Monday, October 15, 2007

Alice And Vulcan Incorporated - Only In America

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Vulcan Incorporated President and Chief Executive Officer at Vulcan's Christmas party, 1988. I proposed to Alice that evening after the party, five weeks after we met.

Belatedly following the advice of my buddy, Sam, I joined the Gualala Rotary several years ago. As with new members, they quickly scheduled me to do a presentation, presumably about myself, at our lunchtime Friday meeting at St. Orres. Without spending much time thinking about what I would say, I chose to talk about Alice and her company, Vulcan Incorporated, plus how we met through Great Expectations, a video dating service. Many Rotarians have since remarked that they were surprised, and pleased, that I chose to talk about Alice instead of myself. It’s not that they’re not interested in my All-American Boy story; it’s just that Alice’s story is much more interesting and compelling.

First things first, Alice and I met through Great Expectations in 1988, the year that my first wife, Marilynn, died of breast cancer at the tender age of 43 less than two months after our 25th anniversary. When we met, Alice already had a very successful small business, Vulcan Incorporated.

Over a decade before we met, Alice divorced her first husband and went back to college while raising her two daughters and working as a waitress in Dublin, the town where they lived in northern California about thirty miles east of San Francisco.

After she completed her degree in Political Science at Cal State-Hayward, her first job was as a Pre-Trainee at Mervyns, with the goal of becoming a Buyer. She soon found each day on the job was a miserable experience, because she had to stand for long periods on her very flat feet. The pain in her feet hurt her concentration and performance, and soon Mervyns informed her that she was not management material.

For her future success, being fired by Mervyns was one of the best things that happened to her.

While a divorcee she had several boyfriends, none of whom were serious marriage material. One boyfriend introduced her to selling, primarily of industrial products like welding rod. She soon realized that she was better at selling and was a much harder worker than the boyfriend. He did make one valuable contribution to her future in sales, when he introduced her to such principles or clich├ęs of selling as: “Find a need and fill it.”

As Alice worked hard, much harder than the boyfriend, she took “find a need and fill it” as her gospel of selling, and one day while visiting Karl, the plant manager for a major boxboard manufacturer, she asked him if there was something the company had difficulty buying.

He was an Italian-American, a flirtatious but fatherly figure, and looking at the leggy young blonde, who was looking back at him with an intense and serious expression, he replied: “Honey, baling wire. Even the farmers are having a hard time buying baling wire.”

“Karl, stop joking, be serious,” she told him, but he just said “follow me,” and showed her the automatic baler that was fed cardboard box scrap through a pneumatic system that gathered scrap from wherever box board was trimmed throughout the plant. She watched as wire was dispensed from hundred-pound spools, threaded around the baled cardboard, and automatically tied when the bale was formed.

The reason baling wire was in short supply was that our government, in October 1974, under the “big government” tendencies and inept leadership of President Ford, was in the throes of one of its usual mindless schemes to do something it had no business doing. In this case it was attempting to control inflation through voluntary and mandatory actions, such as price controls. Do you remember “WIN”? “Whip Inflation Now”?

As is the usual result of unwarranted government meddling, WIN just made matters worse. In the case of baling wire, the price controls on steel production penalized producing low-margin products like baling wire, and favored diverting production to high-margin products. Very quickly baling wire was in short supply, and Alice was unknowingly knocking on the door of opportunity.

She seized the moment, and told Karl she would get him the wire he needed. Soon she found some wire, bought it with a check on funds she knew she didn’t have in her account, and had her boyfriend drive the truck to deliver it. She also prevailed on Karl’s company to pay her immediately, instead of paying through the usual accounts payable cycle, so she was able to get the funds in her account before the check from her supplier hit.

Unfortunately, her wire did not work properly in the automatic baler. Fortunately, Karl did not request a refund and gave her another chance. The second batch of wire worked, but it wasn’t on spools. The third batch was the charm, because Alice worked very hard researching and phoning to get spooled wire. Thus was Alice’s industrial baler wire distribution business launched.

During the Vulcan start up period, her office was her guest bedroom (she replaced the bed with a cheap used desk) in her Dublin home. Before hiring any employees, Alice didn’t want Vulcan to appear to be the little “shoestring” company it was, so she employed a telephone answering service to take calls and transfer them to her home. A sixteen-year old local bakery girl was soon lured away from her cakes to become a part-time employee. The business quickly progressed from purchasing wire directly from suppliers for delivery, to renting warehouse space and services.

While still in her home office, Alice had to worry about cash flow because one of Vulcan’s customers was always slow in paying their account. Alice called the owner, and he promised they would have a check for her after work. Alice went to the company’s office to get her money, and was told it wasn’t ready. She then demanded to see the owner, and was told that was impossible because he was in an important meeting. That was the wrong thing to say to Alice, and she immediately walked past the receptionist, banging doors open, then went up the stairs, barged through a door into the meeting, and demanded: “Who is Bob Sherman?”

“I am,” a slight man at the head of the table answered. “What do you mean by this?”

“I came for the check you promised.”

“Then was then, and now is now, and now we don’t have the money.”

“I’m not leaving without my money,” Alice shouted, then threw her portfolio briefcase at Sherman, narrowly missing him as it curved in flight like a boomerang. “Pick it up!” she shouted after the near miss.

“You pick it up!” Sherman shouted back.

One of the bystanders picked it up and rearmed Alice.

“Get out now,” Mr. Sherman demanded, “or I’ll call the police.”

“Give me the phone,” Alice replied, “and I’ll call them myself.”

"Not on my dime!" Sherman roared, and ordered his men to: “Get her out of here!”

Two big men picked up the chair with Alice in it and carried her out the door to the top of the stairs, but didn’t know what to do next. Then Sherman came to their rescue, pulled Alice out of the chair, and started to carry her down the stairs. Although Alice only weighed 135 pounds, she was bigger than Sherman, and he only carried her down two steps before he dropped her.

Alice bounced down the steep stairs on her shapely rear, her slick polyester dress speeding her descent, and landed at the bottom with aplomb and without physical damage, with her papers and briefcase still clutched in her arms. She stood up, glared at Sherman, and shouted through clenched teeth: “See you in court!”

She then grabbed the door to slam it on her way out, but the pneumatic door closer dampened the drama of her exit.

When she returned to her home office, her receptionist said Sherman’s company had called and said they were mailing a check, but that they wouldn’t be doing any more business with Vulcan. “I told them there must be some misunderstanding,” she told Alice, “and that I'm sure Alice will straighten it out.”

Alice thought Vulcan would be finished when word got out about her confrontation with Bob Sherman, but it was the opposite. The Bay Area refuse collection and recycling industry was abuzz with the story of the “little lady with balls.” In fact, Alice was soon invited to join the California Can Carriers Association, made up of former garbage men who had worked their way up to management and sometimes even ownership of their garbage companies. Alice didn't have to seek out contacts. Due to her new notoriety, men came to her and introduced themselves. Vulcan's sales then increased rapidly.

As sales rapidly increased, a second and then a third employee was added, and then all began tripping over the waste baskets and bumping into the desks. The former guest bedroom no longer sufficed, so Alice rented an office nearby. It was an attic space over a regular office, and was not air conditioned. During the summer the heat was unbearable, and Alice quickly relocated Vulcan before her employees left her. She moved Vulcan to a recently abandoned Red Carpet Realty office, which still had the red carpet.

While there, a competitor sent an employee to intimidate Alice into selling her business to him cheap. The first of many competitors learned that Alice can’t be intimidated.

Although Alice’s father, George, at the time had never had a computer of his own, he came up from his home in southern California and helped install Vulcan’s first computer system. At the time the business was growing so fast that George asked Alice to tell the newly hired salesperson to slow down because the computer couldn’t keep up. His request fell on deaf ears, and eventually the computer caught up.

In the course of the fourteen years that passed before we met in 1988, Alice moved Vulcan into increasingly nicer office space. When I met Alice on October 30, 1988, Vulcan was an all-female company located in a very nice office in Pleasanton. The office space was so desirable, Vulcan sublet space to an attorney and to a medical supply sales representative.

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"Laissez les bons temps rouler!"
1992, Santa Catalina, Alice and I celebrate mass 50th birthdays with her Reseda High classmates, with Vulcan on a roll. Casino (with Avalon Ballroom on top) behind us.


However, in the early 1990’s Vulcan lost their biggest customer, which had reorganized its purchasing and warehousing in northern California and started purchasing wire directly from the manufacturer. Alice gave herself and everyone in Vulcan a pay cut, and soon rented a combination office and warehouse in the industrial part of Hayward, bought a forklift, and added a warehouse man/forklift driver.

Alice also learned computer spreadsheet formulas, and worked many hours on the computer in our Livermore home designing a spreadsheet that her employees could use to predict when and how much of what type of wire a customer could be expected to need soon. Alice’s customer order prediction spreadsheet replaced a manual system she had developed years before. Alice was inspired to create the spreadsheet system when she and her office manager tired of teaching new employees simple algebra. She had only been able to hire one employee who didn’t need training in simple algebra, an elderly gentleman already drawing social security.

Alice copyrighted her spreadsheet, which made it much easier for Vulcan to bring on new employees to handle routine customer reorders. It also gave Vulcan a very good tool for managing its inventories of various lengths, widths, and types of wire in order to meet customer requirements on a timely basis.

During the “lean” period that led to the move to Hayward, I was laid off in 1994 after ten years at Lockheed. As we say in Defense Contracting, “Peace is Hell,” and Lockheed was losing one direct contract after another as I labored in an overhead position as an Environmental Protection Auditor. While drawing unemployment pay, I started working in small business brokerage at Business Team in Walnut Creek, quickly listing seven businesses, but couldn’t find any buyers. Luckily for me, I soon found a position as Accounting Manager with a small defense contractor in Sunnyvale. Alice volunteered to take over my listings, and began working at Business Team but soon tired of the mind-numbing paper shuffling she had to do without any clerical assistance.

The Business Team office manager soon noticed that Alice was not enthusiastic about the work, and suggested it would be best for all concerned if Alice moved on to other things. Alice was glad to be asked to leave, and as she packed up her things, she told another agent she had been fired. That upset the other agent, but Alice reassured her she was happy it happened. At that point the agent told Alice that she was the type of owner small business brokerages hated. When Alice asked why, the agent explained that good businesses like Vulcan, with a healthy owner, no divorce or family squabbles, and not suffering any other major afflictions or catastrophes, would not go on the market at a sacrificial price, and therefore would be very hard or even impossible to sell. Buyers are looking for businesses in distress to buy at bargain-basement prices. No one wants to pay what a successful business is worth.

Working at Business Team and gleaning this piece of information was another of the best things that happened to Alice. Up to that point, she had often and seriously thought of selling Vulcan, but now she realized that she couldn’t get good value for Vulcan by selling it to a buyer. This inspired Alice to creatively find another way to “sell” Vulcan, and she began investigating “sweat equity” schemes.

By far the most significant change Alice brought to Vulcan was “sweat equity” ownership for her key employees. One of her competitors had been hurting the sales of all the other wire manufacturers and distributors, including Vulcan, by aggressive price cutting. Unfortunately for the competitor, he cut prices too aggressively and didn’t fully cover his selling costs, which landed him in bankruptcy. Suddenly, Alice had an opportunity to hire Mike, the competitor’s best salesman, who had done such a good job of selling that he had almost destroyed Vulcan.

Alice couldn’t immediately offer Mike, who still lives and does most of his work in southern California, the kind of money he had been making at his bankrupt former employer, but she thought of a better deal. She would offer Mike the opportunity to earn shares of Vulcan each year, and to one day become the majority shareholder. In exchange for giving up her shares, Alice accepted a salary with annual inflation adjustments, good until age 110.

Alice also extended the offer of Vulcan ownership to other key employees: her loyal and reliable office manager, Pat; and Theresa, her personable salesperson for the northern California territory. The sweat equity system Alice established enabled her to keep her “Big Three” running Vulcan with expertise and stability rarely seen in a small business. Mike soon led an expansion of Vulcan into manufacturing, followed recently by the purchase of a 14,000 square-foot building in Hayward to combine office functions, manufacturing, and warehousing. During Mike’s tenure at Vulcan, gross sales have increased from roughly a million dollars a year to approximately $8 million now.

Vulcan is prospering well into its fourth decade, and is the industry leader in California for sales of industrial baler wire.

Alice and Vulcan Incorporated are truly an “only in America” story. She saw an opportunity and went after it holding nothing back. Along the way she found she had abilities that even surprised herself. She started a business in a historically all-male industry, and succeeded when other larger, more experienced competitors found it easy to fail.

Along the way she showed a remarkable ability to turn setbacks into successes:

She may not have been Mervyns management material, but she’s a great manager when she’s the boss.

When she was thrown out of Sherman’s meeting, she landed on her feet and gained a big reputation and instant respect in a tough, all-male industry.

When she lost her biggest customer, she started doing her own warehousing.

When she couldn’t hire employees who understood simple math, she developed a computer spread sheet for predicting sales that has kept Vulcan far ahead of competitors’ systems.

When a competitor tried to destroy her, the competitor went bankrupt, which enabled her to hire the top salesman of her dreams.

When she was fired from Business Team, she developed a way to “sell” Vulcan to its employees, and receive a generous salary.

It seems each setback Alice faced resulted in her doing better than she would have done otherwise. “When life gives you a lemon, make lemonade.” “When things look darkest, that’s your chance to shine.” “When the going gets tough, the tough get going.”

Each of these describes Alice, but the one that fits best is the one she earned from a real tough audience many years ago. She’s the “little lady with balls.”

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