Liquid gold: Custom water treatment company thrives
Some days, Fred Potthoff feels more like a venture capitalist than the co-owner of a water treatment company.
Seven of the eight businesses that are part of Kroff Inc. started with "some bright, energetic salesperson we brought in, with an idea," Potthoff said.
The North Shore-based company's businesses include selling custom chemical blends to treat water used in factories, preparing water to be reused at oil and gas fracking sites, and recycling used oil.
"We're a bottom-up run organization. This is how we've grown," he said. "I listen to the people in the field who are engaged with customers and their problems."
Hiring seasoned, enthusiastic employees is key. "You're looking for somebody who is a bright chemist or chemical engineer, but who also is a salesperson. The two often don't go hand-in-hand."
The company that Potthoff and partner Keith Kronk founded in April 1988 with a $300,000 loan has grown at a rate of more than 20 percent a year and should generate between $60 million and $70 million in sales in 2013.
On Monday, Kroff announced a five-year agreement with the University of Michigan to provide chemical water treatment, testing and other services for boilers, cooling towers and other equipment at the school's central power plant and a research complex. Terms were not annnounced.
Veka Inc. of Fombell in Beaver County has been a Kroff customer for more than a decade. The vinyl extrusion company uses large amounts of water to cool equipment and sections of windows and doors, fencing and decking it produces, said Duke Pollick, safety and environmental manager.
"With Kroff, it's more than just selling us some chemicals for water treatment. Their service is really a big asset," he said.
Kroff monitors how treatment formulas work at customers' sites and adjusts for problems, such as early signs of rust on pipes, and provides advice on regulatory issues, Pollick said.
Potthoff has a degree in business, not chemistry. After a brief stint in pharmaceutical sales, he went to work for water treatment company Nalco Co. and spent the last five of his 16 years there as a district manager. Kronk worked for him as a sales representative.
"One night over a few beers, we started talking about the future. I said, ‘I just think we can do something different,' and he agreed," Potthoff said.
At the time, companies in their industry usually hired salespeople right out of college. But Potthoff and Kronk wanted to run a company with experienced sales reps who could customize water treatment formulas and build strong relationships with customers.
Potthoff and Kronk uncapped commissions, so their salespeople could build careers in one place, instead of moving elsewhere for promotions and higher pay.
They shared the cost of starting the company with a $300,000 line of credit.
"I backed my $150,000 with the equity in my house, and my retirement savings," Potthoff said. "My wife had to go to the closing, because she was half-owner of the house. It was a rather tense day."
The partners rented an office with one desk and one phone at the University of Pittsburgh Applied Research Center in Harmar.
A two-year noncompete agreement prevented them from calling on prior contacts, but they found work with Weirton Steel, an LTV Steel plant in Detroit and others, mainly steel companies.
By 1990, they had their first employee. "As we hired people, we let them gravitate to the market they felt they were strong in - hospitals or universities or coal," he said.
New laws requiring public disclosure of chemicals used in a variety of industrial processes helped Kroff tailor competing formulas. By the early 1990s, steel plants that previously might have employed a dozen engineers to do chemical analysis, hired company's like Kroff to provide needed expertise in areas such as chemical processes.
The annual $14 billion global industrial water treatment chemical market will grow in coming years as populations, infrastructure and commerce in Brazil, Russia, India, China and other countries expand, the Association of Water Technologies said. The sector includes $5.6 billion in U.S. sales, the trade group said.
Kroff's chemical treatment business and its oil and gas well services unit, focused on preparing water for reuse, are the company's biggest pieces, though the others are growing.
"We have a lot of market share to go after," Potthoff said.
Kim Leonard is a staff writer for Trib Total Media. She can be reached at 412-380-5606 or email@example.com.