November/December 1998
You won’t find the Litmans wearing ten-gallon hats, but there’s still something Texan about their big dreams and old-fashioned approach to customer service at their Dallas scrap paper firm.
By Robert L. Reid
Robert L. Reid is manaaging editor of Scrap.
On its opening day in September 1992, Texas Recycling/Surplus Inc. (Dallas) looked a lot like the Lone Star State it was named after—especially those desert prairies that stretch across Texas for mile after empty mile. For while there may not have been any tumbleweeds tumbling through the paper recycler’s new 30,000-square-foot warehouse/headquarters building, there also wasn’t any paper.
“When we started, we had literally nothing,” recalls Joel Litman, who helped found the company with his father Stan and brother Craig. “We didn’t have a forklift, a baler, or a pound of paper. Just a card table from home, four folding chairs, and our sack lunch.”
Jump ahead to September 1998. A brutal Texas sun beats down on the Litmans’ one-story building in northern Dallas. Colorful pennants flutter over a one-time parking lot that now welcomes large trucks and trailers dropping off high-grade scrap paper from commercial accounts—primarily coated book stock, manifold white ledger, and manifold colored ledger—as well as scale traffic that gives Texas Recycling/Surplus a steady stream of ONP, office paper, and UBCs, among other items.
Inside, the phones are ringing—and being answered. This is one company that refuses to use voicemail during office hours. Meanwhile, out in that once-empty warehouse, forklifts scurry about, loading bales of paper into trucks and boxcars. The BEEP! BEEP! BEEP! of backup alarms echoes through the space, along with the rustle of mounds of paper being hand-sorted. All told, the company ships more than 3,000 tons of scrap paper a month, most of it deinking and high-grade material headed for tissue mills in the United States or Mexico, Stan notes.
How the Litmans grew their company from an empty warehouse to the hustle-and-bustle of a successful family-run recycled paper operation is a familiar story in the scrap industry. It involves a father’s desire to build a business for his sons, a businessman’s belief that a better product will bring a profitable return, and a salesman’s certainty that establishing a good relationship with customers is just as important as offering them the best price.
But the Litmans’ story also begins in a rather unusual setting for scrap processors—a corporate world of suits and ties, attorneys and judges, even movie stars.
Goodbye, Corporate Careers
Unlike many scrap families, the Litmans have no multigenerational ties to the industry. Instead, Stan Litman came to Dallas from Kansas City, Mo., in 1972 as sales manager for a manufacturer of industrial cleaning and maintenance supplies. By 1980, however, he had tired of his job’s four-day-a-week travel schedule and wanted to start his own business. But he had no idea what field to enter. Then he met an old gentleman with a rag and newspaper drop-off company named Daltex Waste Material.
After leaving his good-paying sales job, Stan asked if he could work for Daltex for free for three months to see if he liked the business. The old gentleman, Sam Blend, not only agreed, he left Stan in charge for those three months. In that time, Stan discovered that the paper mills he called were eager to buy all the scrap he could send them. Likewise, the Dallas printing industry seemed to have plenty of scrap paper for him to collect.
“I figured this was easy,” Stan says of his 1980 decision to buy Daltex with the help of two investors, who put up money but didn’t participate in running the company.
Stan’s stewardship of Daltex got off to a good start. He bought the company its first truck, put up large signs advertising the business, and made an early profit. Then the reality of business cycles struck. His truck broke down and never worked properly again. Even worse, the economy soured.
“About six months after I got into the business, things changed completely,” Stan recalls. “I couldn’t sell a pound of paper.” Attending his first paper roundtable meeting in Chicago, hosted by the National Association of Recycling Industries (an ReMA predecessor), he heard only “gloom and doom” from the more experienced paper recyclers. “It was a long ride back from Chicago on the airplane,” he says. “I kept thinking: ‘What am I doing in this business? Look what I gave up.’”
Fortunately, paper markets recovered and within a few years Daltex was growing nicely, with new equipment and seven employees. The situation wasn’t ideal, though. The company was housed in an old icehouse with low ceilings, beams and ramps all over the place, and a jumbled material flow that sent paper in and out through the same doors. Plus, the location wasn’t great for the major customers Stan wanted to attract—members of Dallas’s extensive commercial printing industry (third in the country after New York and Chicago, he says).
By 1984, Joel had joined his father at Daltex, having earned a degree in journalism and worked in advertising and public relations. Like Stan’s sales career, Joel’s earlier work experience was in a travel-intensive, suit-and-tie world, with the added glamour of Hollywood clients. But having started a family of his own, Joel wanted to spend more time at home while also building something for the future. The scrap paper business seemed to offer just that. So, he used his vacation time to spend a week at Daltex unloading customers’ paper, weighing material at the scales, and generally getting a feel for the business. Joel liked what he saw, left his PR job, and went to work with his father.
A few more years passed, the company continued to add trucks and accounts, and another set of hands was needed to help manage things.
At the same time, another Litman son, Craig, had reached a crossroads in his corporate job (a third son is a stock broker on the West Coast and a daughter is an interior designer in Kansas City, Stan notes). Craig, a CPA, had worked first for a Big Eight accounting firm, then as vice president-director of tax for a large hospital management company as it reorganized after bankruptcy. But when his employer moved from Dallas to Philadelphia in 1989, Craig chose to switch careers rather than cities. He tried out Daltex for a week, then traded the high-powered world of tax attorneys and bankruptcy court judges for the hands-on work of sorting and grading scrap paper.
Starting From Scratch
With two of his sons now at his side, Stan began to think about their future and the future of the company. Having done all the work of building up Daltex, he wanted to be able to pass it on to his children someday. But first he had to buy out his investors.
That proved surprisingly difficult, especially since the investors had previously offered only financial support without showing any interest in running the company, Stan says. In the end, however, the investors bought out Stan’s share of the
business.
Because the Litmans left Daltex in April 1992 without a noncompete clause, they were free to go right back into the scrap paper business. But while they found themselves with plenty of cash and experience, they no longer had a company, warehouse, or inventory. Moreover, Stan was then 64 years old and quite capable of retiring comfortably.
“I didn’t ‘need’ to go back to work,” Stan says of the decision to launch Texas Recycling/Surplus. “The only reason I did it was that my sons deserved it—they’d earned that right.”
Starting a new family-owned company from scratch might seem like a daunting task, especially since the Litmans didn’t even have firm commitments from potential scrap paper generators or mills, only vague assurances to “call us when you open up.” But the move also had certain advantages. For one, they could search for a more ideal site—one with rail access, room for storage, and enough space to allow a better material flow. They found what they needed in an industrial warehouse section of Dallas.
The building they chose had once been a liquor distribution warehouse and part of the electronics company that still operates from the site next door. With only minimal changes—the biggest job was opening two extra loading docks, bringing the total to eight, and adding an outside ramp—the building was ready for business. Four scales weigh material—one out front for the public, another at the inbound truck and trailer loading dock, a third near the company’s baler, and a fourth at the outbound dock. There’s also a public truck scale down the road, if necessary, Joel notes.
Given the discipline and variety of their corporate backgrounds—in sales, public relations, and accounting—the Litmans were sure they could succeed in their new venture. Still, it was nice to have the numbers bear out their confidence: Within 18 months, Stan notes proudly, they were moving larger volumes of paper at Texas Recycling/Surplus than they ever had at Daltex, with greater sales and profits. Moreover, the company’s tonnage has been growing steadily about 10 percent a year, he says.
Hands-On Customer Service
Ask the Litmans about their approach to customer service and Craig will use the term “Southern hospitality.” His father prefers another word—“archaic”—but he says it with genuine pride. “We’re still more or less an old-fashioned, archaic operation, which works,” Stan says.
What both Litmans mean is that Texas Recycling/Surplus takes a distinctly hands-on approach to understanding its customers and meeting their needs. They view business relationships as longstanding arrangements based on mutual profitability, not one-shot deals for the best price with a new mill buyer or broker who might never order from them again.
Mill buyers and brokers pop in and out of the scrap paper market, looking for occasional loads, Craig notes, but Texas Recycling/Surplus avoids such buyers because they’re not reliable. These buyers take paper in good times, sure, and often pay a better price to get the material that would otherwise go to regular mills and brokers. But when the markets are down—like now—these occasional buyers disappear. “Then you go back to the people you didn’t ship to because there was a better price elsewhere, and they say, ‘You didn’t ship to us when we needed it. Why should we buy from you now?’” Craig says.
“Our reputation is good, especially in tough times,” Stan adds. “We’re still getting orders from mills that other people aren’t because we shipped them good quality when we didn’t have to, such as during the boom times of ’94 and ’95.”
On the generator side, Texas Recycling/Surplus prides itself on understanding what its customers need, which most often comes down to timely pickups. “Our customers are printers,” Craig notes, “and they get their business by sometimes showcasing their plant. They want to bring in executives, so they want a nice and neat appearance. They don’t want paper all over the place, they want to be proud of their warehouse—and it’s up to us to keep it that way.”
A competitor might offer that printer a better price, Craig adds, “but if he shows up three days after the call—or not at all—or doesn’t communicate with the customer, that doesn’t do them any good.” By contrast, Joel and Craig try to keep in regular touch with all 150 of their commercial accounts through telephone calls, lunches, and other hands-on approaches. That way they know when the customer has special needs, such as a big job that might require an extra man during a pickup to help clean the warehouse. “It’s a personal service that you can’t put into the dollars and cents we offer,” Craig states.
The Litmans truly take customer service personally. It begins with that no-voicemail rule during business hours (although the answering machines are available overnight) and extends to a policy that keeps at least one Litman present at the company whenever it’s open, Monday through Friday and a half-day on Saturday.
“You couldn’t call or come here without speaking to a Litman,” Craig says, and he should know—he’s the Litman who usually stays behind when Stan and Joel attend industry meetings and fulfill their ReMA responsibilities. (Stan has served the scrap paper industry for more than a dozen years as an ReMA board member, president of the Paper Stock Industries Chapter from 1994-96, and currently PSI’s convention chairman. Joel is currently secretary of the chapter.)
One Saturday morning, for instance, Stan took a frantic call from a competitor’s paper generator who needed his plant cleaned of paper by Monday morning—when his boss was coming to town—or he’d be fired. It seemed the generator’s regular scrap dealer couldn’t pick up the paper until Tuesday. Stan requested a favor in return—asking the printer to become a regular Texas Recycling/Surplus customer (which he has remained for the past four years), but the key point is that “there was someone here on a Saturday morning who could make a decision.”
By contrast, the big corporations that are coming to dominate the scrap paper industry “sometimes need four signatures and four meetings before they buy a box of paper clips,” Stan says, asserting that “mills prefer our paper because of our hands-on operation. They know they’ll get quality and we’ll be loyal.”
Working ‘With’ the Litmans
Texas Recycling/Surplus also extends that loyalty to its 25 employees, who work “with” the Litmans, Stan stresses. “No one works ‘for’ us,” he says. “We all work together. I don’t like that term ‘for me’ or ‘boss.’” And true to form, the Litmans shy away from titles around the office or on their business cards.
Citing low turnover, the Litmans consider themselves “grateful” for their employees, a few of whom go back to the Daltex days. Stan, Joel, and Craig credit their “employee-friendly” philosophy to the fact that they were once employees themselves. “Working for other people in a corporation has taught us,” Stan explains. “I found out how I wished I was treated when I worked for somebody else.” He adds that “one of the biggest mistakes made in management or big family corporations is not realizing that your employees are human beings with families and feelings just like you.”
It’s a mistake the Litmans try not to make now that they’re business owners. To help its employees financially, the firm has a profit-sharing plan that can equal a week’s wages during good times, with even larger bonuses going to employees who demonstrate extra initiative, Stan notes.
Since most Texas Recycling/Surplus employees speak Spanish as their first language, both Joel and Craig attended night classes to learn Spanish to improve their communications with these employees.
The Litmans also work to keep employees satisfied through small gestures such as handing out grocery store gift certificates at Thanksgiving and sharing Christmas presents sent by customers and brokers with the whole work force. And they understand that employees can need extra breaks during the hottest times of the afternoon on a Texas summer day.
Texas-Size Plans
When the Litmans look to the future, they see big things, as befits their namesake state. Texas Recycling/Surplus plans to expand someday by buying one or both of the neighboring properties, Stan notes. But eventually, Stan predicts, the mills may buy up every scrap paper processor in order to control their raw materials.
Such consolidation would probably take 50 years, he says. Even then, you can almost count on a Litman still answering the calls to pick up a load of paper somewhere. Stan himself remains active in the business at 70, his sons are just in their 30s and 40s, and at least one of his grandchildren has already expressed interest in working at the family firm. Until then, the goal is to keep growing, adding more paper generators, more mill buyers and brokers, and always processing more and more tons of paper.
“If you’re not growing, you’re dying,” Stan states. “It doesn’t have to be by leaps and bounds, but we’ve got to grow.” —
You won’t find the Litmans wearing ten-gallon hats, but there’s still something Texan about their big dreams and old-fashioned approach to customer service at their Dallas scrap paper firm.