Entrepreneur Bucks Big Odds With Small Firm, Wins Award
If Stephen W. Hess had known that nearly all small businesses are doomed to failure, he might never have started his own company.
But ignorant of the harsh realities and driven by a desire to own a business, Hess mortgaged the house, sold some stock and got a little help from a friend to start Hessco Industries Inc. in 1975.
His initial investment in the La Habra-based fiberglass bathtub and shower business was $124,000. Today Hess is projecting $40 million in sales for 1989.
In recognition of his success, Hess was recently named the Small Business Person of the Year by the local district of the U.S. Small Business Administration. The district includes Orange, Riverside and San Bernardino counties.
“We live in a wonderful country, a country full of opportunities,” Hess said.
Hess was selected over seven other nominees after ranking high in such categories as years in business, impact on the job market, contributions to the community and response to hard times.
‘His Story Just Stood Out’
“He was just an obvious choice,” said Sandy Sutton, public information officer for SBA and a member of the panel. “When we read the files on all the nominees, his story just stood out.”
For 15 years Hess dreamed of owning a business and stayed up late many nights trying to figure out what it would take. In 1972 he went to work for Lasco, a company that produces plumbing parts. He soon became part of the corporate staff in charge of manufacturing.
While at Lasco, Hess found the opportunity he was looking for.
“I came in one Monday and the president of the company said, ‘Did you read the Sunday Times? Noris is going out of business.’ This was one of our competitors,” Hess said.
“An hour and 10 minutes later I was talking face to face with the president of Noris, and I made him an offer to buy the molds. He said I would have to have the money there by 9 a.m. So I called a friend and told him, ‘I need $25,000 to start this business, and I want you to be a stockholder.’ ”
Hess delivered the money on time and bought the other equipment 3 days later at Noris’ liquidation auction.
During the first 2 years, Hess said, he was in a daze about running the business. He had four employees and worked 20-hour days.
Gradually he worked his way out of his daze and everything started going his way, until 1981.
“In 1981 we had a depression in the housing industry,” Hess said. “Customers were going broke left and right. Our business dropped to a third.”
Hess filed for protection from creditors under Chapter 11 of the federal bankruptcy code. He knew he had to come up with something new to keep his business alive.
During those lean years Hessco added some products so it did not have to rely on the housing industry. One was caskets. “We must have buried 4,000 to 5,000 people during that time,” Hess said.
Another was whirlpools.
“Whirlpools are becoming the biggest part of the business. We’re selling them in Canada, the Caribbean, Japan, Istanbul, France and England,” Hess said. “Our international sales are about $4 million.”
New Facilities Opened
After the recession of the early 1980s, Hessco got its annual sales up to $8 million in 1983, its pre-1981 volume.
In 1984 Hess opened a facility in Eloy, Ariz., and in 1987 he bought another factory in Wheeling, W. Va. Today Hessco employs 397 people, including 250 in La Habra.
Hess is part of the small percentage of small business owners who succeed. The failure rate for small business in Orange County is 82%, according to the Orange County Business Development Council. The Department of Commerce places the national rate at 88 to 92%.
Hess “is a good man, a driven man,” said Olaf Arneson, Hessco vice president for finance. “He is an entrepreneur in the classic sense.”
When asked what a person needs to be successful in starting his own business, Hess said somewhat jokingly, “The first thing is never run out of cash.”
However, Hess added that people planning to start a business must be prepared to work long hours. They need to know the business well and they need to know how to manage people, he said.
“Business is people, people, people,” Hess said. “No matter what business you’re in.”
HESSCO AT A GLANCE Who: Stephen W. Hess, president and founder
What: Hessco Industries Inc.
Products: Manufactures fiberglass bathtubs, showers and whirlpools.
Facilities: Plants in La Habra, Eloy, Ariz. and Wheeling, W. Va.
Employees: 397
Initial Investment: $124,000
1989 Projected Sales: $40 million
