crains-ny_logo

Low-tech firms’ glowing growth

October 03, 2010 5:59 AM

‘Old-fashioned’ companies’ nimble strategies succeed

By Fran Hawthorne

As a steady stream of people strode in and out of the CVS drugstore in Park Slope, Brooklyn, one recent morning, a handful glanced at the 5-foot-tall red billboards for Olay Regenerist serum that guarded the entrance like sentries, attached to the store’s two security pedestals.

Consumer spending may be down, but those mini-billboards have become a booming business for 5-year-old StoreBoard Media, which has 82,300 of them placed in nearly 14,000 outlets, such as CVS, Rite Aid, Duane Reade and Kmart. With $5.2 million in revenue last year, up from $4.7 million in 2008, the profitable Manhattan-based firm has made it onto Inc. magazine’s list of the 500 fastest-growing private companies for the second year in a row. Sales are up from $394,000 in 2006.

crains-photo SILICON VS. CARDBOARD: StoreBoard Media’s Rick Sirvaitis (left) and Doug Leeds run one of the fastest-growing private companies.
“We found a need at the right time,” says Doug Leeds, chief executive of the nine-employee firm.

Think of small, nimble, fast-growing companies, and the first phrase that comes to mind is likely “high-tech”. But some of the most rapidly expanding firms that do business here provide seemingly old-fashioned items, like StoreBoard Media’s cardboard billboards.

Many have maximized the advantages that come from occupying niches that help others make money or save cash. Other factors are important, too, including a focus on long-term planning, careful cost-cutting, and the kind of customer service that fosters loyalty.

Flexibility counts

A number of the low-tech businesses that emerged from the recession in fighting shape showed a willingness in their business plans to prepare for contingencies, says Alfred Titone, deputy director of the U.S. Small Business Administration’s New York district office.

“They made sure their credit was good and they had enough capital on hand,” he says. “They didn’t overextend themselves.”

Preparation helped Vera Moore Cosmetics recover quickly when a department store’s offer to carry its all-natural, plant-based products fell through about a year ago. The family-owned company—which had sold its wares online and through a handful of shopping-mall kiosks in Manhattan, Queens and Brooklyn and on Long Island—had arranged a $100,000 bank line of credit and invested $75,000 in the bar coding and boxes that a retail chain would require before things fell apart.

But within a few months, President Vera Moore had worked out a deal to sell her firm’s products in about a dozen Manhattan Duane Reade outlets that were setting up in-store boutiques. With sales humming, Ms. Moore foresees doubling the number of Duane Reade stores that carry her products next year. Looking further ahead, Ms. Moore notes that Walgreen has acquired Duane Reade.

“We could be national!” she declares. Not bad for a set of kiosks run by a staff of five.

Some of New York City’s low-tech firms have managed their finances so well that they’re now poised to expand their sales efforts and profits through industry consolidation.

“They’re in a position where they can invest,” says Jeffrey Carr, executive director of the Berkley Center for Entrepreneurship and Innovation at New York University’s Stern School of Business.

For instance, Patson Corp., a metal fabrication and finishing company in Williamsburg, Brooklyn, paid close attention when it saw manufacturing return to American shores because of rising transportation costs, just-in-time inventory practices, and “a sense of pride when it comes to manufacturing in the U.S.,” says Patrick Mullare, vice president of business development. Those returning businesses need the garbage cans, tubing, sheet metal and other products that Patson fabricates, he reckoned.

Fruitful expansion plans

Mr. Mullare invested in expansion, building his company from three employees and $300,000 in sales last year to five employees and an expected $375,000-plus this year. He is now in talks to buy out a competitor three times his company’s size, whose owner is retiring without an heir apparent.

Garbage pails may not be as sexy as the latest Silicon Alley products, but that doesn’t mean they can’t spark an exciting growth strategy.