THROWBACK THURSDAY: A modest man’s vision
This year Fastenal is celebrating its 50th year. In 2001, Chris Steinbach, the editor of the Winona Daily News, sat down with the company’s founders to look back at the company’s first three decades.
In three decades, a Winona entrepreneur’s childhood idea has matured into a business with more than 1,000 stores, nearly 7,000 employees and sales last year of $745 million.
And all Bob Kierlin set out to do was sell nuts, bolts and screws from vending machines — an idea that ultimately didn’t work.**
Today, from his corner office at Fastenal Co., he runs a company whose growth has been recognized by financial publications such as Forbes,Worth and Business Week.
A columnist for the Wall Street Journal once admiringly referred to Kierlin and his Fastenal partners as “hayseeds on the prairie.” Fastenal has done more, however, than garner headlines — turning Kierlin and his earliest investors into multimillionaires and leading philanthropists in Winona.
“There were four of us who had faith in BK,” said Mike Gostomski, a Winona businessman and Fastenal board member.
“There were a lot of other friends of his who didn’t have faith in him.” Kierlin, 62, a 1957 Cotter High School graduate, started Fastenal with classmate Van McConnon, who now lives in State College, Pa.
Kierlin had graduated from the University of Minnesota with a bachelor of mechanical engineering degree and a master’s degree in business administration.
He got the itch to start a business after serving a year in the Peace Corps in Venezuela and working for IBM in Rochester.
He had been thinking since he was 11 and working at his father’s auto parts store about how to run a store that sold fasteners.
Jack Remick, Steve Slaggie and Gostomski joined in as the company’s first stockholders.
Slaggie, who had graduated with Kierlin from Cotter and then from St . John’s University in Collegeville with a bachelor of arts degree in economics, suggested the name of the company as a short form of “fasten all.”
Slaggie, the son of a successful Winona business owner and insurance salesman, joked during a recent interview in Kierlin’s memento-filled office that he knew from the beginning Fastenal would succeed.
Kierlin, with a wry grin, said of Slaggie: “He thought he was pouring (his money) down a rat hole.”
Fastenal sold $35,000 in merchandise in its first full year in business in 1968, and it took three years for the company to turn a profit.
In the early years, McConnon was the company’s only paid employee.
He made $200 a month, which today, adjusted for inflation, would be about $250 a week.
“He starved,” Slaggie said of McConnon.
“He worked for nothing.” Said Gostomski: “Van lived with Steve. Bob would feed him. I would feed him. Steve would feed him.”
Kierlin, a quiet and reserved executive, wore a white open-collar short-sleeve shirt and khaki pants the day he was interviewed for this story.
He left IBM in 1973 to join Fastenal full time as chief executive officer and president, a title handed over earlier this year to Willard Oberton.
Slaggie joined the company in 1987.
“We couldn’t quit (our regular jobs) right away and go to work,” he said.
“There was no money.” Fastenal’s money supply became even tighter after the company’s first two months in business.
That’s about when the partners, who had scraped together $20,000, decided vending machines wouldn’t work.
Their customers wanted parts that were too big for the machines or wanted them in quantities so large they could only be sold in a store.
With the equivalent of about $102,000 in today’s money at stake, McConnon started making sales calls.
He also ran the first store, at 69 Lafayette St., which is now the office for Pro Staff Personnel Services.
Fastenal’s initial stock of merchandise came from Industrial Supply in Chicago.
McConnon made a counter out of some wood found in the building to hold the initial items for sale.
About seven people visited the Fastenal store in its first two days of business.
The only sales were of a few 10-pound bags of “farmer’s mix,” sold at 12 cents a pound.
Sales in Fastenal’s first month totaled $157.
In December 1967, sales were $579.
The partners remember meeting every Friday night back then at Steve’s Bar, which is now the Bullseye Beer Hall, to review sales, drink beer and eat on the cheap while bands blared in the background.
“BK would say, ‘What do you think of the numbers?’ ” Slaggie said with a laugh.
“We couldn’t hear them, and we said, ‘Oh, they look OK.’ We didn’t know it was as bad as it was.” The Fastenal partners succeeded in the early days the only way they knew how: by scrimping.
They stored bolts wherever they could find or borrow space.
They bought used cash registers and an old company car for McConnon.
“We didn’t buy a big warehouse. We didn’t have any money,” Slaggie said.
“That’s how we made it. We managed our cash flow.”
The Fastenal partners eventually realized they could succeed by repackaging bulk imports.
They would buy a keg of supplies and house the remainder for three years if the gross margin on the sale was up to 75 percent.
In 1971, with a $30,000 bank loan, Fastenal purchased a fastener and construction supply business, which was part of Briese Steel Co. in Rochester.
With the purchase came several new product lines, including surveying instruments, snap ties and wire cable.
The Rochester branch store of Fastenal eventually became profitable.
Other branches soon opened in La Crosse, Wis., in 1974; Dubuque, Iowa, in 1975; and Eau Claire, Wis., in 1976 .
By July 1976, Fastenal sales had reached a monthly record of $50,421.
As the company grew, its offices moved from Lafayette Street to 374 E. Second St. (now Winona Heating & Ventilating Co. Inc.) to 58 Johnson St. (now Hiawatha Broadband Communications) and to its current headquarters at 2001 Theurer Blvd.
In 1987, Fastenal leaders took the company public, and it became the most successful initial public offering that year in the country.
An investor who bought $20,000 worth of Fastenal shares at the time of the IPO and kept them would own stock today worth more than $1 million.
The company’s success on Wall Street has turned Kierlin, Slaggie and Gostomski into three of Winona’s leading philanthropists.
All have given money to many Winona groups and organizations, including Cotter High School, Saint Mary’s University and the Polish Cultural Institute.
Other Fastenal investors have followed their example.
The estate of the late George Tandeski, for example, in August gave a reported $1 million to Minnesota State College-Southeast Technical and 40 percent of his Fastenal stock to the school’s foundation.
Tandeski, a retired teacher, died in June.
He was 78.
For the past several years, he funded 21 scholarships at the technical college, ranging from $1,000 to $2,500.
While the Fastenal founders have established foundations to give money away, their company has continued to grow and prosper.
In 1991, Fastenal hired one machinist and bought $30,000 in used equipment to begin making fasteners.
Today, that division employs 200 machinists who work with more than $10 million in equipment and make more than $25 million in annual sales.
Another pivotal year in Fastenal’s history was 1993, when the business began to offer its first new line of merchandise other than fasteners: tools.
The sale of tools marked the start of Fastenal’s transition from a fastener distributor to a full-line industrial distributor.
In recent years, the company has begun using its fleet of trucks to ship products for other companies.
And Fastenal earlier this year announced its largest acquisition in company history of another company.
There is a $100 billion marketplace for Fastenal products, Kierlin said.
“We expect and hope someday to be the largest, so we have a long ways to go,” he said.
His goal: $20 billion annually in sales.
Reaching the goal would give Fastenal national per capita sales equal to the success it enjoys in its hometown.
“For us, it’s just a measure of how long you’ve been there and how you’ve developed the marketplace for what you’re doing,” he said.
Said Gostomski: “There’s so many companies you talk to, big construction companies, who really haven’t heard of us yet.
There’s a lot of market out there.” Skeptics for years have said Fastenal couldn’t grow any more and that the entrepreneurs who started the company would be unable to manage its rapid growth.
Kierlin disputes such claims.
“Entrepreneurs are often-times perceived to be eccentric.
This can lead to the belief that a more systematic planner is needed to ‘manage’ the organization,” he wrote in his book, “The Power of Fastenal People.”
He continued: “This is more like makework for the managers than good reasoning. Entrepreneurs can learn leadership … it’s not like they lack the ‘leadership gene.’ ”
Kierlin – a self-described nerd who runs 15 to 20 miles a week and serves in the Minnesota Legislature in addition to his role at Fastenal – is an entrepreneur.
He’s also the main reason for the company’s success, according to his partners.
“I don’t think the whole thing was an accident, and, of course, Bob was the catalyst,” Gostomski said.
“Maybe he doesn’t want to say it, but Steve and I certainly will say it, and I know Van would say it.” The words “follow me” are printed under his senior picture in Kierlin’s old Cotter High School yearbook.
Gostomski, for one, is sure Kierlin would have been a leader even if Fastenal had failed.
“Maybe he’d be heading IBM by now,” Gostomski said.
**Ultimately the bugs were worked out, and vending machines are now one of the fastest growing of Fastenal’s divisions.
This story first ran Sept 16, 2001