GreatAmerica Leasing Surpasses $1 Billion Mark in 2009
Monitor: In October 2009, GreatAmerica Leasing noted it had surpassed the $1 billion milestone, and that this milestone was achieved organically as opposed to through acquisition. To the extent that GreatAmerica Leasing has had the opportunity to consider the acquisition of portfolios, why haven’t acquisitions been the alternative of choice? Does the fact that you have been able to sustain an average annual growth rate of 25% have anything to do with focusing on internal growth as a strategy?
Tony Golobic: We at GreatAmerica have not been very active in portfolio acquisitions mainly because we approach our business very strategically. In other words, lease volume by itself is not very meaningful to us unless it is good quality, profitable business that advances us further on the road to achieve our strategic goals. Well over 90% of our business is originated through loyal vendors with whom we have established strong relationships. This makes it a lot easier for us to experience a consistent record of growth.
M: Given the state of the economy and the impact it has had on the creditworthiness of your prospective new and existing customers, what are some of the key adjustments you have made to sustain growth without compromising the quality of your portfolio?
TG: Our credit philosophy has remained fairly constant throughout economic cycles. In other words, we are not any more liberal in a strong economy than we are in a weak one. Of course, our approval ratios in a weak economy are lower, but that is just because during a weak economy fewer businesses meet our standard credit thresholds.
Many of our competitors get a lot more aggressive in good times, which is usually at the very top of the economic cycle. We think this is one of the problems with poorly performing portfolios. Of course, there are certain industries greatly impacted in a downturn and those we analyze more carefully. The construction industry is a good example. However, we still approve construction industry applicants. We are just a little more careful with them.
M: Since we’ve been following GreatAmerica Leasing’s growth in the Monitor 100 for the past nine years, we’ve noted you have augmented your staff considerably. What are some of the characteristics you look for in a potential new hire? Also, what is the key to sustaining a high staff retention rate?
TG: We are privileged to enjoy a reputation as one of the more desirable places to work. In fact, we received an award as the best place to work in our community. In good times or bad, we have many applicants for our openings. Historically, we have been very selective in our hiring process; over the years we have been hiring less than 2% of applicants. We look for a tight cultural fit and usually hire new grads of local colleges before they acquire bad habits. We want bright, ambitious, team-oriented, high-energy individuals who have an intense desire to learn and contribute. Then we put a lot of energy and much investment in various formal training programs that are a continuous process at GreatAmerica. The attention we pay to our organizational culture and knowledgeable empowered team members is a huge reason for our reputation. No one person is responsible for the success of GreatAmerica; there are 314 of us responsible. We are very fortunate to enjoy a high retention rate of committed and loyal GreatAmericans.
M: We notice that GreatAmerica still does business with indirect sources. Does this include brokers and, if so, could you comment on the broker business? Specifically, what’s your outlook on the continued viability of the use of brokers as an origination source?
TG: We do business, less than 10% of our volume, with a select number of brokers that manage quality vendor programs. We pre-approve those vendors and we respect the relationship between the broker and their vendor. I do think the broker-originated vendor programs can generate good business and they have for us. We are looking forward to cautiously growing this business.
M: Based on the latest results GreatAmerica provided for the Monitor’s Top Private Independents (TPI) ranking, your firm has experienced year-over-year volume growth. This really isn’t the norm for most participating firms. Can you comment on this performance in the context of a changing competitive landscape (fewer sources) and your own sense of the opportunity to do business? Also, despite concerns over the economy, are you expecting to sustain new business growth in 2010? If so, what do you see as the key factor in realizing this positive forecast?
TG: GreatAmerica has had the good fortune to experience prudent and profitable growth every year in each of our 17 years. I think there are two main reasons for this record: We at GreatAmerica are a bunch of hard workers who really, really care about our customers, our company, about each other and our community. This is our reputation and we try to continuously nurture and grow it.
The second reason for our growth is consistent discipline. We have built a prudent, profitable portfolio that enables us to have access to plentiful and cost-effective funding. In the past several months, we have seen some of our competitors come back into the market with their old habits; commodity pricing and aggressive credit appetites. I guess some people just don’t learn from their past mistakes. Despite this, we are very encouraged calendar year 2010 is going to be another record year for us, both in volume and profitability.
M: You noted in your TPI response that you don’t expect normalcy to return until 2012. What do you see as key to an economic recovery?
TG: Unfortunately, I think we are in for several years of very lackluster and problematic economic growth. The nature of this recovery is different from the ones before. The key here, of course, is the consumer spending that accounts for over 60% of our economy. At current and foreseeable structural high unemployment numbers, I am not optimistic consumer spending will substantially improve over the near term. I am also very concerned about our government’s appetite for spending, higher taxes and regulatory environment.
M: In the spirit of sharing information that could make a difference for our readers in their lives and careers, what would you say are the top, say, three guiding principles that are non-negotiable for GreatAmerica Leasing?
TG: At GreatAmerica, we have ten principles, which we will never compromise. Anyone who does so will not be with us for long. It would be hard to select just three of them, but here goes: We deliver on our commitments and provide excellence. Also, we live our values with utmost integrity, and we create an environment conducive to greatness and to a positive image of GreatAmerica.