business

When your main competition is a cardboard box and the market penetration is only 4 percent, you can see how your business might have a sizable upside.

Of course, there can be challenges, too, particularly if your product is a comparatively simple plastic container that costs 25 to 50 times more than the aforementioned cardboard box.

Ken Schneider and Alan O'Regan appear to be meeting the challenge quite nicely. The two veterans of the data-storage business at 3M and Imation own Golden Valley-based Perm-A-Store, which manufactures hard plastic storage cases with molded slots to hold various sizes of computer tapes, disks and hard drives.

The company was based in Wichita, Kan., heavily in debt and had been struggling for several years when the men bought it early in 2004 in partnership with Archie Black, CEO of Minneapolis software company SPS Commerce.

Thanks to their knowledge of the data storage industry and the spur of federal regulations regarding security of medical and business records, the two have doubled Perm-A-Store's revenue in just two years, with sales on course to jump another 28 percent in 2006.

We're not talking big bucks -- at least not yet. Perm-A-Store grossed $1.8 million in 2005, a record for the company, and appears to be headed for about $2.3 million this year. But demand is growing, in part because of federal regulations.

One is the Health Insurance Portability Act, which includes tough provisions aimed at ensuring the confidentiality of patient data. Then there's the Sarbanes-Oxley Act, which frowns on companies that lose crucial data.

"I've seen a lot of data stored in cardboard boxes, Tupperware and Rubbermaid containers, even tin cans and suitcases," Schneider said. "But the enormous amount of valuable data on today's tapes and disks, and the risk of losing it from jarring, dust and other factors, make our higher cost less of a consideration."

The Perm-A-Store product, dubbed the Turtle Case for its hard, contoured shell, costs $40 to $80, depending on size.

OK, so plastic boxes aren't the sexiest topic to come to our attention. But I've resorted to less-promising subjects -- remember the folks who made raincoats and booties for dogs? -- when confronted by daunting swatches of white space.

Besides, the steps that Schneider and O'Regan have taken to reverse the company's fortunes offer an interesting seminar on the art of the turnaround. Among the highlights:

• Using contacts made as 3M and Imation managers -- O'Regan as marketing manager for high-end tape products, Schneider as business development manager for data storage products -- they persuaded IBM, Hewlett-Packard, Sun Microsystems and Imation to recommend Turtle Cases to their corporate clients.

• Another major computer manufacturer, which insists on anonymity, recently hired Perm-A-Store to produce a private-label media case as an added value for the client's branded tape products. O'Regan said that contract should add 10 percent to annual revenue.

• The partners also began wooing off-site data storage companies and wound up with an assignment from one of the leaders in the field to design a large-capacity transport case with beefed-up impact protection. That could add another 10 percent to sales, O'Regan said.

• Schneider and O'Regan used their connections to add three large distributors, where the previous owner had relied on a smaller company with limited reach. This helped boost the number of dealers 50 percent, to about 450.

• The partners also grew the product line substantially, adding two hard-drive cases, a large-capacity case to simplify off-site shipping and three multimedia cases with flexible plastic slots that grasp and hold different-sized media.

• Equally important, they expanded export sales to Australia, Asia and Latin America and replaced a single sales agent in Europe with Imation as the distributor. The payoff: Overseas business generated 15 percent of 2005 sales, headed for 20 percent this year.

• Taking a step toward diversification, the company plans to introduce in June a lockable, waterproof container for business and legal documents.