Through its entrepreneurial strategy and willingness to embrace new technologies. The Magnet Group has become a leader in the global promotional products industry. David Gill tells about a company that has more than tripled its revenues over the past six years.
Since 1996, The Magnet Group has grown from $25 million in revenues to a projected $90 million for this year. A lot of factors have combined to expand the company, but its central philosophy provides the key to its approach to doing business. As Bill Korowitz, the company’s chief executive officer, says, “We are marketers, no question, but what drives our marketing is that we’re cutting-edge manufacturers. We’re not afraid of new technology. We’re always on the hunt for ways to improve the company.”
Korowitz provides the company’s sales growth as evidence of its constant search for improvement. But he also tells the following anecdote about how far The Magnet Group has advanced: “When I joined the company in 1996, it would take us a month to process an order for one million pieces. Now it takes us three days. We always pride ourselves on being one of the most innovative companies in manufacturing and decorating our goods.”
The Magnet Group consists of five companies, the centerpiece being Magnet LLC, the manufacturer of magnetic promotional products and accessories. The others include PCE, which produces computer accessories and cell phone-related promotional products; Benchmark, a manufacturer of gifts, awards, crystal and art glass; Professional Towel Mills, which makes golf, kitchen, bath and sport towels, and Perfect Promotional Products, which makes promotional imprinted products such as sports/water bottles, soft vinyl products, luggage tags, mouse pads, stress balls, visors and identification badges. PCE, Benchmark, Professional Towel Mills and Perfect Promotional Products all were acquired over the past six years.
Since 1996, says Korowitz, “We’ve been aggressive in making acquisitions and we’ve also grown our existing product line significantly. We’ve also invested a tremendous amount in those new product lines. We’ve had a lot of success in the product lines we’ve launched.” All of this has added up to put Magnet on a fast growth track – a track that shows no signs of slowing down.
The Entrepreneurial Spirit
Fast growth has been a Magnet trait from its beginnings. Its founder, Bill Wood, started the company in 1984 in a rented car wash in Washington, Mo., with $500, a couple of machines and two employees. One of the industry’s first magnetic products manufacturers in the promotional market, Wood had an inventive streak that is absolutely crucial to competing in the promotional products industry. By 1992, the year Wood sold the company to Peter Seidler, president of Seidler Equity Partners, Magnet had garnered $10 million in annual sales.
Zero to $10 million in eight years was a phenomenal growth rate, but Magnet’s salad days were in fact just beginning. The 1990s proved to be an era of great expansion for the company. “We got a tremendous amount of growth from the economic boom,” Korowitz says. “In particular, our industry benefited from the coming of the Internet. The dot-coms spent a tremendous amount of money on promotional products.” Coupled with the acquisitions spearheaded by Seidler Equity Partners, Magnet soon gained market share. Today, Magnet LLC alone has 400 employees operating out of two facilities in Washington, Mo., and is one of the top 10 magnetic promotional product makers in the United States. During its peak season, The Magnet Group as a whole numbers nearly 1,000 employees.
Korowitz estimates that, nationally, promotional products are a $17 billion business. “It’s highly fragmented from the supplier point of view, and the industry has a lot of entrepreneurial, inventor-type companies,” he says. Yet that is also what Magnet is, and it goes a long way toward explaining its rapid success.
Along with Korowitz, The Magnet Group’s executive ranks include Tom Gorgonne, the chief operating officer; Paul Leone, the chief financial officer; Annette Eckerle, senior vice president of mergers, acquisitions and legal, and David Kagel, president of Perfect Promotional Products and senior vice president of new business development.
Magnet sells its products through a distributor network that numbers about 80,000 sales representatives in the United States alone. “We’ll only sell to someone who’s reselling our products,” says Korowitz. “In our industry, this works well because there are so many end users that a manufacturer like us couldn’t possibly put together a sales force.” Along with the two Missouri plants, The Magnet Group also has facilities in Oxnard, Calif., (Perfect Promotions), Riverside, Calif., (Benchmark), Hollywood, Fla. (PCE) and Abbeyville, S.C. (Professional Towel).
In recent years, Magnet has spiced its new product launches with a line of imported items called Innovations by Magnet. This program consists of paper holders, executive desk displays, CD openers, desk accessories and magnetic pens. The first grouping entered the market in 1999, and from the beginning it has posted “tremendous sales,” according to Korowitz. “All the new lines have done fabulously.” The Magnet Group’s other units have made long strides in new products as well. Among these are promotional bags and coolers from Professional Towel; electronics and computer accessories from PCE; a line of inexpensive gifts and awards such as key lights, tools, key chains and pens from Benchmark, and plastic pens from Perfect Promotional Products.
Korowitz takes great pride in Magnet’s record for innovation. “We’re not afraid of new technology and we love to mix the technology from other industries with our own,” he says. “We’ve been able to use many ideas from the printing industry, for example.” Cootom Garyonne has been instrumental in changing the manufacturing philosophy from pioneers to engineers. He also gives a lot of credit to Kagel in his capacity as head of new business development for the company’s groundbreaking products and use of technology. “He and I are like Lennon and McCartney,” is how Korowitz describes their working relationship.
The new products and Magnet’s use of technology are two of the keys to its future success. “Looking at the fact that we just entered the crystal business, and by the end of this year, you could end up being the third or fourth largest crystal supplier in the whole industry, gives you a feel for what we can accomplish when we focus our resources, ” Korowitz says. “If we can continue to add to the manufacturing side of the business, we can gain a lot more share down the road.”
Magnet also isn’t done yet in the mergers and acquisitions game. Look for the company to acquire more firms, both also in the promotional products industry. “Seidler is always aggressive in acquiring new companies,” Korowitz says. “Companies with innovative products and strong management, teams that know how to grow usually top that list.
“As we speak, we are reviewing potential acquisitions with several companies. We’ve learned some things on the acquisition trail. There’s a definite balance between doing something yourself versus buying a company that already does it.” In this way, Magnet has steadily maintained founder Wood’s entrepreneurial and inventive spirit – a spirit that has underscored its rapid growth over the past few years, and should lead to more expansion over the next five to 10 years.