Building a brokerage firm from the ground up

One on one

October 15, 1990

One on One is a weekly feature offering excerpts of interviews conducted by The Evening Sun with newsworthy business leaders. Nathan Chapman is Chairman and Chief Executive Officer of The Chapman Co., a Baltimore stock brokerage firm.

Q. Before starting your brokerage firm in Dec. 1986, you worked for the investment banking firm of Alex. Brown. Why did you decide to leave that firm and its security and venture into the uncertain world of a new company?

A. I loved working at Alex. Brown & Sons. I liked the environment there and I liked what I was doing. But for me, I've always had this dream to own my own business. Ever since I was a kid, I've wanted to own my own business. When I got into college -- well, really, high school-- and I learned about this particular business, it matched pretty well with my interests. I like numbers and I like people, and this is one of businesses that you can put that together. So, at Alex. Brown, once I felt comfortable that I had the support of my clients and I had the technical knowledge that was requisite, I decided to go out there and form the firm. It was a choice of the fish or the fishing pole . . . .

Q.Since you started, how has your firm grown in terms of employees, clients and revenues.

A.When we started, I left Alex. Brown with my assistant and we hired two additional administrative staff. So the Chapman Co. started with four people. We now have over 30 people in five offices. Those five offices are in Los Angeles, Chicago, Birmingham, Dallas and here in Baltimore. When the firm began, my client base was exclusively the clients who transferred from Alex. Brown. These clients were largely retail clients. Now our clients are roughly 50-50, retail and institutional, with institutional accounts such as the City of Baltimore, the State of California, Chrysler and the United Auto Workers. Our revenues have roughly doubled each year we have been in business.

Q.After a number of years, do you perhaps yearn for that security of being an employee rather than being a boss?

A.No. There are rewards in owning your own business that go beyond the hardships-- and there are some hardships. Managing a large number of people, a large number of different personalities, especially in the sales business. I think managing sales is different than anything else that you can do. It's a lot different than managing a group of lawyers or managing a group of doctors. When you manage a group of salespeople, it takes TC lot of time and, I think, a lot of special skills.

Q.The investment banking area, investments in general, are dominated by some of the largest firms around, such as Merrill Lynch and to a lesser extent, Legg Mason and Alex. Brown in Baltimore. I'll venture to say that you're one of the smaller brokerage firms in the country. What advantages and disadvantages are there to being a smaller firm and what do you do to compete with the larger companies?

A.Well, it's interesting. The Chapman Co. is not as well known as a Merrill Lynch or a Prudential Bache or a Salomon Brothers, and usually the way I describe the Chapman Co. to people who don't know what we do . . . I say that we're just like Merrill Lynch, except that last year we made money. So, it's not how big you are really, or how much you gross, it's how you end up at the end of the year, where your market focus is. We're a small firm. Our market focus is a little different than those big guys . . . and because of that and because our costs are much lower, we're going to end up being a much more profitable firm. We look at ourselves as a firm for the '90s, a firm for the 2000s -- what an investment banker has to be. And investment brokerage is not going to be a firm that has buildings and takes on a lot of fixed costs and a lot of fixed overhead. Investment banking firms of the '90s and the 2000s are going to be firms that are very flexible, that keep their costs low and invest in people, that are customer-service oriented.

Q.What are the long-term plans for the Chapman Co.?

A.The Chapman Co. is in basically three businesses: we're in the brokerage business and we're in the public finance business and we're in the investment management business. That's the core of what the Chapman Co. does, and we're looking to spread that along a national agenda. We have branches in different parts of the country now and we're focusing and expanding those branches along those three service lines . . . We're hiring additional people; we're coming out with new, innovative ways of doing finances and providing customer service that is second to none in the industry.

Q.You recently appointed Paul Heid [formerly of Ferris, Baker Watts] as your new head of public finance. Why was this appointment made and what does it show about your emphasis on public finance?

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