Harold Finch, CEO of CottageCare (#167), in Overland Park, Kans., has done it both ways. He first made the Inc. 500 in 1983, with a management-training company, Padgett-Thompson, which was born of his frustration with existing options. In 1985 Finch sold Padgett-Thompson to H&R Block. He was 52 and ready, he thought, for an early retirement. "But business was in my blood, and I had to get back to it."
The sale gave him the money and the time to research his next venture. Research had always come naturally to Finch. In 1971 he had completed a doctoral dissertation on changes in the labor force, and early in his career he had been a project director at Midwest Research on the NASA/Apollo project -- that's right, a rocket scientist. "The discipline you need as a scientist to track data and make decisions based on it is very useful in business, very transferable," he says.
Finch spent six months at the library studying broad economic trends and identified three he thought were key to the success of his next business: the rise of service, of franchising, and of the working woman. He figured if a business took advantage of those trends, it stood a fair chance of sustaining growth. So he began to consider fast food, child care, and housecleaning. That's when his next partner approached him.
Tom Schrader had started a housecleaning company 17 years earlier in Lincoln, Nebr., for which he had experimented with new ways to price and clean customers' homes. Schrader had wanted to franchise his business, but he had underestimated the capital requirements and had to sell his company to cover debts. Eager to start over, but chastened (and broke), he approached Finch, looking for marketing know-how and capital.
Both men had come to the right place at the right time. "Tom allowed me to shortcut my industry research," Finch says. "He's a walking textbook on housecleaning." CottageCare was born.
Its start-up phase was utterly unlike that of Finch's first business, Padgett-Thompson. Then, he was a new manager on the NASA/Apollo project, having just been promoted from researcher. "I had years of training as a scientist, but not one minute's training as a manager. When I asked how to do it, I was told, 'Just do it.' And I made every mistake in the book." Finch shared his frustration with a friend in the same situation; they looked at the available management-training programs and saw a big opportunity. Soon after, they quit their jobs to start their own training company. "We had no plan," Finch recalls. "We went in blind."
After some nerve-racking months, with Finch and his partner buying food on credit for their families, the venture began to take off. "We started with one seminar in Chicago. We needed six attendees to break even," says Finch. "Well, we got six. But two businessmen from Iowa got lost in Chicago, and they hadn't paid in advance. So instead of having dinner and getting a motel overnight, we drove home and ate apples. But that taught us who would and wouldn't come, and we just kept increasing what worked and decreasing what didn't." Within five years Padgett-Thompson had grown to $7.6 million in sales. By 1985 sales had reached $30 million.
Despite his success, Finch doesn't recommend starting off with such heedlessness. "I'm more a planning person than an inspiration person," he says. And the next time around, with CottageCare, he and his partner planned carefully. After the broad market research, they concentrated on finding new efficiencies in the industry. But Finch credits the success of CottageCare to innovations in marketing and sales that allow managers to focus on customer service.
Typically, housecleaning businesses advertise with doorknob hangers or flyers distributed by kids, whom managers have to supervise. CottageCare handles marketing at the corporate level, and uses direct mail. The approach gives managers more time to inspect sites and to talk to customers, and it keeps down customer turnover.
The sales operation is centralized as well. When prospective customers call the CottageCare franchise in, say, Seattle or Houston or Minneapolis, their local call is automatically patched through to the corporate sales offices, in Overland Park. There, telemarketers price a house over the phone, from perhaps hundreds of miles away. Most housecleaning companies send a manager to the house with a tape measure. CottageCare's staff can estimate the size of the house based on clues from the customer and zip-code information about the neighborhood retrieved from the company's database. That too frees up managers to concentrate on quality.
Finch still goes to a hotel room at least once a month, with nothing but a pad and pencil, to think up ways to do his work more effectively. But he recognizes the practical limits of research. "At some point you have to stop reading, stop talking, stop studying, and do it." If his first start-up hadn't taught him that, he says, he might still be sitting in the library. -- Michael P. Cronin
4. How Much Experience in the Industry Do You Need?
"Since I was a little kid, I've always had something going -- shining shoes, washing cars," says Natalie Stiles, CEO of OCS Consulting Services (#238), in Orlando. "And I always wanted to own a business." But Stiles postponed that dream after college, and instead became a systems consultant to corporate giants. When she finally grew frustrated enough to rededicate herself to entrepreneurship, she stuck with what she knew. After 20 years of industry experience, she had a pretty good idea of what to do -- and what not to do.
