Little Big Company
Inc 500 Number One Company
In high school the Mendiburu brothers didn't seem destined for riches and glory.
Mike had a reputation as a party animal. Younger brother Tom was voted "class flirt." Classmates snickered at the Mendiburus' decision to skip college. "We didn't have a lot of direction," says Mike. The first years after graduation yielded little evidence that the brothers were taking life more seriously. When Mike showed up for his 10-year reunion, he was struggling to support a wife and two kids after racking up $20,000 in credit-card debt.
That was in 1996.
Today Mike and Tom are the owners of High Point Solutions, the fastest-growing private company in America. Going from $200,000 in sales in 1996 to $60 million in 2000, High Point amassed 29,902% growth in five years. No one who knew the Mendiburus back at High Point Regional High School, in Wantage, N.J., is laughing now. In fact, several classmates have joined the company in rural Sparta, N.J., just a few towns over from the brothers' birthplace. "I wasn't surprised by the level of profits," says Jeffrey Bolson, a partner in Ernst & Young's national tax group, who has advised the Mendiburus. "Shocked is more like it."
High Point's climb to the top is particularly striking when you consider the business: selling hardware for computer networks. Think Cisco routers and Lucent servers. "We're far from glamorous," says Tom, who is director of sales. "It's a strange story, almost unbelievable," says Mike, the company's CEO and technical leader, who is 50-50 owner with Tom. "My brother and I have to pinch ourselves all the time."
Certainly, there is something dreamlike about a high-tech company that's so laid-back that many of its 19 employees cut out for the fishing hole or bowling alley at lunch. Others join the owners for a game of tennis or horseshoes. Few work past 6 p.m. The corporate credo: family first, company second. Sandra Curran, whose résumé includes stints at Ernst & Young and Marriott, chucked a four-hour commute to become High Point's chief financial officer in 1998. "There's no traffic coming in, and I see the groundhogs every day," she says.
Maybe there's something in that country air. Sales per employee at High Point average a staggering $3 million. "That's about 10 times what's normal in this industry," says the CEO of another network-equipment reseller. Says Tom, "I think we can bang out $100 million with the same people, to tell you the truth." Such a lofty projection in the midst of an uncertain economy just makes the story even more surprising.
Much about the Mendiburus defies expectations. Unlike the typical Inc 500 CEO, Mike never aspired to be an entrepreneur. And while many fast-growth-company builders have pursued advanced degrees and outside expert advisers, the Mendiburu brothers claim to be entirely self-taught. Tom has never cracked a sales book and rejects popular sales gurus as "cheesy." Pressed to name a mentor, Mike offers only one: God.
And few company founders come from such meager beginnings. Growing up in tiny Wantage, the brothers wanted for practically everything. Mike remembers getting his first job at 13 to buy his own school clothes. Now the 33-year-old CEO owns a 220-acre spread in Wantage, complete with two lakes and a working farm. Tom, who is 30 and doesn't believe in debt, paid for his stately house in cash and arrived at his own 10-year high school reunion behind the wheel of a Ferrari. Who says you can't go home again?
In fact, homegrown precisely describes High Point. When Mike launched the company, in July 1996, he wanted to keep it small and in his own house; he hesitated to take on even his own brother. The elder Mendiburu's caution was born of experience: eight years spent toiling for two networking-equipment companies had seriously soured his outlook. During those years Mike had repeatedly encountered back-stabbing employees and unethical managers, and twice was betrayed by close friends who had promised him equity in start-up ventures. In the end, all he got for his efforts was a pile of credit-card debt.
It was at the lowest point in his life ("My wife and I got on our knees and asked God what to do," Mike says) that he decided to start High Point. Leaving a job in Minnesota, Mike headed for home. He closed his first sale at a rest stop in Ohio.
After Tom came aboard, Mike wanted to keep it just the two of them -- because the two of them were having so much fun. Company life wasn't terribly different from high school life: every time one brother made a phone sale, he got to fire several shots from his BB gun at a target outside their first-floor window. But they soon ran out of pellets -- and the resources to handle the growing business on their own. Mike decided they needed help and a real office.
Even in little Sparta, a 90-minute drive from Manhattan, the brothers found plenty of talented people who were eager to work close to home. Their first hire was a childhood friend who was then attending medical school but soon dropped out. (He is now the company's number two salesman, behind Tom.) Another friend had nine years of industry experience. A former classmate left IBM to join High Point's sales force. Several members of the technical team once ran small businesses of their own.
But even as the company doubled its sales each year, Mike kept a careful eye on the head count. Staying small is how the company discovered its calling.
High Point Solutions sells internetworking hardware, the stuff that companies use to put their networks on the Internet. The business doesn't design networks. It doesn't install them. It doesn't maintain them. High Point makes no attempt whatsoever to be a one-stop service provider -- because that would require lots of people. Instead, the Mendiburus carved out the most profitable business they could (net margins are about 15%) with the fewest employees.
The company found its niche as a "logistics" expert, helping confused corporate buyers with technical details and tailoring its operations to the needs of a small group of customers. "That's the story," says Mike. "We only need 50 good customers." But until recently the business has actually thrived on far fewer: historically about 20% of High Point's 50 or so clients, which include large telecom companies, provide 80% of revenues. "We latched onto some very large customers, and they trusted us with more and more," says Mike.
"You have these two non-college-educated brothers, and their clients don't mind at all," says Ernst & Young's Bolson. "The amazing thing is the clients are Fortune 100 companies. It's not normal."
The Mendiburus attribute their customers' enthusiasm to High Point's ability to bring off tricky network updates without a hitch. In many cases, the company's salespeople serve as the liaison between a customer's purchasing staff and its engineering or IT department. After the sales rep assesses a company's needs, he or she can usually locate the parts in High Point's warehouse. Buying smart is crucial, says Tom, who has a knack for finding good deals on new and used equipment. High Point's eight technicians simulate complex installations to head off problems before the actual rollout. "You don't want to screw up a 'hot swap' on a Saturday," says Tom. Translation: customers can't afford to bring their networks down to make changes and repairs. High Point virtually guarantees they won't have to.
Corporate buyers reportedly appreciate High Point's efficiency. The company recently delivered 80 Cisco routers to a customer in just two days. It might have taken Cisco six weeks to fill such an order, according to Tom. The brothers credit their speedy spartan workforce for such achievements. "We realized by just doing logistics we could stay lean and mean," says Mike. What the company sacrifices in lower-margin hardware, it makes up for in lower overhead.
It sounds simple, but don't be deceived, says CFO Curran. "I've worked with people who have a lot more education but don't have the skills of Mike and Tom," she says. "Both of them have very brilliant business minds. They're honest and treat everyone with respect. They get things done. And they communicate. We get a deal, and Tom comes out and thanks everyone. Little things like that mean a lot." (So does the generous bonus program.)
Although High Point will be hard-pressed to sustain such blistering growth, the brothers insist their approach to getting new customers will stay relaxed. "I tell my salespeople, 'Don't try to click with people who are not worth clicking with," says Tom.
As for exit strategies, Mike has one wish for retirement: to turn his weekend farming into a full-time career. "Farming is awesome," he says. "You have to trust God to get you through. When you're successful in business, you don't think you need anybody. Farming is a good reminder for me. That and the economy."
Susan Greco is a senior writer at Inc. Kate O'Sullivan also provided reporting for this story.
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