Small town, Big time
With apologies to Horace Greeley, not every young man has to "go west" to strike it rich. For Jeff Thompson, success happened where he happened to be.
By Gina Fraone -- EDN, January 1, 1998
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By Gina Fraone
photograph by David Fitzgerald
The stereotype of the electronics entrepreneur is a determined and opportunistic individualist who goes to Silicon Valley to make his or her fortune. As with all stereotypes, there are exceptions. A few, such as Jeff Thompson, the founder and chief executive officer of Peripheral Enhancements Corp., have the independence and the talent to bloom where they're planted. In these special cases success happens wherever they happen to be.
For Thompson it began when he was only 14 years-old in the basement of his parents' house in his hometown of Ada, OK (population 17,000), amongst oil wells and grazing fields. While earning merit badges as an Eagle Scout and deciding whom to bring to the prom, Thompson changed his business strategy from selling Macintosh computers he had repaired or upgraded to brokering memory chips.
During his first year in college, operating out of his dorm, his business exceeded a million dollars in sales. At 20, he was invited to President-Elect Clinton's Economic Development Conference. At 22, he was named Entrepreneur of the Year by the U.S. Small Business Administration. At 24, Peripheral made Inc. Magazine's Top 500 list of fastest-growing American companies.
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at-a-glanceName:Peripheral Enhancements 1986: Fourteen-year-old Jeff Thompson starts purchasing and reselling Apple Computers with the $2,500 he saved from his paper route. Names his business Peripheral Outlet. 1989: At 17 years old, Thompson switches to supplying memory products exclusively. Worldwide sales total $500,000. 1990: Thompson enters college at the University of Oklahoma in Norman, OK. Continues to manage the business from his dorm room with a computer, cell phone and fax machine. Sales exceed $1 million. 1991: Peripheral starts manufacturing, under contract, its designs for memory modules. 1994: Thompson graduates from college. 1996: Thompson changes name of company to Peripheral Enhancements Corp. Sales exceed $40 million. Company makes Inc. Magazine's Top 500 Fast Growing Private Companies list. 1997: Peripheral opens a new 10,000-square foot manufacturing facility to start manufacturing its own designs, becoming the only facility in Oklahoma to manufacture memory. |
Today, at 26, Thompson still rides herd on Peripheral. Last year the company had sales of $65 million. More recently it opened a sales and service branch in Austin, TX, and a distribution office in London. At an age when some people are still trying to find themselves or have moved back into their parents' basement, Thompson is entering his twelfth consecutive successful year in the electronics industry and shows no signs of slowing down. All this in a town whose previous claim to fame was a quadruple lynching in 1909.
A life less ordinary
Thompson showed an acumen for business at an early age, recalls his father William, a former hotel executive who now works as Peripheral's chief operating officer. "When Jeff started delivering [the Ada Evening News] at 10 years old, he immediately tried to come up with a way to increase his profit."
Thompson actively solicited business by going door-to-door and increased his paper route from 50 papers per day to 150. He also asked customers which competing newspapers they wanted delivered. Then he would buy them at retail from the newsstand and mark them up to make a profit on the delivery.
Thompson's interest in electronics began at 14, when his parents bought him an Apple computer that he immediately took apart and put back together. Pretty soon he was also tinkering with the used computer market. With $2,500 he had saved from his paper route, Thompson got into repairing, upgrading and brokering Apple computers.
"It became more than a hobby when I realized a profit could be generated," he says. "I began to realize that this is what I could do for a living."
By the end of high school Thompson shifted to reselling computer memory products, in part because the inventory took up less space in his basement. The other reason was the challenge. "It's the thrill of dealing with products that have very rapid price changes," he says. "That's fun." Focusing on the memory business helped Thompson's sales reach $500,000 in 1989, the year he had to decide where to go to college.
Robert Lush, dean of the College of Business Administration at the University of Oklahoma in Norman, had read about Thompson in the business section of an Oklahoma City newspaper, and he hoped to help Thompson with that decision. In Thompson, Lush saw the potential to strengthen Oklahoma's stake in electronics.
Right after finishing the article, he made arrangements to meet with Thompson. "I drove to Ada the next day with three local businessmen. At the time, Jeff was considering colleges in Texas and California. I knew if he left, he'd never come back to Oklahoma. I decided to offer him a full scholarship right on the spot."
According to Thompson's father, the University also offered Jeff his pick of campus housing, faculty parking and two phone lines for his room so he could dedicate a line to his fax machine and modem. Jeff accepted only the scholarship and extra phone line, says his father. He chose to live in the freshman dorm because he wanted to be treated like the other students.
Staying in school
Armed with a cell phone and fax machine, Thompson continued to manage his business out of his dorm in Norman while his employees worked in an office in Ada.
"It was difficult keeping Jeff in college," says Lush. "He was learning so much through his business and was already making good money." But Lush persisted, believing that keeping Thompson in college would be essential to keeping Thompson grounded in Oklahoma while the business continued to grow.
"It was hard for Jeff when the company was experiencing phenomenal growth during his sophomore and junior years and he had to [spend part of the day] in class learning stuff he already knew," says Thompson's brother Ryan, who is vice president of operations and in his senior year at Oklahoma University.
"I insisted on his staying," says Thompson's father. "I used to say to him 'You mean that you've been Entrepreneur of the Year, met [President-Elect] Clinton, accomplished all this stuff and now you're going to quit school?' "
Overachiever
"My most difficult challenge in college was time management," admits Thompson, who was trying to keep up with his studies, serve in a fraternity and carry on a relationship with a girlfriend while managing a company. "I like to do everything I do very well and it was easy for me to feel like I was doing just a half-way decent job at many things."
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A sadder but wiser Thompson says: "My biggest challenge probably was realizing that the rest of the world doesn't do business the [honest] way I do. ['Trust me'] doesn't mean much coming from many people." |
It was also frustrating for Thompson not to be present at times he felt his company needed him to make important decisions. He recalls one time when he went to Peripheral after a day of classes and found out that his employees had sold the company's entire stock of memory chips at normal prices that day. Unfortunately, Thompson had learned earlier in the day that the factory of a major supplier had burned down that day and market prices for memory had shot up 30%.
Though seemingly a natural businessman, Thompson did learn a few lessons the hard way. "My biggest challenge probably was realizing that the rest of the world doesn't do business the [honest] way I do," he says. "['Trust me'] doesn't mean much coming from many people."
Thompson remembers in the company's earlier days how his belief in one customer's word almost killed the company. "I had shipped $120,000 worth of parts that I had paid for out of our operating cash to a customer [in reliance upon] her word that I would receive payment that week. I was so relieved to receive her check for $80,000. It bounced." Thompson soon learned that a check for $40,000 that the customer had sent earlier had bounced too.
He had to hunt the customer down and was eventually able to collect $80,000 of the money owed. Thompson even involved the FBI but the customer disappeared for good before the total amount was recouped.
Honesty is the only policy
Honesty, Thompson believes, sets Peripheral apart from other memory module companies. Now a manufacturer of memory upgrades for almost every brand of computer, Thompson emphasizes: "People who know me know that I would sell my house to keep a promise. We really do test every single part."
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Ryan Thompson on brother Jeff: "It was hard for Jeff when the company [was growing] and he had to [spend part of the day] in class learning stuff he already knew." |
"Peripheral has never ever ever let us down," says Ira Feigelman, vice president of marketing for Cyberian Outpost, Kent, CT, a company that sells more than $30 million in products exclusively on the Internet and uses Peripheral as its main memory supplier. "Even during the UPS [strike last August], Peripheral Enhancements made sure we always received our products overnight," Feigelman says.
Thompson also had to learn to tighten the focus of the company. "At one time, Peripheral sold to both end users and to distributors and resellers," says Tom Eleazer, vice president of marketing. "We used to run full page ads in magazines and, essentially, competed with our customers." That caused a few to complain.
In 1996, Thompson made the decision to quit selling to end users. "The company had grown up selling to individual users," he says. "But as the company grew we began to target distributors and resellers . . . we made a lot of money selling to end users but it made sense to choose." The company has shifted the money it formerly spent on ads aimed at end users to strengthen its services for resellers and distributors.
"It's all about service," says Cyberian Outpost's Feigelman. "I can beat its prices, but Peripheral has given me consistently great service and great advice. They are the only company that I can completely trust. If memory prices are about to go up, they'll let me know when to buy a lot. When memory prices are about to drop, they'll make sure I only buy what I need."
Each Peripheral memory module has an eye-catching hand-painted bright blue edge, making it immediately recognizable on a circuit board as a Peripheral product.
"We don't print our name on our modules because sometimes our competitors buy parts from us when they're low on stock," says Thompson. "We've put so much into making sure our products are reliable. Yet if an end user was happy with our memory products, it wouldn't know how to request our products from the distributor to which we originally sold them. Now they can ask for 'the ones with the blue stripe.' The stripe goes on very last so competitors buying from us can request not to have the stripe."
Location, location, location
Though Peripheral has managed to thrive on the plains of Oklahoma, certain problems attributable to its location remain. "It's difficult to attract really great sales [people] and engineers to this area. They just don't get as excited about living in Ada . . . even though it's a really nice town," says Eleazer.
Thompson says that he plans on keeping Ada as Peripheral's headquarters and will raise his family there, even though international sales now account for more than 50% of the company's business.
But does Thompson ever feel the pull of the Valley and other hot industry locations? "I really like doing business in Oklahoma," he says. "Operating costs here are low, and the people are friendly and hard-working." He feels he can expand to those locations if necessary, but not have to relocate the manufacturing plant and head office from Ada.
Let's make a deal
Eleazer, who has been with Peripheral for about a year, is amazed continually by Thompson's energy.
"He's really incredible at motivating the sales staff," Eleazer says. "[One time] he was running around with a [telephone] headset and $20 bills taped to his face. It was around 6:00 p.m. and our sales manager had left but the company had not quite met its sales plan for the day. Jeff would run up to our salespeople on the phones, listen in on the call through his headset and coach the salesperson on what to say to the customer. As soon as the sale was made, the salesperson got to rip a $20 bill off his face."
Thompson attributes his success to luck, hard work and intelligence that he characterizes merely as "above average." Because of Thompson's abilities and example, at Peripheral Enhancements "average" results seem to have never even been an option.
