The Entrepreneur of the Year program involves six months of continual winnowing and exhaustive research, analysis, verification, and debate -- all boiling down to the seven national winners featured in this issue. But there is so much more. Those who survived the process and were even considered for a national award are some of the most dynamic company builders in America. Here's a sampling of that exemplary group
San Mateo, Calif.
Founded: Electronic Arts, 1982; 3DO, 1991
Business description: Electronic Arts sells video games and interactive entertainment software; 3DO develops technology for its Interactive Multiplayer and licenses it to hardware and software manufacturers
Employees: Electronic Arts, 1,000; 3DO, 200
Projected 1993 revenues: Electronic Arts, $400 million; 3DO, negligible -- it's still launching its product
At age 19 Electronic Arts and 3DO founder Trip Hawkins borrowed $5,000 from his dad to start his first company. The business was a flop, but Hawkins learned two things. "I loved being an entrepreneur," he says, "but before I'd do it again, I'd figure out how to do it right." He proceeded to get the training he needed. He got an M.B.A. from Stanford and then became the 68th employee at Apple Computer. In 1982, at age 28, Hawkins pulled together his personal funds to start what is now one of the leading providers of interactive entertainment software.
Early on, Hawkins realized his video-game and interactive-entertainment-software company was really in the entertainment business. "If you treat software creative people like artists, you can attract and retain the best people," he says. In that spirit, Electronic Arts' software packaging includes a photo of the team members who created the software and a list of their names (done in the style of movie credits).
In an attempt to provide the best distribution channel for his artists' work, Hawkins again looked to Hollywood, this time studying film distribution. He knew that retailers might balk, but he took a chance anyway and started selling his software products directly to them. Sales for Electronic Arts are projected to hit $400 million in 1993.
In 1990 Hawkins left his active role at Electronic Arts to found 3DO, a technology-development company focused on creating a unifying electronics standard for interactive entertainment multimedia. Hawkins quickly drummed up capital for the new home interactive multimedia platform called the 3DO Interactive Multiplayer, by creating partnerships with giants Time Warner, AT&T, Matsushita, MCA, and Kleiner Perkins. Without even a product (3DO is licensing its architecture to hardware and software manufacturers instead of manufacturing the Multiplayer), Hawkins believes he was able to create an impressive coalition because his reputation was solid and his timing was right. -- Stephanie Gruner
Roland F. Dugas Jr.
Acadian Ambulance Service
Business description: Provides emergency and nonemergency medical transportation
Projected 1993 revenues: $58 million
In the late 1960s Roland Dugas, president of Acadian Ambulance Service, left the U.S. Air Force and joined Lafayette General Hospital as an assistant administrator. While there, he met up with Richard Zuschlag, a contract employee through Westinghouse, and Rolland Buckner, a registered nurse. The three began discussing the ambulance crisis: typically, funeral homes had provided ambulances, but when many of them started backing out, some small communities were in danger of losing their service altogether.
When Dugas and his two partners decided to start their ambulance service, in 1971, they were short on cash, but they knew where to get it. Acadian is a classic example of a customer-financed business. Using a Pennsylvania company as a model, the former hospital workers sold memberships to the community through a telethon. Every August Acadian hosts one membership drive, in which it saturates the market with advertising. Members pay a $49 flat fee, which covers their ambulance needs for the year. The concept was a winner. Acadian has more than 140,000 members and boasts a 90% membership-renewal rate.
Dugas's creativity is not limited to financing. To alleviate a shortage of paramedics, Acadian invested an initial $50,000 to fund an associate program through Southwestern Louisiana University's nursing school. Students get their clinical training by working with the paramedics at Acadian, and the company sends personnel to assist in teaching classes. Dugas claims that after graduating, the majority of students come to work for Acadian, where they continue to get in-house training. -- Stephanie Gruner
Business description: Manufactures and assembles electronic components
Projected 1993 revenues: $13 million
Sean Nguyen (pronounced "wen") turns 30 this month, but he's already amassed a list of mighty impressive accomplishments -- not the least of which is starting a company at the age of 23, a scant three years after fleeing Vietnam on a homemade boat with 39 other refugees. By the time the group had made it to Thailand, pirates had raided the boat seven times, taking the refugees' clothes, their money, and their motor. Nguyen spent nine months in refugee camps until a cousin living in Minnesota arranged for him, his father, and his brother to come to the United States.
With little money and few skills, and speaking very little English, Nguyen took the first job he could find -- testing circuit boards -- to provide for his family in the States as well as those he had left behind in Vietnam. He found that difficult to do on $4 an hour, so he jumped when he saw an opportunity to make extra money by bringing testing and assembly work home. In a stroke of precocious entrepreneurial savvy, Nguyen asked to be paid as a separate business entity rather than as an employee. He thus created Nguyen Electronics. Enlisting the help of relatives and friends, he soon had a booming 5-to-11 business to supplement his 9-to-5 income. He continued to operate the business out of his basement until 1988 but kept his day job until 1990.
Nguyen credits a combination of Vietnamese culture and American opportunity for much of his success. He says he's benefited not only from his own ingrained work ethic but also from that of his 85% Asian work force. He also feels he's benefited greatly from American openness and from long-term planning. "In America, if someone has a good idea, they come up to you and share it with you." Does Nguyen still work the same long hours? "I work about 80% as hard, which is still pretty hard." When he started the company, his urgency was born of necessity. "Before, I just had to support my family. Now I have to make the company grow." -- Christopher Caggiano* * *
Legal Copies International
Business description: Provides facilities-management and reprographics services
Projected 1993 revenues: $40 million
In 1980, while he was still in college, Mark Hawn met this guy -- retired at the age of 36 -- who had this idea for a copy service that would cater to the special needs of architecture firms. Would Hawn be interested in learning how to start a business or perhaps even in eventually running this one on his own? Why, sure. The business took off, but Hawn's employer, even though he was paying lip service to a national expansion program, wasn't keeping the capital in the company. "We didn't even have the plane fare to check out a new city," Hawn says. When the company announced layoffs and pay cuts, he knew it was time to go. While sitting out a six-month noncompete agreement, he raised $100,000 in seed capital by selling his house and cars and hitting up a couple of former clients. When he eventually started his business, it made a profit its first month, and it has been profitable ever since.
Hawn knew he wanted to grow his company very quickly. "My goal has always been to be in 60 major U.S. cities and have sales of $500 million." Sales have doubled every year since 1990, and Hawn plans to maintain that pace for 1994. His most important tool in managing rapid growth has been his compensation plan for his managing partners. As the company has expanded, Hawn has set up in each new city a "managing partner" -- sort of a mini CEO -- with complete autonomy and profit-and-loss responsibility for his or her particular city. A major portion of the managing partners' compensation is based on the profitability of the units in that city. A stock-sharing plan ties the partners to the company as a whole.
In addition to providing reprographics services, Legal Copies International (LCI) is heavily involved in facilities management, providing contract office services for law firms and major corporations. That means LCI performs functions that would normally be handled by a company's office services: rather than hiring office-services personnel and dealing with copy machines and other major office equipment themselves, companies hire LCI to install a turnkey operation that includes equipment and personnel. Although there's lots of competition, Hawn focuses on the big guys: Xerox and Pitney Bowes. How can LCI hope to compete with such monoliths? "They can buy up market share anytime they want. So we have to offer an apples-to-oranges difference." Hawn feels his focus on service sets him apart from the giants, whose service arms he sees as being tacked on. LCI isn't tied to any one manufacturer, so it can work with a company's existing setup or install the equipment that best fits the client's needs.
-- Christopher Caggiano
Don Laskowski and Dan Tekulve
Business description: Manufactures wood-processing machinery
Projected 1993 revenues: $43 million
Neither Don Laskowski nor Dan Tekulve had any experience in the sawmill industry (Laskowski, a farmer from North Dakota, was an engineer; Tekulve designed motorized hospital beds), but when they combined their creative talents, they invented a dynamic product in an old market. The Wood-Mizer, a portable band saw that can extract 30% more usable lumber from trees than traditional saws can, significantly minimizes waste and environmental pollution. The product has helped bring Wood-Mizer Products' worldwide sales to more than $40 million.
The company has helped seed its global market by donating roughly 10% of its annual profits to third-world countries. When the program was first implemented, Wood-Mizer also "gave 300 sawmills to third-world countries," says Laskowksi. "The gift of those sawmills created a by-product for us -- the base for the sale of our products in 80 countries where our equipment was very badly needed.' What's more, the company built a lumber-processing plant in Poland, employing more than 80 Polish citizens and providing home builders with wood-processing and construction training. -- Vera B. Gibbons
Jeffrey P. Sudikoff
IDB Communications Group
Culver City, Calif.
Business description: Operates a domestic and international communications network
Projected 1993 revenues: $300 million
"The way you become successful is by accident," says IDB's 37-year-old founder, Jeffrey Sudikoff, "and the way you do that is to make sure you're in the way of the oncoming bus. Make sure you get hit by the bus." That pretty much describes IDB's big break. In 1981, after a stint as a radio journalist and a job as a concert-tour production manager, Sudikoff, understanding the need to bring new technology to radio, started doing consulting work for radio networks. Two years later Sudikoff's bus came. He was approached by a concert promoter who was looking to broadcast a show on radio nationally. Completely green, Sudikoff rushed out and secured a $15,000 "car loan," bought a mobile satellite transmitter, and drove the satellite trailer to the concert.
Instantly, the telecommunications company was born, and within months IDB had dozens of clients. By 1984 it was pretty clear that Sudikoff was in the right place at the right time. The breakup of AT&T created all sorts of opportunities for start-ups like IDB. For instance, the giant's dissolution was closely followed by a slew of media events, most notably the Democratic and Republican conventions and the Olympics in Los Angeles. IDB jumped in, expanding its services to provide satellite transmission for all three events.
Sudikoff is constantly exploring new markets. Currently, IDB's international communications network provides radio- and television-transmission services, private-line and long-distance telephone services, facsimile and data connections, and mobile-satellite communications. Sudikoff is determined to keep the company's entrepreneurial edge alive, because it has allowed IDB to respond to niche markets faster than its behemoth competitors could. He claims that the telecommunications industry is so dynamic that new opportunities present themselves every six hours, and short of betting the farm, the company continues to take calculated risks. Whether it's a case of being in the right place at the right time or taking managed risks, his approach is paying off. Analysts predict that IDB's revenues will top $300 million in 1993.
-- Stephanie Gruner
Millstone Coffee Inc.
Business description: Manufactures and distributes premium coffees
Projected 1993 revenues: $70 million
Phil Johnson capitalized on the booming growth in the premium- and specialty-coffee market by pioneering, in the early 1980s, a previously untapped distribution channel -- supermarkets. Undeterred by the failure of a previous start-up in the food-brokerage business, he mortgaged his home, used his family savings, and even borrowed money from his mother to found Millstone Coffee.
Combining a high-end product with a Frito-Lay-style marketing strategy, Millstone started out as virtually a one-man show, with Johnson buying and roasting fresh premium beans, delivering them directly to supermarkets, providing merchandising displays, and supplying and maintaining the coffee grinders. Plus, he made the setup a no-lose proposition for retailers by taking back any unsold product. The only thing a supermarket manager had to do was check the coffee in on delivery and check it out at the register.
The profitable turnkey operation is appealing to small chains because it effectively gives them a premium house brand. Millstone's quality is safeguarded because the company controls every phase of production and distribution. Company reps track inventory and service in stores daily. Although several competitors have entered the fray, Johnson's preemptive control of the direct-to-supermarket channel has left him in a good position to defend his considerable market share. -- Vera B. Gibbons
John H. Chuang
Business description: Provides placement for temporary personnel with Macintosh skills
Employees: 80 full time, about 7,000 temps
Projected 1993 revenues: $28 million
While John Chuang's Harvard classmates were fielding lucrative offers from investment-banking firms, Chuang was making about $300 a week, but at the helm of his own company. Chuang and his two freshman-year roommates had started a desktop-publishing business in their junior year, taking turns manning the shop between classes. They hit upon the idea for MacTemps when they saw clients having trouble finding temps with Macintosh skills. Although they knew nothing about the industry (well, Chuang had temped a little in high school), Chuang and his partners used the back room of their print shop to start their first MacTemps office. MacTemps overtook their desktop-publishing business within months.
According to Chuang, "people are seeing that their job security no longer comes from the security and good graces of a Fortune 500 company." Many large corporations and quite a few smaller ones are downsizing, keeping a core staff and outsourcing a number of peripheral functions. Chuang hopes to capitalize on the shift toward more workers' making their livelihood as full-time "professional" temps. To make the transition easier, Chuang offers his long-term temps benefits (a pioneering concept in the industry), including health and dental coverage, a 401(k) plan, and paid vacations and holidays. How can he afford it? His long-term temps are more highly skilled than most temps and command higher margins.
Chuang is starting to see more interest in his industry in offering benefits. But their interest notwithstanding, Chuang thinks it would be hard for giants like Kelly and Manpower to match the kind of benefits he offers, because most of them "don't make as much per temp as we do."
-- Christopher Caggiano
North Sioux City, S. Dak.
Business description: Provides trucking services
Projected 1993 revenues: $155 million
In 1972 Chuck Peterson, CEO of Direct Transit, started his first refrigerated-carrier trucking service. Ten years later he sold the $32-million business and signed a two-year noncompete agreement. In September 1985 he bought 75 tractors and 130 trailers. Without an office or a single employee, Peterson says, "I packed my bags and went on the road and started selling." Peddling dry-van trucking services in the meat-packing center of the United States was no easy task, but it didn't take long for him to land a local gelatin manufacturer's account to help get his company off the ground. Peterson continues to spend 30 to 35 hours a week on the road, face-to-face with his customers, which he believes gives him an edge over the competition.
Investing in technology has also helped boost the company's sales to $150 million. Direct Transit recently spent $6 million to create a satellite-equipped fleet. It can pinpoint the location of any of the fleet's trucks in North America within 200 feet. The technology enables larger customers to gain direct access to Direct Transit's computer system, giving them instant information and reducing Peterson's personnel costs. The system automatically reports the trucks' positions every hour, suggests load switches, and predicts lateness before it occurs. Peterson says that allows his customers to take a proactive approach to business. -- Stephanie Gruner
Eagle Hardware & Garden
Business description: Operates retail home-improvement centers
Projected 1993 revenues: $147 million
Dave Heerensperger was an entrepreneur at age 24, when he started his first home-improvement business, Pay 'N Pak. After developing the business into a chain of 112 small home centers, Heerensperger was quick to spot the market's demand for larger warehouse-style chains. So after leading a leveraged buyout to fend off a hostile takeover, Heerensperger left Pay 'N Pack in 1989. With $4 million of his own capital plus additional private and public financing, he opened his first Eagle Hardware & Garden store in November 1990.
Catering to do-it-yourself customers as well as professional contractors, Eagle Hardware stores each carry more than 55,000 different items, maintaining more inventory than any of their competitors do. Low prices on brand-name products allow the company to benefit from higher margins on harder-to-find merchandise.
That basic "more of everything for less" strategy is enhanced by innovative merchandising. Each store, for example, features a Design Center with 8,000 square feet of kitchen and bath displays, including some 26 styles of kitchen cabinets. Design coordinators, using computer-assisted design, work with customers to plan home-improvement projects. A "racetrack" aisle provides convenient access to the store's various departments.
Just three years old, Eagle Hardware already seems to be living up to Heerensperger's somewhat hyperbolic description of it as "the Nordstrom's of the home-center business." -- Vera B. Gibbons* * *
Business description: Develops, markets, and supports PowerBuilder, an applications-software-development tool for the client/server market
Projected 1993 revenues: $42 million
In 1968 Mitchell Kertzman dropped out of Brandeis University and landed a job as a rock-and-roll deejay in Boston. Today he runs Powersoft Corp., a company many analysts have touted as one of the hottest initial public offerings of 1993. Sales for the applications-development-tool builder shot up from $55,000 in 1990 to $21.2 million in 1992. Foresight and good timing have led Kertzman to success. In 1988 he shrewdly entered the emerging client/server market, an industry experts say will double in market share each year for the next couple of years. Then he risked his small manufacturing-resource-planning business by sinking more than $3 million into research and development. The investment resulted in PowerBuilder, an applications-development tool designed to serve the Windows-based client/server market. The gamble paid off. In February Powersoft's stock nearly doubled on its first day of public trading.
Kertzman likes to attribute his company's success to the quality of his people, who he says are in tune with the needs of information-services departments. How does he get them? "Beg, borrow, and steal, with an emphasis on steal," he says. How does he keep them? One way is by rewarding employees who best exemplify the company's corporate values. Plaques, travel vouchers, and an extra week of vacation are awarded annually to individuals who best demonstrate a firm commitment to quality, customers, and coworkers. -- Stephanie Gruner
Richard Long and Gary Turner
Huntington Beach, Calif.
Business description: Manufactures and distributes bicycles and accessories
Projected 1993 revenues: $100 million
Gary Turner's son had a problem: too much hard, off-road travel had broken his bike's frame. The handyman of choice? His father, a race-car driver and soon-to-be entrepreneur.
Turner borrowed a friend's tube-bending machine, reconstructing a frame that was more durable and stronger than conventional off-road frame designs. Neighborhood demand soared, so Turner joined forces with a newly befriended local-bike-shop owner, Richard Long. Together they put plans in gear. GT Bicycles -- financed with the sale of Long's retail operation and flexible credit terms from distributors -- was formed in 1979.
In an industry in which manufacturers are forever in search of cheaper foreign labor, GT Bicycles does much of its manufacturing domestically. And in an industry in which the United States traditionally does a lot of importing, GT exports to more than 30 countries.
So what's the magic formula? "In a downturn economy, we haven't streamlined anything," says Turner. "But we do everything in-house." Management spends aggressively on research and development, works diligently with vendors, and is in constant and direct contact with some 4,500 dealers (the highest number in the industry). Long-term relationships with suppliers keep prices down.
The company also tracks trends closely. It continually expands its product line (with patented designs in frame and tube technology) to battle its closest competitors, Schwinn and Raleigh. "Our being well-rounded helps us in a very volatile industry," says Turner. -- Vera B. Gibbons
Bob Baker and Jim Watson
Skyway Freight Systems
Business description: Provides air-freight and trucking services
Projected 1993 revenues: $100 million
"Some companies see us as an information company. Some see us as a freight company. I think that means we've struck a good balance," says Bob Baker. In 1977, he and Jim Watson put together a business plan to use the belly space of wide-body airplanes for shipping freight, raised $80,000, and started Skyway Freight Systems. Two years into the business, Baker and Watson had the foresight to computerize the company. By installing a real-time freight-tracking and -information service, they won a key account with Motorola in 1979 and, eventually, a place on the Inc. 500 in 1983 and 1984. "If you can move data instead of moving freight, you're way ahead of the game," says Baker.
Last May transportation giant Union Pacific Corp. paid $100 million to purchase Skyway, because, Baker believes, it was interested in Skyway's innovation and technology. "I'm most proud of taking a pure idea and making it into something salable to one of the premier transportation companies in the country." Not bad for an $80,000 investment. -- Stephanie Gruner* * *
Malik M. Hasan
Business description: Provides managed health care
Projected 1993 revenues: $600 million
Malik Hasan and his partners started qualmed mainly as a defensive measure to protect their private neurology practice in Pueblo, Colo. "We didn't go into it to start this business," Hasan says. "Our business was being affected by HMOs, so we set up our own." Soon Hasan realized that QualMed was better equipped to control HMO costs than other managed-care companies were, because of its in-house medical expertise. QualMed assigns one medical director to manage 20,000 members, an unusually low ratio in the industry. The medical director's job is to oversee treatment and to review physician care. Hasan believes that if you place physicians, instead of administrators, at the center of patient care, the quality of care will go up and the cost associated with inappropriate procedures will diminish. "If you start focusing on quality issues, suddenly you find that your costs are going down," he says. That philosophy helped land the fast-growing public company a slot on the 1992 Inc. 100. With QualMed's 1993 sales projected to hit $600 million, Hasan says, "I decided that maybe this was not a bad business to be in."
-- Stephanie Gruner
Robert A. Chlebowski
St. Louis Leasing Corp.
Business description: Leases and sells personal computers
Projected 1993 revenues: $105 million
In 1986 Bob Chlebowski sold his interest in First Alliance, a computer-leasing company, for $150,000 and used that cash to open St. Louis Leasing Corp. (SLC).
Chlebowski saw that leasing networks of PCs, as opposed to leasing mainframes and minicomputers, was the future of the industry. While at First Alliance, he had seen customers' purchasing decisions were made in the individual departments, rather than in the information-services departments. So a company could have dozens of brands of computers, each with its own configuration and idiosyncrasies. Plus, buying on a PC-by-PC basis didn't take advantage of volume purchasing power.
Chlebowski stresses the advantage of leasing PCs -- treating the cost as an expense item rather than a capital expenditure, which increases liquidity and helps prevent companies from getting stuck with outdated equipment -- and he's had terrific success with Fortune 1,000 companies. But the real money is in selling the used equipment when the leases expire; that represents the most profitable aspect of Chlebowski's business.
At first SLC developed a small-business clientele for used PCs. Then it occurred to Chlebowski that the individual consumer might represent a terrific used-computer market. So in the fall of 1992 SLC launched its first retail outlet, dubbed 2nd Byte. It has since opened a second store and is scouting for a third metro St. Louis location. Chlebowski says he's not quite ready to take his retail efforts national. "We want to make sure supply isn't a problem and build up more of a history with the outlets we now have." -- Christopher Caggiano* * *
Diamond Comic Distributors
Business description: Distributes comic books
Projected 1993 revenues: $220 million
Stephen Geppi has been a comic-book fanatic since he was a nine-year-old sorting comics in the back room of a neighborhood liquor store in Baltimore's Little Italy. Later, in his early twenties, his passion was reignited when he saw his nine-year-old nephew reading a comic book. "I saw him enjoying that comic and flashed back to when I was his age." Geppi discovered that the 10Â¢ comics he had read as a boy were now collector's items worth hundreds of dollars, so he started buying and selling comics at garage sales and swap meets and through the mail. "Before I knew it," he says, "I was making more from comics than from my full-time job." So he quit his job and opened Geppi's Comics World, his first retail store, in 1974. Today he owns the largest distributor of U.S. comics in the world.
The switch from retail outfit to distributor was almost accidental. In 1982 one of Geppi's main distributors was on the verge of bankruptcy. Geppi stepped in, mostly to ensure his own future supply of comics. In an industry that has seen much consolidation in recent years, Diamond has enjoyed tremendous growth through geographic expansion and through acquisition. In 1988 it became the first truly national comics distributor when it acquired a major West Coast supplier. Today Geppi has a 45% market share in a $500-million industry. "Now I focus on making the market grow so that my 45% means more," he says. Diamond became the first U.S. comics distributor to go international when it formed a London subsidiary, in 1991.
At one time there were some 20 comics distributors, but because of attrition and consolidation, that number has now shrunk to about 12. Diamond leads the pack, with its closest competitor at 25% market share. Distributors historically operate with very slim margins, so Geppi tries to do more than compete on delivery time and price. "Those are given. We have to offer more." Diamond's extra effort comes in the form of a variety of services to the retailer, like catalogs, co-op advertising, and stockpiling inventories. Diamond is also in the process of bringing increased technical sophistication to the industry. The goal is to extend technology up to the vendor and down to the retailer in the form of bar coding and point-of-sale systems to improve automation and inventory control. Geppi envisions placing "golden handcuffs" on retailers, "so they can't switch, because we're too good." -- Christopher Caggiano
Wild Birds Unlimited
Business description: Sells bird-feeding supplies and nature gifts at the retail level
Projected 1993 revenues: $35 million
With an initial investment of $8,000, avid bird-watcher and bird feeder Jim Carpenter has created, through franchise development, a 152-store retail chain where bird lovers flock to chirp and chatter.
"We went into a market that retail hadn't taken seriously," says Carpenter. "And now that the industry is expanding -- there are over 80 million people feeding birds -- we have given the hobby the respect it deserves."
Carpenter's strategy is simple: to make the shopping experience more pleasant than it is in pet-store supermarkets, in garden centers, or at price-competitive discounters, Wild Birds' managers are trained and certified to teach people how to enjoy birds. They cater to bird-watchers and bird feeders, providing accurate information and advice on everything from bird names, behavior, and courtship rituals to what kind of birdhouse and birdseed would best suit an individual's needs. They also hold weekly in-house lectures and seminars.
The stores themselves are a delight to the eyes and the ears. They're decorated with running-water displays, murals, and minigardens, and they ring with the lilting sounds of singing birds (on tape).
The cash register also rings. Wild Birds Unlimited grew 50%, taking in $35 million last year. -- Vera B. Gibbons
Ashok Trivedi and Sunil Wadhwani
Mastech Systems Corp.
Business description: Provides specialized software services including software design and development, systems integration, and data communications/networking in the client/server marketplace
Projected 1993 revenues: $36 million
After quite a few beers one night, longtime friends Sunil Wadhwani and Ashok Trivedi decided to start Mastech Systems Corp. "The more we drank, the better the ideas got," says Wadhwani.
Wadhwani had entrepreneurial experience from his recently sold million-dollar medical-device-manufacturing company. Trivedi brought corporate expertise, having spent 11 years at Unisys Corp. as a software specialist, marketing manager, and product manager.
Banks turned up their noses at the founders because of their unconventional business plan to sell by telemarketing $350,000 software-development and -support programs without setting up local offices in the areas they were ser-vicing. So Wadhwani and Trivedi were forced to fund the business with personal loans and their own money.
Mastech is banking on its expertise in areas that have a shortage of trained users. The company devotes 10% of its resources to finding and training workers in cutting-edge technologies. Wadhwani attributes Mastech's success to the company's speed and responsiveness, which it gets by investing money in learning about emerging market segments. "We start preparing ourselves early," Trivedi says, "so when they hit the market we can support them." Sales have jumped from $244,000 in 1987 to $20.2 million in 1992, earning Mastech the 31st place on the 1992 Inc. 500 and the 146th spot on this year's list. -- Stephanie Gruner
Walton Hills, Ohio
Business description: Wholesales automatic-transmission parts
Projected 1993 revenues: $60 million
Monte Ahuja set out to build a company that did more than merely sell transmission parts. His vision was to sell technical expertise to help repair shops cope with a staggering amount of information.
The typical transmission shop used to be able to get away with dealing with 7 or so transmissions, but with recent technology changes and the rise of imports, shops must now deal with more than 90 different transmissions. So Ahuja has positioned his company to compete on information rather than on price. He provides 250-page product catalogs, handbooks that describe and diagram every transmission in detail and also tell what parts are necessary to fix them. Transtar provides technical support over an 800 line to help mechanics understand not only Transtar's products but the transmissions as well.
With the bewildering array of transmissions, shops can't begin to stock all the necessary parts. So Transtar has set up a national computer network linking its 12 regional offices to provide information on the status of in-stock parts, orders, and delivery schedules. That means salespeople can find out on-line the availability of a product anywhere in the United States and have it shipped to them directly. An automated warehouse system and a computerized UPS-delivery program help ensure shipment within 24 hours. Transtar currently carries more than $11 million in inventory, a figure Ahuja claims is 10 times as much as any competitor stocks. -- Christopher Caggiano
W. Joseph Duckworth
Founded: 1968; Duckworth took the helm in 1986
Business description: Builds and remodels homes
Projected 1993 revenues: $94 million
Though he was one of few "outsiders" to reach upper management at the largest home builder in the area, Duckworth was frustrated because he knew he could never reach the top. "As hard as I tried," he recalls, "I knew I could never be a full brother." So in 1986 he risked his entire net worth and took a 50% pay cut to take the helm of a sleepy, 20-year-old competitor, Realen Homes. Realen's sales have increased more than 300% since Duckworth came on board.
As conventional sources of financing for home-building companies have all but dried up, Realen recently acquired investment capital from a rather unconventional source. Duckworth had wanted to take the company public and enlisted some big-name, big-price-tag players (among them Price Waterhouse and Kidder Peabody) to help him do so. But just as they were about to take the plunge, another home-building company that Kidder Peabody was handling plunged first -- and sank. So Kidder Peabody decided to hold off on Realen.
But Duckworth saw that he could use the stamp of approval from the likes of Price Waterhouse and Kidder Pea-body to his advantage. So, red herring in hand, he went out on a road show with the goal of raising $25 million. Realen sent out 15 proposals and met with six potential investors, including the Pennsylvania Public School Employees Retirement System (PSERS). Ninety days after Realen first sat down with PSERS, it struck a deal; PSERS was in for the full $25 million.
How was Duckworth able to persuade a traditionally conservative pension fund to risk an investment in such a grim real estate market? He argued that when recovery came, Realen would be in the best position to take advantage of it. And even if recovery didn't come, Duckworth said, Realen had demonstrated an ability to make money in a lousy market. "So the worst you'll get is what you see." Which ain't too bad. -- Christopher Caggiano
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