Here’s Proof to Not Put New Wine in an Old Wineskin.
Startup to initial public offering in three years.
It’s also proof that is better to be lucky than good.
Builder Marts of America was founded by Clarence Bauknight and Tom Rowe. BMA was in a low profit margin business distributing building materials to independent lumber yards across the United States.
In the early 1980s, a BMA executive, Richard Ingram, got frustrated when he discovered the huge profit margins that ATT received on long distance phone calls. He wrote an exasperated letter to the Chairman of ATT complaining about what he perceived to be obscene prices. Richard got back a perfunctory letter basically explaining that ATT was close to a monopoly and BMA had little choice.
Unfortunately for ATT, Federal Judge Harold Greene decided about that time to break up ATT into the Bell companies we know today. Richard realized he could buy long distance phone service from ATT at a wholesale price and resell it to end customers at a profit. This was very similar to the distribution business that BMA was already in. The best part was that the judge’s order prohibited ATT from lowering its retail rates to respond to the emerging competition. Maintaining high retail prices would cause ATT to lose market share in the long distance market to competitors, which was the point of the breakup. Richard realized, what a deal, what a deal, Lucille!
Richard went to Clarence with the idea of selling long distance phone service inside BMA to its independent lumber dealer base. Clarence wasn’t so sure this was a good idea. Failure would damage BMA financially. Clarence consented when Richard suggested providing the new service through a new company, Telecommunications Management Inc., known as Tel/Man.
Whether through insight or luck, I don’t know. This was a case where it was probably better to be lucky than good.
As it turned out, Richard putting this business in a new entity at the edge of BMA worked beautifully. There was a wholesale/retail dynamic in Tel/Man that was similar to BMW, but long distance phone service wasn’t 2X4 lumber. Organizing Tel/Man as an independent company allowed it to develop its own systems and processes aligned with this emerging market. It also created a sense of urgency and focus in the management team because there was no going back. If Tel/Man employees were going to eat, they had to succeed.
Tel/Man was very successful, very rapidly. In 1984 the company was able to attract significant outside capital through an initial public offering. Three years later Tel/Man was sold to SouthernNet, a company acquiring long distance start-ups that sprang up after the judge’s ruling. Richard, the Tel/Man management team, as well as BMA and its executives, all did very well for themselves.
For the longest time, Richard had the ATT letters framed on the wall in his office. He would point to the letters and tell the story of Tel/Man with a smile.
