Edition: April 2002 - Vol 10 Number 04
Author: Mark Thill
Over the past 10 to 15 years, as large distributors have acquired more and more small ones, the owners of many small companies have had to ask themselves a hard question: ''Can I make it in corporate America?''
This is the story of several people Bob Wooding and the Cohens who ultimately decided that corporate life was not for them. Both would admit that large companies have something to offer. But both also believe that with bigness comes a certain remoteness from the customer. And that was a prospect that was attractive to neither.
Like Son, Like Father:
Bob Wooding and Arizona Southwest Healthcare Supply
Bob Wooding was pretty comfortable working in corporate America. The son of a Naval admiral, he moved all over the world before settling down in high school in Arizona, where his dad then retired from the Navy became a professor of engineering at Arizona State University.
But his search for excellent customer service led him to follow both his dad's footsteps, as well as those of his son.
After graduating from ASU, Wooding taught high school for two years. But he couldn't help wondering where this career would take him. ''Back then as now teachers got paid a real pittance,'' he says. With that in mind, he applied for and got a job as a sales rep at Clico Laboratories, a laboratory supply company based in Phoenix.
Over the years, Clico shifted many times under Wooding's feet, though he himself stayed put. The company was bought by Schering Medical and Scientific, which became part of Bergen Brunswig Medical/Surgical, which became Bergen Brunswig Corp., which became National Healthcare and Hospital Supply, which ultimately was acquired by Owens & Minor. It was after this last permutation that Wooding left, joining General Medical (now McKesson Medical Surgical) and then Professional Hospital Supply in Temecula, CA, whose vice president of sales John Luyben was a good friend.
But working for corporate America was taking its toll on Wooding. ''The major corporations have forgotten that service is the name of the game,'' he says. Beleaguered by onerous group purchasing contracts, distributors have had to price themselves very aggressively and focus on logistics. ''When you do that, you lose the personal relationships, the personal focus,'' he says.
What's more, some big companies created their own boxes, then made their customers conform to them. In other words, they established policies and procedures to suit them, then made their customers do business that way. ''Customers end up doing business the distributor's way, instead of the other way around.'' And that's no way to run a railroad or a distributor, he believes.
''When I started in the business, I knew a woman at Scherer Monique Lane who said that the way to survive in the next millennium was to do business outside the nine dots,'' says Wooding. The way to do that, he believed (and still does), is to listen to your customers, provide them what they want when they want it, and at the agreed-upon price 100 percent of the time.
The Son's Business
With these thoughts stirring in his mind, Wooding's son, Bryan, expressed an interest in selling Southwest Healthcare, the physician distribution company which he had founded in December 1997. Dad jumped at the chance to buy it, with a couple of partners. The transaction was completed in August 2001, and Wooding renamed the company Arizona Southwest Healthcare Supply.
Wasting no time, Wooding moved the Mesa, AZ-based company into a new, 5,000-square-foot building. With the help of a friend who retired after running a successful pharmacy business, he started a closed-door-pharmacy, which dispenses pharmaceuticals to nursing home patients. The company also began offering its physician customers a full line of injectables. The pharmacy business has grown so fast it now accounts for 460 SKUs Wooding intends to move again, this time into a 10,000-square-foot building.
At $2.8 million in sales, the company also offers durable medical equipment (as well as med/surg and pharmacy supplies) to providers in Southern California, Arizona, New Mexico, West Texas and Nevada. Arizona Southwest Healthcare has a staff of seven, with four sales reps.
Small Guys Can Compete
Small companies that aren't afraid to get the necessary funding, and that control their inventory and accounts receivable ''can compete with the big ones,'' says Wooding. Belonging to a cooperative in Wooding's case, Daytona Beach, FL-based IMCO helps him keep his costs competitive. ''If you make a mistake, don't try to sugarcoat it,'' he advises other small companies. ''Try to find out what happened and figure out how it won't happen again. And if you have a shipping mistake, make sure your driver picks it up next time he's out there.'' ''I love it,'' says Wooding, speaking about running his own distribution business. ''It allows me to do the things I was trained to do 20 years ago. I still believe beyond a shadow of a doubt that this is a relationship business. There's a huge market share for small independent companies that take care of their customers' needs and establish the right client base with a win/win for both.''
Keeping It Simple
The Cohens and Star Medical Distributors
Gary Cohen knows a thing or two about running a business. He and his wife, Roseann, have owned and operated half a dozen of them since they got married 31 years ago. Several have been in healthcare, but some have not. For example, in the late 1970s, they owned a national mail-order tennis goods business. Today, they operate Star Medical Distributors, Fort Lauderdale, FL.
Gary and Roseann first got into healthcare distribution when they opened Facility Supply in Miami in 1986. As an assisted-living-facility administrator, Roseann had discovered that getting supplies was one of the hardest parts of her job. To the Cohens, that spelled opportunity. ''In South Florida, we have no lack of nursing homes or old people,'' says Cohen.
They began by selling paper goods e.g., toilet paper and paper towels to nursing homes. Then, in 1987, Cohen decided that the company should branch out into medical supplies as well. One of its first products was diapers from Inbrand (now part of Tyco). Later, they began handling First Quality products. Before long, the company exceeded $10 million in sales. In 1989, Gary's brother, Myron, joined the company as director of sales.
Given its success, Facility Supply became an acquisition target. In November 1995, it merged with Atlantic Medical Supply, a long-term-care distributor. Less than a year later, the newly merged company was itself acquired by Retirement Care Associates, an Atlanta-based operator of nursing homes. Subsequently, RCA was acquired by Albuquerque, NM-based Sun Healthcare, an operator of long-term-care and subacute-care facilities around the country, and owner of a medical distribution company, SunChoice.
The Cohens stayed with the company until their contract expired in August 1999, two months before Sun and its subsidiaries filed for protection under Chapter 11 of the bankruptcy law that August. (The company just emerged from Chapter 11 on Feb. 28, 2002.) When they left, ''we had no jobs, no nothing,'' he says. But they did have some contacts, and with the help of one of them, opened up Star Medical in November 1999. The company shipped its first goods in January 2000.
''From the time we started Star, we stayed away from Medicare and Medicaid billing,'' he says. The Cohens didn't want their long-term-care customers to perceive Star as a potential competitor for their business. Nor did they want to spend a lot of time on billing matters. ''We tried to do what we do best move boxes, get them to the customer on time, and provide good pricing,'' says Cohen.
It was a good formula. Last year, the company reached $8.5 million in sales. This year, Cohen expects sales to exceed $12 million. With five reps on the street, Star covers the entire state of Florida and parts of Georgia, Alabama and Louisiana. The company is currently evaluating expansion opportunities in the Southeastern United States.
Star delivers 98 percent of its products on a next-day basis, the vast majority on its own trucks. Approximately 40 percent of its business is comprised of long-term-care or assisted-living facilities, between 20 percent and 30 percent home care, 10 percent to 15 percent closed and independent pharmacies, and 10 percent to 15 percent in government and export sales. The company also exports to the Caribbean and South America its private-label Star Touch gloves and its private-label Star Comfort incontinence briefs. It is developing a private-label line of wipes.
Gary serves as company president, Roseann as director of operations, and Myron as director of sales.
Although Cohen shuns corporate life, he's not altogether opposed to it. ''To tell you the truth, we used a lot of what the large corporations taught us,'' he says. ''A lot of what they do is right.'' At the same time, though, he believes that too many big companies ''take a perfectly oiled business, put it in a bag, shake it up, and whichever way it comes out is the way it ends up. In our type of business, you need a little bit more tender loving care.''
The real answers are simple, he says: ''Good pricing, good service, and telling your customers the truth.''