After years of cautiously building a business by the book, Accuship's Mason Kauffman pulls out all the stops in a race to rule the online logistics market
Company: Accuship Inc., in Germantown, Tenn.
What it does: Lets companies compare various shippers' services and prices online; processes and tracks delivery orders; handles billing and service auditing, accounting, and payment
Number of employees: 100
Conventional wisdom: Who needs an intermediary on the self-service Web?
Unconventional wisdom: Middlemen like Accuship can thrive online; who doesn't need a one-stop spot for shipping options?
Revenue growth: From $18,000 in 1994 to $3 million in 2000; $9.7 million projected for 2001
Profit profile: 2% in first year; highest percentage profit, 21%, in 1997; planned loss in 2000; projects 20% profitability for second half of 2001
Capital: Start-up investment of $100 in personal funds; founder took no salary for first year; $7.6 million in one round of private funding in 2000
It's been nearly 25 years, but Mason C. Kauffman still remembers the first pearl of wisdom he ever got from Federal Express founder Fred Smith. "He said, 'If you want to create a business, go to a party and listen. You'll hear people complain," Kauffman recalls the legendary entrepreneur telling his University of Memphis M.B.A. class back in the mid 1970s. Every complaint, Smith said, equals a need, a problem, a vacuum. Meet it, solve it, fill it -- and there's your business.
After graduating, Kauffman signed on with Federal Express, where he spent 16 years in sales, operations, engineering, and information-management jobs. He learned plenty about Smith's approach to the shipping and logistics business. But at 40, when Kauffman yearned to start his own company, he found himself drawn back to Smith's advice. So he listened . And he heard complaints -- lots of them -- from companies seriously frustrated about every aspect of shipping: the sheer number of carriers; the broad range of services, rules, and costs; and the complex and constantly changing shipping process itself.
Most businesses, Kauffman figured, could use expert guidance in finding faster, cheaper, and easier ways to ship, and account for, their parcels. So in 1994 he left his $100,000-a-year FedEx job to found Express Logistics Inc., a consulting business that helped companies streamline their shipping operations. Today the company (renamed Accuship.com in 1999 and plain Accuship late in 2000) works like a travel agent for parcels. The company provides its customers -- mostly big corporations like the Coca-Cola Co., Sprint, and Home Shopping Network Inc. -- with one online source for shipping and tracking (as well as optional accounting, auditing, and bill-payment services). At Accuship's Web site, users can compare options and prices to decide whether, say, to pay one shipper's $40 fee for delivery by 8 a.m. or another's $8.75 charge to get the package there by 3 p.m. They can also arrange for same-day couriers, print labels, track deliveries, and check invoices -- all online. Accuship takes a flat monthly fee or charges per transaction; the company's share works out to 20% to 50% of its customers' savings on shipping costs.
In many ways, Accuship is a virtual company. Because it doesn't do the actual shipping, it owns no planes, trucks, or warehouses. And all transactions -- about 850,000 a day, worth a daily average of $5 million -- have always been electronic, initially through electronic-data interchange and more recently over the Web as well.
But in several key ways, the company seems more rooted in the old economy than in the new. First, at age seven, Accuship is, by Internet standards, a granddaddy. Unlike most of its dot-com brethren, it's been at least slightly profitable for much of its life (ranging from 2% on revenues of just $18,000 in its first year to a high of 21% on $895,000 in 1997). In another Web-world rarity, Kauffman started Accuship with his own savings and didn't receive any outside funding until the business was six years old. He worked alone in the attic of his home for the first year, taking no salary. After that, he built his staff slowly, making sure he had new accounts in the pipeline before he hired people and funding expansion through cash flow.
Finally, even at the height of the Internet inferno, he hired no dot-com executives and imported no one from Silicon Valley. But even Kauffman will admit that the company's more recent financial picture would raise eyebrows at any traditional business. First, Accuship lost money last year even as revenues increased 36%, reaching $3 million. (Kauffman emphasizes that 2000 was "a planned-loss year" because of major technology and staffing expenditures.) And the company turned to outside investors for the first time, receiving $7.6 million in a single round of private funding in May 2000, two months after its sixth birthday. But, again unlike many other dot-com CEOs, Kauffman expects to recoup his investment quickly and says he's on track for 20% profitability for the second half of this year.
Kauffman funded the company's expansion through cash flow and made sure that he had new accounts before he hired people.
The capital infusion is part of Kauffman's plan to make Accuship the biggest player in its field this year, adding new Fortune 1,000 clients and expanding to new countries every week. To that end, Kauffman invested heavily in the company's staff, technology, and Web site in 2000.
All those changes represent a marked departure from the CEO's earlier mantra of growing cautiously. Why so aggressive, and why now? "Timing," Kauffman says. In the past year, most Fortune 1,000 companies have gotten enough bandwidth -- and enough confidence about data security -- to feel comfortable about handling internal business on the Web. At the same time, with the economy contracting, many companies have scrutinized expenses and discovered that they have been literally wasting a fortune on shipping.
By mid-2001, "somebody will lead this market," Kauffman says. He'd like it to be his company. So that made 2000 just the right time to invest in the fuel needed to propel Accuship to the top of the heap. And an impressive heap it is: online logistics, currently a $42-billion market, could reach $274 billion by 2004, according to Bear Stearns & Co. In fact, electronic logistics "will ultimately determine which old- and new-economy companies will survive and prosper and which companies will fail in their ability to distribute their product and services to an increasingly 'plugged-in' marketplace," Bear Stearns analysts wrote in a June 2000 report on the industry.
Bear Stearns praised Accuship in particular for its exclusive business-to-business focus and its customer roster, which includes names like Verizon Communications and Reebok International Ltd. "If Accuship continues to demonstrate shipping savings for such large companies, its customer list could grow substantially," analysts wrote in the report.
Accuship also won top marks from Armstrong & Associates, a logistics consulting firm in Stoughton, Wis. In a 2000 report titled Who's Who in Logistics Web Sites, the consultants gave Accuship an A, its highest rating, which indicated that the company had "a high probability of survival," says company vice-president Evan Armstrong. The firm based its rating on Kauffman's FedEx background, his strong management team, his ability to get funding, and his company's powerful Web site. Also, Armstrong says of Accuship, "they have a solid customer base, they have a real revenue stream, and if they do need additional funding, they're likely to get it."
Kauffman says that as he expands his customer list, he doesn't want to do it all at once. "This year is going to be a very big one for us," he predicts. "But growth can kill companies. So I'm reminding everyone that we can't be in every country tomorrow and we can't be in every company tomorrow. Timing is everything."
Anne Stuart is a senior writer at Inc. Technology.
With no fanfare and little venture money, the companies profiled here are delivering real stuff to paying customers and making a buck in the process. There may not be any "new rules," but there are rules, and we suspect every one of them will look familiar.
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