A New Kind of Middleman
For components broker Terry Noone, low prices are no longer enough. Today, it's all about service.
Published July 2005
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COMMENT ON THIS ARTICLEIn many ways, Terry Noone's world is a small one, revolving around a few square blocks on Chicago's North Side. Each morning, he walks from his home to his warehouse through a quiet world of tree-lined streets and low-slung commercial structures, evoking a time when business, and indeed life, were largely local pursuits.
But Noone's outlook couldn't be more global. He spends a typical weekend watching Chinese-language movies and listening to Chinese-language tapes. At least once a week he makes sure to eat with chopsticks. "You've got to show people you're interested in their culture," he says.
Noone is interested, all right. The 54-year-old entrepreneur is founder and CEO of Capacitor Industries, which imports low-cost electronic components from China and sells them to motor makers and other manufacturers in the U.S. and, increasingly, abroad. His stock-in-trade is capacitors: tiny devices that store charges, maintain electrical currents, keep motors running, and protect computers and communications equipment from surges. Every motor manufacturer needs a steady supply of them, which has helped send Noone's annual sales to $5 million.
Noone's basic business model -- buy cheap overseas, sell at a profit here -- was revolutionary in 1990 when he founded his company. And it served him fine for years. But these days, middlemen like him are a dime a dozen. So his business model has had to evolve. Increasingly, he has learned, every business is a service business.
In the early days of Capacitor Industries, for example, he simply connected U.S. buyers to Asian sellers, providing the cheapest price available. Now customers demand more. Sometimes they come to Noone with a design idea -- say, a capacitor casing that will eliminate a step in the motor-assembly process. Noone takes drawings and accompanying parts to his Chinese manufacturers, seeking one that can produce the reconfigured capacitor. Once the device is built, he personally shepherds it through approval by Underwriters Laboratories, a two- to six-month process. "We handle it all," Noone says. Almost a third of Noone's sales involve such custom work, which not only allows him to charge more, but also raises the bar for competitors who might try to swipe his customers. "It's total protection," he says.
Prices in the global capacitor market are falling about 5% to 8% a year, according to Reed Electronics Research in Oxford, England. So Noone keeps his business focused -- capacitors only. And he keeps overhead to a minimum, using outside sales representatives rather than staffers. He's raised inventory management to an art form, keeping in touch with suppliers and customers to avoid being stuck with stale parts. He also has moved into higher-margin items; recently he signed up a supplier in India to make more sophisticated capacitors that sell for $50 to $1,000 each to military contractors, labs, and communications concerns.
It's heady stuff for a college dropout and former construction worker whose father, an Irish immigrant elevator operator, advised his son to "never take chances." Instead, Noone wound up taking a big one, becoming an unlikely pioneer of globalization in the process.
He started down that path in the late 1980s, when he was working a $5-an- hour position at a small capacitor manufacturer. Later, he switched companies and jumped into sales. At the time, foreign competition was just a faint drumbeat. Quality concerns dogged most foreign components. And pre-Internet, it was almost impossible for all but the largest buyers and sellers to find one another across an ocean.
