Gary says he does not recall getting such an offer or making such a comment, but he concedes that Greg proposed giving him "a large sum of money payable over many, many years" on condition that he stay away from the business. Gary rejected the offer. "I didn't want to leave," he says. "I was very content working with Greg."
"I just wanted my own career back," Greg says, "and I was willing to give away the farm to get it. It had nothing to do with money, obviously, or I wouldn't have offered him that deal. In the end, we had to go to arbitration. I bought him out for $184,000. He left and started his own business. He was my first competitor."
Gary's company, founded in April 1997, was called Pond Supplies of America and was based in Yorkville, Ill., about 20 miles from Aquascape's headquarters in Batavia. While PSA did reasonably well, Aquascape took off like a rocket. In 1995, Gary's last year in the office, it had done $800,000 in sales. The next year, sales more than doubled, to $1.8 million. In 1997, they doubled again, to $4 million, and they kept right on climbing from there. By 2002, sales had reached $31 million, an increase of 16% over the year before. That was respectable enough, but it paled alongside the surge in net pretax income to $4.2 million (13.3% of sales) from $1.6 million (5.9% of sales) in 2001--a leap of 163%. This year, Aquascape will do between $43 million and $45 million in sales, thanks partly to an acquisition.
That growth has come in the face of ever-increasing competition. PSA's sales are now $6.8 million, according to Gary, and 11 other direct competitors have entered the picture, all offering products similar to Aquascape's but at lower prices. Then there are the many companies that offer different pond-building approaches altogether, mainly for the do-it-yourself market.
Some of Aquascape's remarkable growth can be explained by traditional marketing techniques--and Greg Wittstock's willingness to invest in them. The catalog is a good example. Aquascape now sends out 3.2 million catalogs a year in nine different mailings. None of its competitors do more than two. Still, the catalogs don't explain the most tantalizing part of Aquascape's success, namely, the willingness of old customers to pay a premium for sticking with the company. To understand that, you have to look at other factors--one of which is Aquascape's in-house pond-building division, headed by Ed Beaulieu. Up until 1995, it was virtually the whole company, but as Wittstock transformed Aquascape from a pond-builder into a designer and marketer of pond-building equipment, the role of the construction team changed. It became Aquascape's research-and-development unit, coming up with new products, testing them in the field, experimenting with different types of jobs, and developing the marketing and management techniques that other contractors could use to build their own businesses and motivate their employees.
In principle, the construction division--which builds ponds only in the Chicago area--competes with other local contractors, but it also refers work to those that become Aquascape customers, and it regularly takes on lower-margin jobs to acquire experience and learn lessons that it can then pass on to other landscapers around the country. Moreover, by operating successfully in a competitive market, the team gives Aquascape a tremendous marketing advantage: Customers know its products have been field-tested by one of the best pond contractors around. "That gives me a lot of confidence," says John Russell, the CEO of Russell Water Gardens in Redmond, Wash. "I know that whatever I buy from Aquascape is going to work." Meanwhile, Aquascape is in the unusual position of having an R&D division that earns a profit.
Another factor is Aquascape's back-order policy. It's very simple: There will be no back orders on any product the company carries. If a back order occurs, the flag in front of the building is lowered to half-staff. This is an expensive policy. It means the warehouse is perpetually overstocked. "I'm willing to err on that side," says Wittstock. "It's about how ponds sell. When a landscaper gets a job, he needs the equipment right away, or he'll have guys sitting around for days. That's also why we double-check parts going out of our warehouse. If one $2 plumbing fitting is missing, you can't hook up a pump. Someone has to go to Home Depot. A one-day job becomes a two-day job, and you cut your profitability in half. Instead of making $2,500 per day, you're making $1,250 per day."
The back-order policy gives Aquascape another huge marketing advantage. "Other companies just can't match their service," says Tom Smith, owner of Garden State Koi, based in Warwick, N.Y., who gave up lucrative but competing product lines to become an Aquascape distributor. "Their fill rate [for orders] is something like 99.5%. Can you imagine getting that kind of fill rate in this industry? If I order from anybody else, I'm lucky to get 50%."
"It's a big part of their success," says Steve Stroupe, the independent sales rep. "Any competing vendor who doesn't understand the power of their no-back-order policy is going to get bloodied."
