ToolWatch software keeps tabs on companies' tools, equipment.

• Author: Peterson, Eric
• Position: Don Kafka

In the 1980s, Don Kafka--then owner of a Chicago-based electrical engineering contractor with 100 employees--had a problem.

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"We were losing tools, just bleeding tools," he recalled. "We were buying them and buying them and we had no idea how many we had or where they were. We never had enough tools. It just never ended."

Kafka took it upon himself to do something to soak up the red ink and wrote a program in COBOL to track tools internally--and manually. The 'a-ha!' moment came when a FedEx driver showed up with a hand-held bar-code scanner. "I got the idea, 'Let's try that for tools,'" he said. "It worked out great, and I got a lot of interest from other contractors."

As a result, in 1991 Kafka launched a second company, ToolWatch Corp., to sell the software and bar-code scanners. He ran both firms from the Windy City before relocating his three-employee startup to the Denver Tech Center in 1994 and selling his contracting firm a few years later.

ToolWatch has 30 employees today, consistently growing at an annual rate of 30 to 35 percent in recent years without any outside investment. Even the tech slump didn't slow ToolWatch's boom. "If anything, the tighter economy caused companies to look at us in a little different light," said Kafka. "It's a little sexier to manage tools and equipment when margins are slim."

Beyond tool tracking, the ToolWatch system now incorporates theft prevention, billing, and purchasing features. A typical license and installation runs $25,000 to $30,000. The company's client list reads like a who's who of heavy industry: Boeing, Caterpillar, GE, and GM are among ToolWatch's 3,000 customers, as are plenty of small contractors, public utilities and municipalities.

One Fortune 100 client cut...