In Karl Keller's Catharpin garage--connected to a house that fits a family of five and a yard that fits three dogs and eight cats--sits not Keller's car, but his multimillion-dollar business.
The company, Explore Reasoning Systems Inc., is a 15-person virtual company based out of, well, each person's home. It makes customized software to solve problems and run systems for specific businesses.
ERS's most recent creation--Investment Planning Factory--is a Web-based tool that allows investment advisers to do simple automated financial planning functions. Each business that subscribes to the service has the Investment Planning Factory custom-built to look like its own Web site. ERS charges the company a subscription fee for the service.
Information is directly entered onto the site, and Investment Planning Factory does the rudimentary planning. The financial analysts then go to the next level of financial planning on their own. "By no stretch do we replace investment analysts," said Keller, the company's CEO.
No clients wanted to be named in this article because of confidentiality concerns. However, ERS does currently serve five clients, Keller said, mostly Fortune 500 financial firms on the East Coast, although the company has one client in California and just worked on its first overseas project, in Germany.
"It's a very specialized niche," Keller said, because the product changes each time ERS attracts a new company. "Clients will come in with their own ideas, and we make the software."
ERS usually pulls in clients by "vigorous marketing and salesmanship," Keller said. "We'll analyze a specific domain like mortgage banking and get smart on it and pick out some of the more difficult problems."
ERS employees also attract clients when they hear of problems that companies are having "through the grapevine." They then approach the company's higher level managers. "We find where there's demand for what we're doing," he said.
And the employees also hang on to any contacts they have made over the years. "I just recently had a client that I interviewed with earlier in my career. When they had a problem, they've contacted me," Keller said.
ERS works with the company's technical department to make sure the application fits their needs and is compatible with the company's system. ERS application designs also can be customized for other clients in the same type of field.
Other applications ERS has created include a medical claims processor--SmartClaims--for insurance companies, with which users list a patient's medical tests or procedures and their cost. The program then automatically acknowledges whether the claim should be accepted or denied based on average costs and whether or not the patient should be receiving the test.
The six-year-old company pulled in a 1999 revenue of about $2 million, Keller said. He expects revenue to double next year if he can get Investment Planning Factory to take off.
Many of the employees at ERS--including Keller--know one another from working together at Mitre, a think tank that works for the Department of Defense. When Keller's independent consulting business took off in the early 1990s, he called on his old co-workers for help.
ERS was not always a completely virtual company. It was housed in a Tysons Corner office until about a year ago. "Our lease was coming due, and they increased the rate by 30 percent. People were really suffering from rent levels," he said.
So Keller used the lease end as a catalyst to make the company completely virtual. "Our clients wondered if they would see us again," he said. "But e-mail was back up in a day."
The company, which has grown without taking on debt, "couldn't have gotten to where we are without [being] virtual. There is much less overhead. It's obvious in today's world that [renting office space] is a waste."
During the past two years, ERS has changed its focus from being primarily a consulting firm to focusing more on the actual products. "Now that we're establishing those relationships, we're expecting some good growth next year," Keller said.
CAPTION: Karl Keller's Catharpin garage is the home base for his 15-person virtual company, Explore Reasoning Systems, which makes customized business software.