Alumni Success StoriesJames Sowers, M.B.A. '84
What kind of business did the entrepreneur start?
Mr. James Sowers is an entrepreneur who has combined his many talents and ambitions to build a successful business. A charismatic fellow, he is one of three co-founders of SRS Industries, which sells re-conditioned computer parts to the third party maintenance industry. Unofficially, Mr. Sowers refers to his business as a "wrecking yard full of computer parts which sells repaired pieces to large companies." SRS sells only to institutional buyers, not to the end-users and have accounts established with such large computer manufacturers as IBM, Hewlett-Packard, Sun Microsystems and Compaq. Its focus on institutional buyers is directly reflected in its mission to become a substantial player in that particular industry.
During the initial startup of SRS, Mr. Sowers and his fellow co-founders made a commitment to aim high and work as hard as possible to become the biggest in the business. Although he is a co-founder, Mr. Sowers official title is "Vice President of Operations." He jokingly admits, "this is what the banks know me as." Whatever his exact title, Mr. Sowers exemplifies the meaning of having an "entrepreneurial imagination."
What is the background of the entrepreneur?
Born and raised in Fresno California, James Sowers credits much of his internal drive and ambition to both of his parents. "They were an extremely hard act to follow," states Sowers, "I knew it would be very difficult to try and match them." Indeed, his parents were tough acts to follow. His father was a well respected surgeon and his mother a pediatrician, but what was even more amazing was that they had both graduated from medical school at the age of 22. Being a part of this talented and hard working family meant that Mr. Sowers had high expectations placed on him at an early age. As time passed, he demonstrated the same creativity and skills his parents possessed and ultimately ended up surpassing all expectations.
Mr. Sowers began his education in the Fresno public school system and believes that he received a first rate education in this system, characterizing it as a positive experience. In 1979, Mr. Sowers came to the University of Southern California to start his college career as a freshman and went on to receive his degree in business administration with an emphasis in accounting and finance. Upon completing his Bachelor’s degree in 1982, Mr. Sowers enrolled in USC’s Entrepreneur Program a few months later. After some time in the working world, he returned to academics by pursuing a law degree. Mr. Sowers attended Southwestern University Law School (while at the same time still working) and graduated with his Jurist Doctorate in 1993. He states that the combination of his business and legal education provided him with the tools needed during the startup and eventual success of his own company.
In addition to his education, James Sowers also had some key work experiences before starting SRS Industries. His first taste of being an entrepreneur came while he was an undergraduate at USC, during which time he began to get acquainted with the emerging field of computers. He states, "back then the business school only had two Apple computers that never worked properly and which nobody ever used. Today, however, there are numerous computer facilities located in the business school and they are almost always overcrowded." Mr. Sowers started a side business as a computer consultant, and helped those who were unfamiliar with the new machines. He recognizes that in contrast to his undergraduate days, his business would probably have been more profitable in today’s market. In addition to computer consulting, Mr. Sowers’ early work experiences included a venture up north in Alaska. He recalls, "in the mid 1970’s one of my friends had returned from a six week fishing expedition with a lot of money. Taking into consideration the enormous payoff in such a short amount of time, I decided to go up there and see what it was all about." It was all about the commercial salmon fishing industry, and indeed, it was very profitable. Mr. Sowers mentioned that his superiors would earn approximately $100,000 during a six week run. With this in mind, he returned to Seattle and began pursuing commercial fishing as a possible career. He even wrote an entire business plan and bought a fishing boat. However, due to the high costs and intense competition in that industry, his initial vision for the business ultimately fell through and he abandoned the idea altogether.
In the early 1980’s, James Sowers entered the real estate market, a very profitable industry at the time. However, he ultimately returned to the computer industry. He states, "I got out of real estate just in time. After I had left, the market went completely south." Mr. Sowers used his knowledge about computers to begin consulting again and also began to offer training services. During this period, Mr. Sowers had enrolled at Southwestern’s Law School and was balancing his time between work and school. He continued with computer training and consulting through the early 1990’s when he and his partners started their own company.
How did the entrepreneur get the idea for starting this business?
James Sowers’ idea for starting this business can be explained in two distinct ways. First, his idea was the result of an evolution of experiences which had accumulated over a lifetime and second, it can be viewed simply as an old friend’s suggestion. As mentioned previously, Mr. Sowers had been exposed to the computer industry for quite some time. Beginning with his consulting practice as an undergraduate and through the late 1980’s as an instructor, James Sowers was keenly aware of the computer market and its trends. As a result of this knowledge, he even considered entering the software market at one point. However, as time went on, that idea never came to fruition.
It was not until March of 1994, when two close friends (Gary Rochlin and Harry Shaeffer) suggested that they extend the current business of which they were a part (buying old computer parts and re-selling them), that Mr. Sowers began to consider this specific industry. Ironically, he had initially turned their suggestion down when it was first mentioned. He states, "at that time I asked myself, who would want to buy a bunch of old parts for an outdated machine?" In addition, Mr. Sowers turned to his business education as a means of understanding and analyzing the potential market. He added, "after I had completed the proper market analysis, I had concluded that this was a rather unattractive industry." However, his friends had not told him that one of their uncles had started a business selling re-conditioned computer parts and had done quite well. In fact, his sales in one year amounted to over $2.1 million dollars. Upon hearing this, Mr. Sowers thought that maybe this industry was worth "another look."
What did the entrepreneur do to start this business?
The actual time it took to conceive the idea, put it all together, and then incorporate it into a successful business was not that long. In March of 1994, Harry Shaeffer had begun to consider opening his own business. Recognizing the mistakes that his company, a large San Diego based company, was making, Harry knew that he could do it differently and in a way that would generate a substantial profit. After recruiting Gary Rochlin for a management position in his new company, the next step was to find someone with both legal and technological experience. The logical choice was their friend James Sowers. It took a little over one year for Mr. Sowers to analyze the market and convince himself that this company could have a chance for success. In April of 1995, they joined together and pursued this venture.
Once Mr. Sowers had decided to give this business a chance, his first step was to continue to research and find out more about the market. Given his existing knowledge of the computer industry, much of this research was based on his own past experiences. The next, and perhaps most important, step in starting this business was the negotiations that took place between he and the other two partners. Essentially, they needed to establish working roles and identify the individual responsible for paying the bills. With his strong background in business and law, Mr. Sowers would initially be responsible for the company’s legal, technological and contractual obligations (they later hired an outside attorney for this role). Gary Rochlin assumed a management role in the business because of his prior knowledge with the existing company. The third partner (Harry Schaeffer) had an excellent reputation in sales, and most importantly, he already had an established client base. As a result, he would be responsible for bringing in the initial clients for the new company.
As a means of obtaining additional financing, Mr. Sowers spent most of his time during this period negotiating with banks for an accounts receivable line of credit. He and the other partners had also worked out a preliminary business plan for the company. They also needed to decide on the legal structure of their business. Given their desire to become a large player in the industry, they were incorporated as a corporation, rather than a partnership or an LLC.
After nearly three months of negotiating between themselves, writing various business plans and dealing with the banks, SRS Industries was finally incorporated in July of 1995. However, they were still not ready to officially open. Once the legal and structural issues were completed, Mr. Sowers then needed to use his technological background to establish a computer network in the business. This network would keep track of different accounts, sales, payroll, and any other records that could be kept on-line. For the next couple of months, Mr. Sowers began to create the large database that would be at the heart of this new business. Once that was in place and the partners were comfortable with their new roles, SRS officially opened its doors for business - it was September of 1995.
During the initial startup, Harry, the partner in charge of sales, began to hit the phone lines in an effort to bring in new accounts. "He would get in the office around 6:30 a.m., and would be on the phone all day long," says Sowers. This was the primary means of bringing in new clients and in October of 1995, it began to pay off. SRS had made its first major sale to GTE for $10,000. Later that year in December, a local bank finally granted the company an accounts receivable line of credit which gave the company an additional source of funds. With the new funds in place, SRS Industries moved into its first real office location in Marina Del Rey in the beginning of 1996 and at the close of its first fiscal year (October 1996), SRS Industries sales totaled $10 million.
What major problems did the entrepreneur encounter during the startup of this business?
As with the startup of any new business, there were many problems that Mr. Sowers, Harry, and Gary faced. The first major issue was that the partners had difficulty agreeing on various matters. Mr. Sowers indicated that it reached the point at which he had to act as an intermediary between Gary and Harry as they had decided not to speak to each other. Mr. Sowers states, "the internal conflict wasn’t doing anybody any good. It was a terrible waste of time and ended up costing a lot of money." The differences in opinion even led to one of the partners quitting at one point. (James didn’t specify who exactly it was).
Another major problem that Mr. Sowers experienced concerned the technological side of the company. First, he could not find the right software for the company’s database which resulted in a delay of opening for business a reliable system was necessary in order to keep track of all the records. The second technological problem was in the form of data entry errors. Once the database was in place, certain records were incorrectly entered, thus causing serious problems in the accuracy of the company’s on-line files which made it difficult to keep track of who bought the items, when they were shipped, and if they were received. Without this vital information, the company made several mistakes in shipping the products to their clients. This led to one of the largest problems that SRS had to deal with - the loss of its clientele. One of the most fundamental aspects of running a new business is not only getting customers, but retaining them as well. In essence, SRS lost some of its clients as a result of technological errors and poor communication. More specifically, the company failed to ship its products to customers in a timely fashion, or even not at all, which, in turn, cost those clients a great deal of time and money. As a result, some terminated their accounts with SRS.
The final problem that Mr. Sowers faced in his new business was the inability to obtain financing through lenders. He states, "the banks were concerned about loaning money to a new business because of the default risk. As a result, we were turned down many times." As grave as these problems might sound, James Sowers and his other partners were able to overcome them and eventually launch a successful business.
How were those problems solved?
Solving these problems was certainly not an easy task. It required technical ability, creativity, and a great deal of patience. In terms of technical errors, Mr. Sowers was responsible for correcting them. Relying on his computer background, he was eventually able to figure out exactly what kind of software they needed to use. Additionally, he and his partners were able to provide a solution to the different errors made in the database system. Working together and using Mr. Sowers’ technical expertise, they were able to overcome these serious errors that had cost them some of their clients. However, when it came to their internal differences they could not rely on a simple computer program. Rather, Mr. Sowers created an atmosphere in which all the partners had to talk to one another and simply refused to continue as the "middle man." With regard to the company’s inability to obtain loans, Mr. Sowers stated that he remained persistent and continued to negotiate even when the outcome looked grim. "Never give up," he states, "it is simply a matter of being persistent." That advice apparently paid off due to the fact that SRS was able to overcome all of these first time obstacles.
Who did the entrepreneur use for help and guidance during the startup?
The startup of SRS Industries was a strong collaboration of both teamwork and special skills. James Sowers and his other two partners spent many long hours brainstorming different ideas and providing solutions to complex problems. However, even the most successful of entrepreneurs have relied on external advice to get them through the early stages of their businesses, and SRS is no exception. From the very beginning, Mr. Sowers sought help from various friends and business associates and their input ranged from recommending different business strategies to simply giving encouragement when it was needed. Mr. Sowers admitted that it was indeed these individuals that made SRS Industries successful in the beginning. "They essentially gave a fresh perspective on problems that we had tried solving by ourselves," stated Sowers, "If it wasn’t for them, most of our problems could have ended up more serious than they did." Perhaps the individual who had offered the single most important help as an outsider was Mr. Sowers’ former mentor, Tom O’Malia.
Upon graduating from USC’s Entrepreneur program in 1985, Mr. Sowers went to work for Tom as a computer consultant. However, when the time came to start SRS, it was Mr. O’Malia giving the consultation on the various business and legal issues facing the new company. In essence, he helped Mr. Sowers re-write SRS’s general agreement. During the first few months of negotiations between Mr. Sowers and his other two partners, they had worked out the first draft of the company’s general agreement. This was the contract that outlined the partners role in the new business as well as the parties responsible for providing the initial funds. Although Mr. Sowers was highly educated in both business and law, he still decided that it would be in the company’s best interest for an outside person to review the agreement. He naturally chose his long time friend and former business associate, Tom O’Malia.
When Tom first reviewed the document, he told Mr. Sowers that the agreement virtually guaranteed failure. Seeing that they needed help, Tom began working with them on revising the first draft and ultimately pointing them in the right direction. Mr. Sowers states, "Tom played a very major role in developing the legal structure of our company. Having someone of his status giving us advice was invaluable." Indeed, the help and encouragement from outsiders had a significant impact on the startup and early success of SRS Industries.
What advice would the entrepreneur give to someone thinking about starting a business?
When giving entrepreneurs advice for starting their own businesses, Mr. Sowers has plenty. With all of his past experiences in working for himself, he categorized the important lessons that he has learned into three main areas which include: learning the industry, having clear goals and objectives, and finally, working with others who share complementary skills.
The first main rule Mr. Sowers stresses is to have knowledge of the specific industry before starting a business. He believes that this can best be accomplished first through working in that field in some capacity through which the entrepreneur will learn invaluable lessons. His background with computers had taught him many different trends and general knowledge about the industry - all of which would later help him during the startup of SRS. He states, "without the proper work experience, I most likely would have made some general mistakes that could have been costly."
According to James, the second way an individual can develop knowledge about a certain industry is to spend time observing and studying it. This will allow a potential entrepreneur to analyze any significant market trends and changes that might end up affecting his or her venture. Again, this can be accomplished in an environment that is virtually cost free. If, however, the individual does not spend the proper amount of time in the industry performing various market analyses, then that individual could ultimately make a very expensive mistake in the future.
The third and final piece of advice that James Sowers gave was to work with partners who share complementary skills. This is vital for creating synergy. Without synergy, it would be extremely difficult for a new company to create new innovations and solve complex problems. According to Mr. Sowers, allowing certain partners to specialize in their areas of expertise will enhance both performance and provide better results overall. In the case of SRS Industries, James Sowers was strong on the technical and legal side of the company while Gary Rochlin had prior experience in the industry and exceptional management skills and Harry was an expert in sales and already had a developed and successful client base. Each of the partners had a certain expertise that they brought to the business. As a result, they each focused on their specific roles and created the synergy that led them to be successful in the first couple of years in the industry.
Why was this entrepreneur so successful in his business?
In order to understand exactly why Mr. Sowers was successful in his business, one should analyze his ventures from the search, psychological, and social perspectives.
When analyzing Mr. Sowers through the search perspective, it becomes evident that there was a methodical thought process that took place during his life when it came to finding his career path. The search perspective views invention as a matter of effective search for ideas in a space of possibilities. This was true in the case of James Sowers and SRS Industries. The first crucial factor was the length of Mr. Sowers’ search. It took many years of trial and error before he found an industry in which he could begin a successful business. In short, it was a long road of both hard work and educational experiences that ultimately led him to the business he now operates today.
The second factor was the progression of certain breakthroughs. Perhaps the most pivotal breakthrough in his career came when his two partners (Harry and Gary) invited him to become a part of their new venture. Other important breakthroughs came when he had fixed the technical failures that SRS had been experiencing, and when the banks finally agreed to lend them money. All of these events combined to form a steady progression of successful turning points for the new company. The third factor in the search perspective was the element of chance. According to Perkins and Weber, Mr. Sowers’ eventual success could be characterized as systematized chance. That is, the searcher undertakes a systematic survey of a sizable number of possibilities within a defined set, looking for the ones with desired properties. In this case, Mr. Sowers had been in the computer industry for quite some time prior to starting SRS. When the time came to begin this venture, he researched the market to identify any trends that could affect his business. Therefore, his success was not merely sheer chance. Rather, it was a combination of knowledge and research. The fourth and final factor in the search perspective was the use of formal methods in solving problems. This was best demonstrated when he and the other partners worked out their technical and personal problems.
The psychological perspective characterizes what psychological attributes equip and motivate such searches which can be broken down into two main categories. First, one could analyze Mr. Sowers’ cognitive characteristics. It is clear that he possesses many traits that are commonly seen in successful individuals. For instance, he demonstrated exceptional intelligence. This was evident in his extensive educational background while attending college, an MBA program, and graduating from law school. In addition to intelligence, Mr. Sowers also exhibited a great deal of creativity. As seen in his problem solving skills, Mr. Sowers has an ability to think "outside of the box" when dealing with vague and complicated matters. Finally, James Sowers demonstrates the characteristics of a hard-working, ambitious individual. He has worked hard in the early stages of SRS to insure its success in the long run. In short, his ambitions outweighed the risks involved when starting one’s own business.
The second aspect that one could analyze under the psychological perspective is Mr. Sowers’ attitudinal characteristics. For example, he has a remarkable sense of humor. The ability to not take every issue so seriously has manifested itself as a healthy approach towards dealing with problems that might occur during the normal course of starting one’s own business. He essentially has a good attitude about work and life in general, and, as a result, he has kept himself from burning out, i.e., his sense of humor will ultimately give him longevity in the computer industry. Another attitudinal characteristic Mr. Sowers exhibits is sheer persistence. This turned out to be a crucial trait for him due to the many obstacles SRS faced in the initial phases of the business. If he was not persistent and gave up easily, then the company would most likely have failed. The final attitudinal characteristic that Mr. Sowers demonstrates is a high expectation of himself and of his colleagues. Whatever he did, he always gave a 100% effort and, in turn, demanded this same effort from his business associates. This hard-driving attitude gave Mr. Sowers a quick reputation for not only doing the job, but also doing it well.
According to Perkins and Weber, the social perspective explains the different social patterns and institutions that support inventive search. Mr. Sowers grew up in a strong family that encouraged hard work and success. Later, he used these lessons when working for himself as a computer consultant. However, it was his own company (SRS) that created the best environment for success which was accomplished by bringing together three partners who each shared complementary skills. As mentioned before, Mr. Sowers had a strong technical background in computers, and was also proficient in the law. As a complement, his two partners were strong in the areas of sales and management. Individually, they were each considered successful in their own respective fields, when they combined their skills and talents together, they created additional synergy that ultimately turned into sources of competitive advantage for their company. The success of SRS could not have happened without all three of them working together sharing their complementary skills. Likewise, Mr. Sowers could not have made SRS as successful as it was if he had started the company alone. In short, this case proves the social method as being one of collaboration and of teamwork.
As the search, psychological and social perspectives demonstrate, Mr. Sowers' success was a combination of several factors. From a hard working family, to a strong education and collaborative teamwork, each of these elements gave Mr. Sowers a key advantage in not only being a successful businessman, but also being a truly remarkable person.
- Joe Logan