A Bit of a Stretch

9 Dec

About this time, Reg M., a friend of mine, (the professional cabinetmaker that had donated the construction of the service counter for Harley’s) asked me if I would work with him to build up a new venture he was planning. He had purchased a used CAT scan machine (don’t ask me how or why he ever made the cross-over from carpenter to Clinic operator…he’s never been able to explain it, either!), and wanted to rent a location, build it out, and hire a doctor and a technician to offer CAT scan services to area physicians.

Some market research indicated that there was, indeed, a shortage of such services available in the area, so we selected an area that seemed to be between two large populated areas, and found an appropriate building in a strip mall. We also decided that the offering needed to include other associated services, so we bought a couple of X-ray machines and an ultrasound, as well. Then, with very little assistance, we turned a 3,000 square foot shell into a very nicely outfitted clinic, with reception and waiting area, restrooms, darkroom, ultrasound room, office/examination room, CAT scan room and X-ray room. Both of these had to include the necessary lead shielding, and carry the blessing of a federally certified inspector. We did all this downstairs, while building the second floor foundation for the future addition of more examination rooms.

It took us about three months to finish the clinic, and get the equipment installed and on-line. We were both very pleased with the way it turned out.

About this time, I received a call from Mark E., who had been president of the company I had most recently departed, up in Orange County. He asked me if I would be willing to undertake a brief fact-finding mission for him, at an eastern Mexico plant his new company operated there. He explained that they were experiencing serious technical difficulties in the manufacturing processes, and he needed to know if the problem was in the equipment, or the people. We settled on a fee, and I left on what was supposed to be a one or two week venture.

A week later, I made my initial report to Mark, and he asked me if I would be willing to stay a while, and implement my recommendations. I agreed, and so began what would end up being a six month project, with bi-weekly trips home, to see my family.

We successfully established the necessary processes and controls at the Nuevo Laredo plant, and productivity was steadily improving. However, apparently there had been a concurrent study, back in the corporate offices, to determine whether they might “farm out” the production to a Chinese manufacturer, and improve their profits. About a year after I returned home, I heard they had begun the process of shutting down the Mexican operation, in favor of outsourcing to China. I saw this as very unfortunate, as they had some very capable and dedicated people running the show in Nuevo Laredo, and I think they forfeited more than they know, by outsourcing over three hundred million dollars a year to another country’s economy.

As I was wrapping up my tasks in Nuevo Laredo, Reg M. contacted me by phone, and asked me to undertake another project for him. He wanted to relocate his 35 year old cabinet shop, from north San Diego County, to Tijuana, in order to get a leg up on the competition.

We discussed the necessary steps in such a project, and agreed upon a time-frame, and I began the formation of US and Mexican corporations. By the time I returned from Nuevo Laredo, Reg was eager to get started, and asked me if I would join him, managing the operational side for him. We agreed upon terms, and I set about acquiring the necessary licenses and permits. Meanwhile, Reg started looking at buildings, and after a couple of false starts, we settled upon one, and began the necessary modifications.

During the transition period, we knew that we would lose some productivity, but at the same time, the owner of the property where Reg’s San Diego operation rented, decided to relocate, and sell the property to finance the construction at his new site. He served Reg with notice to vacate, when we were still a couple of months from being ready in Tijuana. We stepped up our building modifications, but little can be done to move various government entities along faster, if they’re not so inclined. We ended up losing seven months of operation, and by the time we were able to start up again, many of Reg’s established clients had already had to find other sources.

We began the tedious marketing effort of introducing ourselves to general contractors and architects, some of whom had heard of Reg’s work, but many that had not. This process was made somewhat more difficult by the fact that the name of the new US corporation was different that the previous operation’s, so some name recognition was lost. It took nearly six months to get the operation to the point of self-supporting, and after a year and a half, Reg and his partner, Rafael, are still unable to take a regular salary.

Some months into the operation, I agreed to a temporary 25% deferral of my salary, and to date, I am owed over $80K in back wages. All three of us had to make major sacrifices, in order to give the business an opportunity to succeed – Rafael lost his second home, and is currently losing his primary. Reg is months behind in his rent, and I have expended everything we had saved, from the sale of our second home, as well as the inheritance I received from my mother’s passing.

I think it’s important to note here, how important it is to such a venture, that the parties have the support of their spouses. I know that Rafael’s wife makes a good salary, so they haven’t gone hungry. Nevertheless, they have lost a significant piece of their financial plan for their retirement. I am in a similar situation, to a lesser degree, having lost over a hundred thousand dollars to date, in support of a venture that I have no ownership in. I cannot comment on Reg’s personal financial situation, but I do know that he, too, has suffered, financially and emotionally.

I can only speak for myself, when I say what a difference it has made, that my wife has been willing to support me in this. At one point, I wanted to offer the business a cash loan, which she was adamantly against. That was fortunate, because as it turned out, we ended up needing that cash ourselves to meet our personal financial obligations. Yet, she has never uttered a single reproach, for having put us in this situation. She makes do, with whatever I am able to bring in, and the support never ceases. I am very lucky in that regard, and I think it has formed a very important part of our relationship. Anyone in our position must recognize the value of such support.


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