Recently, I had the pleasure of interviewing Chip Culpepper, a Partner from BGM International. Chip, father of two and grandfather of two has work experience ranging from washing dishes to owning a business. He states that he has, “an insatiable curiosity for all things American and observing human nature.” He has lived in nine states, traveled to thirteen different countries and chooses to live life, ”with a smile on my face, a gun on my hip and always willing to lend a hand.”
BGM International sells plastic laminates that are used in a wide array of products that include electrical insulation, ex-ray tables, tubes for shoulder fired missiles, integral parts for aircraft and MRI machines, boat bumper guards for the US Navy Seals and all cryogenic tubes used in the reproduction process. These laminates are known for their durability with special performance properties that include chemical, fire and wear resistance.
Chip started this business when he was “broke, out of work and living in my parents basement.” He sought a product that he could build a business around that met the following criteria:
1. The target product must be made and consumed in China thereby creating domestic demand;
2. The product must already be imported into the US and accepted by US consumers;
3. The USA manufacturer could not be a Fortune 1000 company;
4. The product could not be eaten, applied to the body, marketed to children or related to safety.
Chip gathered technological data on a target product, drove to the Chinese Embassy in Washington, D.C., told them about his plans and asked for business development support. Within a week, Chip received confirmation from the Chinese Embassy that the product he was targeting met his criteria. He had his first $500,000 annualized product order within a few short months.
Four major companies dominate the phenolic laminate industry. Each of them sells large volumes of product with low profit margins on a 3 -4 month sales cycle with approximate sales growth of 3 – 5 percent over the past three years; customer service is marginal.
Seeking an opportunity to capture market share, Chip identified a substantial sales growth opportunity for BGM. They began marketing and selling cut to size product lines with an aggressive customer service philosophy.
During my interview, I asked Chip; as an innovator, what other products or services do you bring to the market? “We bring the ultimate customer experience in the plastic distribution business.”
Chip defines his customer experience. “My abilities are defining the needs, wants and desires of our customers combined with creating a motivated work place to meet the customers’ expectations. I create a vision, a path to get there and a clearly defined enemy in our competition that everyone is motivated to fight. When we win, we party. Failure is met with rapid brutality that is instantly forgotten and we move on to the next round. Training is constant and on going. Improvement never stops; from the conversations we have with our customers to how we place a piece of tape on a pallet. Our saying: We’re Good, Fast & Happy.”
In an effort to further penetrate the market horizontally, BGM invested $250,000 in the biggest, fastest and most advanced panel saw available in 2012. BGM has identified that the more flexible they are for their customers with respect to cut size and quantity of product, the higher their profit margin. Sales increases have grown from 48% in 2011 to 98% in 2013. “Why—in 2013 we broadened our playing field with the saw and service. Our competitors think it’s price and all have lower prices than BGM. It’s not price, it’s service. Our competitors have all been around 20+ years and customers have habits we need to break, so we hit and hit and hit again to increase exposure and highlight our service.”
The company has recently invested over $36,000 in a new computer server and software. This move allows for better product optimization, real time inventory control and the ability to provide their distribution team with the same real-time connections at the home office.
BGM’s growth has been strategic and substantial with respect to their competitors. The big four have experienced their growth through acquisitions. Chip’s goal is to penetrate the market to such a point that he creates “enough pain to the competitors until one of them decides to take us on when they can’t take us down.” Chip states. “I’m building this business to be acquired…that’s the point. That’s how you make money, at least for me at my age. “ Once BGM is sold, his future goal is to create a similar business that can be acquired within a five year timeframe.
Increased manufacturing costs, unstable competition and financial health of the company are his three biggest fears for the future. The current banking relationships with small businesses are less than favorable compared to previous years as the banks now demand higher solvency and are less willing to take risks.
Chip believes that an entrepreneur needs to find something they are good at rather than the old adage of finding something they love. “My advice would be to get real clear about what you are good at and build a business around those strengths. Also, be prepared to embrace failure. Everyone thinks their going to be the superstar but most hit some bumps. No shame in readjusting and going at it again.”
Finally, Chip offers two pieces of advice for someone seeking a business venture with entrepreneurial spirit. First, Keep negative people that don’t support your venture out of you conversations…family included. Secondly, as told by the old Indian in The Good, The Bad & The Ugly , “Endeavor to persevere.”
