SMALL BUSINESS PROFILE: MATRIX LABEL SYSTEMS INC.: Label maker manufacturing growth - again Fourth expansion project set to open this summer

March 24, 2008


MATRIX LABEL SYSTEMS INC. Label maker manufacturing growth - again Fourth expansion project set to open this summer

Within a month, Plainfield-based Matrix Label Systems Inc. will break ground on a fourth addition to its central Indiana facility, adding nearly 17,000 square feet of warehouse space and potentially more workers.

That's just the latest growth spurt at the 23-year-old company that started out of a garage and now has 50 employees and $15 million in annual revenue.

But it started on a fluke.

In the 1980s, Plainfield resident Jerry Perrill worked as a salesman for a labelmaker based in Brazil, Ind., while his wife, Cindy, a former elementary school teacher, stayed at home to care for their two sons.

Jerry Perrill sometimes did some work for their neighbor Mike DeField, an airtraffic controller with an entrepreneurial bent, helping out with a chimney-cleaning business DeField started when the wood-burning stove craze hit.

When DeField was laid off in 1985, Perrill suggested he go into business as a label wholesaler, an idea he had after seeing clients at his day job who wanted niche products they couldn't get from major manufacturers because of low demand.

So Perrill and DeField got a list of label distributors, offering them two niche label products designed to run through a postage meter-once the meter determined postage, it would print that amount on the labels, which users could peel and stick to their mail.

"Within a week, we had several orders but we didn't have any product," Perrill said. He took the orders to his employer, which agreed to manufacture them. DeField then repacked and shipped orders out of his garage under the name Peafield Products Inc. The Perrills invested about $7,400 in the business.

About six months in, DeField got his job back and the Perrills bought him out. Jerry quit his office job and he and Cindy became entrepreneurs.

For Jerry, it was a dream come true. For years, he'd wanted to own his own business and entertained thoughts about buying a Dairy Queen franchise. For Cindy, it was a path she never expected to take.

"If anybody had told me back in high school or college that I would ever be doing this, I would have told them they were insane," she said.

The Perrills moved the label boxes into their garage and set up office space in the bedroom and dining room. More orders poured in and, by 1989, they moved the business into an office on the west side of Plainfield.

Moving into manufacturing

In the early 1990s, Peafield Products was running into quality problems with labels it still bought from manufacturers since Perrill didn't want to get into the manufacturing side of things.

"Manufacturing is really difficult. It's headache after headache," he said.

But the problems risked hurting Peafield Products' reputation.

Finally, a supplier out of Richmond convinced Perrill to start a joint partnership manufacturing labels. The company, Matrix Label Systems Inc., bought a used machine, rented space in Knightstown and started making labels with Peafield Products as one of the main customers.

While classified as a manufacturer, the firm technically is a so-called converter, ordering large rolls of label paper, then cutting and printing products to customers' specifications. The Perrills owned 40 percent of Matrix Label and three partners split the remaining ownership.

Shortly into the venture, Perrill had to turn back an order because quality wasn't up to snuff, a move that irked his partners.

"They said: 'How can you do this; you're a partner?'" Perrill recounted. "But I'm also a customer and I can't sell products that are going to affect my reputation. Why should I?"

Despite attempts to work out their differences, the partners eventually went their separate ways after the Perrills bought the rest of the business for about $150,000. In 1991, they added on to the Plainfield office to make room for manufacturing equipment.

Before the purchase, Peafield Products' annual sales were about $550,000. With the manufacturing capabilities, the Perrills grew revenue into the millions by tackling many custom orders bigger companies would turn down.

"My business philosophy is to find areas where there is less competition," Perrill said. "It's generally products nobody else wants to do, usually because it's too hard."

For example, in the mid-1990s, the U.S. Postal Service barred direct-mail companies from using staples to seal their pieces. So Matrix Label stepped in with circular stickers that fold over the bottom of a mailer, adding a new product line-and the potential for new customers.

Niche nirvana

Identifying such niches is how a lot of small companies get the jump on larger competitors, said Jerry McColgin, founder of Insight2, a Carmel-based product innovation firm.

Large companies often look at a new product and consider only the volume they can produce, not how profitable it might be to make even a small order.

"Big companies say, 'We don't want to mess with [a small order],' and small companies can take it and grow to a dominant force," he said. "Big companies are often blindsided by this."

Matrix Label has been able to use its niche prowess to grow even as the peeland-stick label industry's growth has slowed. The industry took off in the 1980s and 1990s, growing by double digits, said Yolanda Simonsis, editor of Paper Film & Foil Converter Magazine, a trade publication. The $7.6 billion industry grew about 6 percent last year.

"I wouldn't say that the industry has matured, but it is increasingly feeling pressure," she said, as the cost of raw material grows and customers aren't able to support higher prices.

The Perrills, both 58, said they're cutting steps out of production to make the process as lean as possible while keeping quality. And it's the eye on quality that they think makes the company excel.

"Jerry is very picky," said Cindy Perrill. "But we managed to build the business because he's extremely picky."

Matrix's reliability keeps customer Bob Boisseau coming back. The owner of Texas-based Label Source Ltd., which sells labels and supplies for bulk mailings, has ordered products from Matrix since 2000.

"Their quality is great. Their products don't have any problems," he said.

As the company has grown, the Perrills have landed some bigger accounts, too. Matrix has made product stickers for Ace Hardware, Best Buy and True Value stores. And it makes labels for a bookstore chain with 1,200 stores nationwide, Perrill said, declining to identify the chain.

Matrix's salespeople have been in talks for nearly three years with a big-box retailer that's on the verge of signing a deal with the firm. If that goes through, it would mean enough work to hire four additional employees, Perrill said.

When they look to the future, the Perrills want to keep innovating-and growing as profitable projects come down the pipeline.

"There are a lot of opportunities out there, but the market is unbelievably competitive now," Jerry Perrill said.
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