The costliest storm in U.S. history, Hurricane Katrina wiped away neighborhoods, businesses and infrastructure. Devastation wrought by the 2005 storm forced companies still standing to make tough decisions about the way they would do business going forward.
“It was a pretty interesting time, balancing the personal tragedy with the needs of our clients,” recalls Bud Jones, CEO of AGJ Systems and Networks Inc., an IT company on Mississippi’s Gulf Coast.
For Jones and partners Ryan Giles and Brian Alford, the first priority was to make sure their 12 employees were accounted for. They made contact using the one cell phone they had that worked. “We just kept saying, ‘Take all the time you need.’ It was remarkable that some came to work the next day,” Jones says.
The roof of the Biloxi headquarters was partially sheared off by Katrina’s winds but the building stood and served as housing for staff, including Giles, who rode out the storm in the attic of his house, which took on 13 feet of water.
Customers who had lost all of their equipment needed replacements immediately. Money was a huge problem. “We had to use our personal assets to subsidize the business,” Jones says. “Katrina happened at the end of the month, and the Post Office didn’t run for about a month. We had no real cash reserves but enough to make payroll. The disruption of cash flow almost killed us.”
They asked the credit card company to increase their credit line and asked vendors to work with them as they struggled to help their clients. Not all did, Jones says. Still, the partners never missed payroll.
“Before the hurricane, we had about 700 clients,” Giles recalls. “Right away we started making phone calls, but it was impossible to reach many of them.” About 30 percent of their customers were lost; others drastically downsized or moved.
In a couple of days they were back working. “We started invoicing immediately and hand-delivered bills when we had to,” Jones says. To help one client reopen, they formed a line to move IT equipment up nine flights of stairs.
The partners acquired warehouse space for interim offices and shared it with a few clients. “We were doing everything we could to keep people working,” Giles says. Giving up never occurred to the partners. “We’re young and optimistic and weren’t afraid to work hard.”
For advice, they went online and discovered supportive peer groups, including vendor-partnership groups such as Microsoft and Dell, certification groups and independent consultative process review groups. “We felt like the only people who had ever gone through something like this, but we found out a lot of companies had had disasters of some type,” Giles says.
The loss of customers forced some serious decisions about the business approach. “Many of our smaller clients did not survive the storm for various reasons,” Giles says. “The bigger and stronger companies were able to come back stronger and with greater IT needs. We realized that providing more comprehensive services to a smaller client base was more beneficial to our clients and more profitable to AGJ.
“This business shift has completely revolutionized our day-to-day operations and changed the way we interact with our clients. Our clients now see AGJ as a strategic partner,” he says.
The company also changed its billing model to a monthly flat-fee rather than hourly rates. “This change means that we’re most profitable when our clients are running smoothly with no problems. With our previous, hourly model, we were most profitable when our clients were having technical problems,” Giles says.
As a result of the changes, “our profits have increased every year, even though the number of active clients has dropped,” he says.
Since the storm, AGJ has dedicated itself to process improvements that have led to an 18 percent reduction in expenses. The company, which now has 15 employees, stresses the importance of technology certifications and hired a fourth partner, Brian Sherwood, who had an extensive career at Microsoft.
In 2008 AGJ moved into its own 9,000-square-foot, state-of-the-art, purpose-built headquarters designed to withstand winds up to 145 mph. “Hopefully, we’ll never see another Katrina,” says Jones, “but AGJ will be ready if we do.”