Patrick Byrne and Shawn Giffin used to play a friendly game of one-upmanship when they were eager young salesmen for a Santa Ana equipment leasing company.
If Byrne came to work at 7:30 in the morning, then Giffin would arrive the next day at 7:15 or so, which would bring Byrne in the following day at 7 a.m., which would trigger a 6:45 a.m. arrival by Giffin, and so on and so on until they called a pre-dawn truce. Then one day, Giffin would arrive a little earlier than Byrne and the race would be on again.
Now that Byrne and Giffin, both 28, are eager young owners of a fast-growing private equipment leasing firm, they have solved their rivalry of arrival: They have offices 60 miles apart.
But it is that same hard-driving style that has fueled the spectacular growth of Balboa Capital Corp. during the last six years through recession and interest rate cycles.
Byrne and Giffin say that Balboa Capital, which maintains twin headquarters in West Los Angeles and Irvine, has excelled by doing things differently, and perhaps more intensely, than its competitors.
"It's just a matter of working harder and smarter," Byrne said with a shrug.
In the process, Byrne and Giffin contend they have shaken up their corner of the leasing industry a bit--but there are rumblings that the company may be too aggressive.
The $128-billion equipment leasing business, after all, was used to fatter and happier days. And while it has one foot in the country club world inhabited by banks and insurance companies, the other foot remains planted in a pool hall atmosphere associated with slick salesmanship.
Balboa Capital--in competition with other independent firms, banks and subsidiaries of manufacturers--acts as a middleman between a business that wants to lease equipment and the company that makes or distributes the equipment.
More businesses have opted to rent in recent years because they can frequently get lower payments than they would for an outright purchase, and because leasing allows them to leave their bank lines of credit alone.
Balboa Capital is still relatively small by industry standards but is swelling so quickly that it made the latest list of fastest-growing privately held companies published each year by Inc. magazine.
Thanks to sales growth of 2,652% between 1988 and 1992, Balboa ranked 67th among 500 private companies on the roster. Balboa was also a finalist this year in an Entrepreneur of the Year competition sponsored by the magazine along with Ernst & Young and Merrill Lynch.
Balboa expects revenue of about $40 million this year, which includes about $35 million in equipment costs (much of which passes on to Balboa's equipment vendors) and about $5 million in interest revenue (which Balboa keeps).
The company, named for its first office on Orange County's Balboa Island, has grown to four locations and 75 employees.
Not bad for two guys who, one year out of the University of Arizona, pooled $2,000 apiece in savings to tackle the leasing business. They focused on providing high-tech equipment to small and medium-size companies in such industries as apparel, photography, film post-production, telecommunications and computer graphics.
"In the beginning, we were a start-up company, we didn't have any customers and we were 23 years old . Now that was when it was hard," Byrne said.
The two spent a lot of time doing business by telephone or letter before meeting with bankers to whom they hoped to sell their leases, Giffin said. But after a few months in operation, Balboa landed a nearly $1-million transaction with a Mississippi department store chain.
"That really gave us real credibility in the eyes of the bankers," Giffin said. But the "youth thing," as they call it, can still be an obstacle in more stuffy financial circles, he said.
"You can always see that glint in their eyes when they see how old we are," Giffin said.
"It's always fun to see their faces," Byrne added.
Less fun was a falling-out with five key salesmen from the Los Angeles office in March, 1993, when they left to form their own leasing company a few blocks away. A messy lawsuit followed, and tempers flared.
The dispute was marked by harassing phone calls, complete with heavy breathing and giggling, placed from Balboa's office to the new competitors, and it escalated to where the former employees caught Byrne going through their dumpster one July night looking for documents, court filings contend. A building janitor declared in court documents that Byrne jumped from the dumpster and wiped his filthy hands across the clean dress shirt and tie of one of his former employees.
"The fact of the matter is, all defendants are on the brink of personal bankruptcy," former Balboa employee Daniel Bassett--he of the soiled shirt--stated in a court filing. "We did not anticipate having to fight a ridiculous lawsuit when we started Truxton Financial and now we have exhausted our personal resources."
Truxton Financial went out of business, Bassett said in a brief interview. The former employees think they did nothing wrong but agreed to settle the lawsuit to avoid further legal expenses, said Bassett, who declined to say more.Byrne said the suit was settled for about $150,000 and the former employees agreed to stop using Balboa's trade secrets.
"That was kind of an ugly situation," Byrne said of the suit. "It got real personal."
But the loss of so many key salesmen was only "a minor setback," Byrne said. "It basically decimated the office, but we were able to build it back up."
Competitors' salesmen hint at disgruntled Balboa customers complaining of lease terms that change with no notice or are spelled out in tiny print; Balboa responds with testimonials from happy clients.
The firm's bare-knuckle image, said Kenneth D. Goodman, Balboa's vice president of marketing, has developed because Balboa is "aggressive in an industry that's used to being passive and too 'professional' to do marketing. . . . 'They must be doing something wrong or else how would they be beating us out of so many deals?' "
The recession, which ate up dozens of Balboa's competitors, was a challenge, "but we were so young and everybody we hired was so young when we got into the market that we didn't know any difference," Giffin said. And banks pulled back from the leasing business during that time, which helped, he said.
The company also has reaped much new business from equipment trade shows where they are frequently the only leasing company there, Goodman said.
Beyond aggressive sales, Balboa is different because of the individual attention given to tailor a lease for each customer, Giffin said. A corporate mission statement hanging in each office declares: "No cookie cutter deals. Blast the boundaries of conventional wisdom."