The affluent residents of metropolitan New York City don't view perfection as an option when they plan a party. So they turn to Stamford Tent and Party Rental, based in Stamford, Conn.
"The New York market, L.A. market and some of the other bigger cities have this very demanding clientele," says Steve Frost, Stamford president. "There are people in other areas of the country who aren't as exacting as ours - but most of ours absolutely want it perfect.
"We really focus on the high-end social market," he says. "We do a lot of corporate work, but it's the higher-end social corporate. We do a lot of the big galas, the charity work."
Corporate could mean a product showcase at a corporate headquarters or a backyard dinner party for 80 hosted by a director of sales. "We do a lot of that and build that because we're so close to Wall Street," Steve says. "There is a phenomenal amount of wining and dining and entertaining that goes on in private homes. So if we include that in the corporate, corporate is 80 percent of what we do."
Steve and his brother Tim Frost, a company vice president, grew up in the rental business. Steve says the company's success is partly a result of the school of hard knocks and always being open to learning more. "It's common sense, it's listening and paying attention," he says. "I've made pretty much every mistake there is to make and so now I know better."
This learning curve led to a decision: strive for quality rather than quantity.
"There was a point early in my career where my goal was to be the biggest tent and party rental company in the country, or certainly in the New York market," Steve recalls. "I went after every single job I could get and I was killing myself, but we weren't making very much money because I had to give some jobs away. I said after two or three years, you know, this isn't working for me.
"So we decided that we didn't want to be the biggest, but we wanted to be the best. We wanted to be able to charge more. We wanted to be able to get a premium for our product and differentiate through quality. We started focusing on quality and pretty soon we were the biggest players in the New York market.
"And so by trying to not control the growth and going after everything we could get, we couldn't get there. But by controlling the growth and focusing on quality, we got there. We got where I wanted to go to begin with.
"One of the ways we've sustained that growth rate is by consistently delivering a higher quality product and service than our competitors and that has created a demand that is greater than what we can supply," Steve says. "As long as we can focus on that quality, the demand will continue to be greater than we can supply. The minute we try to meet the demand, we lose control of the quality and the demand falls away."
The focus has worked. The company has averaged about a 20 percent annual growth for the past five years.
"We, as a rule, re-invest between 10 and 15 percent of gross revenue back into new inventory, to replace worn-out equipment and to grow and build the business," Steve says. "Ten percent basically renews your inventory; 15 percent helps you grow your inventory. You need to spend at least 10 percent a year or your equipment is going to get old and outdated."
Yet even though Steve feels that the growth needs to be controlled, he still can find it difficult to keep from pushing for every job.
"I am the most enthusiastic of the salespeople. The operations people have to come to me and say, 'Slow down, we can't produce anymore and produce the same quality'," he says. "We could absolutely build the sales and increase tremendously. We could increase more in one year than we can handle. My role is to keep pushing that process and keep asking, 'Well, how much more can we handle? Let's handle some more - we can handle more.'
"We have a sales-based philosophy. Our sales pushes our operations. The more we sell, the more they [operations] must produce to keep up. The first thing that I ask is, 'Do we want to do this job? Is it profitable? If so, let's find a way to do it.'
"Our sales could have gone up here with our inventory going another way, and we wouldn't be here talking today. So both have to be managed," Steve says. "It's interesting, as we were growing I didn't even know what a balance sheet really was. Our accountant would give us our monthly statement or, actually, at that time it was our annual statement and this goes back to probably the early '80s. I'd say, 'OK,' and put it down. Finally one day he said, 'Don't you want to look at it? Go over it?' So he showed me the assets and liabilities and I slowly started to learn about that stuff.
"Now we're pretty focused. I know what my EBITDA [Earnings Before Interest, Taxes, Depreciation and Amortization] is - we try to keep it between 15 and 20 percent. We averaged 17 to 18 over a five-year period - we know those numbers." The inventory turnover rate is about four times a year.
Stamford today employs about 200 people during peak season and 70 year-round, many of whom have been with the company several years. The owners recognize employees for longevity, offer a 401k plan and promote from within whenever possible.
"The heart of this organization is our employees. A lot of them have a lot of pride in what they do and we have a really good reputation and it's really because of them," Steve says. "It's almost not because of Tim and I - it's almost in spite of Tim and I. They are the ones who really work hard and do a good job. I'm a perfectionist and that drives a lot of work, but a lot of them are, too. This company has grown to be so much more than either one of us could do on our own. We've built the system that makes it work, but it's our employees who make it happen."
There is some crossover for employees between the two divisions, tent and party rental. Stamford employs outside account executives for tenting and an in-house staff for party rentals, although there is some cross-selling. There are 11 salespeople.
"While most of our salespeople have been in the tent business for some time, it was for their sales skills that we moved them into sales," Steve says. "I've got several women selling for me that have never put up a tent. We've had them out with the crews to see how it's done, but we have a trained field supervisor on each of our tent installations. Our salespeople visit each job during the install, but they have to handle multiple installs at one time."
The Frosts say they try to keep the management organizational structure more horizontal than vertical, and stay accessible to their employees.
"One advantage Tim and I both have is that there isn't a job that gets done here that we haven't done for 18 hours a day or in the rain," Steve says. "I think a lot of people that work here respect Tim and me because we have done everything here, so we know whereof we speak."
There are separate operations and production managers for both divisions. Stamford is working toward more cross-training between the tent and party rental employees.
"We had developed the separate philosophy because installing a tent is Page 48 From Page 46 a much more specialized task than delivering a table. You've got people that can be out earning you more money putting up a tent than delivering a table and we can train a guy to deliver a table much faster," Steve says.
"So we said, 'Let's take these guys - the specialists, if you will - train them separately and keep them out making more money. Let's have the party rental guys do their thing separately.' So on all of our big jobs, the tent crew goes in, the carpentry crew goes in and builds sub-floors, the carpet guys go in, and we have a lighting guy that goes in and does the lighting. And then the rental crew comes in and delivers the rental equipment.
"Where that philosophy does not work is on the smaller jobs, and there are still a lot of small 20-by-20s, 30-by-30s out there. That doesn't represent a huge portion of our business revenue-wise. It does represent a good portion of our activity. They say that 80 percent of your income comes from 20 percent of your sales - well, that is true in this case as well.
"So the tent crew puts up a 30-by-30 and then the rental crew comes in two hours later and drops off six tables and 60 chairs. That's very cost-effective on the bigger jobs - it's not very cost-effective on the smaller jobs. So we're really trying to cross-train a lot of the rental guys to do the smaller tents and to cross-train some of the less-experienced tent foremen to deliver rental equipment."
Stamford's managers and supervisors are the trainers. The company has developed a list of things to know about each piece of equipment. "For example, when they are teaching someone cooking equipment, they test three times," Tim says. "They have to show how to safely hook it up, get it ready for the job, clean it, put it away, and load it on and off the truck. It's taken awhile to develop these criteria with all the foremen. Because once you get to be foreman, you know those things. But how do you show your production assistants? How do they get to the next step? That's the cross-over from production assistant to foreman. You can know every piece of equipment and if you can't help five people to do it effectively - that's the hardest part."
"Every spring we start to hire guys in and they go through a four-, five-day really focused training program," Steve says. "We give them a tour of the warehouse, we tell them the difference between a frame and pole tent, and we show them how to put a frame together and we teach them vocabulary - this is a corner coupler, this is a mid-leg - things that they wouldn't otherwise know. And it really works well for the first group of hires through April and May. But by mid-May, we are full-out screaming busy and that falls to the wayside. You need bodies on the road because you're putting up jobs - we're installing 40 to 50 big jobs and doing 200 to 225 deliveries a week."
Stamford purchased the inventory of the former McLean Party Rental in Virginia in 1996, partly because of the recommendation of their key employees. "I never saw the equipment, never saw the building, never saw anything but numbers," Steve says. "So we sat down with our key people and said, 'What do you guys think? You tell me: do you want to grow, do you want to pick up that extra equipment, do you want to work this hard?' We had three or four of them go down. They inspected it, they did so with diligence and came back and said, 'Let's do it.'"
The purchase also included a contract to produce an event for the next three years. The income from that contract was greater than the purchase price of the McLean inventory. And the planners just renewed the contract for Stamford to produce the event for the next three years.
Stamford also recently purchased the party inventory of a former Connecticut business after it was bought by United Rentals. With these acquisitions, the owners think expanding to other locations is probably on the horizon.
Along with the New York metropolitan area, Stamford has done jobs from Virginia to Vermont. Tim says Stamford may need satellite warehouses "because of the size and complexity of some of our jobs - not just the simple 20-by-20s or 30-by-60s, but the huge, complex jobs. You can only do so many of them out of one location. My goal is to have an office in Long Island or an office in New Jersey, and then they can all radiate out."
Steve thinks the market can sustain more branch locations. He has researched the tent and party business in the metropolitan area and believes it represents about $100 million annually. But adding more locations means more transportation time on busy East Coast highways - and a tricky balancing act.
"Anticipation and communication are really key and you can share equipment, but you can't plan to share equipment on a semi-permanent basis," Steve says. "What you would do is fill a need. The Boston office needs an extra 2,000 white woods for this one job. If Stamford is the central location and you've forecasted that Boston should own 2,000 white woods, right now if they get a call for 4,000, they can't service it. But if we think we should own 10,000 here, maybe we should own 12 so we could send some here and there. But you can't own enough equipment to handle 100 percent of the demand during your peak season. It's just not cost-effective to do that. You have to own enough equipment to handle most of the season so you're turning it over.
"For example, we want to turn our tents 10 times in a year. But I probably get demand for them 15. Well, if I owned those extra tents to do that, it's not a good return on investment. So I have to turn some business away. But if I need them a little bit more and Boston has almost as many as they need, well now those five extra I can be using and getting a decent return on investment.
"I do see us being a regional company in the next five years," Steve says. "I absolutely see us not only having more offices in the New York market, but outside the New York market as well. We've been approached by other companies and we've been approached in other markets, and I think it can be done. It's a question of people and you have to know the local preferences.
"You're going to have to manage those products differently. Yes, your 8-foot tables are 8-foot tables and your Kestell chairs are Kestell chairs. But your linens are different, your glassware patterns and flatware patterns are different and the way you treat your customers is different. You can't establish a white-wood chair at $X a chair and say that's what I'm going to get nationwide. You have to look at each market individually. I don't think Stamford Tent could run as profitably as it does in another part of the country if we were to run it the same way. We would have to change the way we run it."
Economies of scale result from expansion. A good example, Steve notes, is "Even as our volume continues to grow, the dollar cost of training programs isn't going Page 94 From Page 52 to necessarily increase, but the percentage that represents my overall sales will decrease. So I think getting a formalized training program will be more cost-effective.
"And I think purchasing will get a little more cost-effective. I think we can grow without increasing a lot of the administrative costs.
"I like the business, but I didn't want to be the guy out there on Saturday night at Mrs. Jones' house fixing the leaking rain gutter, so how do you get yourself away from that? You hire people to do it," Steve says. "Well, how do you afford to pay the people to do that? You have to grow, and in order to grow, you have to hire more people. So it sort of becomes this self-feeding monster, but you have to keep on feeding it. If you don't grow, you stagnate."
Stamford recently has grown via its new Internet presence, located at <stamfordtent.com>, and the release of a new corporate brochure. "It had been at least five years [since the last brochure] if not longer, and we've changed," Steve says. "We really are no longer a tent and party rental company so much as we are an event production company. We do decor, we do specialty lighting, we do air conditioning, we do flooring, wall-to-wall carpeting.
"We go in and get as much dollar out of that wedding as we can," Steve says. "But we're entering into the decor and specialty lighting aspect of this very carefully, because so much of our business comes from decorators and we don't want to step on their toes - we want to help them. A lot of them have these great creative ideas, but they can't produce it. People will spend a lot of money for decor at the high-end events."
But Stamford won't forget the smaller parties, either. Tim says the company is seeing a need for growing that business and being able to serve last-minute requests. The owners have considered creating a separate small tent/party division.
"Those last-minute calls we have to turn away on Thursday and Friday just drive me crazy," Steve says. "But a lot of those we would turn away anyway because they're not realistic in terms of the cost. And we spend an awful lot of time with the people that we say no to because we think it's important to make a lasting impression on the client. We want them to get off the phone with the feeling, 'Boy, I wish I would have called them early enough to have used them.'"
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