In 1965, fresh off his service in the Army, Paul Swakow walked into a building for an interview set up by the unemployment board. He wasn’t sure what the company was or what the job entailed, but he knew the board had it all set up for him. What he didn’t know was that he had just walked into the wrong building. His interview was supposed to be in the building next door! As it turned out, the building he did enter was a Clark dealership, where he got his start in the industry he would come to love. He eventually left Clark to take a job at a fledgling wholesaling company, Scott Lift Truck.
In the 30-plus years since, Swakow has made the most of his unexpected career choice. Along with his younger brothers, Loren and Scott, Paul has turned the old wholesaling outfit into one of the nation’s most respected material handling companies.
Recruiting the Family
Scott Lift Truck was formed by the founding partners of LPM as an outlet for used lift truck parts. Paul Swakow signed on when Scott Lift was still in its infancy. “Scott Lift was only a month or two old when I joined. It had a name, but there wasn’t a building yet,” Paul says. “It was a wholesaling operation and they were looking for somebody to come in and handle the retailing side of business.”
It didn’t take long for Paul to realize retailing is what really intrigued him, so he bought out his partner, a wholesaler, three years later. Now Paul had a vision of what he wanted and the control to make it happen. What he needed was another person on the inside. He turned to his brother Loren, who had spent the last two years working for a book printer since graduating from Carthage College in 1974. Loren had no experience in the material handling industry, but he had the administrative and operational skills Paul sought. In 1980, the youngest brother, Scott, joined the company after earning a business degree from the University of Illinois. Scott briefly considered employment with a larger company, but he decided to stick with the family business and took a full-time position, beginning in the parts department.
The demise of White, whose trucks the company had been selling up to that point, led Scott Lift Truck in 1985 to become a dealer for Komatsu, its primary product ever since. “We dabbled in other product lines, but it was confusing to our customers, so we focused on Komatsu,” Loren says.
By this time, each of the three brothers had established his own niche. Paul’s was parts and service, Loren’s was administration and finance, and Scott’s was sales and marketing. Today, those roles haven’t changed. Scott still leads the sales force, which now numbers seven territory sales representatives in the Chicago area, plus himself. “We each have our own area of expertise. That’s why we’ve been able to work together for over 20 years,” Loren says. “We don’t overlap and step on each other’s toes so that makes it work.”
More than Just Equipment
In addition to being a Komatsu dealer, Scott Lift Truck is an LPM dealer, selling discounted parts for overnight delivery. “LPM brings lower margins, but the volume is high, and since sales are primarily electronic, the cost is low. It works out well,” Loren offers.
The Swakows also have two other companies, SLP Realty and SLP Financial. Loren explains the relationship between the three entities by saying, “All three work together but are separate. SLP Realty owns the building we’re in and rents out other industrial space. SLP Financial is a company we devised that’s able to finance a truck, collect payments from the customer, pay the bank and pay Scott Lift Truck to maintain it.” The three brothers are all equal partners in these other two companies—the names come from their initials—but Paul is the majority owner of Scott Lift Truck. He owns over half the common stock and all the voting stock. That makes shareholder meetings unnecessary, and he simply votes in his brothers as vice presidents every year. Although Paul is officially the owner, he admits that his two brothers really run the company. “I’m still president, but I’m slowly backing toward retirement,” Paul explains.
As part of his stock deal with his brothers, Paul receives four months’ vacation every year once he turned 55 in lieu of cash. That leaves Scott and Loren to handle the daily operations, which they have done with aplomb. The company remains one of Komatsu’s largest Midwest dealers and sees growth ahead in coming months.
Looking to the Future
The brothers all see an industry rebound forthcoming. Scott says, “We see good growth for 2004 because the industry is stabilizing. It’s not as chaotic as it was five years ago. We can take deep breaths now, whereas we couldn’t even breathe before.” Loren says the company recently had its largest purchase order in history from a single buyer, which indicates the recovery has already started. Paul says business will come back first in service, then in rentals and finally in sales. He cites increased quoting activity as a reason for optimism, but is quick to point out that many dealers will be more cautious because they don’t want to get hurt again by an unstable economy. As for Scott Lift Truck, the past few years were slow, but profitable. “We laid off some people and tightened our belts to remain profitable,” Paul says. “Having been through previous recessions in the ’70s and ’80s, we knew what to do and were able to move faster to avoid getting hurt as much as we did back then.”
If experiences like these teach anything, it’s that the future is always uncertain. However, the Swakows have their ideas about where the industry is heading. “Our industry somewhat follows the car industry, and Ford is conducting an interesting experiment right now in Indianapolis,” Paul explains. “They have one dealer doing sales and five more doing service. That probably won’t be in the near future for us, but a scenario where the factory sells trucks and we only do service is intriguing,” he says. Loren has a similar viewpoint, predicting, “Mid-size dealers like us will have the one-on-one ability to outservice the big guys, but they will be there with high volume capabilities and sales potential.” He adds that a potential change in the distribution of product may be a concern, citing the example of a cargo ship picking up containers at various international ports for delivery to the U.S. where they are stored, organized and distributed. With all that travel time on a large ship, Loren wonders if the process can be streamlined on the water so the products are ready to be distributed as soon as they arrive at port. Scott sees a big challenge to be the outsourcing of manufacturing to overseas markets.
Foundations of Success
The brothers’ leadership is certainly an ingredient in the company’s success. However, other factors also contribute to make it work. Elk Grove Village, the planned community adjacent to Chicago’s O’Hare Airport where Scott Lift Truck is located, was the largest contiguous industrial park in the world at the time it was built and has played a vital role in the company’s growth. “Many goods and services have to come through Chicago,” Loren says, “and we do a lot of business at O’Hare with the big cargo carriers.” The airport is such a cornerstone of the company’s business, in fact, that Scott got involved in some political lobbying when he was chairman of the Elk Grove Chamber of Commerce. He was part of a group that traveled to Washington, D.C., to argue in favor of the O’Hare expansion project. “Getting involved on the local level is important because that’s where our end-users are,” Scott says. “The expansion was a pretty volatile issue because sometimes the residents around the airport who are concerned about the noise don’t understand how many people’s livelihoods are affected. It is imperative for the businesses here that O’Hare remains strong and viable.”
Many of Scott Lift Truck’s customers are also located in the Village, so it is important for all to work together. With a relatively small selling area of one-half of Cook County, there is a very high interaction rate between the company and its customers. “All of us know most of our customers, if not by name then by face,” Loren says. He considers this one of Scott Lift’s greatest qualities, along with being a small enough company that the owners are easily accessible. “We can differentiate ourselves a little bit because people can still reach the owners,” he explains. “If a customer calls with a problem, we take the call ourselves and don’t delegate it to someone else to clear up. Since there are three of us, it really isn’t that much of a burden. It makes the customer feel confident that he can reach one of the owners.”
Practicing the Mission
Giving the customer confidence is the top priority at Scott Lift Truck. The company mission statement is, “To continually improve our customers’ productivity and profitability by providing quality service and quality products.” It isn’t just lip service, either. “Customers respond to it well,” Loren states. “They know our concern is to get them up and running, get them productive and do it in a cost-effective way. They should want to come to us because we’re doing a good job and doing it right for them. The only reason they’re going to come to us is we’re going to help them make money. It’s their money we are concerned about and then ours will follow,” he continues. He stresses the importance of developing customer loyalty. “We want all our customers for the long haul,” he says. “We don’t want a quick hit to make some money and then never hear from that customer again. You have to do all you can to touch the customer through visits, phone calls and e-mails, even if it is just to touch base. A lot of times if you just ask how that last repair was, they’re impressed and it sticks in their mind.” E-mail makes it easier to contact customers, but Loren views it with mixed emotions. “A lot of business is conducted over e-mail, but it also makes me fear that we’re not really touching the customer anymore. That is something we cannot forget,” he says.
Building Employee Loyalty
Another reason for the success of Scott Lift is continuity. Over half of the 35 current employees have been working at Scott Lift for over 10 years, including a handful with a tenure of over 20 years. “It seems that our turnover is less than at other places. It gives me a good feeling that employees are staying here for a reason,” Loren says.
One of those reasons may be the care the Swakows took in designing their facility with their workers’ interests in mind. The 65,000 sq. ft. building is a major source of pride for the management team. “We tried to think about the employees coming into work everyday and make it a nice experience for them,” Loren says. To accomplish this, they converted the area with the tallest ceiling into a service center, complete with special lighting, new maintenance lifts and an air-replacement system. “We put the air system in so the mechanics don’t have to smell fumes all the time,” Loren says. “They can just hook up a hose to the exhaust, like those at car shops. It makes for a nicer environment.” In addition to the amenities of the service department, the mechanics also have a lunch room and a clean locker room.
The remainder of the facility houses a parts room with rows of lights down every aisle and several oversized offices through which orders from nationwide accounts flow. “Our prime area of responsibility for Komatsu is small, but we do sell parts nationwide and collect tax in every state,” Loren says. “We’re able to centralize purchasing and reduce accounting costs for some of our national accounts.” Basically, a customer can buy parts in multiple states but receive only one bill and make one payment, because Scott Lift takes care of reconciling all the taxes. “Normally, if a customer buys ten $3 items over a month, they must account for all ten invoices and all the different taxes on all ten invoices, and the actual accounting cost is greater than the actual tax paid,” Loren explains. “Accounting savings alone more than justify this service. It still allows them to order piecemeal, but the tax is paid altogether.”
MHEDA in 2004
Loren Swakow became MHEDA’s 50th president after having served on the board for six years. He joined the board because he saw it as a way to work with industry leaders and form a working relationship. “To be able to grow with the leaders of our industry was a great experience,” he says. He credits his time on the board with helping to bring strategic planning to his company. “I learned the importance of drafting a model and putting things in writing. Then you have more follow-through and accountability.”
As president in 2004, Swakow will be responsible for guiding the association through its 50th-anniversary year and has plans to provide more value for association members. “The association fees are non-essential funds for companies, so the membership dropped off a little over the past few years. Now, we’re starting to come back so that shows we are subject to the whims of the economy. We’re going to protect ourselves by adding more value to membership and showing that it pays to be a MHEDA member,” he says.
Swakow is adamant in his belief that networking is the essential value of MHEDA. “As a member of MHEDA, you’re able to talk to peers who have the exact same issues you have. You can’t get that at the Chamber of Commerce or in other business groups,” he says. In addition to being a way to get advice, networking is also valuable for establishing contacts for transactions. “I buy from and sell to many MHEDA members. They become both a supply source and a customer base for me,” he says. “In fact, oftentimes when I’m looking for a brand-oriented object, I’ll go to the MHEDA Directory before the Yellow Pages!”
He plans to heavily promote the networking function through MHEDA-NET, small groups of members with similar businesses around the country that can have regular teleconferences and access to structured programs that will allow them to interact and learn from each other. “It will be a subset of MHEDA,” he says.
In addition to MHEDA-NET, Swakow is excited about an affinity program that will allow MHEDA members to receive a discount on freight costs. The details have yet to be ironed out, but if this program comes to fruition, Swakow indicates the savings alone will be enough reason to pay your dues. Members will also have access to more educational teleconferences throughout the year.
Loren Swakow is excited about the coming year and serving as MHEDA’s 50th president. “We hope to provide value so members can’t afford to leave,” he says.