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The freshman class of '93.

A dynamic trio of companies debuts on the B.E. 100s.

It's that time of year again. Every June, in our Annual Report on Black Business, we profile a new crop of companies making their debut on the BLACK ENTERPRISE INDUSTRIAL/SERVICE 100. Below are the stories of three companies that have met--and overcome--numerous challenges to earn the distinction of being among the nation's largest black-owned businesses.

THE ANDERSON-DUBOSE CO.

How many African-American entrepreneurs can acquire the majority share of a ready-made, multimillion-dollar business? Not many. But that's exactly what Warren E. Anderson and Stephen M. DuBose did.

In November 1991, Anderson, 40, and DuBose, 38, purchased a 51% stake in a McDonald's Corp. distributorship, becoming the only African-Americans to own a major fast food chain's distribution center. The purchase was made from Martin-Brower Co., a subsidiary of Dalgety P.L.C., a British food products company. Today, the Solon, Ohio, distribution center buys hamburgers, french fries, plastic goods, condiments and "Happy Meal" toys from vendors and ships the products to over 200 McDonald's restaurants in northeast Ohio. A $110 million BE 100s business, the Anderson-DuBose Co. is enjoying a surge of success.

The deal with Martin-Brower made perfect sense to Anderson and DuBose, now president and vice president, respectively, of Anderson-DuBose. But the question remains: Why would Martin-Brower, a Des Plaines, Ill., company, sell a profitable distributorship to two aspiring entrepreneurs with minimal financing and zero years of experience in distribution? At the time, Anderson was a media sales specialist and DuBose a deal-making financier. The reason to sell to them was simple. Martin-Brower wanted to curry favor with McDonald's corporate honchos by proving its commitment to bringing more minorities into the fold. Anderson and DuBose, who met in 1986, were attractive suitors, particularly because of their willingness to learn the food distribution business from the bottom up.

According to Dennis M. Malchow, Martin-Brower's senior vice president for the McDonald's division, 40% of McDonald's restaurants are serviced by Martin-Brower. Obviously, the company has its sights on more. "This secured our position with McDonald's for the long term," says Malchow, "and Warren [Anderson] and Stephen [DuBose] demonstrated a sincere commitment to this business."

Martin-Brower, which owns 15 McDonald's distribution centers, owns 49% of Anderson-DuBose. Although neither party disclosed the terms of the deal, Malchow says Martin-Brower financed a "considerable" portion of the acquisition.

Anderson and DuBose are living what many entrepreneurs only dream about. They took over the reins of a well-established company that had three things going for it: cash flow, a successful track record and a built-in customer base. From day one, Anderson and DuBose put their stamp on their new company. "We did a lot of management by walking," recalls Anderson. "We let the employees touch and feel us."

A wise move. Anderson and DuBose weren't exactly welcomed with open arms by the staff. "Many people were shocked, surprised and disappointed," remembers Malchow. "Whenever a company is sold, there's an awful lot of concern about change."

Anderson-DuBose's immediate challenge: pumping up revenue. When the company bought the Solon center, business was flat and not showing much sign of growth. Now volume is up 5% to 7% each year, and revenues have increased to $10 million since 1991.

Anderson attributes the success to increased commitment to 100% customer satisfaction, and to better communication, both within the company and with its customers. At first, Anderson says, many of his 80 employees labored under "vague ideas" about how to better serve McDonald's customers. "They said they wanted to do a good job, but they didn't really know what our customers wanted," he says.

Solution: Last summer, Anderson-DuBose surveyed 95% of its customers, asking such questions as: Are our customer service reps knowledgeable? Are they courteous? Are your deliveries made on time? Does our driver call ahead if deliveries will be late?

The biggest complaint was that customers lacked advance information on promotional campaigns. "Some of our customers didn't know which products to order to take advantage of the promotions," DuBose explains. Anderson-DuBose attacked that problem head-on by developing a monthly newsletter, which is mailed and hand-delivered to clients with their orders.

The new owners took other steps to eliminate confusion within the company itself. "In the distribution world, teamwork is critical," says DuBose. "The best way to achieve that is through excellent cross-departmental communication."

Toward that end, Anderson and DuBose called for a voluntary committee of 15 warehouse workers, drivers, supervisors and managers to advise them. Since late last year, its own employees have been scrutinizing company teamwork and communication. "As a group, we explore various methods that will help improve the process," Anderson says.

Although Anderson and DuBose didn't start a company from scratch, they believe they paid their dues. They both chucked six-figure salaries in hopes of acquiring a fast food distributorship without a clue as to how to do so. Anderson left his general sales manager position at WFSB-TV in Hartford, Conn., and DuBose quit his post as manager of international acquisitions at GE Capital in Stamford, Conn. The kicker was that neither man had any idea of how to run a distribution business.

"Both of us just believed we could pull it off," says Anderson. "McDonald's was one of my main clients at WFSB, and I developed relationships with some owners and corporate officials. I knew a regional purchasing specialist who suggested that I contact the Oakbrook, Ill., office to see what kind of business opportunities they had."

Anderson and DuBose had their minds set on buying a distribution center. "The building and trucks are easily financeable and distribution has less of a manufacturing flair, which neither of us felt comfortable with," DuBose explains.

Two obstacles stood in the way, however. No centers were up for sale, and the partners had no experience. There was little McDonald's could do to knock down the first barrier, but it could definitely eliminate the second. That's when the hard part started. Anderson and DuBose were asked to go through a rigorous 18-month business development program that would give them an up-close and personal view of McDonald's distribution business. "McDonald's told us it was going to be a long process," recalls Anderson, "and there were no guarantees that anything would happen for us at any level once we finished."

Officials at McDonald's were immediately impressed by the duo's steadfast commitment. "These guys were willing to put everything on the line," says Michael Gilman, department director of U.S. purchasing for McDonald's.

While in the program, DuBose and Anderson learned every phase of the intricate world of distribution, including warehousing, customer service, budgeting, accounting and loading trucks. "This program is similar to what we do with potential franchise owners," says Gilman, a self-described mentor to Anderson and DuBose. Before they get the keys to the store, they learn all facets of the business from accounting to making fries."

Although Anderson and DuBose were only in the training phase, neither lost sight of the big picture--acquiring that elusive distribution center. McDonald's was instrumental in helping them in that quest. For nine months, the men sent letters to corporate officials, attended conferences and set up several meetings with purchasing managers. "We spoke to about five owners of McDonald's distribution centers, but no one would say if they were up for sale," says DuBose.

Enter Martin-Brower. The distribution giant came into the picture when McDonald's officials introduced Anderson and DuBose to Herbert Heller, president of Martin-Brower.

"It was the ideal fit," says Anderson, noting that Martin-Brower owned the most distribution centers (16 at the time). "We were courting them strongly in hopes they would give us some play."

What are the company's long-range goals? First, Anderson and DuBose plan to buy out Martin-Brower's 49% stake in five years. After that, they claim they're not looking too far ahead. "The goal is to take care of what we have here," says Anderson. "That is a trap many businesses fall into. They don't secure the home base before they have all these dreams of grandeur. First, we want to take care of our day-to-day success."

URBAN CONSTRUCTORS INC.

Construction is one of those industries where who you know means everything. That's especially true for black-owned construction firms, which seldom have the capital, manpower and wherewithal to complete multimillion-dollar jobs on their own.

Jacque E. Thermilus, the president of Miami-based Urban Constructors Inc., knows all about that. "The key to making it in this business is setting up joint ventures," says Thermilus, whose firm handles construction management and general contracting jobs. "We're trying to get a piece of the large contracts and we can't do that."

Thermilus owns 51% of Urban and Joseph Lovermi, the firm's recently retired operations vice president, owns the remaining 49%. The BE 100s company has completed transportation projects, educational facilities and commercial developments for a variety of public and private contracts since it was launched in 1988 by Thermilus. To get this business off and running, Thermilus borrowed $50,000 from the mortgage on his home and secured a $100,000 line of credit.

Since landing its first contract, a $10,000 job to renovate a local mental health institution, Urban has done a total of $47 million worth of renovations for Miami International Airport, the Dade County School Board and the Orange Bowl.

The key to Urban's success--company revenues have climbed steadily from $2.2 million in 1989 to $15 million last year--has been its ability to set up joint-venture partnerships with industry heavy hitters. (Urban has entered into four to date.) For instance, in December, Urban formed a joint venture with Bealfour/Beatty Construction Inc., a majority-owned Miami construction firm, to do $11 million worth of renovations at Miami International Airport. (The total project was valued at $27 million.)

That job became an invaluable learning experience for Urban. It was on this project that Thermilus discovered how to use an electronic cash flow monitoring system. "If Bealfour/Beatty had 50 guys working on a project, they would electronically input the number of hours each of them worked," explains Thermilus. "Unless you've been in this business for 30 years, you don't know if you're making or losing money on a daily basis. This way, the system would tell them how much work should've been completed that day."

Another company Urban intends to engage in a joint venture is Turner Construction Co. of Miami. In fact, Urban anticipated working with Turner on a $7.5 million renovation project at Miami's Jackson Memorial Hospital. But they lost out on the job as the result of a technicality, says W. Shelby Reaves, Turner's vice president and territory general manager. Both parties, however are still eager to work together. "Urban is a good fit for us because we're looking for companies with the staff capability and experience to carry their own weight," says Reaves. "Urban can do the $5 million jobs, and only a handful of minority construction companies in this area can handle contracts that size."

Hurricane Andrew played a key role in making Urban one of the nation's largest black-owned businesses. When the country's most expensive natural disaster hit, Thermilus didn't waste any time chasing contracts. He divided Urban's personnel into three action roles: marketing executives who identified business opportunities; an emergency response unit for those companies and individuals requiring immediate attention; and a group of estimators.

The strategy worked. Urban did about $6 million in hurricane-related work, including rebuilding homes and removing tons of debris. During that three-month period after last summer's hurricane, Urban landed 35 contracts worth $4 million to move more than 200,000 cubic yards of debris, Thermilus says. To do so, he had a staff of 200 working from 5:30 a.m. to 10 p.m. every day. Under ordinary circumstances, 50 full-time workers would've punched Urban's time clock daily.

While Urban has been successful in Miami, Thermilus has his sights set on ventures outside the Sunshine State. Louisiana, Maryland and Washington, D.C., are among the regions that Urban plans to penetrate. "In five years, we want to establish ourselves as the premier minority construction company," says Robert L. Tyler, the company's vice president.

Lofty goals. However, Urban already has a running start. The company opened a one-man business development office in Philadelphia last year to get the inside track on winning bids for housing authority work. Close to $200 million worth of improvements are slated to be made at five Philadelphia housing projects this year, according to Thermilus. "I'd be happy to get $30 million of that work," he says, adding that Urban's Philadelphia office gives them a "presence" in the City of Brotherly Love.

Expanding beyond Florida, however, won't be easy. One brick wall is the lack of access to capital. The company's first line of credit was the $100,000 Thermilus secured from Sun Bank. In the company's early days, acquiring capital was trying. "We had gone to 12 banks looking for $50,000 in additional working capital, but all of them turned us down," Tyler says. Now Urban's second credit line totalling $250,000 stems from black-owned People's National Bank of Commerce. Urban has been able to stay in business on $650,000 in working capital. According to Thermilus, that money comes from the 80 or more jobs completed in the last five years.

Increasing the company's bond level is another hurdle Urban must clear before it becomes a force in Miami and other markets. "These bonding companies control your growth," Tyler notes.

Despite its expansion plans, Urban isn't abandoning Florida. The company is scheduled to open an office in Jacksonville this summer and one in Tallahassee by late 1994. The big lure is the lucrative capital improvement plans to improve the state hospitals and educational facilities in those areas.

Urban also plans to become a "one-stop shopping center" for construction services. Translation: In addition to the general contracting services it provides, Urban plans to offer more construction management services. "This industry is up and down," explains Tyler, "and diversity is really key."

CAPSONIC GROUP INC.

James P. Liautaud rarely takes "no" for an answer. Case in point: In 1968, the then 29-year-old Liautaud was general manager for Kingston Plastics, a Chicago-based plastics molding company. The eager executive approached Kingston's owner with a bold plan. He suggested that the company expand into composite molding, a new technology combining multiple metallic and plastic materials into a single product or component. Ford Escort gearshift levers, Lexus SC400 door hinges and Ford Aerostar airbag sensors now benefit from this technology.

"All the studies showed the companies that were making money were specialized," says a forward-thinking Liautaud. "I thought it was a brilliant idea."

His terms were straightforward: He wanted $100,000 to set up and run the business, which would have been a Kingston subsidiary. "I told them if they didn't do it, I'd quit," recalls the brash University of Illinois graduate. The response? "They told me I didn't have enough qualifications to run a business and said I should quit."

He did.

Liautaud, however, didn't quit on his idea. He took his lone Kingston account (worth $30,000 annually), bought a molding press with $10,000 in savings, rented a building in Elgin, Ill., and set up shop. "The rent was $500 a month, but I rented out the back space to a rug cleaner for $450 a month, so the net cost to me was $50," he explains.

Capsonic Group Inc. was born. To keep it running, Liautaud needed an additional $250,000 for operating expenses. He applied for a loan with the Small Business Administration (SBA), but was turned down.

Instead, constant networking landed Liautaud a $10,000 purchase order with a division of General Instrument Corp., a Chicago-based electronic component manufacturer. That in hand, Liautaud set out to raise sorely needed venture capital, eventually reaping $280,000 from 30 investors.

First-year sales were a skimpy $30,000, but 25 years later, the Elgin, Ill.-based composite molder is a $36 million BE 100s company that works with such corporate giants as General Motors Corp. Ford Motor Co. and Hewlett-Packard Co. Considered by many to be a leader in its field, Capsonic is a subsidiary of Gabriel Inc., an Elgin holding company, which includes four additional subsidiaries. (Liautaud also owns 100% of Gabriel.)

Liautaud, 56, is semi-retired and spends one-third of his time at Capsonic. But he is always thinking ahead, just as he did when he was a fresh-faced manager at Kingston Plastics. His entrepreneurial motto is as ambitious as he is: Think global. From Capsonic's base in the United States, Liautaud is carefully positioning his 237-employee business to form strategic alliances and joint-venture partnerships with off-shore composite molders in Japan, Singapore and Malaysia.

The goal is to identify foreign--and domestic--"host" plants where Capsonic can manufacture its products, he explains. Why?

First, 5% of Capsonic's business is overseas--a small portion, but a costly one, according to Liautaud. If Capsonic has to do revisions, a rush job or is late with a shipment, then air and ship transportation fees can be exorbitant and devour anywhere from 2% to 10% of the product's cost. High-priced tariffs and inventory costs also eat at profits. "We want to have facilities next to our clients overseas to cut down on those costs," he says. Second, identifying "host" plants eliminates the need to invest in building new factories.

So far, Capsonic, which manufactures 80 products and serves such industries as aerospace, automotive and electronics, has formed joint ventures with two companies, one in Japan and the other in Singapore. The first deal, signed in 1988, is a technological exchange between Capsonic and Amai Corp., a Japanese composite molder. Both companies swap ideas and engineers, explains Liautaud.

The second agreement is with Mold Dechnic Ltd., a Singapore-based plastic molder. Capsonic will build its own automated molding systems in the United States and will train two Mold Dechnic technicians/operators on their use. The systems will then be shipped to the Singapore plant, where the technicians will operate the machines to manufacture Capsonic products.

Capsonic is one of the top three composite molders in the country, according to Richard L. Colbert, procurement engineer for Hewlett-Packard's disc memory division in Boise, Idaho. "They stand head and shoulders above the rest," says Colbert, whose division does $5 to $7 million worth of business with Capsonic. "They received one of the highest ratings of any of our key suppliers--a 3.5 on a scale of 1 to 4. They rated high on quality, responsiveness and dependability."

Capsonic, which manufactures 75,000 components a month for Hewlett-Packard, three years ago helped the division design many of the electronic parts now used in the company's personal computers. "We had an idea of how to do it," says Colbert, "but Capsonic had the technology and manpower to make it happen."

Most people who know Liautaud aren't surprised by his success. "I've known Jim since grammar school and he always has had a tremendous amount of drive," recalls Victor C. Faraci, who invested $5,000 in Capsonic in 1968. "Even though he was invariably always the smallest guy in the group, he was the leader and in control of every situation." (By 1986, Liautaud had spent "in the millions" to buy out all investors.)

Liautaud's strong drive, has caused some problems, as Capsonic President Pat Patel, for example, knows firsthand. Patel, who started as Capsonic's quality control manager in 1981, admits that Liautaud, like most entrepreneurs, can be very headstrong. "He's a tough boss and can be extremely demanding," Patel says. For example, four years ago, Patel wanted to bend company policy to accommodate a customer. "Jim was furious. He felt I was running the company differently from the way he had."

Since then all wounds have healed. "Pat is one of the best CEOs I have," says Liautaud. "I know my business could run without me. Now I want to see my guys start spinning off new businesses of their own."
COPYRIGHT 1993 Earl G. Graves Publishing Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:21st Annual Report on Black Business: B.E. 100s
Author:Thompson, Kevin D.
Publication:Black Enterprise
Date:Jun 1, 1993
Words:3337
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