The 10 Commmandments of Hypergrowth

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Pat Kelly had built that capability into Physician Sales & Service before hypergrowth began. Now, as big as the company is, he is capitalizing on what he created not so long ago, back when PSS was just an "ordinary" success story.

THE HARD-EARNED WISDOM OF PATRICK C. KELLY

On handling mistakes:

"I spent my childhood from the age of 5 in the Richmond, Va., Boys Home. When I was 8 I got caught stealing a tube of glue from a store. Pop Wood, the guardian of the home, came to get me. I knew he was going to beat the hell out of me.

"But he didn't. He just said, 'Pat, you know better than this. I'm not going to spank you, because I think you're smart enough to learn from this.'

"Later I got in trouble for something else. We had a new guardian at the home, and he had a different view of the way you treat kids. He beat me pretty bad. It took me a long time to recover.

"Because of this we have a saying at PSS: it's better to ask for forgiveness than permission. People here will never get in trouble for making a mistake."

On giving young people responsibility:

"For 11 months I was responsible -- me, Pat Kelly, a buck sergeant, 21 years of age -- for issuing all the weapons for the troops north of Da Nang in South Vietnam. Later I assigned all the vehicles -- tanks, jeeps, trucks. I had colonels begging me for jeeps. And I'd have a grunt marine come in who just got his jeep blown out from under him. I'd make the decision to move that jeep to the marine, quick, before the colonel got it.

"It's unbelievable what the military does in giving young people responsibility. And that's what we do at PSS. Every time we need a vice-president for this or that, I say, guys, don't look outside. They're down there in the foxholes. Go find them."

On dealing with the government:

"When we started out, we knew we had to collect sales tax. I had written to the state of Florida to get a tax ID number, but it hadn't come. So the first month I just figured out what we owed and sent them a check.

"They sent it back. They said, you don't have a tax ID number, we can't accept your money. I sent it in again with a letter; they sent it back again. The next month we did $43,000 in sales and I sent them another check. They sent that one back, too.

"The third month, I had my state tax ID number. So now I mail in taxes for all three months.

"They took that check -- and sent me a delinquency notice and a fine for not paying the first two months' tax on time!"

On banks:

"I've come to the belief that banks are not in the business of banking. They're in the business of collecting fees. We've been thrown out of five banks. One convinced us they'd made a mistake, and we went back to them. Then they burned us again!

"We once decided to bury a bank in my backyard. We had a casket built. And we grabbed everything from that bank that we had. Our loan documents, their stationery, coffee cups with their name on it. We put it all in that casket. Then we built a tombstone to put on top. We had a hole dug, and every employee at the corporate office got to throw a shovelful of dirt in the grave. Some of them kicked the dirt in.

"To this day, that bank is dead and buried -- in my backyard."

On dividing the equity when you're starting out:

"There were four of us, my two partners and I and an investor. It was a real sticky issue. I felt we couldn't run the company by consensus. If we had four equal partners, it would be hard to make decisions.

"So ultimately I convinced them to set it up so they each had 23% ownership and I had 31%. What that meant was, it took three of them to disagree with me, and all I had to do was find one to make a decision. It was a good strategy. It ended up working."

On personal goals:

"These young kids always believe my goal was to get rich. I say, gang, I was rich 10 years ago, when I was worth a million or two. I can't spend any more than that.

"My personal goal for the last 10 years has been to grow 100 CEOs like me. I figured if I could grow 100 people like me, who make the kinds of decisions I have to make, who treat people the way they should be treated, I'd be worth so much money, it'd be disgusting.

"Now I'm focusing on a different goal. I'm the first kid from the Boys Home to be in a position to do something really significant financially for the home. It has helped so many kids.

"If I become worth $100 million, I know it's going to be good for the Boys Home."

TEN YEARS IN THE LIFE OF PSS ($ IN THOUSANDS)

Fiscal year* 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

Net sales $10,100 $13,900 $20,100 $30,900 $47,800 $66,100 $91,400 $118,300 $169,700 $236,200

Net income $131 $171 $239 $341 ($48) ($496) $803 $339 $1,595 $3,680

Total equity $683 $1,028 $1,618 $2,519 $4,617 $4,722 $6,882 $8,450 $12,087 $39,841

Number of 5 5 7 11 20 25 29 40 45 56

distribution centers *ending March 31

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