Perhaps as no other company in the extremely volatile golf equipment industry, Golfsmith has been successful virtually from the very day that Carl Paul and his wife, Barbara, decided to move their two young daughters into their own bedroom to free up space in their cramped apartment for their fledgling enterprise, one designed to save golfers the distress of having to buy ill-fitting, off-the-rack clubs at arguably inflated prices.

Last year, Golfsmith earned a record $257 million, an increase of more than 45 percent over 1997. It was the 31st straight year that Golfsmith has recorded double-digit revenue growth. Last years's strong finish is especially significant because it came during a period in which others in the industry were nosediving. Callaway Golf, for example, generally regarded as the king, lost $26.6 million and was so hard hit that it had to let go one-fourth of its work force. Two other major players - second-ranked Taylor Made and third-ranked Cobra - seemingly did not fare much better since they also were forced to make substantial layoffs.

In contrast, Golfsmith, has continued to expand rather than retract, adding employees rather than laying them off (it now has about 1,800 workers), while continuing to explore new avenues for increasing revenue in an increasingly unpredictable market. This success is particularly notable since Golfsmith's founder - a tall, soft-speaking civil engineer, now 59 with a head as devoid of hair as a shiny, new balata - had never played a serious round of golf before he was in his late twenties and whose interest in the sport was not so much in lowering his handicap but in the science of club construction.

The company was born in the mid-Sixties, soon after a golfing neighbor in Edison, New Jersey, invited Paul to play a round, generously offering the use of his wife's clubs. But as soon as they left the course, Paul hurried to a second-hand store where he spent $5 on a set of clubs he could call his own. Quickly realizing they would not be adequate he traded them up, immediately doubling his initial investment. Still he wasn't happy. A confirmed tinkerer who grew up working on old cars, Paul reckoned that if he could rebuild a carburetor be could cobble together a workable set of golf sticks.

While his wife haunted garage sales, looking for old clubs, Paul spent his spare time pulling them apart so he could make new ones from the pieces. His goal was to find the right combination that would produce more affordable, better clubs than those then available on the retail market.

Although that worked to a limited degree, Paul still was unhappy with the results he was getting with used parts. The solution, the engineer determined, would be to design his own clubheads. After working up some models, he farmed out the production to a mill in Chicago. He was so delighted with the new products that he and Barbara decided to try to market them by mail, targeting a handful of people who advertised as golf club repairers in the Yellow Pages of major cities. Their first "catalog" was only one typewritten-page long, but the response was overwhelming; the orders began coming in faster than the Pauls could handle it alone.

By 1972, five years after sending out the first catalog, Golfsmith had become a full-fledged business with eight employees, including three who did nothing but take orders. That year, after grossing more than a third of a million dollars, Carl and Barbara made two pivotal decisions. First, Paul quit his day job as an engineer. Second, they decided to relocate to Texas, where Paul had spent his childhood and gone to college. Piling their daughters and everything they owned into two U-Hauls -- with their new partner, Carl's brother Frank, following in his own car -- the Pauls set off for Austin, where Carl had rented a vacant storefront along I-35, the busy north-south highway that runs from Kansas to the Mexican border. Golfsmith is still in Austin and still on I-35, although it now sprawls over a 41-acre "campus" it built in 1992 that includes three buildings with 280,000 square feet of space, an 80-slot driving range, a putting green, a chipping green, and a sophisticated club testing facility.

As the company expanded physically, its structure and philosophy also began to broaden . While Golfsmith had grown to greatness as the country's premier supplier of parts for clubs, the Pauls realized that they were going to have to make some adjustments if progress was going to continue. Establishing a niche - creating a new market where none had existed before - had been relatively easy because there had been no competition to speak of. But expanding the business into an already overcrowded industry, where golf companies rise and fall on a disturbingly regular basis, would be trickier. The secret to continued success, the Pauls knew, would be keeping a step ahead.

"Instead of just one profit center - components - we now have eight," says Paul. Components holds down the top spot but other enterprises are battling their way up the ladder.

While Golfsmith sells its own brand of clubs made from its own components, it also sells clubs produced by all the other top-line manufacturers such as such as Callaway, Taylor Made, Cobra, Adams, Orlimar, and Teardrop. Plus, it is pushing clubs from three lesser-known companies that Golfsmith bought last year: Lynx, Snake Eyes, and Killer Bee (Black Rock Golf Clubs, Inc.) "We also sell components for Snake Eyes and Killer Bee," adds Paul, but not Lynx since they wasn't part of the deal Golfsmith struck with the Canadian company.

Conspicuously, decisions the Pauls made years ago are starting to pay off in a big way.

Back in 1970, when Golfsmith was still an infant, Barbara and Paul conceived the idea of starting a school to teach basic clubmaking. What better way, they obviously figured, to create a market for their components than to teach others how to make use of the products. Today, the clubmaking school has grown into a major money maker with a whole series of classes aimed at clubmakers at all levels, from amateur to seasoned professional.

Using the same reasoning, they created, in 1993, the Harvey Penick Golf Academy, naming the program after the late legendary golf teacher. Since then, more than 10,000 students have graduated. "This year it was rated among the Top 25 golf schools in the country by Golf Magazine," adds a beaming Carl Paul.

In the early Nineties, when the Japanese economy looked like it would never stop rising, most of the U.S. club manufacturers began zeroing in on the Asian market. Golfsmith, however, looked the other way, toward Europe. In 1992, the Pauls opened an office near London, the better to serve their enlarging customer base in England and France. In retrospect, it was a remarkably fortuitous decision since the continuing economic problems in Asia probably were responsible for most, if not all, of the troubles suffered by Callaway and others. Golfsmith not only dodged a bullet, its European operation, according to Paul, has proved quite profitable.

But the really hot new projects are relatively recent additions to the Golfsmith agenda. The first is the skyrocketing popularity of on-line sales generated through Golfsmith's intricate web site, a program that Paul is trying to build to an even greater degree of sophistication. The other is the surprising success of the company's own retail stores.

Golfsmith opened its first outlet in Houston in 1995. Between then and the end of 1998, it opened 23 more. They stand out because of their sheer size (with an average of 25,000 square feet they are roughly 8-10 times as large as most retail golf stores) and the wide range of products, amenities, and services they offer, from clubfitting to swing analysis to in-house waterfalls and cafes. As a result, they have become a shopping destination for golfers instead of a convenience location. "Golfers don't pop into our stores to buy a sleeve of balls," says Ken Brugh, vice president and general manager who began working for Golfsmith 18 years ago as an order-taker. "Our research shows they spend an average of two hours inside." 

Since Golfsmith also is a private company neither Paul nor Brugh want to talk specifics about the stores' money-making capabilities. But the fact that Golfsmith plans to open another 6-10 of them this year - plus Paul's admission that he has been searching for executives with retail experience -- is an indication of their role in the company's business plan.

So what else is in Golfsmith's future? Brugh shrugs. "Maybe golf course management," he says, smiling cannily. "Maybe golf course ownership." At that, he clams up, but his message is clear: Stay tuned, his body language screams, the innovations are just beginning.