Pipeline to Power: BE’s Industrial Service Company of the Year

By fueling sales with integrity, teamwork, and healthy competition, Hightowers Petroleum has doubled its earnings over the past five years

Stephen Hightower has never accidentally been in the right place at the right time. He’s always made sure he was  prepared for any opportunity.

In 2009, at the peak of the Great Recession, GM was in the throes of a government-assisted bankruptcy. And the president and CEO of Hightowers Petroleum Co., a licensed wholesale distributor of petroleum-based products, was prepared to sell to the battered auto manufacturer. He had to be ready to  provide “initial fills,” or place fuel in cars coming off the GM assembly line.  Although it only took two years to gain product certification and approval from GM to produce a top-tier branded product with stabilizers that helped the fuel last longer, it took five years total before he was given a contract; three of those years were spent convincing all participants in the supply chain, from buyers to the CEO, that his team had the expertise and capability to perform on time.

During that time both a vice president and a supplier diversity executive who had championed Hightower left the company, so he had to start the relationship-building process all over again.

“What got me back on track was an automotive summit, hosted by the Rainbow PUSH Coalition,” says Hightower. “They put me back in front of the CEO of GM, [who introduced us to] Barbara Whittaker, a senior procurement manager.” She went back to the buyers and told them to move forward with Hightowers Petroleum, giving the company a shot at the contract. This was historic. Hightower says no other company aside from BP had ever handled initial fills for any auto manufacturer in the U.S.; not Exxon, Chevron, or Sunoco, nor any jobbers—those who buy, sell, transport, and store fuel.

“Bad times are great times for small, innovative, and emergent businesses to take advantage of instability in the marketplace,” says Hightower, who says the company does not have an 8(a) federal designation but is registered with the National Minority Supplier Development Council and has a minority business enterprise (MBE) in select states. “GM gave us the opportunity with 48 hours to implement it … nationally. We had carriers step up and we outperformed our suppliers. We worked 24 hours for two to three weeks but we never let any plant run out of fuel.”

GM got the benefit of witnessing the promise that Hightowers makes to all of its customers: “You come first, every time.” Every drop of fuel that Hightowers delivered met the required specs and was delivered on time, which is the most important part of the job.

“There are great financial penalties for shutting down an assembly line to any supplier to the automotive industry. That would have been the end of our career with General Motors,” says Hightower.

Since that time, Hightower says, every car that comes off a GM assembly line throughout the U.S. and Mexico runs on Hightowers gas. The company now delivers 14 million gallons of fuel to GM every year. Hightower says nobody aside from BP has these kinds of contracts, which in GM’s case is a contract in the neighborhood of $50 million and growing now that the industry has rebounded.

Hightowers is now laying the groundwork to increase its business at GM Canada, and with Ford, Chrysler, and Honda. The preparation involves getting its products tested and approved, and pursuing relationships at the buying level and senior procurement level so that auto manufacturers know Hightowers has the capacity to get the job done.

GM is only one of a myriad of household names to which Hightowers Petroleum distributes fuel. In 2012, the company grossed $303 million in revenues, making it No. 10 on the BE industrial/service companies list, by annually selling an excess of 100 million gallons of gasoline and diesel fuel to companies such as Duke Energy, Sam’s Club, Delta Air Lines, FedEx, and Kroger grocery stores. Hightower says his company does approximately $100 million with Kroger annually. Due to the success of its partnership with Kroger, the retail food chain has quadrupled its expenditures with Hightowers during the past five years.

“Hightowers has proven to be a strong business partner and has continued to assist Kroger in maintaining its competitive edge by providing a high-quality product at a competitive price,” says Denise Thomas, director of corporate supplier diversity at The Kroger Co.

These additions to the company’s roster of blue-chip clients since 2000 have propelled Hightowers to experience extraordinary growth from $10,869 in net income in 2006 to $1 million in 2012.

“Once you start getting those kinds of companies, I think it causes other entities to say, ‘If they are doing that well with Duke, we can give them a shot with our business,’” says Gary Visher, Hightowers’ chief financial officer and a former banker.

Because of the CEO’s keen business acumen, and the company’s remarkable sales growth and commitment to the highest level of performance, Black Enterprise has selected  Hightowers Petroleum Co. as the 2013 be Industrial/Service Company of the Year.

Credit On Empty

Purchasing his father’s janitorial business in 1981 and then selling it two years later, Hightower, who attended Wright State University, also powered his entrepreneurial ambitions by building businesses in construction, industrial materials, and the fuel industry. Although his construction company took off immediately, years went by before Hightowers Petroleum broke even, a luxury he was able to indulge in since it wasn’t his only source of income. He was a quick study, discovering that fuel is a commodity producing razor-thin margins while at the same time requiring a heavy outlay in capital.

“I had business sense and an ability to articulate it at a very young age,” says Hightower, who had been selling contracts through his father’s janitorial service firm from the age of 18. He used that competitive advantage to help gain his first wholesale fuel contract through a set-aside program that allowed Hightowers an opportunity to enter what was a closed market.

Three years later, in 1985, BP took Hightowers from dealer to distributor status, when the oil giant selected Hightowers to carry jet fuel to various government installations such as the Ohio National Guard. Hightowers became licensed with the Public Utilities Commission of Ohio’s hauling authority as a PUCO contract carrier hauling fuel throughout the entire state of Ohio.

When it came time to renew Hightowers’ PUCO authority, BP supported Hightowers so that the carrier could transport fuel on its behalf, says Hightower, who now moves fuel in states from California to Maine. That’s when Hightower realized the incestuous nature of the fuel industry. The fiercest competitors of  jobbers can on any given day be a vendor or customer to one another. Hightower recalls that the PUCO had a restriction that allowed existing carriers to protest new carriers from gaining a PUCO hauling authority in Ohio’s closed market, but BP called the carriers and asked them to not oppose Hightowers’ authority.

“It somewhat legitimized us from being a normal broker out there. It’s unique because you still have to buy from the same people you compete with.”

Between the 1980s and 2006, the company’s revenues appeared to be flat, but the number of gallons it sold grew and its reputation increased among suppliers and customers.

Despite its stellar reputation in the industry, Hightowers was unable to obtain a line of credit until December 2011. Throughout the years the company relied on alternative financing and used larger oil suppliers such as The Lykins Cos. and Truman Arnold Cos., —not banks—to purchase fuel. Without this type of alternative financing, Hightowers would not be able to purchase, supply, and sell product to customers.

For example, Don Lykins of Lykins Oil was both a friend and a competitor. But after Hightower sought Lykins as a mentor, Lykins taught Hightower about the fueling business and supplied him with oil on credit to sell when Hightowers first received the contract through the set-aside program.

Hightower developed his business based on relationships with multiple suppliers throughout the country as well as multiple carriers. He set up a distribution network that allowed him an opportunity to go into any state, city, or county in the U.S. and source fuel on credit with little more than a handshake and his honor.

“I didn’t have to pay Lykins until I got paid,” said Hightower, who practiced competitive public speaking in high school, college, and beyond. Thirty years later, I still have a relationship with Lykins Oil.”

Shifting into High Gear

Visher, who brought a more conservative perspective from the corporate banking world, joined the company in 2006 with the goal to build up the company’s balance sheet, and as a result, Hightowers Petroleum increased profitability and assets, which opened the door to a line of credit.

“To strengthen the balance sheet, I first had to make it profitable, grow the equity, put assets on the books, and restrict tax liabilities,” explains Visher. Laying off workers never crossed his mind. Further, though the price of fuel can change twice a day, the margins are fixed, so Visher couldn’t alter the company’s pricing structure. Instead, he watched the budget and found additional cost savings by averting situations where the company could be overtaxed.

“When you’re selling millions of gallons, that can be a lot of money,” says Visher.  For example, Hightowers Petroleum operates as a fuel dealer in 17 states, which means it is subject to a multitude of taxes, including federal excise taxes, federal inspection fees, and state motor fuel taxes. In some instances those taxes can be 37 cents on the gallon or more.

“Visher’s contribution as CFO is what our organization needed at the time,” says Hightower.

Also in December 2011, Hightowers purchased a 14,400-square-foot building for slightly more than $1 million. Since Hightowers rents out more than 50% of the space, the mortgage is covered.

Exponential Marketing

In the fuel industry, contracts are rarely confirmed with signatures on paper, but with handshakes, says Hightower.

“It is a very upright industry. It depends on good faith and good will. If you don’t have it, you’re not in it,” says Hightower, who is the only African American national fuel distributor. “That had to be proven over time.”

Proving that has been as much about staying accessible to customers as it has been about perfecting the business processes at the pump. Hightower attributes the company’s growth in sales and customer relationships to its exponential marketing strategy, which he implemented 10 years ago. The strategy relies heavily on creating a marketing atmosphere, where others—customers, political networks, and industry agencies—are selling on the company’s behalf.

“My father always says, ‘As much as we travel and promote ourselves, there is not enough time in the day [to do it all],’” says Stephen L. Hightower II, 32, the chief operating officer. “Based on our reputation and our relationships, people have begun to promote us, for us.”

Relational selling is what keeps the elder Hightower out of the office 70% of the time, promoting the company’s core values by sitting on boards and visiting customers.

“We’re able to broadcast through our largest customers. There is no amount of time or advertising dollars that can beat that sort of endorsement,” says Hightower II.

The elder Hightower, who was appointed to the National Petroleum Council in 2010 by Steven Chu, former U.S. Secretary of Energy, says their increased visibility and thereby increased customer accounts is a result of  accepting board appointments, participating in community service events, and from receiving various awards such as the Minority Owned Business of the Year from Dayton’s Business Journal.

By bringing on Visher and Hightower II, the company has increased the impact of its exponential marketing strategy. “We went out into the world together. He coached me to learn his style, selling technique, and marketing techniques. More importantly we began to transfer relationships,” says Hightower II, who worked as a regional field director on President Barack Obama’s first presidential campaign. “The key stakeholders and players would already know me and accept me because I was brought in through my father.”

With Visher handling the day-to-day business in the office, and Hightower II taking more board appointments, the elder Hightower has the opportunity to expand. For example, Hightower has been spending more time with HP Energy, a developer of energy efficiency projects, owned by him and two other partners. In addition, Hightower plans to focus more on Hi-Mark Group Inc., a wholesale fuel distributor targeting the government sector. Hightower II will run that company.

“Stephen has stepped up to the challenge and shown a lot of maturity,” says the elder Hightower, whose daughter Stephanie Hightower-Thomas works in accounting, and whose son Quincy acts as COO of Hi-Mark Construction Group, which launched in 1979 as Landmark Building Services.”

It is also important to the elder Hightower that Hightowers Petroleum extends relationship-building inside the office by maintaining a family-friendly atmosphere. “We still try to keep that closeness. It’s not an easy thing to do,” says Visher. “He pushes us to maintain that because happy, motivated employees give you more.”

They extend those values to their vendors as well. “Our method of managing our carriers throughout the U.S. has been extremely effective and we have some very loyal relationships that allow us to deliver product almost every seven minutes, 24 hours a day, seven days a week,” says the elder Hightower, who attended executive programs at the Kellogg School of Management, at Northwestern University and the Darden School of Business at the University of Virginia. “We have more than 400 trucks available to us for emergency response and we have close to 1,000 trucks available to us for our daily business.”

In fact, after Hurricane Sandy stripped the Northeast of power last fall, Hightowers helped fuel utility company Con Edison’s emergency response vehicles. Hightowers dispensed carriers to New York and New Jersey to stage fueling sites at shopping centers and hotels, and fuel the trucks of Con Ed contractors at night.

“The extraordinary thing there is Hightower came through for us at a time when it was hard for anyone to find fuel,” explains Michael Jones-Bey, director of supplier diversity at Con Edison. “It was really tough and he came through in a big way. We’re really proud of him.”

Topping Off Innovation

Hightowers has sustained customer satisfaction by upgrading its IT system and including value-added services that aren’t typically found across the industry. For example, this spring, the company upgraded from Quickbooks to DM2, a petroleum-specific ERP (enterprise resource planning) system that is designed to calculate federal, state, and local tax reporting for fuels and lubricants. As opposed to the old way of calculating taxes manually for every state it did business in, DM2 will allow Hightowers to give its customers more accurate, flexible reports about real time volume and production. Adding the system was a considerable financial and time investment—every staff member has to be trained on the system—but Hightower believes its implementation will improve the lives of its customers and employees.

Finally, the company provides back-office services for its customers. For instance, Duke doesn’t need to hire an employee to order fuel for its facilities. Because of telemetry equipment on Hightowers tanks, the company is able to monitor each customer’s historical fuel use, forecast their needs, remotely measure tank levels, and automatically send out tankers to refuel their facilities.

As the company’s customer base grows, and as it adds additional lines of revenue, the leadership team continues to diligently service existing customers.

“We’ve been very careful not to lose our focus on our baseline business and customers. We feel that a distraction to our core business could be fatal, particularly in this growth that we’re experiencing,” says Hightower, who likes to mock naysayers who told him minority businesses are not legitimate businesses. “There is only one way to sell fuel. There’s not a black way and a white way. There’s only the right way.”