The freshman class of 1992 – four new firms make Black Enterprise’s top 100 list – The B.E. 100s – Cover Story
Class A entrepreneurs are masterful at turning obstacles and opportunities to their advantage. Each year, the BLACK ENTERPRISE Annual Report on Black Business introduces a new batch of companies that crossed over the threshold to graduate to the BLACK ENTERPRISE 100s. Here are the stories of four freshmen BE INDUSTRIAL/SERVICE 100 companies and the challenges they face as emerging black owned companies poised for major growth in an uncertain economy.
SOLO JOINT INC. SETS TRENDS WITH ITS CROSS COLOURS SPORTSWEAR
Hip hop is more than a sound; it’s a look. Think baggy jeans in earthy greens and purples, baseball caps, quilted nylon and plaid jackets and T-shirts blazing with graffiti. These styles are cut from the broadcloth of today’s urban landscape.
Hip to this look and feel is Solo Joint Inc., the parent company of Cross Colours (CC) sportswear, a 1-year-old, Los Angles clothing line that has rocked the apparel industry with its unique brand of “homeboy” chic. “Our target customers are young, African-American men,” says Carl Jones, 37, Cross Colours’ founder and president. “But these days, everybody’s wearing our clothes.” Indeed, the Cross Colours line has crossed over to the mainstream, capturing the lion’s share of the young men’s apparel market with its streetwise appeal. With retail prices starting at about $20 for a baseball cap to roughly $800 for a leather bomber jacket, the Cross Colours collection is flying off the shelves of popular chains stores, such as OakTree, Macy’s, Bullock’s and Merry-Go-Round. In fact, the 1992 BE INDUSTRIAL SERVICE 100 company’s first year’s saless totaled $15 million.
Cross Colours has survived in an economic downturn because of its niche in the fast-growing “ethnic market.” For example, says Jones, the jean line, which accounts for 50% of the company’s sales volume, has “a bigger silhoutte, a more tapered waist, wider hips and a longer length than anything you’ll find in a Calvin Klein.” Jones, who oversees the daily operations of the 80-employee enterprise, expects this year’s sales to top $30 million.
But trends in the ethnic market are fast and fleeting. When a particular style dies out, the company usually goes with it, says Robert Parola, sportswear editor at the Daily News Record, a New York fashion publication. Cross Colours may avoid that fate by establishing brand-name recognition, Parola says.
Indeed, this specialty company intends to stay on top of street fashions and evolve with the styles, says Jones, a native of Memphis, Tenn., who studied fashion in the early ’80s at Otis Parson’s School of Design and Trade Technical College in Los Angeles.
Furthermore, to Jones, the clothes take a back seat to the company’s broader message that denounces gang violence and promotes education and racial unity. Its message, “Clothing Without Prejudice,” appears on practically every red, gold, black and green hang tag and in every advertisement. This isn’t just lip service. A portion of the company’s profits goes to several community-based programs.
Jones’ first jon in the fashion industry was in 1982 as a designer for a T-shirt company in Los Angeles. A year later, he opened Designer Screen Printing (DSP) with a $20,000 personal loan. In three years, the firm was averaging $300,000 in annual sales. Jones, who worked for various apparel manufacturers learning about seasons, timing and production, had his finger on the pulse of the beachwear craze in 1985 when he designed a series of multicolored printed T-shirts and shorts. Hiring sales people in L.A., New York City and Florida, he opened Surf Fetish, a beachwear company that had $150,000 in retail orders in its first month. He also hired a graphic artist, Thomas Walker, 30, now vice president of Cross Colours. Walker, who has a M.F.A. from Louisiana Tech University, helped propel Surf Fetish into a $20 million company.
While it was successful for five years, Jones got bored with the beachwear business. “I wasn’t a surfer. I was a designer who grew up in Watts during the ’60s riots,” he says. Inspired by that experience, he spent months shopping and conducting consumer research where he discovered a void in the ethnic market for quality sportswear.
Certain that he was onto a powerful new concept, he mortgaged his home, sold his interest in Surf Fetish to its two other partners along with his Ferrari and 17 Harley Devidsons to raise the $1 million needed to start Cross Colours in 1990. The investment in equipment and a six-person sales team, paid off the following year, when Jones and Walker booked $3 million in sales at their debut at the spring 1991 Men’s Apparel Guild In California show.
Blooming sales aside, Jones knows the dangers of the fashion world. To stay ahead, he’s keeping growth between 50% and 60% a year. Plans for a women’s fashion and footwear line, watches, belts and other accessories are in the works. Adds Jones: “My ultimate goal is to become an apparel conglomerate, making everything from underwear to shoes for the African-American consumer.”
MAYS CHEMICAL CO. SERVICES A BLUE CHIP CLIENT ROSTER
Never-say-die sums up the business and personal philosophy of William G. Mays. A slumping economy in 1980 not only forced a lot of business doors to close, it prevented others from opening. But that didn’t stop Mays from launching his chemical distributorship in northeast Indianapolis. The challenge, says the 46-year-old Mays, was to target industries unaffected by major economic downturns. This strategy has proven profitable for Mays Chemical Company Inc. (MCC), a provider of over 300 solvents, additives and preservatives to food and pharmaceutical manufacturers.
Targeting the nation’s largest food and drug makers, such as Pillsbury Co., Kraft General Foods Inc., Eli Lilly and Co. and SmithKline Beecham PLC, has boosted the BE 100s company’s sales from $2.2 million in 1980 to $56.7 million last year. Food and pharmaceuticals account for 50% of MCC’s 1991 sales, the more cyclical automotive and steel industries make up 30% and electronics and beverages, 20%.
As a “middle man” in the $300 billion U.S. chemical industry, Mays, who earned both his B.S. in chemistry and MBA from Indiana University, hopes to increase MCC’s sales by 20% this year. “About 25% of all chemicals sold are purchased through distributors,” says Mays, whose company maintain $3 million in inventory at six warehouses nationwide. Working with distributors allows big chemical manufacturers, such as E.I. Du Pont de Nemours and Co., to spend more resources on manufacturing and quality control rather than on stocking and delivering products.
There’s no denying the vital role distributors play in the chemical business, but the limited number of chemicals produced by large manufacturers means competition for product distribution rights can be fierce. How does MCC maintain and expand its market share? It concentrates on specialty or high-value chemicals and products, for example, the latest solvents or super-strong adhesives, that are not widely manufactured throughout the industry, says Mays.
In order to stay competitive in the ’90s, chemical distributors must grow beyond the $25 million mark, says Mays, who oversees daily business operations at MCC and spends much of his time drumming up new contracts with major suppliers. “The trend in the industry is for one-stop shopping and more emphasis on quality, regulatory requirements and a stronger customer service program.”
To adapt to an evolving industry, Mays invested $500,000 in 1988 to upgrade MCC’s computer system. He plans to add an environmental specialist to his staff of 72, to ensure that the company meets the government’s rapidly changing product, safety, transportation and disposal requirements.
A native Hoosier, and the son of a chemistry professor, Mays took a circuitous route in his career. Back in 1967, he worked for six months as a chemist, testing lubes and gels in a small Indiana-based metallurgical lab before joining The Procter & Gamble Co.’s sales force. Armed with an MBA, in 1973 Mays landed a job as a marketing manager with a local engine manufacturer where he forecast engine demand and oversaw operations and planning. Four years later, he was running the distribution division of Chemical Investors Inc. (CI), a minority start-up firm in Indiana.
It was at CI that Mays developed strong ties to big chemical manufacturers, negotiating seven-figure contracts with Bristol-Myers Squibb Co. and Abbott Laboratories. But when CI’s minority shareholders lost control in 1980, Mays decided to go it alone. In just 30 days, after securing mortgage loan and putting up $10,000 in personal savings, he launched MCC. “I knew if I was able to help build CI into a $5 million company in a few short years, I could do it for myself,” he says.
He did just that, negotiating $750,000 in contracts in one month to supply solvents like methylene chloride, methanol and acetone to Abbott and The Upjohn Co. The deals came fast, but negotiations were anything but easy. Mays had to sign over his home to his supplier, Diamond Shamrock (DS), to get a credit line of $100,000.
Since inception, MCC’s contracts have soared, (the largest was the company’s $8 million deal with Pillsbury Co.,) and its credit line is now $5 million. Equipped with a fleet of over 10 trucks, 10 railroad cars and 35 automobiles, MCC is getting one step closer to May’s 5-year goal to be a $100 million chemical distributorship.
RMS TECHNOLOGIES INC. BANKS ON R&D FOR GROWTH
Staying ahead in the technology business dominated by such giants as IBM Corp., Ford Motor Co. and General Motors Corp. requires a finely tuned ability to recognize opportunities. “You have to define the cutting-edge of technology before everybody else,” says David W. Huggins, the president and founder of RMS Technologies Inc. in Marlton, N.J. The company specializes in information systems engineering and related services, and has grown from a modest, one-client enterprise with first year revenues of $300,000 to $80 million BE 100s company.
The state-of-the-art technology that RMS is developing includes weather systems for airlines. The system RMS sold to South West Airlines, called Metlab, takes in radar data throughout the country and tells the airline’s flight planners what the weather is like in different cities.
With more products like the weather system on tap, Huggins says heavy investments in research and development will help boost the company’s sales to $95 million this year.
Targeting new technologies has benefitted RMS with its largest contract to date. In 1991, RMS received a $150 million contract with the Federal Aviation Administration to upgrade the entire air traffic control system for the National Air Services System. “We hope to supply the oil industry with geographic mapping systems to improve the planning and maintenance of the nation’s pipelines, “says Huggins, who holds an accounting degree from Pace University in New York.
About 80% of the company’s 1991 revenues were tied to computer services and the remaining 20% were linked to systems design, engineering, integration and installation for industrial, commercial and government facilities. The company’s contracts for all current and future services are valued at over $400 million.
Huggins got his start in the late 1950s, at the dawn of the computer age. A former telecommunications expert with the U.S. Air Force during the Korean War, Huggins sowed the seeds of enterpreneurship at RCA’s computer division in Camden, N.J.
“RCA was working with computers when the technology was in its infancy,” says Huggins, 61, who spent five years at RCA until 1967, traveling nationwide, installing everything from first-generation mainframe computers to data communications systems equipped with automated message switching.
Armed with some 16 years of hands-on experience with high-tech companies, Huggins took the plunge in 1977 and started RMS, then located in Trevose, Pa. To get the compny up and running, he sold the $200,000 worth of stock he had accumulated during his 10 years (from 1967-1977) with Computer Science Corporation (CSC) in Moorestown, N.J. Huggins also secured a home equity loan and arranged a $15,000 line of credit with a local bank to ensure that RMS’s debt obligations were met for the first six months.
Later that year, Huggins got a tip from an industry colleague that the Johnsville-based Naval Air Development Center was looking for consultants to help monitor its aircraft. It was an assignment tailor-made for Huggins, who’d helped develop the Navy’s multi-billion dollar, Aegis anti-warfare systems program when he was an operations director with CSC. No doubt the $300,000 generated from this contract helped keep RMS afloat its first year.
However, Huggins credits the government’s 8(a) program for its initial success. In three years, the program generated close to $10 million in contracts for RMS. Although RMS took full advantage of tue 8(a) program for nearly nine years, Huggins says that by the time RMS graduated in 1986, 90% of its backlog was for contracts won outside the scope of the government program, with less than 50% of its revenues tied to old 8(a) contracts.
Today, as a broad-based company, RMS has a staff of about 1,200 computer specialists, scientists, technicians and communications engineers and has expanded its client base to include not only government agencies like the U.S. Department of Defense (DoD), but Fortune 500 companies such as AT&T Raytheon.
GOLD LINE REFINING BETS ON DIVERSIFICATION
So you want to know it takes to beat the competition? Ask Earl Thomas, former pro football player with the Chicago Bears and St. Louis Cardinals. “Patience, persistance and nerves of steel,” says Thomas, 43, whose NFL career started in 1971. Back then, he played tight-end and wide receiver, weaving and bobbing his way past opponents on the football field while aiming for the goal line, the touchdown and the winning score.
Today, as managing general partner of Gold Line Refining Ltd. in Houston, Thomas is tackling the competition in the nation’s petroleum refining business. Last year, the 2-year-old company refined 3.5 million barrels of crude oil and generated $35.7 million from selling gasoil, jet and diesel fuels. Thomas cites the plunge in oil prices, from high of about $35 a barrel during the last year’s Persian Gulf War to roughly $20 a barrel today, as a powerful example of the volatile forces shaping the refining industry.
A sudden price drop or hike is bracing for small firms like Gold Line Refining, a 1992 BE 100s company. “The impact on available credit for smaller refiners can be severe,” says Thomas, adding that a 50% jump in oil prices often means a comparable increase in the cost of financing letters of credit and other loan agreements.
Based on industry standards, small refineries usually specialize in producing seasonal products, such as gasoline and diesel fuel and process 50,000 barrels or less of crude oil a day. In comparison, Exxon Corp.’s or Shell Oil Co.’s larger, fully integrated refineries produce everything from gasoline to petroleum-based chemicals and easily process 300,000 barrels or more.
Even so, there are advantages to being a small refiner in a turbulent market, says Thomas, who manages Gold Line Refining’s daily operations and travels twice a week to Lake Charles, La. to oversee the company’s shore-based refinery. From a manufacturing position, the 51-employee concern has carved out a niche by supplying military jet fuel to the federal government. In fact, JP4 fuel accounts for 60% of Gold Line Refining’s production. The remaining 40% includes diesel fuel and gasoil, which is sold to large, commercial buyers such as Exxon, Fibroenergy and Marathon Oil Co.
By limiting his product line, Thomas is in a better position to adapt to major fluctuations in oil pricing. This strategy also promotes quality assurance–the goal of manufacturing high-end products that meet or exceed the toughest testing standards in the industry. It’s a philosophy Thomas hopes will help increase his sales t the federal government by 20% this year, raising total revenues sales to $70 million.
But so far, his best guard against major losses in today’s down market, is buying and selling oil futures. “I go into the market daily and buy the right to purchase contracts for a certain amount of oil, diesel fuel or unleaded gasoline,” says Thomas, who purchases some $6 to $8 million worth of crude oil each month from major oil producers.
A native Texan, Thomas joined the oil industry after working three years as a project manager for two local home builders. Suffering from a bad case of real estate development burn-out, Thomas took a job as a sales trainee with a local oil equipment company in 1980. But six months later, the sudden death of the firm’s president forced it to close. So, Thomas launched Gold Line Supply out of his Houston condominium.
In ten years he rang up $12 million in annual sales, retailing production casing and tubing to large petroleum refineries, such as Amoco Oil Co. and Exxon. Initially, he used a personal credit line to fill orders, now he has a 15-day letter of credit from his bank. “That allowed me to build up capital, rent office space and hire a staff,” says Thomas.
In 1990, he approached the federal government about supplying fuel to the military. The catch was that Thomas had to own a refinery. To meet that requirement, he bought a small refinery from local tax authorities (for an undisclosed price) in Donna, Texas. Based inland, the refinery processed 3,000 barrels of crude oil a day and generated over $8 million in six months. A year later, Thomas leased the Lake Charles plant, ending the need to transfer products overland before shipment.
Thomas is optimistic about Gold Line Refining’s future in spite of threats by the federal government of deeper cuts in defense spending. (See “Black Defense Firms Battle For More Contracts,” this issue.) As one of the few minority manufacturers of petroleum products in the U.S., Thomas is certain he can maintain, and even improve his position. “We’ve made the grade. We’ve passed the tests. We’ve won the bids. We’ve found a home in the industry.”
COPYRIGHT 1992 Earl G. Graves Publishing Co., Inc.
COPYRIGHT 2004 Gale Group