This Entrepreneur Had a $43 Million Business Idea–and He Owes It All to Steve Jobs
Mike McKenna is the CEO of Diamond Assets, which landed at No. 7 on Inc.’s annual list of the fastest-growing private companies in America.
CREDIT: Sara Stathas
Mike McKenna owes a great debt to Steve Jobs--but not for the reasons you'd think.
As the CEO of Diamond Assets, McKenna spends his days running a company that buys and refurbishes outdated Apple equipment, mostly from schools. His company, based in Milton, Wisconsin, then sells the equipment through various distributors in the U.S.
In the past three years, business has been brisk. Revenue ballooned to $43 million in 2017, up a striking 19,718 percent from $217,406 in 2014--helping Diamond Assets land at No. 7 on this year's Inc. 5000, a list of the fastest-growing private companies in America.
McKenna also used to work at Apple. In early 2014, the then-26-year-old got a job with the tech giant as an account executive, working remotely in Wisconsin. His responsibilities included selling products to schools in the state looking to upgrade their equipment.
There, he discovered that many of his customers had limited options to dispose of their old devices. Electronic recycling programs end up shredding most of the stuff, he says, and trade-up programs either had great prices or great customer service but rarely both. That's when the idea for Diamond Assets dawned on him.
Observations In Action
He wasn't ready to go out on his own, though. Not long after he started at Apple, he shared his observations with Mike LeMaster, a serial entrepreneur who is also the father of one of his college friends. "I see this niche in my industry and no one is doing it right," McKenna told him. "If you were to build this, it would succeed."
A bin of used Apple computer chargers sits in the Diamond Assets warehouse. CREDIT: Sara Stathas
By September, LeMaster was in business. Although the entrepreneur is based in Chicago, he set up shop two hours away in Janesville, Wisconsin, where he got a good deal on an office building and labor costs are lower. He soon began working with schools in Illinois and Wisconsin, in part thanks to recommendations by McKenna. Business at Diamond Assets started doing so well that a year later LeMaster hired McKenna as vice president of sales.
In 2015, through word of mouth and a referral program, the company started expanding to other states in the Midwest, such as Ohio and Indiana. "[It was] a lot of moving our feet," LeMaster says, adding the marketing outreach involved traveling to different school districts and sitting in evening school board meetings to pitch the business, which he personally did in Indiana, for instance. Distributors also started to increase their purchasing orders, LeMaster adds, which prompted the company to up its sourcing from schools.
"Each year we had to go to a new, bigger warehouse," LeMaster says, clarifying that as the business grew, it managed to keep costs down by hiring temporary labor via third-party staffing agencies that took care of payroll and other administrative expenses.
In late 2016, McKenna bought out LeMaster for an undisclosed sum, and he installed himself as CEO. "We were growing so quickly, and I was challenged to lead, manage, and integrate all aspects of the business," says McKenna, who prides himself on choosing staffers with the right kinds of backgrounds. "It was important to expand with a team that understood the edtech environment, so the company invested in strategic hires with Apple and education experience," he says, adding that his current team has about 40 years' worth of Apple executive experience.
A Diamond Assets employee works to refurbish used Apple hardware.
"I sold to Mike [McKenna] because I felt like he had the energy to take it even further," says LeMaster, who is planning to launch a new business refurbishing construction equipment in October. "He is extremely driven. [There's] no doubt in my mind that he's going to continue to grow and build the business."
A 'Win-Win' Strategy
Diamond Assets, which relocated to Milton earlier this summer, now works with school districts across the U.S., including Alaska and Hawaii. Summers are its busiest season because faculties are gearing up for the new school year. In those months, the company's headcount can grow to 120 employees, half of whom are temporary workers. In addition to securing the equipment, its staff also coaches customers on how to maximize buy-back value from future purchases.
For help scaling his cash-intensive business, McKenna brought in an investor in January this year. For an undisclosed amount, Pfingsten Partners, a Chicago-based private equity firm, acquired a controlling stake in the company. "Any company that's growing rapidly needs capital," says McKenna. "This is especially true in our business where we are making large purchases from our customers. [They] need to know that we can meet our financial obligations, which isn't the case with all our competitors."
Of course, his risk is somewhat limited, thanks once again to Steve Jobs. "Apple developed a brand unlike anything else, which translates to worldwide demand," says McKenna. "Our great team coupled with a great product--it's the perfect storm."