In the News

Value Added: From college dropout to Prince of Porcelain

By Thomas Heath, Washington Post

chad_washington_postI was watching Silicon Valley investor Peter Thiel (think Facebook, LinkedIn, Friendster and Yelp) on CNBC last week talk about why some college kids might be better off quitting and starting a company.

His Thiel Fellowship gives $100,000 each to 20 young men and women under 20 who are willing to follow his advice.

Thomas Heath is a local business reporter and columnist, writing about entrepreneurs and various companies big and small in the Washington Metropolitan area. Previously, he wrote about the business of sports for The Post’s sports section for most of a decade. View Archive

I wasn’t born with the entrepreneurial gene and so I didn’t have the risk profile to do what Thiel is promoting. But it got me thinking about the story of Chad MacDonald, an entrepreneur I met a few months ago who did quit college to launch a business.

MacDonald, 47, proudly calls himself the Prince of Porcelain.

The prince has bought and sold a number of companies in the boring, not-so-small niche of facilities management, which is the janitorial and handyman stuff most businesses don’t want to be bothered with — cleaning toilets, buffing floors, cutting grass and making sure the air conditioning is working.

“It’s not a sexy business,” he admitted.

I’ll say. His companies have unsexy names such as Nissco. ServiceForce USA. Connected Services Technology.

“It’s recession-resistant,” he said. “Grass always grows. Toilets always get dirty. Buildings always need to be heated and cooled. So every time you think of toilets, toilet paper and dirty floors, think of me.” Here’s what I think of when I think of MacDonald. He lives on a leafy Northern Virginia cul-de-sac, has a basketball court inside his home (cool) and is worth tens of millions.

He’s admired enough to qualify as the incoming chairman of the U.S. capital chapter of the Young President’s Organization, a global networking group for young top executives.

Who cares whether his business is sexy?

He grew up in Fairfax as the son of a banker and attended Virginia Commonwealth University in Richmond, majoring in business.

In the first semester of his freshman year in 1981, he started earning extra money working afternoons for a carpet-cleaning company owned by his roommate’s father. It paid about $100 a day for three or four hours in the afternoon.

The next summer, the roommate’s family went on vacation. MacDonald offered to rent their van and equipment for a fee and a small share of his revenue.

“I was working construction, and it was hot,” he said. “I could work harder or smarter.”

His first clients were family, friends and a list of neighbors from his lawn-mowing route. It was the day of shag, wall-to-wall carpets.

His pitch: $39.95 for living room, dining room and hallway. The real profits were in additional rooms throughout the home.

He made enough to buy a new Mazda pickup truck for $4,900. He also transferred to George Mason University his sophomore year to be near his high school sweetheart.

A key to becoming successful, especially in business, is to recognize and seize an opportunity.

MacDonald saw his.

One of his carpet-cleaning customers was married to the regional manager of Chi-Chi’s Mexican restaurant chain. As MacDonald was leaving the customer’s house, the manager said he needed an extra-special carpet cleaning at the Springfield Chi-Chi’s because the company president was coming. Springfield was the busiest Chi-Chi’s in the entire chain.

When MacDonald finished cleaning the carpet around 1 a.m., the manager asked him if he would work the night and clean the whole place because the usual cleaning crew had not shown up.

The place was a mess, said MacDonald, who made around $1,500 for the night. “I did not eat Mexican food for three years.”

The restaurant was so clean the next day that the president promoted the regional manager, who assumed responsibility for 100 Chi-Chi’s restaurants east of the Mississippi River — and the grateful executive brought MacDonald with him to clean all the chain’s stores.

At 18, he quit school, established a $25,000 line of credit for working capital and rebranded from Advanced Carpet Care to Advanced Maintenance Services (AMS).

Within a year, he was grossing $1 million in revenue and earned a six-figure salary. He borrowed $700,000 on his credit cards to finance his company’s growth, buying vehicles and cleaning equipment. He even used it to make payroll.

“Much of it was baptism by fire,” he said.

One of the problems was finding reliable workers who are willing to show up at midnight and clean toilets and floors all night. MacDonald bought vans to transport them to and from work. He hired bar and kitchen employees to stay late and help him clean. He insituted aggressive training and follow-up to ensure consistency. He made some of them full-timers to develop loyalty.

He started picking up other clients, such as T.G.I. Friday’s and Bennigan’s. When he walked into a Zayre’s discount retail store with his company uniform one morning to buy cleaning materials, the store manager hired MacDonald’s firm to replace the missing janitorial service. He eventually would clean Zayre’s, Ames and K-Marts throughout the East.

By 1986, AMS had 1,700 employees and $15 million in revenue. MacDonald sold it for $7 million, becoming a millionaire at age 22.

It’s been one deal after another ever since.

Within one year, he launched another janitorial services company called Service Management. The company managed maintenance for 55,000 sites and became one of the biggest companies of its kind in North America. Eventually, it became a publicly traded company known as Building One Services Corp.

MacDonald earned more than $25 million on his stock over the late 1990s. (The company eventually merged with a Houston-based rival, at which point MacDonald departed. Within two years, the firm went bankrupt.)

Restricted by a non-compete agreement, MacDonald used some of his cash to invest $1 million in a technology that helps companies streamline their online purchases. The company later was sold and MacDonald earned $14 million on his investment.

He now owns Nissco Group, which serves as a sales agent for big manufacturers of such necessities as toilet paper, trash can liners, vacuum cleaners and light bulbs.

Another company, ServiceForce USA, a facility management company with 1,000 employees and $40 million in revenue, cleans 10,000 properties.

His latest creation is Connected Services Technology, which is taking the facilities management industry into “the cloud,” otherwise known as the Web. With a $5 million personal investment, MacDonald has built a software company aimed at being a kind of one-stop shop for managing maintenance and supply activities.

“It’s been an amazing evolution from toilets to technology,” he said.

Enough to quit college over.