Entrepreneurs Carve Own Niche : Speed Equals Success in Computer Repair
Not long after the invention of the world’s first personal computer came the world’s first personal computer repair shop.
And as a growing number of entrepreneurs are finding, fixing PCs can be every bit as lucrative as building them in the first place.
Nationwide, analysts estimate, the market for personal computer repair is expected to grow to more than $2.1 billion in 1989, from $850 million last year. The total market for the repair of all types of computers currently is in the $9-billion to $10-billion range, according to several consultants and analysts covering the market.
In the past two years, a trio of Orange County entrepreneurs have turned the simple idea that PCs, like other appliances, eventually will need fixing into a $1-million business.
Icon Computer Corp. of Santa Ana, founded in 1984 by three 24-year-olds, expects to pass the $5-million-annual-revenue mark by the end of 1987.
It has developed into what market analysts believe is one of the West Coast’s largest independent personal computer repair organizations, largely because of its efforts to fill what co-founder Brad Pantoskey, now 26, calls a “void in the marketplace.”
Speedy Service
That void, experienced by anyone who has waited three days to get a car repaired or three weeks to get a TV back from the shop, is speedy repair.
Icon is one of a growing number of independent repair firms across the nation that are taking on the behemoths of the computer industry, such as IBM, TRW and Tandy, by guaranteeing same-day repair.
“We’re like a Chinese laundry,” said Pantoskey. “In by 10, out by 4.”
Actually, Icon promises four-hour turnaround on repairs--a time frame rapidly becoming an industry benchmark for aggressive independent shops.
“The biggest cost (of a broken computer) to most companies is missed work time,” said Dawn Webber, 25, president and co-founder of Icon.
And so the speed at which the machines can be fixed and employees can get back to work is rapidly becoming the key criterion in data-processing managers’ selection of repair firms.
Dominate the Field
Manufacturers traditionally have dominated the field, controlling what D. R. McNaughton, president of Business Development International, a consulting firm based in Franklin Lakes, N.J., estimates to be about 90% of the repair market. Independent firms such as Icon have the remaining 10%.
And while McNaughton said the computer makers will continue to dominate the repair market for “the foreseeable future,” other analysts said there is plenty of room in the booming trade for specialized firms to carve out a niche.
By various estimates, there are about 17 million personal computers currently in use in the United States. Estimates of the PC market’s growth range from a relatively speedy 19% annual increase to a massive quadrupling by 1989. Input, a Mountain View, Calif.-based market research firm, estimates that 3.4 million new personal computers were shipped last year and that 4 million more will be sold in 1986.
And every one of those computers is expected to fail, on average, about twice a year, according to a study by Input.
Peripheral equipment, such as printers and disk drives, breaks down with even greater regularity, said Phil Kohler, 26, vice president and the third of the Icon co-founders.
The more moving parts a device has, the more likely some of them will break, Pantoskey added.
And, “like anything else,” Kohler said, “the older it gets, the more problems you’ll have.”
Check the Plug
Human errors, such as mishandling of equipment, lead to most problems, Icon officials said.
Many times, Kohler said, the first and only act required of the repairman is to check that the machine is plugged in. “When a client calls, the first thing we’ll often ask is, ‘Was the cleaning lady there last night?’ ” Kohler said.
The promise of speedy service “is a strategy that will do well” for an independent computer repair firm hoping to make a go of it, said Rick Brusuelas, manager of customer service programs at Input.
“The big guys are too big to compete against us,” Kohler said.
“Even national companies that use a lot of personal computers are buying regional (repair) contracts” from independents offering guaranteed fast service. They no longer want to depend on IBM or other large repair companies that typically take several days for repairs, said Pantoskey. Among Icon’s customers are Rockwell International, American Hospital Supply and the Internal Revenue Service.
Webber, Kohler and Pantoskey found this niche when, fresh out of college, they were working for a now-defunct San Francisco Bay Area computer retailer. They saw that many customers were frustrated by not being able to find adequate repair service for the equipment they had purchased.
Raised Seed Money
The three drew up a business plan, sold 25% of the company to venture capitalists for $100,000 in seed money and moved to Orange County, which they saw as the fastest-growing market in the state. And, by being sandwiched between San Diego, Los Angeles and the growing Inland Empire area of San Bernardino and Riverside, the county offered still more potential for expansion.
Their first move was to buy a supply of 35 personal computers that they rented out and used as loaners for customers whose repair problems could not be solved in four hours.
The company turned a profit in just three months, Webber said, and hasn’t looked back since. It now has 12 employees.
A Los Angeles County office was opened in Culver City in February, and Icon plans to move into the San Diego market within a year.
Like many firms in the repair business, Icon markets its services in two basic ways, through hourly charges and annual maintenance contracts.
Icon’s basic hourly rate of $65 plus parts is considered at the lower end of the scale. At $120 an hour plus parts, IBM is at the high end, analysts said.
Annual Contract
The annual contract is essentially an insurance policy and is similar to extended warranties often offered by auto dealers. Most repair firms prefer to work under contract, as it gives them a guaranteed cash flow and locks in a client.
But as the cost of personal computers continues to drop, annual contracts, typically costing $200 to $600, become less and less attractive to computer owners, said McNaughton.
He and other analysts see other problems brewing in the fledgling industry.
With such attractive demographic statistics, the repair industry is attracting a little too much attention.
“It’s easy to get into the business, but price competition is causing a shakeout already,” McNaughton said.
Brusuelas said both manufacturers and retailers are getting more involved in the repair business and are attempting to make greater use of their natural ties to the computer owner. For the independent repair firm that means “the market is shrinking from both sides,” he said.
Coping With Changes
Still, Icon seems to be coping with these changes in the business and to have escaped most of the problems that beset many start-up businesses.
The three run a lean organization and keep management salaries to a minimum. “Every person here took a cut in pay” to join Icon, Webber said. “They know that as the company grows, we’ll take care of them.”
Icon has a profit-sharing plan for its employees and shares its monthly financial results with the workers. “They know that the more work they bring in, the more they’ll get out of it,” said Webber.
The three founders are not yet the highest-paid employees of the firm, said Webber--that honor goes to one of the repair technicians. “You don’t see any Mercedeses in the parking lot,” Webber said. The money for the owners “will come later on.”
