Where do America's fastest growing private companies get all those great ideas? A look at how accidents and massive debt were catalysts for productive change in some Inc. 500 companies.
Accident Alters Destiny
First start: Management trainee in family business Catalyst: Near-fatal accident Fresh start: Founder of telecommunications company
Gary Frank seemed set-- predestined isn't too strong a word--for a career in his father's business. He and his brother, Joseph, expected to become vice-presidents of National Power Equipment, a manufacturer of steam-generation equipment based in Newark, N.J. But they had to pay their dues first. In 1986, when Gary was 26 and working on the shop floor, a two-ton steel boiler crashed down on him. The blow severed his left hand and, as he soon came to understand, changed the course of his life.
He was unconscious for nearly two days. For 12 hours surgeons worked to reattach the hand. And that was only the beginning: Frank would require 12 more surgical procedures and two years of extensive rehabilitation.
Fit enough to work again, he could have returned to his father's company. A job as an outside plant supervisor was waiting for him. But Frank turned it down. "I felt like, since this whole thing threw my life up in the air," he explains, "perhaps this might be a good opportunity to go into a new field." With many free hours a day to inquire into other possibilities, he soon was zeroing in on the fast-growing field of telecommunications, and, with his tenacity, becoming, he recalls, "the biggest pain in the butt to every telephone company this side of the Mississippi." Within a week, he had amassed a "library of information."
By 1990, he had a bright idea: building a company that offered automated telemarketing services (the company has since added prepaid telecommunications services) based on technology Frank himself had devised. To that end he founded VoCall Communications Corp. (#17), based in Mountainside, N.J. To finance the start-up's first PC, Frank borrowed $5,000 from his father, who had become reconciled to his son's departure from National Power.
Though Frank's hand still isn't fully functional, his stewardship of the company appears not to have suffered. VoCall posted revenues of $47 million last year and now employs 120. The son of a Holocaust survivor originally from Hungary, Frank credits America for much of his success. "It's so much the land of opportunity," he says, "that you can have one hand tied behind your back and still make it."
Lifeline from Employees
First start: Founder of financial consulting company Catalyst: Debt of $200,000 Fresh start: Employee-financed restructuring
Margaret Johnsson never thought she'd have to ask her employees to bail her company out of debt. After all, what the Johnsson Group Inc. (#218) sells to its customers is financial consulting.
Johnsson founded her company in Chicago eight years ago. In the fall of 1994, she opened a second office, in Denver, and recruited a partner (who has since left the company) to run the Chicago office.
With business soaring (1995 revenues jumped 275%, to more than $1 million), Johnsson says, she concentrated on Denver. By the beginning of 1996, however, she was locking horns with her partner, and the company had accumulated $200,000 in debt, $60,000 of which was owed to the Internal Revenue Service for unpaid payroll taxes, according to Johnsson.
The founder needed cash--and fast. Unable to borrow more from her bank, she turned in desperation to her 15 Chicago employees. Her offer: for each $5,000 they invested, they'd receive a 1% share, and for money lent, they'd be repaid with interest eight percentage points higher than the prime rate.
All told, Johnsson raised $75,000 from 13 of her employees and a few outsiders, to whom she sold 3% of the Johnsson Group stock, while buying out her former partner's 10% stake. Now debt free, the company posted 1998 revenues of $3.6 million. Although Johnsson had to close the Denver office, she says that, like a broken bone that heals, her restructured company is stronger than ever: "My true partners were already in the business with me. They're the ones who turned it around."
For more articles about the origins of this year's Inc. 500 companies, see: