Reprinted with permission from the Ventura County Star.

Tech 101: A Caring Company’s Doing Well

Network Hardware Is All About Its Customers

By Roger Harris

Eight months ago, Guy Lupi needed a piece of networking equipment and needed it fast for his New York City telecommunications company. He found Network Hardware Resale on eBay and called the Goleta company. The critical hardware was delivered overnight, and Network Hardware locked up another customer for life. “Generally, they have excellent pricing, but that’s secondary to the fact that they are extremely responsive,” said Lupi, supervisor of network engineering for Eureka GGN. “I’ve worked with several other suppliers and the responsiveness just wasn’t there.”

Responding quickly to customers’ needs is working well for Network Hardware and its founder and president, Charles Sheldon. In addition to topping $50 million in sales this year, the company recently opened an office in Amsterdam, The Netherlands, and is knocking out walls to double its Goleta office space. Next year looks even better. Sheldon projects a 50 percent sales increase to $75 million and the creation of 25 new jobs.

Network Hardware sells secondhand routers, switches and other network hardware, primarily Cisco Systems equipment, to about 3,000 customers worldwide. “We appeal to the costsaving; cost-conscious mentality for our customers,” Sheldon said. “We sell the same product (as the original manufacturer) with the same guarantee for half the price – or a lot less in some cases.” For example, Network Hardware’s sample price list offers a high-performance Cisco 7500 series router for $3,900. The same router sells for about $26,900 new.

When the economy is sluggish, as it has been for the last couple of years, companies flock to Network Hardware looking for a good price on the equipment they need to upgrade and expand their communications infrastructure, said Sheldon, whose sons are co-owners of the business. John Sheldon is vice president of sales and marketing, and Mike Sheldon is vice president of operations. When times are good, Network Hardware’s business is even better. “Buying used equipment allows a business to do those things that are nice to do, but they don’t have to do,” Sheldon said. “Used equipment lets them do those extra things.”

Whether the economy is hot or cold, Network Hardware’s reputation for service brings in customers, said Mel Beckman, a Ventura software engineer who does consulting for government agencies and businesses. “In the network business, everything is an emergency,” Beckman said. “I was on a job for the Department of Energy in New Mexico and a piece of equipment Network Hardware sold didn’t work. Network Hardware volunteered to fly a replacement part out there at no charge.

“They actually aren’t the cheapest around, but the fact that they stand behind their sales is pretty rare in the second-hand equipment business.”

Network Hardware’s revenue has doubled every year since 1996 when Sheldon moved the business to Goleta. He started the company, formerly called Strand Computer Resale, in 1986 as a part-time business while he was mayor of Hermosa Beach. “The mayor’s salary of $300 a month wasn’t going to feed my family, so I started selling used IBM equipment,” said Sheldon, who previously worked in sales and planning for IBM.

For the last three years, Network Hardware has been named to INC Magazine’s list of the 500 fastest growing privately held companies. Much of the company’s success can be attributed to its willingness to try new marketing tools and keeping a careful eye on overhead, Sheldon said.

His philosophy is to add personnel and infrastructure only when the company has the revenue to support the expansion. The company now has revenues of about $1 million per employee, a ration Sheldon intends to stick to. The dot-com implosion is a prime example of the companies letting their infrastructure get way ahead of revenues, Sheldon said.

As for new marketing tools, Network Hardware has found eBay and other online auctions to be fertile ground for new business. A year ago, the company averaged $25,000 month in online sales. This year, online sales are about $600,000 a month.

Selling is only half of the business. Mergers, acquisitions, bankruptcies and overstocks are the fuel that keeps the company growing, said Sheldon, who pays employees a commission for buying and selling equipment. A commission for buying is unusual, but it’s not the only employee-friendly company policy. Network Hardware offers a 100 percent match for employee 401k contributions, and each year the company takes every employee for a three-day all-expense paid vacation to popular resorts such as Cabo San Lucas. A well-rewarded work force translates intro profits and that, after all, is why companies are in business, Sheldon said.