John Lee and Edward McKinley make no bones about what many of their childhood friends thought they would be doing when they grew up.
“We’re supposed to be at Grand and Division running [Italian] beef stands,” said Lee.
Instead, the pair is running Elk Grove Village-based Legacy Inc., a global information technology company with customers in the Philippines, Hong Kong, Iceland and Australia, in addition to the United States. Its sales have mushroomed to $25 million since the company’s founding in July 2000, months after the Internet bubble burst.
In fact, that burst was the big bang for their business, which is unique and relatively simple: buy truckloads of used equipment such as scanners, laptops and personal computers that major companies are replacing, then refurbish and sell what can be recycled. The remainders get shipped to a landfill licensed to accept old tech equipment. About 70 percent of what they buy can be refurbished, they say.
Unlike some entrepreneurs, McKinley had an edge on competitors: practice. He grew up promoting refurbished gear. As a teenager, he operated a used parts department out of the back of his family’s appliance store. He scavenged the parts from old appliances that were traded in.
But 2000 wasn’t the greatest year to start a business, the two agree. Dozens of tech companies, including some major local operations such as Comdisco Inc. and Divine Inc., were going down in flames at the time.
Despite the timing, Pat Arbor, a former chairman of the Chicago Board of Trade and a board member of United Community Bank in Lisle, didn’t hesitate to recommend the bank back the venture after a four-hour presentation.
Legacy’s business has one major requirement–access to loads of cash to sweep up the truckloads before other firms can cherry-pick the profitable stuff. Unlike many tech companies, it is not only profitable but does not have any debt.
“It is a business that I personally am familiar with,” said Arbor. “What John and Ed did was to take it to a new level because they are doing it on a much larger scale.”
Since recruiting their first employee who was job-hunting off a street corner in Wood Dale–they conducted the interview while driving to their office, which then was in an abandoned West Side bakery–they have moved the company three times. Legacy is now housed in a 75,000-square-foot office and warehouse that it could outgrow in short order based upon current growth projections.
The two boyhood friends have succeeded by convincing businesses hooked on buying the latest and greatest technology equipment that used sometimes may be just as good. They call it “refurbished.”
While a handful of employees are perched in front of computers monitoring worldwide Internet business-to-business auction sites, most of the pair’s 40 employees are in a cavernous warehouse unpacking, cleaning and repairing the equipment that arrives by the truckload on almost a daily basis.
Lee and McKinley sit in adjoining offices frequently shouting buy and sell orders. They constantly are on the lookout for companies that want to unload tons of used equipment, while scouting for buyers for the corporate castoffs.
They are so convinced that used is the wave of the future that they drive used automobiles, albeit luxury models.
The company’s biggest deal to date was signed just before Christmas with Metro Gaisano, a Philippine retailer that operates a chain of stores selling everything from clothes to food. Some of its stores are as large as 500,000 square feet.
Under the multimillion-dollar deal, Legacy will supply Gaisano point-of-sale equipment, such as price scanners, credit card readers, price displays and keyboards, for the retailer’s stores.
Legacy counts among its customers some of the biggest names in the world of business–Wal-Mart Stores, Follett bookstores, Liz Claiborne and Kroger. And it landed them while competing aggressively against the likes of IBM, Dell Computers and Hewlett-Packard.
Not only does Legacy sell the equipment, it also offers warranty and maintenance agreements under which it will repair or replace any equipment it
refurbishes.
“The savings are significant. In a lot of cases, the equipment is half the cost of new,” said Joseph Hula, executive vice president and chief information officer of River Grove-based Follett Corp., which operates bookstores for hundreds of colleges and universities, including Notre Dame and Stanford.
Follett has installed a mix of new computers and servers and refurbished point-of-sale equipment in many of its more than 680 stores.
“Our premise is to use used equipment rather than new when possible,” said Hula. “New is like a car: You buy it, and the next day it’s old.”
