Investment Insight

Building for the Future
NFIB MEMBER: Dick Bascom, Bascom Truck and Automotive Inc.
LOCATION: Des Moines, Iowa
INVESTMENT: Land/Building

After renting the facility that housed Bascom Truck and Automotive Inc. for 23 years, owner Dick Bascom decided that in order to grow, he needed a larger facility. At the time, Bascom was renting a 4,500-square-foot space that accommodated four repair bays, where the company fixed a range of vehicles, from passenger cars to semis. But a lack of space was keeping his company in neutral.

Not only was his rental space too small to handle additional customers; new landlords had increased the rent. Those factors drove Bascom to finance 10 acres of land and build a 12,000-square-foot shop with 10 repair bays, allowing for a higher volume of repairs. In 12 years, Bascom increased the size of his staff from 10 to 24
people and more than tripled profits.

“We knew the price per square foot [at the rented space] was not going to be sustainable at the revenues we were at,” Bascom says. “So if we were going to pay more for a facility, we needed to have more volume to generate more revenue.”

Bascom spent $750,000 on the land and building, and bought enough acreage to expand in the future. That move is now paying off: The company is putting the finishing touches on a $1 million expansion that will add another 14,000 square feet to its footprint.

An Education in Investing
NFIB MEMBER: John Heaton, Pay Plus Benefits
LOCATION: Kennewick, Wash.
INVESTMENT: Education/Training

One day while walking through his office, John Heaton heard an employee finish a phone conversation with, “I’m sorry, we don’t do that here; that’s not part of our service.” Heaton, owner of Pay Plus Benefits, a human resources outsourcing firm, says that line is too common within companies, and he wanted a solution to better serve potential customers.

In researching such a solution, he came across IDEO, a global design and consulting firm that teaches employees how to innovate. It was Heaton’s eureka moment. Using IDEO’s concepts as a springboard, he implemented his own innovative methods. Heaton approached a local community college and proposed a curriculum focused on innovation.

With $40,000, Heaton helped set up a foundation two years ago to design a curriculum based on developing problem-solving skills and innovative ideas. In return, the program feeds Pay Plus Benefits with a steady stream of potential hires. Three interns are working at Pay Plus Benefits, while two former interns are now full-time employees.

“With our [national] economic situation, what businesses need are problem solvers and new ideas,” Heaton says.

Finding the Courage Within
NFIB MEMBER: Martha Moore, McCormick Asphalt Paving and Excavating Inc.
LOCATION: Little Rock, Ark.
INVESTMENT: Sole ownership

Any breakup is painful. When that relationship happens to be a family business, it can be gut wrenching. 

Martha Moore endured this difficult experience firsthand eight years ago, when a disagreement with her brother about pursuing federal contracts contributed to a personal and professional crisis.

Obtaining federal contracting work required a lengthy, upfront certification process and lots of direct, time-consuming marketing to promote the business. Her brother, who co-owned McCormick Asphalt Paving and Excavating with her, felt pursuing those jobs was a waste of time.

That disagreement, among others, led to him leaving the business for another career.

“I was absolutely unprepared for it,” she says. “However, I found the help I needed from NFIB, the SBA and others to move forward, even with incredible odds against me as a woman in this industry.”

Moore needed to make a decision: Meet her brother’s demands, or partner with a stranger. Moore decided to compensate him and move on. (She declined to disclose the terms.) Eighteen months later, the company’s revenue tripled. Moore attributes most of the growth to becoming certified to work on federal jobs, which now account for 85 percent of the company’s sales.

Instinct Pays Off
NFIB MEMBER: Mark Faulkner, Vireo Systems Inc.
LOCATION: Madison, Tenn.
INVESTMENT: Packaging/Labeling machine

Business owner Mark Faulkner is a quantitative decisionmaker. But for one of his recent investments, he relied more on gut than data.

As Faulkner tells it, his bio-tech company that manufactures alternatives to pain medications and steroids was successfully selling AminoActiv, an Ibuprofen alternative, when internal production snags inhibited meeting demand.

“The packaging and labeling side of [the production process] was the bottleneck because … there was too much manual involvement,” Faulkner says.

To better automate that step would require money Vireo Systems didn’t have. The company already had exhausted its budget for capital equipment, so buying the labeling and packaging machine would require “deficit spending.” But Faulkner had a hunch AminoActiv would continue to gain popularity, based on positive patient feedback and an article that indicated the pain management market was worth almost $30 billion. He decided to purchase the machine with funds from his operating budget. (Faulkner preferred not to disclose the amount.)

His gut feeling was right. Production ramped up 200 to 300 percent, almost instantaneously.

“If I had stopped and thought about it much, it may have made me uneasy at first,” he says of taking a risk and spending beyond his budget. “But I went with my gut and pulled the trigger before I could stew over it much.”

 

Spending to Avoid Extinction
NFIB MEMBER: Jim Annis, The Applied Companies
LOCATION: Reno, Nev.
INVESTMENT: Online marketing

Four years ago while attending a mentoring event for CEOs, Jim Annis, president and CEO of a group of staffing, recruiting and human resources agencies, saw a presentation on the surging popularity of social media and search engine optimization. Annis, who had relied mostly on word of mouth, sales staff and the Yellow Pages for new customers, knew things were about to change for his company.

“There are dinosaurs for a reason, and I didn’t want to be a dinosaur,” he says.

Instead of becoming extinct, Annis decided to invest $40,000 to redesign two of his four websites, with SEO as a key component of the project. Annis hired an outside Web developer to spearhead the project.

The revamped and optimized websites have changed the way Annis connects with customers, as many now call his offices after finding his websites on search results pages. And the leads he receives from SEO are higher quality than those from the Yellow Pages: They’re typically larger clients that spend more. His companies also are seeing a higher volume of customers, so much so that Annis has hired seven new employees in the last 18 months.

“I just said [focusing on SEO] is the right thing to do in terms of staying contemporary with our business," he says.

A Hire Efficiency
NFIB MEMBER: Jon-Mikel Bailey, Wood Street Inc.
LOCATION: Frederick, Md.
INVESTMENT: Personnel

Last summer, Jon-Mikel Bailey decided his company was going to focus more on in-house product development than outsourced services. (In-house products, such as mobile apps, generate residual income for the Web/mobile design and development company.) But making that shift meant Bailey, president and partner of Wood Street Inc., needed to do something he hadn’t done in almost three years: hire a new employee.

Bailey’s six-person team had been bogged down with managing subcontractors and Web development (writing code), and he needed to hire someone to lighten the load. One employee, for example, had been spending 30 hours a week on Web development, including managing a few subcontractors, even though he’d been hired for in-house product development. To relieve him of his coding and management responsibilities, Bailey hired a full-time Web developer.

Since coming on board, the full-time developer has taken over all back-end coding, which has saved his company money by using fewer subcontractors. Plus, employees can focus more on customer service and attention to detail for existing clients, which Bailey says is how his company can separate itself from the competition.

“With the time [the developer] can now spend on coding, our team has been able to spend more time on planning and coordinating the production of these apps,” Bailey says.

Preserving a Community Business
NFIB MEMBER: Kiley White, Ord Grocery Kart
LOCATION: Ord, Neb.
INVESTMENT: Refrigeration equipment

When Kiley White makes an investment in his neighborhood grocery store, he feels it’s an investment in the community. But his best investment as owner and manager of Ord Grocery Kart was getting a loan to install $200,000 worth of refrigeration equipment 10 years ago.

The old refrigeration equipment was almost 20 years old and beyond its life cycle, White says. It was operating inefficiently, resulting in higher utility costs, and technicians were on site monthly to repair the equipment for a cool $700 per month.

To upgrade, he installed 47 doors of frozen coolers, a nine-door cooler for dairy products, new produce sections and refrigerated cases for the meat department. The new equipment operates more efficiently, saving about 10 percent monthly on utility bills. It also requires maintenance technicians to visit the store only about once every six months. White expects the equipment to last another 20 years.

As an added benefit, he received compliments from customers. “If customers see you make changes, they know you’re investing to stay for the long haul,” White says.
 
 

Collaboration in Controlling Costs
NFIB MEMBER: LoRayne Logan, workplace staffing
LOCATION: Rockford, Ill.
INVESTMENT: Workers’ compensation captive

LoRayne Logan’s staffing business is about 90 percent temp-to-hire. So before individuals transition to her customers’ payrolls, she assumes their liability, including workers’ compensation costs. Controlling those costs is paramount for her business to be profitable, says Logan, the company’s founder and president.

Logan’s best investment dates all the way back to the early 1990s, when all staffing agencies were placed in a higher insurance risk pool, which meant they paid a 25 percent mark-up on the going workers’ comp rate. To combat those high costs, Logan became a founding partner in a workers’ ompensation captive—a group of business owners that helps control insurance rates by allowing owners to retain unused premiums, Logan says.

Here’s how it works: About 35 percent of every premium dollar she pays funds the captive’s operations; she retains about 65 cents of every dollar to put toward injury expenses. If minimal injuries occur, the 65 cents per premium dollar may come back to her in three to four years—money she can invest to grow her business.

Buying a share in the captive cost her $36,000, but she knew joining would help her and other small businesses control insurance costs and avoid volatile insurance rates. In 2011, Logan’s workers’ comp premiums with the captive were 18 percent less than Illinois’ published rates.

“I said to myself [at the time], ‘What is $36,000 against my escalating comp costs?’” Logan says. “I’ve had a return of hundreds of thousands of premium dollars.”

Rolling Out the Welcome Mat
NFIB MEMBER: Tom Little, ServiceMaster of Kalamazoo
LOCATION: Kalamazoo, Mich.
INVESTMENT: Building

When Tom Little built a facility for his restoration and janitorial business, he admits the decision wasn’t easy. He knew sales would have to stay strong to pay off the investment, and he understood that his pay might have to be reduced or delayed until the business was profitable again.

“It was definitely a little scary,” he says.But the reward of having a facility to call home after renting for more than 20 years was worth the risk—and the $500,000 investment. Little purchased about 3 acres of land in 2003 for $80,000 and then used that land, which was paid for in cash, as equity for a loan to finance the 10,000-square-foot facility.

Since occupying the building in 2004, Little says sales have consistently increased. (In 2011, sales were up about 20 percent from 2010.) As a result, Little has been able to double his monthly principle payments on the bank loan.

The increase in sales is attributed to having a facility that’s welcoming for employees and customers. The facility Little had been renting was too small and uninviting for customers or prospective workers.

“[The new facility] helped us attract customers because we could invite them here much more comfortably,” Little says. “It’s a functional building. And it really gave employees a boost in morale.”

Making the Cut
NFIB MEMBER: Jerry Miller, M&M Hi Tech Fab LLC
LOCATION: Lexington, Ohio
INVESTMENT: Manufacturing equipment

Jerry Miller has purchased many pieces of equipment in his 20 years in the metal-fabrication industry. But one of his latest investments truly transformed his company.

While attending a trade show in 2002, he bought a $150,000 metal-cutting machine that uses water-jet technology. Miller had just acquired a new client in the aerospace industry whose products required cutting a significant amount of stainless steel, copper and brass for electrical components. The primary piece of cutting equipment he had at the time, a CNC punching machine, was insufficient.

The water-jet cutter, on the other hand, makes quick, clean cuts on stainless steel, copper and ceramics. The machine has become integral to another part of Miller’s business: manufacturing products for airplane galleys, including carts, trays, drawers, and ovens, which came about after Miller acquired a company in 2006. The galley equipment now accounts for 45 percent of Miller’s business, and the water-jet machine is part of the manufacturing process every day.

Since purchasing the cutting machine, M&M Hi Tech Fab LLC has expanded. Before it purchased the airplane galley manufacturer in 2006, the company was generating about $500,000 a year in sales. Sales today are about $2 million, Miller says. In addition, the company has moved from a 5,000-square-foot facility into a 22,000-square-foot building to accommodate growth.

 Is now the right time to make an investment? Read our Q&A with a small business expert at www.NFIB.com/invest_now.