Challenges. Every business has them. The key is finding ways around or through the obstacles.
For Matthew Sheehan, owner of Aero Specialties Inc. in Boise, and Larry Landa, who owns LarKor Construction in Homedale, the problem was shifting markets. Sheehan watched a huge section of his business disappear as the recession took hold. His way out: sell overseas, but that also brought challenges.
Landa needed to find a niche in the construction business that would help him move ahead. He found it in the federal government, but not without learning the ins and outs of getting a shot at those contracts.
Both men talked with Business Insider about the problems they encountered and how they overcame them.
THE HISTORY
Owner Matthew Sheehan, a pilot and former auto body shop owner, began repairing and refurbishing ground equipment for aircraft and maintenance operations 22 years ago. His company continued to grow, eventually reaching $10 million in sales. It got a boost after 9/11, when corporations expanded their private flights to keep highly paid executives from standing in long inspection lines to get on commercial aircraft.
Many corporate employees were pre-cleared for flying, taking cars right up to company aircraft and departing without waiting.
Aero supplied those companies with a variety of ground equipment, including ground generators to feed electricity to parked aircraft, tow bars to pull planes around and carts to empty waste from on-board bathrooms.
THE PROBLEM
Aero got slammed by the recession in 2008 as companies trimmed back or closed down their corporate flying departments and quit spending money.
“It was like somebody disconnected the phone for about 90 days,” Sheehan says.
Sales fell by 50 percent. Sheehan was looking at laying off about six of his 20 employees. He suggested, instead, cutting the workweek to 30 hours beginning in 2009 and stopping employer contributions to retirement. Employees agreed.
THE CHALLENGE
With the U.S flying market in tatters, Sheehan had to develop new markets or face extinction. He turned to a piece of his business still in its infancy, having accounted for less than 20 percent of the company’s revenues in 2008: exporting.
Aero had begun testing the export markets well ahead of the recession. In 2005, Aero was in several countries, especially in Europe. Foreign sales accounted for about 5 percent of the business.
When U.S. sales plummeted, foreign demand stayed steady, Sheehan says.
“Had we not been exporting, we probably wouldn’t be talking right now,” Sheehan says. “We’d have rolled up to almost nothing.”
The company went after foreign markets with an aggressive plan that included landing distributorships and enhancing high-tech marketing.
Aero competed with well-built European equipment, but its prices were lower.
While many U.S. companies hoarded their pennies, Aero kept spending. The company went to overseas trade shows that cost $30,000 to $40,000 each.
“The marketing budget was cut very little,” says Derek Rose, Aero’s sales and marketing manager.
Aero tried selling directly and had some success but recognized it needed distributors to provide sales and service and to bridge language and culture gaps.
In the past three years, the company has added six distributors that cover Europe, the South Pacific and parts of the Middle East.
The company doesn’t pay as much money to send employees to overseas trade shows as it used to. Sheehan decided to sell equipment at a discount to distributors and require them to represent the company. The move hasn’t produced much in the way of savings. “You are not better off in a way,” Sheehan says. But he’s still counting on those distributors — some of whom are still learning about Aero’s equipment — to boost sales.
“I think now we are just starting to catch up to that second wave to where the distributor will now start to expand that market on our behalf, and I think our profits will come back,” Sheehan says.
But the foreign distributors aren’t doing all the heavy lifting. At home, Sheehan and Rose are putting efforts into marketing.
While the company has a small employee roster, it has designated one full-time job to someone who tends strictly to social media: Facebook, the web, Twitter. Part of the job is to make sure the right key words for foreign audiences are in Aero’s online entries.
For example, the machinery used to remove waste from aircraft bathrooms is called a “lav cart” in the States. But it is referred to as a “toilet trolley” in many parts of Europe.
Moreover, Aero recognizes that nearly all the purchasing agents for overseas companies they want to attract are typically under 30 and weaned on the Internet, Sheehan says.
Aero also went visual in its push to attract customers. On YouTube, the company posted videos showing how its products work. Even though the commentary is in English, the company believes the visualization crosses the language barrier.
HOW IT HAS WORKED
Since 2008, exports have grown from 17 percent of the company’s sales to 40 percent. Exports have risen more than 300 percent since the company began overseas sales in the early 2000s. The payroll, which had fallen to 18 people in 2009, is up to 26. The 40-hour workweek was restored in 2010, and Sheehan reinstated contributions to employee retirement this year.
WHAT SHEEHAN LEARNED
The people working for his company and Aero’s vendors made a huge difference in helping the company through tough times. Sheehan points to one vendor from whom Aero typically has ordered five large tanks at a time. He couldn’t do that as the market contracted. So he and the vendor reached an agreement. The vendor would create pieces for 10 tanks — which improved the vendor’s efficiency — and hold on to them. Then the vendor would assemble and ship tanks as Aero needed them. “Everybody understood,” Sheehan says.
FOCUSING ON FEDERAL CONTRACTS
A tiny construction company learned how to compete for big government dollars
THE HISTORY
Larry Landa grew up on a family farm in Homedale. He and his father and siblings raised potatoes, alfalfa seed and corn on about 2,000 acres. But in 2001, Landa decided he wanted to do something different. He jumped into the construction business.
“I went out and bought a truck,” says Landa, who owns LarKor Construction with his wife, Korene. He hauled dirt and materials as a subcontractor, doing some work for the Walmart that was constructed near Glenwood and State streets.
THE PROBLEM
By 2002, with a recession under way, commercial construction had withered. Jobs stopped coming Landa’s way. “The industry just started to fall,” Landa says. He thought he might have to leave and return to farming.
THE CHALLENGE
Landa knew he had to find a new market, but he wasn’t sure how. Then he got a phone call from a boyhood friend.
Bryan Zatica, a general contractor in California who owns Macro-Z-Technology, called a few days after Christmas 2002. Zatica, who has known Landa since the two were in grade school, said he was working on a federal job laying water pipelines at Fort Huachuca, Ariz., 70 miles southeast of Tucson. He offered to bring Landa on as a subcontractor.
Landa, who was out of jobs at the time, left for the Army base immediately. He compacted ground over the pipe and hauled out the excess dirt. More than that, he got his first taste of working in the federal construction market.
Zatica mentored Landa through the technical and complicated maze of competing for federal jobs. “I did it to help,” Zatica says.
The federal government operates in a world of acronyms and detailed reports. “I knew he would suffer” as a beginner dealing with all the complexities of federal contracts, Zatica says.
But Landa got an edge. LarKor got a federal designation as a minority-owned business — Landa is Basque — and he was operating from an area with low income and high unemployment. Those two factors qualified him to compete for jobs for federal contracts and money the government sets aside for businesses that meet those criteria. He worked through the Small Business Administration in Idaho, which helped him with the paperwork and kept him informed of the changes in the law.
Before long, Landa was competing for — and getting — contracts.
Among them:
* Demolition and removal of restroom buildings at Lake Cascade State Park in 2009, $97,000.
* Design and construction of a building for high-altitude training of pilots at Fairchild Air Force Base in Spokane in 2008, $5.3 million.
* Designing and building the Veterans Administration Regional Office building in Boise in April 2008, $8.4 million.
Landa keeps in contact with construction people in the federal government. “You almost pester them,” he says. He also goes to Washington, D.C., and meets with military personnel who work on construction contracts.
HOW IT HAS WORKED
In 2004, just as Landa was getting into federal contracting, he had $2.2 million in revenue. By 2010, that had grown to $12 million, a 425 percent increase. In 2012, Landa’s designation as a minority business will reach its nine-year limit and expire. But he still will be able to compete for set-aside money as a small business.
WHAT LANDA LEARNED
His journey through federal contracts have made him a better businessman, he says. When he was farming, he just tried to raise a good crop. But with the entry into the federal markets, he learned the complexity of doing business with the federal government in a short time.
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