Minchak and his wife are the sole stockholders. "Our mission is to maximize our own personal gain," he says. "You can't rape your company and make it unhealthy, but it is a cash cow." Minchak further allows: "I have all the toys -- a yacht, a pool, fountains, maids. I don't have to do anything except work. Sometimes I screw off massively, and then I get bored and go back to work." He calls entrepreneurs "extremists," for whom " moderation is a difficult word to understand." He hastens to add, "That describes me, unfortunately."
In case you're wondering, J.B. Dollar Stretcher Magazine does have other employees. It has five vice-presidents who run the sales operation. "I clone them to do what I've done," says Minchak. The company has a bonus pool that can amount to up to 6% of sales. Between commissions, base salary, and the bonus, Minchak's clones can earn from $65,000 to more than $100,000.
Minchak says selling equity to other investors would be a mistake. "I'd probably offend any shareholders I had by pillaging the coffers of the company, but they are not the ones working 7 to 11 every day." Nor does he fear alienating those around him -- perhaps because he doesn't know what fear is. "I am a mutant. I flourish with competition," he says. "No one has launched a competing company against me in this area. I take no prisoners. I steal my competitors' customers first, then I go in the back door and raid their salespeople." Minchak, at 36, has no regrets. He says that at the end of the day "there's loyalty, love, and confidence" inside his company.
* * *
John Ballenger
$50,000
Age: 63
Position: President, Computer Equity Corp., Chantilly, Va.
1994 financials: $16 million in revenues; profitable
Equity ownership: "Majority"
Number of employees: 76
Business founded: 1987
Challenge: To make more millionaires
At 63 John Ballenger is a bit more seasoned than Bob Minchak -- and surely more restrained. But then, maybe he can afford to be. Ballenger has already built two technology companies that have paid off handsomely for him. His net worth is in the millions. Ballenger is a classic entrepreneur in the sense that he believes in the power of equity not just to enrich but also to motivate. For him equity is an organizing principle that renders the company-building process coherent. In that sense, Ballenger brings to compensation issues a discipline and perceptiveness not often seen in fast-growing companies. And as an afterthought, Ballenger pays himself a token salary at year's end to signal where his priorities lie. "There is no real reasoning behind my salary," he says. "It's just by habit and custom. It sets an image for the rest of the company. We want to keep our overhead to a minimum, work hard, and make things happen." Ballenger adds that employees in a high-tech company like his are not stupid. He says were he to pay himself excessively, "they would either steal my ideas and leave, or grow indifferent to the fate of the operation."
Ballenger's first company was started with no money in the bank and currently has 2,500 employees. "The only way to build the company was to give key employees enough stock so they could feel like owners from day one and you would get the extra mile out of them," says Ballenger. "I have carried that philosophy through each of my companies."
Computer Equity Corp., Ballenger's third high-tech company, is a systems integrator that primarily markets computer and telecommunications equipment to the federal government. Late this year or early next, Ballenger expects to do an initial public offering.
At Ballenger-run companies, key early employees -- usually about six people -- get from 1% to 5% of the stock. In paying those key employees Ballenger ties bonus compensation strictly to sales. What matters most to him initially is having people who can bring in those early sales. To him, it's a rare talent. "The world is full of professional soldiers who can follow orders," says Ballenger. "There's only a handful of people who can make things happen quickly."
As the business matures Ballenger divides the bonus compensation differently, with half based on revenues and half on earnings before interest and taxes. That is because, he says, "profitability starts to matter more than revenues."
As the company grows further he brings in a second wave of employees. That group earns a higher base salary and bigger bonuses, but it receives stock options as opposed to stock. Explains Ballenger: "You want to make sure the people will work out. If you can stretch out the option plan, you can better gauge their performance." Ballenger notes that at this stage in his company's development -- it will have $25 million in sales this year -- more employees will be eligible to receive stock options.
As Ballenger reiterates, his main goal is to take Computer Equity public and turn all the hard work into something liquid. That means keeping salaries and overhead low. He rents inexpensive space and buys used furniture when he can. "That keeps our costs down and maximizes the chances of a later public offering. We want to show how tight we run. That attracts investors."
Ballenger proudly points out that in his previous companies he has made more than 30 other people millionaires with net worths ranging from $1 million to $50 million. The risk is that with such high expectations, if Ballenger's company stumbles, morale could sour.
* * *
David Muir
$92,000
Age: 32
Position: CEO, Switch Gear Systems Inc., Irving, Tex.
1994 financials: $2.4 million in revenues; profitable
Equity ownership: 100%
Number of employees: 21
Business founded: 1985
