Tom Luken and his father, George, walked into the office of their brand new distribution business in the winter of 1965. After a brief look around, George Luken opened the door, said, "I'm out selling," and left. Tom was now the inside manager for Luken Supply Co., Inc., which began without one official line of products.

Alone and never having sold, or bought, anything over the telephone, Tom picked up the phone when it rang. His first order was a skid of rags.

Many phone calls and sales calls later, Tom and his brother Buddy, who came on board after graduating from college in 1978, have survived recessions, dropped product lines, price competition and myriad other problems in their small operation in downtown Nashville, Tenn.

Turning problems into opportunities is what he and his father did best, Tom says. They supplied items in large contracts to many companies in middle Tennessee, only to see many of their customers fail to thrive. When that happened, they looked for other customers and lines, becoming experts in many product areas, from abrasives to tools to janitorial products. You might call them "instant specialists," Tom says.

"Take those rags, for example," he says. "That was actually very big business. But as soon as others found out, we got priced right out of the business almost overnight. Suddenly, we became abrasives specialists."

Michigan Abrasives was looking for an outlet in the middle Tennessee area, and George, an outside salesman his whole life, knew the woodworking market in the region. Luken Supply took on the Michigan brand.

"That first night Dad came back with $1,000 in orders and we were officially an abrasives company," Tom says.

And so it has gone for much of the last 38 years: adding a line, dropping one because customers left the region or went out of business, or becoming a specialist in a new field in order to compete in the marketplace. Buddy Luken handles purchasing responsibilities and is office manager, while Tom is generally on the road three days a week, securing business.

The company specializes today in die sets, cutting tools and abrasives. The Tennessee Valley Authority and state of Tennessee remain good customers, although at lower volumes than in past years. The brothers still juggle product lines when necessary, to offer customers new products and to stay ahead of the competition, Tom says.

Due to time constraints, suppliers and their representatives are not helping distributors get and hold business, Tom says.

"In all cases, working with factory reps requires a large degree of confidentiality and trust in today's competitive marketplace," he says. "Most manufacturers today are running scared and the days of the exclusive distributor are nearly non-existent."

For the first few years, Tom and George took on lines and built clientele. They were big in conveyors, power transmission and irrigation. Tom had studied engineering and that came in handy designing projects from golf courses to conveyor systems. However, such large projects for customers like Jack Daniels Distilleries and the Tennessee Farmers Cooperative were taking up all of George's time on the road.

At that time came a major change in the company's direction. In 1968, the Lukens decided to be an industrial distributor and took on the Union Twist Drill cutting tool line. At the time, every distributor got a 25-percent discount across the board.

"That meant your relationship with your customer was what got you the business," Tom says.

However, other cutting tool lines began offering 35 percent off list and that started a slide in prices and market share that Luken could not overcome. Slowly, the company added lines as the years went by to make up for such circumstances.

In the late 1980's, Luken Supply was a general line distributor again, selling many more lines than was originally planned. As competitive pressures forced prices down, it had to once again decide what kind of company to become and what to do for specialties. It started paring down lines and eliminating others.

"We just changed, again. When you're so small, you have that luxury," Tom says. "It came to the point where we could sell a lot of lines, but couldn't stock them and would not purchase on a lot of credit," Tom says.

According to Tom, his father had not bought anything on credit since he bought a car at several points above the prime rate years before starting the company, and it angered him.

"We always put two dollars back into the company and a dollar in our pocket," Tom says. "We operate paying cash for everything and that includes inventory. We never borrowed again after he bought that car."

From that point on, the company concentrated on tool & die supplies, abrasives and inserted carbide and other cutting tools, although it continues to represent other industrial lines as well.

One of the Lukens' customers for the last 15 years, Parris Tool & Die, buys die supplies, abrasives and cutting tools. Bill Dudney, one of the owners, says Tom comes in every two weeks to check in. Parris Tool is one of the progressive die makers sprinkled throughout the region. It makes custom-ordered metal stamping tooling.

"We buy mostly die components – springs, pins and bushings – and some abrasives, end mills and milling cutters," says Dudney. "Tom has always been concerned about getting what we need and following up. He always follows the details."

Mike Dickerson is the regional sales representative for Danly Die Co., one of Luken's largest suppliers. His relationship with Luken Supply goes back 14 years, when he got the territory. Typical customers for die supplies in the area are tool & die shops and large, consumer products metal-stamping companies like Amana Corp. and Whirlpool Corp., Dickerson says.

"Tool & die shops are holding their own in the region. I wouldn't say any new ones are opening, but only one has gone out of business recently," he says.

Staying small is one of the ways Luken Supply has stayed a step ahead of its bigger competition. The catalog houses have forced prices down, but small distributors don't need the same margin as huge companies, Tom notes. Luken has never sold products over the counter and therefore never needed counter people.

The company has succeeded in being selective with the customers it accepts, who must be willing and able to pay on time. As a result of that and the company's low overhead, Luken's gross margin is close to the published Industrial Distribution Assn. average and the net margin is better than average, Tom says.

The experience and connections the brothers have built up over the years allows them to second-tier supply many of the integrated supply contracts that larger distributors have in the middle Tennessee area. Integrated suppliers are in a price and payment bind, Tom says, because large customers are demanding every product on a five-percent-over-cost basis, while expecting to pay net 90-day terms.

"Our policy is we don't try to get all the business from a company because we can't deal with the time and low margins involved," Tom says.

Part of its sales strategy over the years has been to jump on a new product and push it. It does well with it until others get into the same or similar product. Then, the price goes down and various brands are available.

Through all the changes in prices, lines and customers, Tom and Buddy have kept up with other aspects of running a business, like insurance and retirement plans. They know they won't be in business forever. The Lukens installed a retirement plan in 1990, along with a profit sharing plan drafted by an attorney. They pay into a small-business medical insurance fund.

Buddy suffered a mild stroke that kept him out of work for three months. He has since fully recovered. In the interim, relatives stepped in to the breach, proving that the business is a family affair, Tom says.

Still, the pair doesn't plan to pass the business on to family. They hope to find one or two salespeople to learn the business and, hopefully, accept the principles they have worked by for nearly four decades. When the time comes to retire – in the not too distant future, Tom notes – it would be nice if those people were in position to purchase the business. Realistically, they realize the business may sell to unknown buyers, perhaps a large corporation.

Tom and Buddy grew up in the industrial supply business and are confident that they have helped their customers grow, as well.

"I believe you sell yourself to people, then they buy your products," he says. "Most people I sell to are friends. If there's anything in this business to become an expert at, that's it."