- May 18, 2018
A plan to expand
Companies by Janet Leiser | Senior Editor
Tribridge's founders plan to grow the company by at least 20% annually over the next five years. It'll hit $50 million to $100 million in five years, depending on how many more acquisitions it makes.
Clarity comes at the oddest times. For three former Arthur Andersen partners that started Tribridge Inc., it came after "the water cooler incident." That afternoon, they spent two hours debating bottled water versus filtered water.
Tony DiBenedetto vividly recalls the energy he and co-founders Brian Deming and Mike Herdegen wasted trying to decide what water to buy. It wasn't too long after they started the technology consulting firm.
"It was a great lesson learned," DiBenedetto says. "After that meeting, we laughed and said, 'What are we doing?' We decided we'd never have three people sitting in a room and arguing about water ever again. It was the difference between us being a small company and a bigger company."
The decision not to micromanage worked in their favor.
This year, Tribridge revenue is expected to hit $20 million, up from $15 million last year and $4.4 million in 2005. With an average growth rate of 136.5% over three years, most growth occurred organically.
Now if the partners are stuck on an issue, they ask: "'Are we doing the whole water cooler thing again? Someone pick the water and lets go.'"
DiBenedetto, Deming and Herdegen started Tribridge in 1998 with $300,000 from angel investor Tom Wallace, who's known in the Tampa Bay area for his success with technology companies. He's now CEO of Red Vector.com. (Wallace and DiBenedetto are among those who co-founded the Tampa Bay Technology Forum in 2000.)
Tribridge's founders realized national consulting firms targeted only Fortune 500 companies and global businesses so their company would go after the small and mid-sized firms in the Southeast United States. They'd help other businesses figure out ways to be more competitive, more productive and more profitable.
Only half of the company's projects initially involved technology. Now it's all about technology. In fact, Tribridge expects to be Microsoft's largest U.S. partner in five years.
DiBenedetto says the firm is already the largest Florida-based technology consulting firm with 120 employees and 500 customers, including Naples-based WCI Communities and Tampa-based OSI Partners, formerly known as Outback Steakhouse, and the law firm of Holland & Knight. So far, only 100 customers are from other states, and they're split between Tribridge's offices in Houston, Dallas and Atlanta. The company also has locations in Fort Lauderdale and Orlando, as well as its Tampa headquarters.
"We're well established from Texas to Florida," he says. "The areas we're looking at, both organically and for acquisitions, is Chicago, Charlotte, Birmingham, Louisville and Nashville. When we envision our company we see the Midwest, Minnesota, Chicago down to Texas and over to the Carolinas."
Tribridge focuses on industries involved in manufacturing, wholesale distribution, real estate development, professional services, such as lawyers and doctors, and software companies.
"People that rely on people to get the job done," Di Benedetto says. "The big labor trend now is services. A number of our customers rely mostly on people to bring in revenue."
What they do
Those companies that become a Tribridge customer usually remain one.
Tribridge was initially hired in 2001 by home-builder WCI to help with the marketing of the firm's 30 communities.
"The communities are at different levels, but their marketing department would send the same piece to somebody who lives in Sun City Center as someone who lives in a high-end community," DiBenedetto says.
It was costly for WCI to rely on mass marketing instead of targeted marketing. And each one of its communities had its own database, which weren't connected.
"So if you went and saw one location and you went and saw another location, they didn't even put you together in their system and track that you looked at these three or four places," he says.
Tribridge made recommendations, both from a profit perspective and technology perspective. WCI decided what it wanted and Tribridge implemented it.
Since then, Tribridge has performed numerous other projects, from technology security to the installation of Windows SharePoint that allows WCI's human resources department to distribute documents and forms online.
When it comes to technology, Tribridge, which averages about three or four projects per customer, pays "ethical hackers" to determine weaknesses in a firm's computer system. Then Tribridge fixes them.
Tribridge has been profitable in all of its eight years, even its first year when revenue was $2 million, the CEO says. Of course, the co-founders, who were paid lucratively at Arthur Andersen, didn't make much of a salary the first five years.
DiBenedetto declined to provide specific profit figures, but he says the firm's goal is 7% to 10% EBITDA (earnings before interest, taxes, depreciation and amortization). He did say Tribridge made 7% profit in 2005, which is a bit more than $1 million.
There were a couple tough years, especially in 2001 and 2002, when the tech bubble burst.
After 9/11, business dropped dramatically, he says, but management assured employees there wouldn't be layoffs. The co-founders took large pay cuts, and at one point it looked like one of them would have to cover payroll out of his personal account.
"We were looking at each other, saying, 'If we don't get another receivable, who's writing the check?' "
At that time, the company had hit its credit line on its asset-based loan and needed new work to increase the credit.
"Brian Deming and I went to Chicago and pitched this firm," DiBenedetto says. "We thought there was no way we were going to get the work."
Within two weeks of them making the sales pitch, Tribridge was given the $1 million project over Arthur Andersen LLP.
"That was just lucky," he says. "At the end of the day, you have to make payroll and you have to have cash. About 80% of our costs are payroll costs."
Cash hasn't been a problem since, he says. Tribridge pays its way as it goes, and it doesn't usually use much of its credit line.
In Tribridge's most recent acquisition, its fifth since 2003, Lance Raab sought a buyer for Ideal Consulting Inc., which he started in 1989.
Raab wanted to focus on one of his two companies so he sold Tampa-based Ideal Consulting, which had about $3.5 million in revenue last year and 15 employees, to Tribridge. Raab kept REPS Software, which provides proprietary software to senior adult communities. Neither DiBenedetto nor Raab would disclose the sale price.
But good financials aren't all that Tribridge seeks in an acquisition, especially since there are plenty of big egos among skilled technology workers. "They think their way is the way," DiBenedetto says. "When you do an acquisition you have to meld that way into the company. I look for people who can accept that level of change."
Tribridge, for instance, considered a Chicago company that was profitable with $5 million in revenue.
"As we did more and more due diligence, it was a great company, but we felt they'd want to be independent so we pulled the plug on the deal."
DiBenedetto says Ideal Consulting actually had a stronger reputation in the marketplace than Tribridge.
"When Lance came to us, it was an easy conversation," he says. "We knew his clients were happy. We had a lot of respect for Lance prior to doing the deal. We always hoped he wasn't in the deal when we were competing. This was a great advantage to us, to take probably our best competitor from a quality perspective in Tampa, and allow them to be part of our team."
Other Tribridge competitors are one-person firms or large companies, he says, adding, "We're probably the fifth largest in the country."
The market is still highly fragmented, though. Tribridge hopes to continue the consolidation.
TONY'S THREE TIPS
Tribridge Inc. CEO Tony DiBenedetto offers these tips on running a successful business:
GET AN OUTSIDE board that challenges the CEO. It doesn't matter if the company is small or large. My board members, Tom Wallace and Bill Meurer, are extremely aggressive, successful people. They smack me around sometimes. I walk out of every meeting with a long list of things to do.
HAVE ENOUGH CAPITAL. It seems like an obvious no-brainer. But I see with our customers and entrepreneurs how important it is to be well capitalized. I don't think I did a great job thinking about the capital needs five years out. I always thought about capital a year out. We have a good banking relationship to fund our accounts receivable. Because we've been successful, anytime we've asked for an increase, they say yes with very little fanfare. Most of the time our credit line has nothing on it so that helps.
We pay as we grow.
STRONG MANAGEMENT is a must. We kid ourselves if we think we can grow this company without all the other people we've added to the team.
I've made the comment at board meetings and I've asked board member John West, when he was in between jobs, 'John do you want to become the CEO? I think you'd do a better job than me.' He declined.
But I think you have to be in that mindset to bring the best people in to run the company and not feel like just because you started it, you have to run something. If your interest is in running a company, then that works. If you want a lifestyle business, then you can be in charge of it. But most entrepreneurs get in their own way, especially technology guys.
They know technology really well, but they're not good business people. They think because they start a company they need to be a CEO and they don't.