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Business Observer Friday, May 14, 2004 18 years ago

Risk Manager

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Bill Mullis, one of the godfathers of the professional employer organization industry, finds success again and again.

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Risk Manager

Bill Mullis, one of the godfathers of the professional employer organization industry, finds success again and again.

GCBR's 2004 Entrepreneur is Bill Mullis - a Bradenton businessman who is one of the pioneers of the professional employer organization industry.

Mullis - a Florida Cracker with a modest demeanor and a no-nonsense approach to business - founded Employee Leasing Solutions three years ago. The company, with 2003 revenue of $299 million and nearly 12,000 employees, experienced average annual growth of 142% since 2001.

He's a man who values his reputation and is loyal to his employees. His top managers have been with him for years; most came from his previous company.

Mullis isn't the only one recognized in this special edition. Nine other Sarasota-Manatee entrepreneurs were singled out for coverage: There are two real estate developers, two construction firms, another employee leasing entrepreneur, two alcoholic beverage distributors, a software entrepreneur and a pharmacist.

As Mullis, the son of a gas station owner and toll collector, so aptly says: "Only in America."

We know there are many more business owners and risk takers who deserve recognition. We can't wait to hear your story.

Bill Mullis

Founder, president

Employee Leasing Solutions

Bradenton

By Hali White

Contributing Writer

Sometimes it's better the second time around. Ask Bill Mullis, 56, president and founder of Employee Leasing Solutions in Bradenton.

His company has seen an extraordinary average annual growth of 142% over the past three years. Many owners might consider such exponential growth, with the potential for management dilemmas, a mixed blessing. Not Mullis, who says that number could be 500% if he so chose.

"This pace is very comfortable," says Mullis.

The company had 2003 revenue of $299 million, up from $55 million in 2001. It has more than doubled every year.

For Mullis, who helped develop the professional employer organization (PEO) industry in the early 1980s, success today is a simple matter of living out the lessons learned on the first go-round.

Mullis, the son of a gas station owner who moonlighted as a toll collector, grew up in Bradenton. As a boy, he dreamed of becoming a banker.

After high school, where he enjoyed small town success as the football team fullback, Mullis attended Manatee Junior College for a year. He left to pursue his dream of becoming a banker.

But local banks turned him away, citing his inexperience. Mullis finally heeded the advice of a banker who told him to start in the finance business. A few years later, with experience on his side, Mullis joined Manasota Bank, now defunct, where he handled everything from collections to lending.

He stayed in the financial world, at various banks, for about 15 years. Today, he gives the industry mixed reviews.

"One of the sad situations in the banking world, and you've seen it a million times, is that people gain knowledge and then go sell their knowledge to another institution," he says. "It's sad that that's the way it was, but it was that way and it's probably still that way today."

It's a lesson he would remember at the helm of his own company.

"I always thought I'd do things differently if I was able to," he says. "I wanted to keep my people here. They're worth more to me than they are to someone else."

In 1984, Mullis left the banking world and set up a partnership with an insurance broker. The pair was involved in the predevelopment stage of setting up a PEO at a time when the concept was brand new. They soon parted ways after discovering what Mullis calls "philosophical differences."

Three others joined Mullis: Doug Mark, a neighbor and banker; Tom Cooley, an engineer and friend; and Jim Roberts, a salesman whom Mullis met through business. Each contributed $5,000 and set up shop in Cooley's garage to form Staff Leasing Inc.

Their initial $20,000 lasted longer than expected, even though they didn't have bank financing to supplement their startup capital.

"We worked 'til midnight every night and everyone was committed," he says. "It was such a great concept." After six months, the men began receiving a salary.

Now, when people remark on Mullis' presumed prosperity - apparent on his person only in the form of a heavy gold ring with a dime-sized center diamond - he laughs.

"But I say, 'You don't remember when we had everything on the line and risked everything to make this work,'" he says.

He adds: "Only in America."

As Staff Leasing flourished like the state's roadside kudzu, Mullis was in his element; he was the only partner who didn't want to sell when a buyer approached in the early '90s. But Mullis, in his mid-40s and the youngest of the shareholders, agreed to sell in deference to Cooley and Roberts, both in their mid-60s at the time.

"I didn't want to negatively affect them at their age," he says.

Sadly, the men lost Mark to cancer before the deal closed.

David Varnadore, chief financial officer for ELS and former CFO for Staff Leasing, says Mullis played Bradenton country boy during negotiations with the New York investment bankers who descended for the sale. The bankers, in a misguided attempt to play hardball, offered a supposedly non-negotiable deal.

Mullis remained unflappable, according to Varnadore. Without once raising his voice, Mullis drawled, "You know, Mama's not going to be real happy with that."

Doubtless, the suits wondered who Mama was.

Only Varnadore knew that "Mama" was Mullis' wife, and that Mullis' unruffled tone belied the bottom line: the deal wasn't good enough. In the end, Mullis out-New Yorked the New Yorkers, later cashing in some of his Staff Leasing stock for millions.

Mullis tells the same story more modestly, saying only that the deal was good for him financially. He is more candid about the effect the deal had on him emotionally.

"Not having control over my company was very painful, but that's part of the territory," he says.

Mullis chalked the experience up to a life lesson - and bided the time until his non-compete ran its course. When the contract expired in 1998, he didn't act hastily. Mullis dabbled in real estate and stock investments - successfully, he says, for several years. But he was bored.

Opportunity knocked in late 2000 during a chance meeting with Varnadore, who mentioned that his brother, Brian, owned a small PEO called Progressive Employers Group. At that time, the business was "just moving along," not exactly thriving, Mullis says. Brian's non-compete was up, and he wanted to move the company forward. Mullis liked the idea.

By then, early 2001, the PEO industry had changed. Insurance companies had pulled their workers' comp coverage almost across the board, citing the loss ratios they faced with PEOs which had driven down costs in a wild dash to sign clients. The resulting premiums failed to cover the cost of claims.

"There were some bad apples in our profession who were not managing the risk; that were doing things to jeopardize the carrier," Mullis says.

In response to the insurance pullout, many PEOs began a shift from blue-collar to white-collar coverage, considered less risky.

Mullis didn't waver. He stuck to his original winning formula - coverage for blue and gray-collar workers. His prior success quieted the naysayers.

"I had 10 years in the industry with mostly blue and gray collar," he says. "We had a great rapport. They knew my philosophy."

That same simple philosophy guides him today: "Where there's risk, there's reward. It's that simple - if you manage it. You can't do business with everyone, and you can't take every risk."

Says Varnadore of Mullis' blue-collar niche: "Bill grew up in that environment. He knew them as a banker. He knows that client better than any other owner."

Mullis calculates the risk of insuring blue-collar workers, screens the companies he accepts and charges them a premium price. Mullis' caution was rewarded in 2002 when New York-based Insurance Cos. of America agreed to offer workers' comp coverage to Employee Leasing's clients. Aetna provides health insurance. That's not to say he didn't shop around.

"We went across the board, talked to everyone who could spell insurance," Mullis says. "The fact that we had done a good job early on, when we had Staff Leasing enabled us to do things we might not have been able to."

Another lesson heeded from round one involved capitalization. Mullis personally capitalized Employee Leasing, providing a freedom otherwise unusual for new companies. (He declines to discuss specific financials.) Mullis built the company's infrastructure long before income supported such a move. With that structure in place, he says the company can afford to quadruple growth with the addition of only a few payroll employees.

It's an important point with Mullis: "You can actually sell more service than you can provide. I don't want to be in that position."

He passionately protects his reputation.

"It all comes back to how you're looked at on the street. Word of mouth is how we grow."

But the real key, Mullis says, was hiring many of his former employees, at both the management and associate levels. Here again his reputation mattered. Thanks to extensive press coverage, provided by local media, his former employees knew what he was up to. Most called to ask for work. The system was win/win for both sides. Each side knew the other's expectations.

"I didn't have to hire three to get one that was good," Mullis says. It shortened the learning curve considerably.

Returning to the fold as senior vice presidents were: Varnadore as chief financial officer; Everett Southwick as chief information officer; Robert Kelly in charge of acquisitions and mergers; Ted Nipper as general counsel; Brian Varnadore in charge of sales; and Ed Richardson in charge of new markets. Joe Gulash also joined as sales director. The Varnadore brothers, Southwick, Kelly, and Richardson had worked with Mullis at Staff Leasing. Nipper was Mullis' personal attorney as well as a personal friend. Gulash came to Employee Leasing with more than 25 years' marketing and administrative management; 20 spent with Zales Jewelers.

Today, each senior vice president serves as part of the key decision making team. Although David Varnadore and Mullis comprise the actual board, they make decisions as part of the team. They also consider the opinions of a second tier management team.

"Once we get all the facts on the table, it's pretty clear what direction we need to take," Mullis says. "It's a matter of getting the facts together. You can manage facts. We don't manage hearsay. We don't manage 'almost.' We manage the actual issue and deal with them as a group."

That group input has resulted in one major philosophical change since the early days. This time around, Mullis is focused less on how many employees his company services - the benchmark for success in the Staff Leasing days - and more on cash flow and profits.

The management structure, with each principal in charge of a key aspect of the company, serves a more subtle purpose, as well. It keeps the top seven in growth mode - and away from the natural tendency toward laurel resting.

"You surround yourself in each area; have plenty of depth in each department," Mullis says. "Early on, I knew that was (a risk), so we knew we had to have people below us who really did the day's job. It worked well."

Mullis trusts the company's infrastructure enough to take personal time off when warranted, but admits he still thinks about the company constantly.

He's at the office at least 30 to 40 hours each week, attending daily owners' meetings at 8 a.m. on the ground floor of the office building. On Mondays, the team reviews detailed sales reports; on Thursdays, the principals address the risk side of the business - whether to take on particular customers.

Mullis doesn't plan to take the company public - "been there, done that" - or to expand outside of Florida. Nor does he plan to acquire more companies. Having spent the money on infrastructure build-up, including a move to the company's current sixth-floor office in downtown Bradenton, and the opening of offices in Fort Lauderdale, Miami, Naples and West Palm Beach, Mullis plans to enjoy the fruits of his labor.

"The hard part's done," he says.

What's in a name?

Mullis' first PEO, founded in 1984, was Staff Leasing Inc. He sold controlling interest in 1993. The company's name was changed to Gevity HR. In 2001, Mullis bought Progressive Employers Group, which he renamed People Leasing. Following a 2001 legal dispute, brought by a similarly named Mississippi company, its name was changed to Employee Leasing Solutions.

STATS

Employees: 2001: 3,340; 2002: 8,074; 2003: 11,646.

Revenues: 2001: $55 million; 2002: $170 million; 2003: $299 million.

Average annual growth: 142%

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