radiator by his bed and a doctor coming by to read an EKG machine. The picture of that doctor trying to make sense of a squiggly line and not knowing what was wrong haunted me for years."
It was what drove Anderson to become a medical technologist and, while working in the cardiopulmonary lab at the University of Minnesota, to pursue her quest to improve lung-function testing. A self-taught programmer, she developed software to translate diagnostic measurements into easily read computer graphics. "I developed this technology to give doctors the tools that could have saved my father's life," she says.
"Many entrepreneurs are driven by some experience they keep buried deep down," says Anderson. "But it's important to recognize it and share it. It gives you a clarity of vision."* * *
The stockholder wasn't satisfied. After listening to management's progress report at the shareholders' meeting, she pressed for an answer addressing her real concern: her dividend. "Why are we not making more money than we made last year?" she wanted to know.
That scene -- or a similar one -- is played out in corporations across America, month in and month out. But this time the location wasn't IBM or Ford. Instead, it was a plain-looking room several floors above a busy street in the Bronx. And the shareholder was one of the employee owners of Cooperative Home Care Associates, a radical experiment melding business and social goals. At this fast-growing, profitable company, a committed management team has demonstrated that employee ownership can work in an area most often thought of as a symbol of capitalism's failures: the South Bronx. Many of the women at the shareholders' meeting were former welfare recipients; in total, 75% of the company's 270 employees have spent time on public assistance. Yet for all the differences between this room and most corporate boardrooms, it was the similarities that were most striking. The women are serious about their business and earnestly debated the direction it should take.
That was what Rick Surpin had hoped for when he and a team of managers founded Cooperative Home Care, back in 1985. He had been hired as director of an economic-development agency and decided that the best kind of economic development he could do was to create jobs. His research showed that home health care was a growing field with lots of entry-level jobs, but the pay and benefits were poor. By creating a worker-owned cooperative, Surpin reasoned, he could pay the workers slightly better because they, rather than a third-party owner, would be receiving the operation's profits. Today Cooperative Home Care has grown to $3.5 million in sales and is helping form similar companies in other cities.* * *
A Rich Diet
At age 32, and 220 pounds, Doug Foreman heeded his doctor's warning that unless he changed his eating habits, he was headed down the same road to a triple bypass that his father had traveled. "I could get away with substitutes for everything except chips and salsa," he recalls of his new meal planning. So with some tinkering in the kitchen, he came up with a baked -- rather than fried -- tortilla chip, and knocked on the back door of a neighborhood whole-foods store. Three years later finds Foreman 40 pounds lighter and running Guiltless Gourmet, his healthful-snack-food company based in Austin, Tex., which had 1991 sales of $2.5 million.
Only the most savvy entrepreneurs manage to sustain a growth company long after that first white-hot product burns out. Count among them Michael Lerner of Safety 1st, in Chestnut Hill, Mass., who parlayed a single novelty in the early 1980s into a business that boasts a 150-product line today.
When Lerner started out, in 1983, he hardly expected to sell 10 million of his "Baby on Board!" signs. "I suppose I could have just gone with the fad and taken the profits until they dried up," he recalls. "But I wanted to be more than a flash in the pan."
One imperative became clear: extend the product line. He would have to exploit the national distribution he had won with his first runaway product to roll out others. So he assembled a product-development staff to explore new ideas and identify trends. "We gathered lots of data about where child fatalities and injuries occurred," Lerner says. "We even wrote a book about child safety and began to build a line of products around it."
Innovative pricing and packaging allowed Lerner to mass-market once-specialized products through the national chains. Retail buyers gradually bought in as products blew off the shelves.
Adamant about growth, the company has continued to expand into other categories. "Of the 50 new products we're rolling out in January, half of them are nonsafety," says Lerner. Now a major vendor to several national chains, Lerner notes, the company had to "reach the right maturity and avoid taking on new lines before we were ready."
-- Alessandra Bianchi, Michael P. Cronin, and Anne Murphy contributed to the reporting and writing of this article.
George P. Mitchell
Mitchell Energy & Development Corp.
The Woodlands, Tex.* * *
Each year our judges choose one national Master Entrepreneur. The Master award is designed to honor a company founder not just for recent accomplishments but for a lifetime of entrepreneurial success. It is meant for the entrepreneurial legends.
Without question, that description fits George Mitchell, the 73-year-old founder, chairman, and president of Texas-based Mitchell Energy & Development Corp., #402 on this year's Fortune 500. Mitchell's company is one of the nation's largest independent energy companies, with fiscal 1992 sales of $874 million and pretax operating income of $154 million. The company is also an innovative real estate developer.
Diversification and long-term vision are the two keys to Mitchell's success. He started the forerunner of Mitchell Energy in 1946 with his brother and a family friend, a trio of wildcatters looking for new Texas oil wells. Mitchell credits his early success in finding oil and natural gas to luck and to an education that combined geology and engineering.
That early success was critical; one north Texas area Mitchell and company began drilling in 1952 has so far yielded nearly 4,000 wells. But his initial good fortune has been augmented by his shrewd business sense and exceptional long-term vision. Consider the last several years, which have been dismal for the natural-gas industry. Although it hasn't been a good time for Mitchell Energy, either -- the company cut 1,000 employees from the payroll in the mid-1980s -- Mitchell has done comparatively well, in large part because the company has diversified wisely. For example, 42% of Mitchell Energy's fiscal 1992 operating earnings came from natural-gas liquids, processed products extracted from natural gas. As a result, Mitchell Energy is somewhat buffered from the cyclical nature of the energy business; when natural-gas prices drop, costs fall in another area of his business. In addition, Mitchell has protected the company from price shocks by setting up long-term contracts for much of its natural gas. He has also diversified into the pipeline business.
But Mitchell's most significant -- and risky -- diversification was into an unrelated field, for reasons that weren't just business ones. In the 1960s he had visited urban areas like Bedford-Stuyvesant and Watts. What he saw made him fear for the future of America's cities. "The white flight was destroying the cities," he says. "The tax base leaves and they shut the gates . . . and the less advantaged can't manage the urban core."
Most CEOs would have left it at that -- or at best written a check to some worthy nonprofit. With the optimism and daring that perhaps only a successful Texas entrepreneur could muster, Mitchell instead decided his company could do something about the problem -- and make money at it. "I said, 'Why can't we do better?' " he recalls. " 'How do we really make an important contribution to urbanization?' " His answer was the Woodlands -- a Houston-area real estate development that for years was ridiculed by the investment community. By gradually buying up 25,000 forested acres north of Houston and developing them into a carefully planned, carefully landscaped mixed-income community, Mitchell hoped to create the kind of atmosphere that people in other cities were seeking in the suburbs. Yet he made sure the city of Houston got the right, sometime in the future, to annex the subdivision and thus acquire the tax base. To enlarge that tax base, Mitchell started a Woodlands venture-capital firm and launched the Houston Advanced Research Center, aimed at fostering collaboration among local universities, government, and the private sector. His aim: to create in the Houston area the same critical technology mass that he saw leading to innovation and job generation in places like North Carolina's Research Triangle.
For years Mitchell took flak about the Woodlands. Today he appears to have outlasted the skeptics: in calendar year 1991, for the second year in a row, the Woodlands was the best-selling residential community in the Houston area; an Arthur Andersen survey of home sales said it was one of the five best-selling master-planned communities nationwide. (In our 1990 Metro Report, Inc. featured the Woodlands as a prime example of a thriving entrepreneurial neighborhood.) In the midst of a dismal national economy, in fiscal 1992 builders sold 925 new homes in the Woodlands, and the community is said to have added nearly 1,500 new jobs, bringing its population to 33,000 and its nonconstruction-job count to more than 10,000. Meanwhile, the real estate division of Mitchell Energy had fiscal 1992 operating earnings of $23 million on revenues of $131 million.
Mitchell's advice to entrepreneurs who would like to see their companies reach the $800-million mark? Be honest with your bankers, and combine risk taking with strong critical judgment. But his example suggests another lesson as well: keep control and don't think just about short-term profits. Mitchell didn't take his company public until 1972, after he had begun planning the Woodlands, and he rejected an underwriter's suggestion that he could sell more than half the stock and still maintain control. If he had followed that advice, Mitchell says, the company might have fallen victim to a corporate raider at some point during the lean years. Instead, his 63% share of Mitchell Energy has enabled him to run the company according to his long-term vision (while making him one of America's 400 richest people, according to Forbes). At the same time, he continues to plan for the long haul: in 15 out of the last 17 years, Mitchell Energy has increased its natural-gas reserves. (There is, however, one long-term problem that he hasn't solved: succession. He's not in favor of family businesses and says he has four able division presidents. But with a company so driven by one man's vision, it's hard to imagine a successor taking over his role.)
What does one of America's best entrepreneurial visionaries see for the future? Not surprisingly, a strong market for natural gas, his bread and butter. Yet Mitchell is also renowned for his thoughts and concerns about world problems; as far back as 1979 he was warning about the dangers of global warming. In 1989 his advocacy of economic development and sustainable growth won him the Lorax Award, an international environmental prize. That's a true anomaly for an entrepreneur -- and especially for one in the oil industry, not known for its tree hugging. But Mitchell doesn't understand why his business peers don't also look at bigger problems. "If officials of just the top 200 companies would use their skills, all the troubles facing us in the future could be erased," he once said.
His attitude hasn't changed. Combining his trademark vision and can-do spirit, Mitchell has a couple of questions for other CEOs: "If you can't make a planet work with 5.5 billion people, how will you make it work with 10 billion -- for your children and your grandchildren? And why don't you try to do something about it?"
-- Martha E. Mangelsdorf
Randy J. Daughenbaugh and Dean P. Stull
Hauser Chemical Research
Boulder, Colo.* * *
The growth of Hauser Chemical Research would give almost any entrepreneur the bends: From $3 million in 1990 to $27 million two years later. Sales on track to double again and hit $60 million in 1993. Margins approaching 20%. The stock, initially offered at a humble nickel a share, trading as high as $27 last year. The company janitor, having exercised his options, paying cash for a house. Are you light-headed yet?
Looking at the numbers, it's obvious why Randy Daughenbaugh and Dean Stull carry away this year's EOY award in the category of emerging companies, although erupting better describes Hauser's growth. What's less obvious is how this once-small contract research-and-development lab positioned itself to seize one promising opportunity after another and eventually score.
Research is at the very heart of the business. Founded in 1983, the entire enterprise was begun as an experiment by the two research chemists to explore whether it was possible to do socially valuable work, have fun, and make money at the same time. "We hadn't even selected a niche," says CEO Stull. "We figured we'd discover it in the process," says president Daughenbaugh. They soon did. Offering contract research and development in chemical and process engineering, the two developed a proprietary extraction technology for isolating and purifying plant and animal compounds at higher yields and lower costs than conventional methods produced.
Applying that technology, they began turning $50 tests into million-dollar accounts. Small R&D contracts led to larger supply agreements. And thanks to their success solving problems in the lab, the two men gradually found themselves drafted into manufacturing, in part to protect their technology.
Hauser's home run is an anticancer drug called taxol -- a natural compound extracted from the bark of Pacific yew trees. Now in the third phase of clinical trials, taxol inhibits tumor growth in ovarian and other kinds of cancer, and has received wide attention because of its unusual promise. Hauser's ability to collect and produce the compound in commercial quantities won it an exclusive $100-million supply contract with pharmaceutical giant Bristol-Myers Squibb, making it the nation's principal supplier. While Hauser's manufacturing division may be the breadwinner in the company, accounting for all but $2 million in revenues, it is the technical-service division that charts Hauser's future. By working on some 1,200 contract projects a year -- any number of which could prove to be the next wonder drug -- the service division flags opportunities that lead to manufacturing downstream. "It's our business-opportunity generator," says Stull. And a surefire way to better the company's odds.
While competitors here and abroad have recently announced rival technologies and set their sights on the taxol market, Hauser isn't likely to forfeit its first-mover advantage soon. It's still the only FDA-approved supplier of bulk taxol. And like its potential rivals, Hauser is exploring semisynthetic alternatives to the taxol it harvests from trees.
Still, Hauser is banking little of its future on taxol. Or leaving it to serendipity. "Our strategy is to turn over a lot of opportunities, get paid for it, then when the right one comes along," says Stull, "run with it." -- Anne Murphy
Curaflex Health Services
Rancho Cucamonga, Calif.* * *
The company Charles Laverty took over in February 1989 made for a particularly bleak "before." Curaflex Health Services was losing $16.5 million on sales of about $15 million. It's remarkable that anyone could imagine an "after," much less bring it about. But today Curaflex is the picture of health: the company made $1.2 million in 1991 on $39 million in revenues, and industry analysts project 1994 sales of $100 million. The intervening years saw one defining moment and lots of follow-through.
In 1989 Curaflex's main businesses were medical-equipment rental and general home-nursing services. The company, only a regional player, maintained no sales force but relied on managers at each clinic to bring in sales. They marketed Curaflex's services to insurers and to hospital-discharge planners.
When Curaflex's bankers at Morgan Stanley recruited Laverty to turn the company around, he was working at Avon Products as president of its misfit home infusion division, preparing it for sale. Home infusion therapy allows chronically ill patients needing intravenous medication to leave hospitals and return home. Health-care-cost containment has fueled the fast growth of that market, and Laverty saw the coming boom. "I tried to persuade Avon to hold on to it or to let me do a leveraged buyout," he says. "But the Street wanted Avon out of health care, no matter what. The division would have been a $250-million company today."
At Curaflex, Laverty had to make wholesale changes. He moved the company from Houston to Rancho Cucamonga, Calif. -- "there was a stigma attached to us in Houston." He scrapped the capital-intensive, slow-growing core business to focus on infusion therapy for such long-term diseases as cancer and AIDS. Then he thrust Curaflex onto the national stage, opening 49 offices.
Laverty imported experienced management, much of it from Avon. That team tied every aspect of the company to indicators that measure performance -- something that's always difficult to do in a service business -- and tracked them. Curaflex now knows everything from the rate at which offices collect balances of more than $10,000, to the number of infections caused by poorly inserted catheters.
He built a sales force from scratch, then gave it the marketing tools to reach two key classes of customers: doctors and insurers. Curaflex publishes the quarterly Journal of Infusional Chemotherapy for physicians and a sourcebook for insurers, Home Infusion Therapy Resource Guide. "Our competitors bring them doughnuts and coffee," Laverty says.
Confident but not complacent, Laverty is preparing for the next health-care trend: alternative site treatment. Those facilities offer a range of related services, somewhere between home and hospital. -- Michael P.Cronin
SUPPORTER OF ENTREPRENEURSHIP
Fulton-Carroll Center for Industry
Chicago* * *
June Lavelle may have won this year's award for Supporter of Entrepreneurship, but what won over the judges was her entrepreneurial spirit. Lavelle, who founded a business incubator for start-up companies, created an enterprise with all the commitment and risk taking of any company founder.
To be honest, Lavelle's initial goal was not helping company founders. "My whole intent was really community revitalization," she says. In the late 1970s, she was managing a government-funded work crew in Chicago's West Side in a neighborhood that had still not recovered from the damage of the riots of the 1960s. As long as the 350,000-square-foot factory building in the middle of the neighborhood remained largely vacant, Lavelle reasoned, the area would never revive. So, through Lavelle's work, her employer, the Industrial Council of Northwest Chicago, won a $1.7-million U.S. Economic Development Administration grant to acquire and renovate the block-size property.
At the time, the idea of a business incubator to foster new companies was a largely unknown one. But Lavelle couldn't imagine that any established companies would choose to relocate in what became known as the Fulton-Carroll Center for Industry, so she decided to grow her own.
Using the lure of ultralow rents, Lavelle was able to attract start-up companies, particularly those that needed light manufacturing space. It wasn't exactly luxurious: "When we were loading out our first exhibit, the docks collapsed," recalls William Murphy, an early tenant. But the price was right, and Fulton-Carroll began providing services like shared clerical support and office machines. Over time Lavelle was also able to direct tenants to professional advisers and encourage the tenants to learn from one another and use one another's services. Starting in 1985 her incubator began breaking even on its operations; subsequently, Lavelle was able to add services like financing assistance.
According to Lavelle's most recent survey, the incubator houses 69 businesses with 441 employees and has a 94% occupancy rate; an additional 71 companies with 561 employees have "graduated" because they needed larger quarters. Only 16% of the tenants and graduates have failed over an 11-year period; in contrast, one study has shown that 60% of new businesses don't last even 6 years. And the incubator is doing its part for neighborhood revitalization: Lavelle reports that 46% of the tenant companies are owned by women or minorities, and estimates that about three-quarters of the employees live within a two-mile radius.
Lavelle's work has become a model for incubators around the world. She is "the intellectual and spiritual leader of our industry," says Dinah Adkins, executive director of the National Business Incubation Association. "June has created a human miracle in Chicago. I see her as being a sort of larger-than-life figure, and I always have."
-- Martha E. Mangelsdorf
SOCIALLY RESPONSIBLE ENTREPRENEUR
Pam Del Duca
The Delstar Group
Scottsdale, Ariz.* * *
For years Pam Del Duca kept her community and business worlds separate. While she grew her retail business, she dutifully served on boards of civic groups during her off-hours.
There was just one catch to that approach: entrepreneurs don't have very many off-hours. So now Del Duca has another solution: she's integrated her concerns about social issues into her business. "I knew I wanted to make a difference," she says. "And as an entrepreneur the place you make a difference is at work."
Del Duca has been running successful Phoenix-area gift stores and boutiques for 20 years. In 1979 she got into airport retailing, and within a few years she had three stores in the Phoenix Sky Harbor International Airport. By 1989, the airport was in the process of opening up a new terminal, and Del Duca was eager to expand. As a woman-owned business, her operation qualified for special consideration under Federal Aviation Administration affirmative-action goals, but the awarding of the spots also depended on Phoenix City Council approval. Since Del Duca was applying for several of the available stores, it would probably have helped her case if she had had a minority partner as well.
That much was dictated by political reality. But Del Duca's solution was uniquely her own. She formed a partnership with three well-known nonprofit organizations: the Phoenix Urban League, the Phoenix Indian Center, and Chicanos por la Causa, a Hispanic community development group. Each group became an affiliate with one or more of the six new stores, agreeing to recruit low-income employees to staff them while getting a small percentage of annual gross sales for 10 years.
Del Duca, meanwhile, hired a full-time trainer to set up classes not only to cover the basics of sales attitudes and the stores' computerized registers but to create a whole series of courses for all of Delstar's employees. Although the initial jobs are entry level and can be filled by people without previous retail experience, the classes enable motivated employees to move up through the ranks. According to training director Carol Gleason, about 100 people recruited by the agencies have gone through the training program since the stores opened. About a third are still employed at the stores, a turnover level she calls standard. She says at least 10 agency-recruited employees have been promoted to the rank of supervisor or higher. In addition, Delstar is offering after-hours classes for all employees interested in learning about how to start a small business themselves. So far, Gleason says, at least five have launched full-time start-ups, and a number have begun part-time businesses.
Still, controversy surrounded Del Duca's unusual proposal to the city council back in 1989. A more conventional approach would have been simply to take on a minority businessperson as a part owner. "I thought the proposal was fabulous," says Rose Newsome, equal-opportunity director of the city of Phoenix. "And some people thought it was horrible." But to the three nonprofits, the program represents an unusual effort by an entrepreneur to make a real commitment to them and their clients. "I think it's a model program," says Pete Garcia, president of Chicanos por la Causa. Delstar remains profitable and its revenues are growing, despite a tough retail climate.
-- Martha E. Mangelsdorf