Change is inevitable. That’s what Tilmon F. Brown realized in 1994 as he stared early retirement in the face at age 49. As Interstate Brand Corp. launched a takeover, Brown knew his high six-figure salary as vice president of sales at Continental Baking, which made Wonder Bread and Hostess Cakes, was no longer secure, so he had to act fast. What happened next was divine intervention. Brown received a call from a good friend concerning a partnership to purchase a faltering manufacturer of soft rolls and English muffins.
Brown, who had been in the baking industry for 40 years, was a great candidate and felt that the call was a sign to follow his long-time dream of becoming an entrepreneur. “Too much fell into place too perfectly for it to be a coincidence,” recalls Brown. “My wife and I prayed on it, and I decided to do it. I left Continental on a Friday and walked into New Horizons on a Monday.” Brown structured a deal to form the new entity, New Horizons Baking Co. (No. 75 on the BE INDUSTRIAL/ SERVICE 100 list with $50 million in sales). He would eventually own 51% of the company, cut expenses, secure capital investments totaling $18 million, and grow revenues by 33% in 10 years.
Brown is just one example of how entrepreneurs can use change to their advantage. Growth and opportunity, however, mean different things to every business owner. For some it means diversification to ensure that a company is not tied too closely to one client. For others, like John F. Carter, president and CEO of Carter Brothers L.L.C., it means aggressive expansion nationally and internationally to become an industry leader. These savvy entrepreneurs are among this year’s
Freshman Class-the newcomers to the BE 100S. They were able to build thriving enterprises by taking calculated risks, building sound strategies, and acting on their visions. The result is successful enterprises with substantial revenue growth and the profits to match.
THE MASTER PLAN
When Brown, now 61, got that fateful call from John Paterakis, chairman of Northeast Foods, he had been responsible for nearly $2 billion in sales at Continental Baking. Still, he felt the need to become an entrepreneur, diving into the new venture with Paterakis and Peter Grimm.
Brown joined the company as president and CEO, Paterakis became chairman, and Grimm was named secretary. Their first order of business was to hammer out a buy-sell agreement. With Brown owning 20% of the company and each of his partners owning 40%, the agreement stated that once debt was cleared, Brown would expand his ownership to give the company minority-owned status. McDonald’s (one of BLACK ENTERPRISE’S Best Companies for Diversity in 2005) wanted to groom Northeast Foods to become a minority supplier. The partners were able to pay off the debt owed to JP Morgan Chase bank in 2002, and Brown moved to get controlling interest.
Going into the venture, Brown understood that New Horizons and McDonald’s had a unique relationship. The two businesses had agreed to the terms of the relationship on a handshake-which is the fast-food giant’s corporate policy for suppliers. New Horizons would provide McDonald’s with a continuous supply of buns in perpetuity for about 1,300 restaurants-approximately 10% of its U.S. business-in Michigan, Ohio and West Virginia. Brown was assured by Paterakis, who had done business with McDonald’s for nearly 40 years, that the restaurant would honor its end of the bargain.
The potential problem with this type of agreement is that McDonald’s is 85% of New Horizons’ volume. The agreement precludes Brown from seeking other clients in the quick-service restaurant industry, so he’s diversifying his client list by adding other food-service companies.
The next goal, says Brown, was to turn the company around and build it into a stable, money making enterprise. “My first set of challenges was coming to grips with the fact that there was no big brother up there who was going to pave my road for my future. I had to make those decisions that would impact my future.” Within the first week, Brown and his team sat down to identify ways to trim fat and increase profitability. First they reduced unnecessary manpower, dropping down to 205 employees from 345. Then they automated several tasks, which improved productivity and decreased workers’ compensation claims by 20%. The final step involved disbanding the corporate office and splitting it between the bakery locations in Norwalk, Ohio, and Fremont, Indiana, to save money on rental space. In seven years, Brown was able to invest about $18 million in capital improvements.
In 2003, the company decided to diversify its customer base and develop several noncompetitive customers outside of McDonald’s, including ALDI, Michael Foods, and Schwebel Baking Co. Over the last 10 years, McDonald’s began shifting its menu to offer more salads and chicken products, Brown says. This left New Horizons with the equipment to produce a lot more buns than McDonald’s needed, and the excess capacity was costing both companies money. “If I have excess capacity and you are the only customer that I have, who eats all of the overhead? You do,” Brown says. “So if I can spread that overhead over a broader base, I help maintain some stability in the pricing to my major customer, and in some cases, even reduce that price. It just makes good sense.”
HARD-LINE DEALING
Cris Carter, former NFL wide receiver for the Minnesota
Cris put up the initial seed money of $400,000 and became chairman, while John, who runs the company day to day, became president and CEO and added $250,000 to the pot. Before leaving his position as vice president of Barton Malow, a construction company based in Detroit, John oversaw close to $5 billion worth of construction projects for clients such as the Cincinnati Bengals and the Chicago Bears.
It was Cris’ connections that got the fledgling security company its first break. An executive from ADT approached Cris as a fan, and in conversation Cris spoke about his new security company. The executive says he immediately saw an opportunity for the two companies to work together. At the time, Tyco Fire & Security, a major business segment of Tyco International Ltd. and an ADT affiliate, that provides electronic security and fire-protection solutions in more than 100 countries, was looking for a partner with construction experience. “Managing multiple large products and dealing with construction companies every day is where they saw their weakness. That is our strength and where our experience came into play,” says John. Within weeks, the men set up a meeting.
Tyco Fire & Security benefited from the strategic alliance with Carter Brothers because it had been maintaining an in-house installation team, leading to tremendous overhead. The agreement allowed the company to outsource that work to Carter Brothers. In addition, Carter Brothers provided Tyco with its largest supplier diversity success story, says John. Over five years, Carter Brothers has managed more than $250 million in projects and assets for ADT. “If you looked at our business in the beginning, we were primarily supporting ADT as a second-tier supplier. Over the last five years we have been able to grow our
relationships with some of our largest accounts.” Certification as a Minority Business Enterprise with the National Minority Supplier Development Council helped Carter Brothers secure additional business, totaling about 200 clients.
John believes recent industry trends will allow for continued growth. Yesterday’s security was cameras and card access. Today, it goes further to include how those cameras, card access, and IT interact with outside lights, border gates, and other barriers. Everything and everyone has to be in communication. “I think 9-11 has really changed it,” John says. “You used to deal with a security director. Now you are dealing with the COO, the CIO, the security director, and the director of facilities.” He expects revenues to swell from $47.8 million to as high as $75 million next year. Projects under management are expected to grow from $79 million to $150 million.
Both of these entrepreneurs have one thing in common: They understood when it was time to take a different path in life. As a result, they’ve created multimillion-dollar entities with strong foundations that are built to last.
Industrial/Service
| RANK | COMPANY | LOCATION | STAFF | TYPE OF BUSINESS | SALES* |
| 18 | MIG-Visteon Automotive Systems L.L.C. | La Vergne, TN | 185 | Tier 1 automotive parts supplier | 242.000 |
| 26 | Millennium Steel Service L.L.C. | Princeton, IN | 55 | Warehousing and processing of automotive steel | 157.577 |
| 30 | Trillion Communications Corp. | Bessemer, AL | 7 | Provider of telecommunications supply chain services, reseller | 135.480 |
| 40 | Systems Electro Coating | Madison, MS | 51 | Electro coating of automotive and industrial metal parts; subassembly | 103.000 |
| 57 | New Technology Steel L.L.C. | Detroit, MI | 140 | Slitting, pickling, blanking, and leveling special bar-quality steel | 72.000 |
| 74 | C.H. James Restaurant Holdings | Deerfield, IL | 1027 | Burger King franchisee | 50.325 |
| 75 | CMI Management Inc. | Alexandria, VA | 600 | Administrative support services, records and governemt facilities management | 50.000 |
| 75 | New Horizons Baking Co. | Norwalk, OH | 210 | Manufacturer of soft rolls and english muffins | 50.000 |
| 80 | Carter Brothers L.L.C. | Atlanta, GA | 110 | Electronic security, equipment installation | 47.800 |
| 81 | Americus Credit Group | Los Angeles, CA | 38 | Equipment loans, security equipment sales | 47.000 |
| 90 | Z-Tech Corp. | Rockville, MD | 300 | Software development, Web design | 35.000 |
| 92 | SoBran Inc. | Dayton, OH | 500 | Biomedical and environmental research, mail sanitation | 34.000 |
| 96 | Altos Federal Group Inc. | Washington, DC | 275 | Medical staffing services and healthcare providers | 32.000 |
| 96 | CDO Technologies Inc. | Dayton, OH | 275 | Technology services, strategic consulting, business solutions | 32.000 |
| 100 | Alpha Rae Personnel Inc. | Fort Wayne, IN | 1,000 | Recruitment & staffing | 30.000 |
Auto
| RANK | COMPANY | LOCATION | STAFF | TYPE OF BUSINESS | SALES* |
| 83 | Queen City Lincoln Mercury | Charlotte, NC | 47 | Lincoln, Mercury | 28.691 |
| 90 | Southland Chrysler Jeep | Southaven, MS | 48 | Chrysler, Jeep, Dodge | 26.906 |
| 96 | Northpoint Ford Lincoln Mercury Inc. | Bastrop, LA | 32 | Ford, Lincoln, Mercury | 19.478 |
| 97 | Middletown Ford | Middletown, OH | 35 | Ford | 18.185 |
| 98 | Anthony Underwood Automotive | Bessemer, AL | 40 | Ford, Chevrolet, Nissan | 15.000 |
| 99 | Westborough Buick Pontiac GMC Inc. | Westborough, MA | 35 | GM, Buick, Pontiac, GMC | 14.543 |
| 100 | Cleve White Nissan Inc. | Statesboro, GA | 25 | Nissan | 11.587 |
Private Equity
| RANK | COMPANY | LOCATION | STAFF | UNDER M. CAPITAL* |
| 3 | Parish Capital Advisors L.L.C. | Chapel Hill, NC | 13 | 425 |
Banks
| LIGN=”MIDDLE”>RANK | COMPANY | LOCATION | STAFF | ASSETS* |
| 25 | North Milwaukee State Bank | Milwaukee, WI | 25 | 66.000 |
Investment Banks
| RANK | COMPANY | LOCATION | STAFF | MANAGED TOTAL* |
| 10 | Capital Management Group Securities L.L.C. | Chicago, IL | 11 | 10,886 |