Making hay in the rainMaking hay in the rain

Anyone can make hay while the sun shines, but it takes a special type of business entrepreneur to make hay in the rain. And, say some, that’s the best time. Years ago, a business partner of Steve Uhlmann (CEO of The Tech Group, Scottsdale, AZ) began a cap and closure division during a down time. Walt Poulson’s philosophy was that a slow economy was the perfect time for a startup to enter the market with new or better products and take market share away from established firms who might be turtling to protect shareholder value. It worked for Poulson.

David Pedrotti, president of Modern Mold & Tool Co. (Charlotte, NC) found luck from another’s misfortune when he got the opportunity to purchase a 60,000-sq-ft building in Pittsfield, MA from the Berkshire Bank. The bank had repossessed it during the bankruptcy of PM&T, another mold shop.

This opportunity was a timely one, notes Pedrotti, as it gave the company room to expand. “Our molding business, Magnus Molding, which is a division of Modern, had been going flat out for the first quarter,” Pedrotti explains. Magnus operates 16 presses, 15 to 300 tons.

“Now that’s slowing down and moldmaking is coming on strong,” he continues. “It sort of balances itself out.” Modern Mold recently purchased a new CNC machining center and Mitsubishi wire EDM.

To keep up with growth in molding, Pedrotti is looking at purchasing some molding machines, which are used but have very little time on them—another benefit of the business slowdown in molding. “We’re anticipating some new projects being released with a lot of volume,” he says.

Prospecting Amidst Prosperity

Molder Evco Plastics didn’t let a down economy stop it. Evco built a $7.5 million, 69,000-sq-ft molding plant in Oshkosh, WI, giving it twice the space of its old plant, and also doubled the size of the company’s facility in Georgia. Dale Evans, president and CEO, says the company’s strategy has been to move in directions that go against the grain of what others do.Using the boom times to strategize pays off long term. For example, Evco’s ability to expand was a result of the company’s efforts to pay down debt during the good years. “When things were going down, we doubled the size of two plants and installed new electric machines,” he says. “Quite frankly, we got great deals on this stuff.”

The easiest time to get business is when nobody wants it, says Evans. “When things got very busy, we decided to go after long-term customers, those companies we knew would take us a while to get,” he explains. “Many companies want customers who can offer immediate business, often turning down a lot of business with long-term potential. We did a lot of prospecting when things were booming.”

Evans also says that some molding companies go after only the biggest customers, those that can offer the $1 million/year programs, which are often plentiful in boom times. The down side is that those are often the programs that fall the hardest when OEMs cut back in a slow economy.

Instead, Evco grew steadily by pursuing several $100,000/year accounts, which resulted in the company having a good year in 2002. Sales and profitability increased, and Evco added some new customers to its roster.

Staying diversified among markets and its customer base has always been an important strategy for Evco, whose business is split among consumer products, appliance, medical packaging, and industrial-automotive-power transmission products. Evans recognizes that, as a capital-intensive business, injection molding can’t weather the drastic ups and downs of business swings as easily as others. For that reason, diversification has meant Evco grows slower during the boom times. “But on the other hand,” says Evans, “we don’t come crashing down during the down times.”