For some Inc 500 companies, these are the best of times.
We all know that Internet-related businesses are dropping left and right, if they haven't been felled already. But Manoj "Marty" Puranik, CEO of Atlantic.Net (#223), an $8-million Internet service provider in Gainesville, Fla., has turned the upheaval of the ISP industry to his advantage.
Last year, as small ISPs began failing, Puranik started scooping up their abandoned customers. His company also acquired customers from surviving ISPs that had raised their prices in an effort to cope with the downturn. Often, Puranik says, those price increases didn't sit well with value-conscious customers -- giving midpriced Atlantic.Net a chance to swoop into the space with lower prices. A third source of new customers emerged when national ISPs like EarthLink acquired local players. "Usually, [the acquirer] only retains 60% to 70% of the subscribers they buy," says Puranik, because the merger process is expensive, and thus service costs increase.
Puranik says that 20% of the 7,500 new customers Atlantic.Net has signed up so far this year have come to the ISP through its various "scooping up" methods. Moreover, grabbing abandoned or unhappy customers from competitors has helped the company grow its corporate business: In 2000 only 25% of the company's revenues came from corporate customers. In 2001 that figure rose to 60%.
Does Tom Sullivan actually welcome downturns? The president of Boston-based Lumber Liquidators (#315) says he wouldn't go that far. Still, his company's growth makes the question worth raising. Lumber Liquidators sells hardwood flooring at discount rates through 18 retail stores. Sullivan believes that the economic slowdown has given contractors more time to comparison shop for low-cost suppliers. Sullivan expects 2001 sales to increase more than 40%, to $34 million.
On some items Lumber Liquidators charges less than half the Home Depot price tag -- and Sullivan is determined to keep it that way. He's so determined, in fact, that last year, when gas prices skyrocketed, Sullivan faced a choice: he could pass the expense on to customers by raising his own prices, or he could eat the cost increase and keep his prices low. He chose the latter. So far, the jump in sales volume has more than offset the extra costs.
Thomas Beer's company, Yesterday's Business Computers (#494), of Bridgewater, N.J., collects and resells used computers. About 30% of its revenues come from an auditing service, wherein YBC manages a company's outdated or expendable computer equipment. First, YBC inventories, cleans, and stores a customer's unneeded hardware; then it resells those components and takes a cut of the proceeds.
The company has blossomed during the downturn: both revenues and profits have risen more than 50% this year. The reason? For one thing, massive layoffs mean more companies need audits. "Corporations have all those PCs that no one is using anymore, and they want to recover those assets," says Beer. All the more targets for YBC's auditing service -- and more used equipment for the company to resell. In the past year, the percentage of sales that come from audit fees has increased from 29% to 39%.
Resales, which constitute the majority of YBC's revenues, have played no small part in the company's boom. Which begs the question: Who buys all that used equipment? The company sells 80% of the gear overseas, mostly to "third-world countries, where people are just getting on the Internet for the first time," explains Beer. The high demand for computer equipment in foreign markets gives YBC's founder one more reason to feel fine regardless of the struggling economy in America.