The 10 Commmandments of Hypergrowth

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The process today is similar, just more intense. Trainees are assigned to a branch, where they spend 16 weeks working and learning the business. Those who make it through -- the dropout rate is about 10% -- get a week at "PSS University" in Jacksonville. There, instructors lead classes in everything from trends in the health-care industry to basic sales techniques. The trainees are in class from 8 to 5 every day. They role-play, watch themselves on video, and critique one another. Evenings, a dinner speaker reviews the lessons.

All told, the company spends about $10,000 on training each salesperson. "How do I know it's worth it?" asks Kelly. "I can only look at the company's results. Forty percent annual growth. Twenty-two percent same-store growth, when the industry average is 3%. You tell me."

IV. . . . And Give Them Better Tools Than Anybody Else's
PSS always had better systems than its competitors did. Nick Pecoraro remembers when his company was acquired by PSS. Suddenly, the stock-number system was rationalized. Suddenly, he could call in his orders rather than write up picking tickets and drive back to the warehouse.

But hypergrowth companies have to present a moving target, and Kelly has made sure that PSS does. Two years ago, for example, he noticed a problem. The more successful his eager young sales reps were, the more they got bogged down in paperwork. He also saw what he thought was a solution: notebook computers.

Today, when sales reps such as Stephen Douglas go out on a call, they carry with them a tiny Compaq Concerto computer hooked up to a touch-screen input device, or "pentop." A tap on the screen's menu calls up Douglas's list of customers. Another tap brings up the records of the physician he's visiting. Other taps can conjure up reams of customer data, including order history, prices, credit records, and current accounts receivable.

When the customer places an order, Douglas taps in the information -- quantities, prices, and so forth. Douglas often has full pricing discretion, so he can sell by historical price, by gross margin, or by any other method he chooses; the computer can handle them all. Should he want to discuss an expensive piece of equipment, he has half a dozen manufacturers' electronic catalogs at his disposal. PSS has even built in cost analyses, so that the rep can tell the doctor exactly how long a blood analyzer, for example, will take to pay for itself.

Order in electronic hand, Douglas can then hook a pocket-size radio-frequency transmitter to the computer. In seconds the order is winging its way to PSS's central computer, and then to a printer in the warehouse. If the order is received before the time cutoff, it will be delivered to the physician that afternoon. Otherwise, it will go out the next morning.

Chief information officer Darlene Kelly (no relation to Pat) estimates the cost of this system at about $1.2 million. On average, she says, it has allowed each of the company's 460 reps to write an additional $10,000 in sales (or roughly $3,000 in gross profit) each month. Competitors are just now developing systems of their own. "PSS is way ahead," says analyst Lawrence Marsh of Wheat First Butcher Singer.

V. Focus on Growth -- But Get Everyone Else in the Company Focused on Profits

Ever since PSS passed the survival stage, Kelly has been a nut for growth. When that lunchtime speaker talked about missions, Kelly thought about one thing: getting bigger.

Then again, a lot of entrepreneurs are nuts for growth. What makes Kelly more successful than most is that he has built a concern for profitability into the bone and sinew of his company.

For starters, every branch is a profit center. No surprise there. Branch managers get big bonuses for hitting earnings targets. Regional vice-presidents, each of whom oversees 10 or 12 branches, get the same.

But unlike most companies' employees, every PSS salesperson, truck driver, warehouse worker, and office staffer is watching profit margins, too.

Salespeople get a commission not on top-line revenues but on gross margin. Their computers can report cumulative margin (and commission) for any given month, week, day, or individual order. Operations people get semiannual bonuses based mainly on their branch's profit performance. Employees at a top-ranked branch can get bonuses of several thousand dollars a year.

What gives those incentives some teeth is that everybody knows all the numbers, all the time. Salespeople's daily and month-to-date reports are posted on the office walls. Every branch's profit-and-loss statement is discussed at monthly meetings. The fact that bonuses depend on those numbers has a way of focusing employees' minds. "Last meeting they were questioning every single thing" on the income statement, says operations manager Aszklar. "Our freight out was a little high. The guys in the warehouse asked, 'Why?"

The expectation at PSS is that a new branch will turn a profit after 18 months, and that mature branches will earn in the neighborhood of 8% on sales. Not many branches miss those targets. So PSS makes money even while it grows at breakneck speed.

VI. Build Your Equity
"If you're a fast-growing company," says Kelly, sighing, "it's like having a company that's losing money. It makes the bank nervous."

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