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Source: Small Business School

HATTIE: Hi. I'm Hattie Bryant. If you want to learn how to start, run and grow a business, stay with us for the next 30 minutes. Howard Kent has 30 years of experience you can learn from. Every week here at SMALL BUSINESS SCHOOL we give you the opportunity to learn from a small-business owner who is succeeding at running a business. There are no academics, no journalists and no gurus in our Master Class. A Master Class is led by a pro, and the pros you can really learn from are those who are not just talking about their goals; they're achieving them.

HOWARD KENT: Well, this is the Ironbound section of Newark, which is bound by the Erie Lackawanna and Penn Central railroads back to the Hudson River. So this area of Newark was referred to as the Ironbound section of Newark. It's an ethnic community now, the largest concentration of Portugese people this side of Portugal. They pride themselves in taking care of the community. This street we're in is all residential, and our buildings fit in between them, so we have to be a friendly neighbor.

HATTIE: So you didn't name your business Ironbound Supply because it's iron you're selling?

HOWARD: No. We weren't very unique in deciding to pick what name.

HATTIE: (Voiceover) When you see this, it's normal to assume that Howard Kent is in the plumbing business.

If I walked up to you at a cocktail party and--and I didn't know you and I said, `Well, gee, Howard, what do you do?' what would you say to me?

HOWARD: What do I do? I say I sell industrial pipe valves and fittings. For 15 years, my wife says, `He owns a plumbing supply.' And I said, `Plumbing supply? We don't handle anything in plumbing.' But she couldn't associate pipe valves and fittings with an industry or anything, so she'd say, `My husband's a plumber. He has a plumbing supply.' But we have an industrial pipe business.

HATTIE: For 15 year? Do have you convinced her now?

HOWARD: I don't know if I convinced her, but she says now, `He owns an industrial pipe valve and fittings supply house, isn't that correct?'

The pipes that we sell would be used in an office building to supply the heat chemicals. You can't build any type of a structure without needing pipe valves and fittings to do it.

HATTIE: Were you selling this product 30 years ago?

HOWARD: Not only this product, but the exact same product. Copper tubing, steel pipe, plastic pipe has not changed at all in 30, 35, 40 years, 50 years.

(Voiceover) It's the exact same dimensions, it's made from the same alloys, and better technology of manufacturing the item today but the item itself is the exact same thing. The only thing we do different today is how we track the movement of the inventory, how do we track how much we have in stock or how little, or who we sold it to, when's the last time we sold it. That we're able to track very quickly.

HATTIE: (Voiceover) Tell me how this all started 30 years ago.

HOWARD: Well, my father-in-law, who is still in business--he was a big heating-technician contractor--and he decided to maximize his profit. He would like to buy direct from the manufacturers. Well, they wouldn't sell a contractor direct; they only sell supply houses direct. So he said, OK, he'll open up a supply house. And I was working for a corn products company at the time and, lo and behold, after a year, I became the Eastern regional data processing manager for corn products, and I was looking to leave, and my father-in-law said, `I started this business, someday this may be yours, you should learn something about it.' And I said, `OK.' I left there, and I came to work for what I thought was, like, the old-time country store. There was no pots and pans hanging from the ceiling, but pipe fittings and valves and everything else didn't seem to be a very elaborate way to make a living. And we only had one customer at the time, which was...

HATTIE: Your father-in-law. Right.

HOWARD: ...his own company was selling to the family; had no inventory, so to speak, no trucks, no equipment. So we had one customer and, little by little, we started to look for other customers and found out that there's a need for these items and found out it's a very profitable field to be in. And then through the years, as things evolved, we ended up picking up more products and more lines and a lot of customers. My father-in-law is a customer today. They're still in business, he's still running the business. He's now 80 years old.

HATTIE: Wow.

HOWARD: So that means that business has been successful, or over 55 years in business. And many things have changed through the years, yet our community here in the ironbound is the same, and I'm still selling the same pipe valves and fittings that I did 30-some years ago. It's just the way that we keep track of it and--and look for that business that has changed; the marketing of it has changed.

One of the major reasons that I did leave, -- I was 25, married and my wife was pregnant at the time -- we had to think of my livelihood for the future. But I did find, coming into the archaic business, that it was very profitable and you could make money, and that within two years, three years, I could be making more money than I could have for a big corporation going up the corporate ladder and having a lot of people to answer to, where here I only had to answer to myself. So I decided if I put forth the effort, let's see what happens. And after one year, I was firmly convinced that this is something I thoroughly enjoyed because it wasn't work, although I would get in at 7 in the morning and leave 5:30, 6:00 at night, and that was six days a week. But the rewards were for my family because we got the financial rewards and I was getting the pride, the fulfillment, the things you can't measure in dollars and cents, besides the money on the bottom line. So I was very happy that I made that career move.

Ten years went by, and I had built the business up to--we had a lot of customers, a lot of inventory, had employees, and went to my father-in-law and said, `Jeez, Dad, you know, you own the business and I'm just your son-in-law. How about selling me the business?' And at first, he was adverse to it, and we made an arrangement and then I bought the business from him. And at that point, I really felt a sense of pride because now I'm 35 years old and gonna buy the business over a 10-year period of time from him, so by the time I'm 45, I'll fully own the business, and it's up to me to make sure that during that 10-year period of time it's successful because I gotta support my family, but I also have to pay off my obligation of paying back the loan for the business.

HATTIE: Right. So he carried the finance. I mean, he financed it.

HOWARD: Right.

HATTIE: He carried the payments.

HOWARD: This building has gotta be over 100 years old.

Incorporating Technology

HATTIE: (Voiceover) Even though he left a job and a big company behind, Howard has always looked for ways to treat his small business like a big business, especially when it comes to technology.

HOWARD: Well, I used the technology when we first went in business to try to get rid of writing an order on a piece of paper and a pad, try to get that automated as much as possible, because being the only employee, I wanted to be able to do as much as I could as quickly as possible, as efficiently as possible. So I looked to technology, a small computer or whatever, to aid me to do it that much faster.

One of the major changes that we did after selling the same commodities, which I've said many times, pipe valves--and they've been the same for 30 years--the only thing that's changed on that is the marketing of it. Years ago, we still sold it one on one, face to face, a piece of pipe; you're putting up a building, fine. But with the advents of computers and advents of telemarketing, we can now find out how much we have in stock instantly: How much did we sell of this item year to date? This year? Last year? Are we increasing our sales of this? Decreasing our sales of it? What's the cost? Keep track of it any way we want. We can tell when a customer last bought it: How much did they buy? How much did we make from them? When did they use this item? Is it as seasonal item? This has enabled us to cut our inventory by a third, increase our delivery time--I mean, turnaround time--to a customer, getting them the material that much quicker, that much more efficiently, and yet decrease our inventory so put that money to work someplace else.

Through the advent of the computer, we do telemarketing, faxing out to customers nightly, by SIC codes, not selling the material, just letting them know who we are and what we have to offer.

HATTIE: One SIC code gets XYZ message; another SIC code gets ABC message and it's faxed to them overnight...

HOWARD: Overnight.

HATTIE: ...at a low rate.

HOWARD: A low rate and...

HATTIE: And your machine does that for you.

HOWARD: Machine does it all for us, so overnight we've contacted 200 customers for about $15. And the next day, we have a receipt saying that it was either received or it doesn't--wasn't received; you know a fax was read and you've reached a couple hundred customers, or potential customers, overnight.

HATTIE: So you've tracked that and you know you're getting business from it.

HOWARD: There's no a--question. We've got good responses from it. Customers either say, `We need your services, send a salesman,' or in many cases, it's led to an on-the-spot order, where they need the services immediately, we can turn it around and do it for them, and we've got the order. So that is something that a couple years ago was not available to us. And now with the technology advances that we've had in the last five, six, seven years in PC computers, it's unbelievable. They can put the cost of-- any small business owner now can buy a PC for $1,200. That's enough to help run the business and then get some software in there and program and custom tailor it to keep track of the business very quickly.

Lightbulb.

HATTIE: Howard Kent has been selling the exact same products for 30 years. Yes, he's added some new bells and whistles, but basically the pipe valve and fitting business hasn't changed much. What has changed is the way he sells pipes, valves and fittings. His infrastructure is a small but powerful computer. He and his salespeople use this hot technology to stay on top of customers and prospects and even anticipate their needs.

For example, the computer sends out 200 faxes every night. Each customer's buying history and their fax numbers are entered into the system. And the computer knows who should receive what messages and when. Doing $3.5 million in sales isn't easy, even if you've been in business for 30 years. Take it from Howard Kent, you must find ways to keep your name in front of even the most loyal customers and find new customers and invest in technology. He's already on the Internet selling pneumatic pumps. And what was once a local, simple business, is now dependent for survival and growth upon technology and going global. Let's go to his Web site.

The Internet

HOWARD: (Voiceover) As far as I'm concerned, a Web site would be good if you had a total unique item that you would like to sell; then you get a Web site. But if you just want to say, `I have a Web site,' and look at yourself up there it's not gonna do anything for your business.

Because if you're selling a toilet --a white toilet and you look on the Web, there's five million people selling white toilets. But if you're looking for a specific brand and a specific color that's very unique, now something like that on the Web can bring a buyer right to you.

HATTIE: In Howard Kent, I found a man who has balanced high-tech with high-touch. Technology is important, but he still believes that the people in the company are its most valued asset.

Employee Management

Unidentified Man: I'll probably stop in tomorrow around 11 and...

HOWARD: You have to bring people in to help you make it grow because you can't do it all yourself. You've got to be able to back off now. You've gotta be able to relinquish control so that the employee is intent on running the business. If not, your business always stays small because you've gotta be the chief cook and bottle washer and have such a tight control you prevent other people from doing their thing and the business doesn't grow.

HATTIE: So why do you think people don't teach the employees that they hire what the employee needs to know to be successful?

HOWARD: I think it's because they fear if they teach them too much and they're too good a teacher, they'll leave and go down the street and start their own business or go to work for their competition who may be bigger and ends up putting them out of business. You've got to have a feel with that employee that you--well, you're living with someone, basically, all day long. You spend probably more time with them at work than you do with your family, at least awake hours, anyhow. And after a while, you know what their motivation and what their goals are.

HATTIE: You do?

HOWARD: Well, you hope to by communicating with them as far as where do they want to be five years from now? What would they like to do? If you make it, share it, because the more your employees working for you see you're successful, the business is successful, they want to be successful. But if you're successful, you're making the money, and they come to you ask for a raise and you say, `No way, I can't afford it,' when you can or you don't want to give it to them, you get resentment. I always say it's like the cogs on a wheel. Every one in a small business has to be pulling their own load and be happy in what you're doing, working together. You can't have one person pulling the oar in the opposite direction.

This is Scott Gross. He's our vice president for Ironbound Valve Actuation, our Actuation Division, and...

HATTIE: Howard is not resting on laurels. He has started a whole new company with an 18-year Ironbound veteran at the helm.

OK, Scott, can you explain what is an actuated valve?

SCOTT GROSS: An actuated valve--basically, what we're looking at is...

HOWARD: OK, when I hired Scott, Scott was 17, 18 at the time.

SCOTT: This is a valve with a pneumatic actuator on the top.

HATTIE: This is the valve?

SCOTT: This is the valve. This is the actuator.

HOWARD: His brother, Don, was working here, working at the counter, and I needed a driver, and he was the legal age, he came in and started driving. And from driving--he was aggressive--he came in and he started working the counter, and after working the counter for a couple years, we brought him on inside sales. And from inside sales, he started to learn about the computer system and started doing computer input and data entry. And then from there, he was working in the office as the office manager and then, finally, to the vice president. And a very, very competent, hard worker. He's in early in the morning, stays late at night, does work on the weekends, because he feels he has to do these things to make a good salary for his family and to help the business survive against the big corporations that are out there that's our competitors.

HATTIE: And Don's been with you...

HOWARD: Don was with us about a year before Scott. Don's our outside sales manager, and he's been calling on contractors, industrials, commercial accounts, hospitals and every type account in New Jersey and New York for the last 18 years.

SCOTT: (Voiceover) What this component does--with a supply of air pressure, turns a rotation of the pistons within the actuator, which opens and closes this valve.

HOWARD: We're just replacing the man with the pan wheel or the lever. We would say, `Open the valve because I want so much flow,' and he opens it and says, `Hold it, that's far enough, and now close the valve.' Well, we can do the exact same thing with an actuated valve much, much more accurately, cheaply. It works 24 hours a day, seven days a week, 365 days a year; very inexpensive and there's no hidden payroll costs for it. And hopefully, this will continue to grow as fast as it's been growing for us.

Since 1964

HOWARD: Plan your work and work your plan, so that if you plan to do something, how are you gonna do it? You have to implement it. So if you plan it and then you work at your plan, when you do succeed, it's not by chance and it's not by luck; it's just that you followed your game plan. And it takes a lot of discipline to follow through on it. You make a lot of mistakes. You may go ahead and think what you're doing is correct, and only to find out you've dead-ended yourself and it cost you a lot of money. But you hope to learn by that discipline.

I mean, I've been in business for 30 years. Besides being older, if I went in business today, the only advantage I'd have is all the acquired knowledge I have today over then, so I know I could be successful today because of the acquired knowledge.

HATTIE: And that knowledge came from failure, some.

HOWARD: Oh, a lot of failure.

HATTIE: Talk to me about some of those mistakes. You know, you're in this core business. Have you wavered off? Have you tried other things that failed?

HOWARD: Oh, yeah. I remember years ago, a friend of mine that's in the insurance business decided--we play tennis all the time recreationally--that we would make a training device for tennis. And it was a PVC frame that you hit through. It was just like a picture window on stilts. And we decided to market it. We got endorsements by major tennis corporations and major tennis players had used it; made friends with Arthur Ashe, Billie Jean King, Colin Dibley. They had hit through our trainer; they'd used it. We got endorsements by it. We became the world's largest manufacturer of an Encore training device, only 'cause we were the only manufacturer. And after two or three years of doing this, we realized we'd made a lot of friends, had a lot of fun and we're enjoying what we're doing; we're not making any money.

HATTIE: Uh-oh.

HOWARD: We're losing money. The bottom line: Each year, we're putting money into this. And finally, I said, `I can't enjoy this hobby anymore,' because that's really what it came down to be because it wasn't a business paying for itself. And most businesses either succeed or fail within the first three years. First year, particularly, we had the financial resources to keep it going, but we figured, `OK, that's enough.' I turned my stock and everything over to my partner for $1. He inherited the business and he kept it for two years, and then he sold his end of it. And we're out of business, but like I said before, if you don't try something, you don't know, and you can't be afraid to fail. And when you do fail, you learn by it, so don't deviate into another field from a field that you know well that you can be successful in. You got a niche, and I guess that's the biggest success of small businesses: They have to have a niche market, know what the niche is, know what the market is, and then work at it, but don't get jealous, when you start to see your business grow, that this other guy's got a bigger business, growing faster, and it's a different market you know nothing about, but it sounds good, so you get into it, and then two years later, you're selling your business for $1.

HATTIE: Do we have to tell ourselves that, `Maybe if I'm in pipe that tennis isn't my game as a business,' or get used to the idea that if you switch over to that industry, in this case tennis, it's gonna take--it could take 15 years to get in that where you got with this?

HOWARD: Well, I would say the key to that, Hattie, was the fact that we went into the tennis business on a part-time basis, and you cannot make a small business succeed doing it part time. If we would have put both of our efforts into it 100 percent of the time as full time as we did, I have no question at all that we would have made it into a profitable business. Now profitable enough that we can enjoy the same standard of living we have now? I doubt it. But we didn't. We gave it part-time service and we were hoping that it would succeed, and because we couldn't give it the time and effort that it needed to nurture it and develop it and handle it properly, well, it's out of business.

HATTIE: OK. So all these infomercials on TV about `Get started in business part time, work from home for a few hours a day. You'll get rich'--what do you think?

HOWARD: I think that's somebody having a business, looking to get people to work for them part time without paying a full-time employee. And after six months, when you found out it didn't pan out, you no longer work for them, and they find enough of those people, they got free employees. Because how many of those people started those little one-home operations today have their own businesses? I have a lot of friends of mine that tried it, and I know for a fact, not one of them ever succeeded.

A motivational speaker, Ann Powerden, said, `Look, close your eyes, relax, let your arms go at your side. And I want everybody to raise your arm above your head as far as you can, stretch it out. OK. Relax, bring it down to your side.' It's easy enough. `Go ahead. Do the same thing, only this time, try to give me an extra quarter of an inch.' And you reach up, put it to your side. OK. `Now do the same thing one more time, put your arm up and try to give me an extra foot.' Can't do it.

HATTIE: It's not there.

HOWARD: It's not there. It's impossible. I can't reach my foot. The mind rejects the idea and gives up completely. But by saying, `Give me an extra quarter of an inch,' the mind will accept that challenge and, therefore, you will try to do it. So in business, I would say we have to try the extra quarter of an inch. And I've been doing that years with my employees. `I just want a little bit more from ya.'

At the beginning of the year, everyone comes and says, `We want a raise. It's next year.' OK, that's right. So is small business gonna say, `Fine. What do you want, 1 percent, 2 percent, 3 percent, 5 percent?' `What are we gonna get for a raise? Are you gonna be 5 percent more efficient for me this year? Are you going to be worth 5 percent more to me this year?' Why should I pay you more? If my sales stay the same and my profitability stays the same, I just lost money paying you a raise. I don't want to do that. How can we do it?'

So each employee has gotta reach inside and say, `I have to try for that little quarter of an inch today, quarter of an inch tomorrow.' Every day, when they come to work, they've gotta be properly motivated to try to do the same things you do. You may be motivated in what you want to do, but if you can't motivate the employees working for you also to do it, you can't be successful. You all have to be on the same wave...

HATTIE: But it starts here.

HOWARD: You have to say to them, `We're all working together,' and you gotta lead them and show them that you're willing to work hard and you appreciate their work and everybody works together.

HATTIE: In that you're the one demonstrating first and showing that you're stretching for the quarter-inch first.

HOWARD: Well, that goes without saying. If I would expect them to do more work and work harder or be more efficient, and then I'm slacking off and I'm not doing it, then they say, `Why should we do it? We're just making money for him,' and I'm not the one doing it. So you can't slack. You're forced to continue to stay on-guard, even when you don't want to, only because the employees expect that from you.

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