Newark, Del.-Based Production Firm Saves Delaware Jobs, Thriving International Export Business, and Manufacturing Sector Growth Potential, Thanks to SBA Financing
At its Newark, Delaware production facility, O’Connor Belting International crafts products that touch almost every aspect of modern life and every corner of the globe. O’Connor Belting produces European-style conveyor belting that sorts and packages product for customers worldwide, including household names as Kraft Foods; National Gypsum; and Tootsie Roll Industries (O’Connor Belting’s are the only conveyor belts used in its Junior Mints candy production).
Since first opening its doors in Delaware as a production facility 20 years ago, O’Connor Belting has built on its international roots to develop both a thriving stateside and international export business. In 1993, O’Connor Belting was opened by European manufacturer Fabreeka International under its own name and then joined the Holland-headquartered Derco BV corporate family in 2007. In 2011, O’Connor Belting International took its current form, following its purchase by its American plant manager, Paul O’Connor. Today, O’Connor Belting is the only east-coast-based producer of customized European-manufactured conveyor belting and the sole American distributor of sought-after Derco brand belting. From its convenient mid-Atlantic location, O’Connor Belting ships European-manufactured belting customized at its Delaware facility across the nation and around the globe with customer service support, shipping rates and efficiency unmatched by European-based competitors. Along with a thriving stateside customer base, O’Connor Belting now exports to customers in a host of foreign countries, including Brazil, Argentina, South Africa and Zimbabwe, as well as other African and Indonesian countries.
The Future Hangs in the Balance
But the business world is fickle and provides no guaranty of success, even for a promising, proven business like O’Connor Belting. Since launching O’Connor Belting for its then-owner, Fabreeka International, in 1993, the Delaware facility’s head, Paul O’Connor, has grown the business exponentially. By 2010, demand for the Delaware facility’s European-manufactured belting made the Delaware site a strong candidate to become a full-blown belting manufacturing facility with unlimited job growth potential. Nonetheless, in 2010, the Delaware facility’s future – including the jobs of the growing number of employees relying on the facility for their livelihoods – hung in the balance; a sell-off of the facility by its then owner, Derco BV, threatened to close the Delaware operation’s doors for good.
Saving the Delaware production facility’s cadre of jobs and bright future would take every ounce of business savvy, perseverance and resource available to its leadership. But, if anyone was up to the task, it was Paul O’Connor – a Delaware native, Vietnam War combat veteran, and former U.S. Army Special Forces Green Beret with nearly 30 years of belting industry experience. And, if any business resource was equipped to stand shoulder-to-shoulder with O’Connor to secure the business he had built, it was the U.S. Small Business Administration.
An Offer He Couldn’t Refuse
In 2010, Derco put the Delaware facility – its belting division – on the market for sale, seeking to exit the fabrication business entirely to focus purely on manufacturing. The realities of the conveyor belting industry meant that the Delaware facility would most likely be purchased by a big-business Derco competitor located far from Delaware, and the Delaware-based enterprise’s cutting-edge equipment and solid jobs would be moved out-of-state.
Without a local buyer, the Delaware facility’s fate was all but sealed.
Paul O’Connor knew all too well what was at stake when Derco’s management approached him with the offer of a lifetime. If O’Connor could muster a sufficient cash down payment, he could purchase Derco’s Delaware-based enterprise and continue the business in Delaware as the only U.S.-based Derco distributor. Closing this deal would secure the future for Paul O’Connor, his family, and the entire Delaware-based team, as well as preserving the facility’s potential to grow into a significant manufacturing facility, benefitting the entire region’s economy.
By 2010, Paul O’Connor had invested his entire career in the belting industry. Working his way from the shop floor to management, O’Connor knew every aspect of the business. There was no doubt that O’Connor’s career was built in in the belting industry, but, by the same measure, O’Connor had built his life in his native Delaware. Now, O’Connor had the opportunity to finish his career in his home state. And, as owner of the business, O’Connor could realize another dream – he could create his own family business. O’Connor’s two sons, Paul, Jr., and Eric, were already following in their father’s career footsteps, logging 17 and 5 years, respectively, building their own careers at the Delaware facility and moving from the shop floor and into management. As the Delaware facility’s owner, O’Connor could join with Paul, Jr., and Eric to shape the business into a legacy to pass to future generations.
Finally, if O’Connor could purchase the Newark enterprise, he could secure its jobs and its economic development potential here, in Delaware. Since opening the Delaware enterprise in 1993, O’Connor had built a trusted staff, many of whom had worked with him at previous employers and moved with him when he started Fabreeka’s Delaware operation. With O’Connor at the helm of the Delaware operation, the business could stay – and grow – in Delaware. Over a lifetime in the belting industry, O’Connor had built a full book of European-manufactured belting customers across the nation and around the world. As the only U.S.-based Derco distributor, O’Connor was confident that he could keep and build on that customer base, in turn, keep and grow his employee roster. With that anticipated incremental growth, O’Connor hoped to support the Delaware facility’s expansion into a full-blown manufacturing enterprise, with all of the revenue and job growth that that would entail.
But all of Paul O’Connor’s plans – along with the livelihoods of the entire Delaware facility staff – would hang in the balance until Paul O’Connor could put the financing in place to purchase the Delaware enterprise.
When Derco USA’s Delaware facility hit the market in 2010, the economy had hit rock bottom, and, with it, most small business’ commercial financing prospects. But Paul O’Connor was not “most small business people,” and his Delaware operation was not “most small businesses.” By 2010, O’Connor had an established relationship with SBA lender Wells Fargo, and Wells Principal Relationship Manager Shawn Heller understood the true value of O’Connor’s proposed purchase of Derco’s Delaware facility, beyond Wells Fargo’s own return-on-investment interest. O’Connor’s purchase of the Delaware facility would mean everything to the facility’s employees – their very livelihoods hung in the balance. And, by that measure, the purchase could mean everything to an entire recession-battered region, starved for the job creation promise of a facility like O’Connor Belting, poised to develop into a significant manufacturing facility if allowed to grow. And, when the crushing realities of the greatest economic recession since the Great Depression made putting together a financing package to make that purchase a reality seem impossible, Heller understood the power of Well Fargo’s lending partner, the SBA.
Through its flagship financing program, the 7(a) Loan Guaranty Program, SBA makes it easier for participating lenders like Wells Fargo to make small business loans, even in a strained economy. By guaranteeing the lender that SBA will repay 75-85% of the loan amount should the borrower default, SBA empowers lenders to provide qualifying entrepreneurs secure financing on reasonable terms.
So, undaunted by the challenge of a still-recovering economy, Heller recruited Wells Fargo’s SBA lending department to back the financing that O’Connor needed to purchase the Delaware production facility. Soon after Wells Fargo brought the SBA team headed by Andrew Eshleman, its Vice President of SBA Business Development, to the table, O’Connor was approved for the loan, settlement was complete, and O’Connor Belting International was born. Financing in hand, O’Connor could finally turn the page on the future – for himself, his entire cadre of employees, and for a region eager to see what tomorrow brings for this manufacturer-in-the-making.
To learn more about SBA small business assistance, like the SBA-backed financing that O’Connor Belting secured through Wells Fargo, visit http://www.sba.gov.
Steadily building their Wilmington-based printing business—The Mercantile Press— over a period spanning three centuries, the Bye family weathered its share of business unpredictability. But, by the 1960’s, The Mercantile Press had proven it was “here to stay,” running two shifts daily and providing its full stable of employees with living wages, full benefits, and steady work in a well-respected trade. The firm had proven its mettle and reached its all-time growth peak just in time to face the industry-wrenching challenges of the coming decades.
The advent of the internet and increased competition from cut-rate overseas commercial printing operations would bring the American commercial printing industry to its knees, mercilessly thinning its ranks as once-reliable customers all but evaporated, favoring online communication or cheaper foreign labor over stateside traditional print shops. Surviving commercial printers were competing for an ever-shrinking customer base, and profitability in this harsh new business landscape required new perspectives and new strategies. For The Mercantile Press, one of the few Delaware-based commercial printers to survive into this new era, that meant forging a new partnership – a partnership with SCORE Delaware. Together with SCORE – an SBA-backed small business advisement organization – Mercantile Press President Coleman Bye, III, identified new markets prime for his firm’s services and tailored his print shop to land that lucrative business, firmly reclaiming control over the firm’s future.
From Humble Beginnings
In 1871, Mercantile Press’ founder Harry Bye, broke into the printing business at the age of 12 when he invested $7.00 in a crude printing outfit and began publishing a monthly paper called “Youth’s Banner” with a subscription price of $0.10 per year. Thirteen years later, in 1884, Harry and his brother, Elmer, purchased some used printing equipment and founded The Mercantile Press in the city of Wilmington, Delaware.
Over the ensuing generations, The Mercantile Press built a strong customer base deeply rooted in the agricultural, chemical and pharmaceutical industries that grew to dominate Delaware’s economy. The Mercantile Press was thriving, growing into a two-shift operation and employing nearly 50 skilled print tradesmen.
A Whole New World
But by December 2001, when The Mercantile Press’ current President, Coleman E. Bye, III (“Corky”), took the business’ helm, everything had changed. Six months before, one of The Mercantile Press’ largest customers had moved its manufacturing overseas, taking with it more than 20% of the firm’s annual sales. Undaunted, the company re-tooled, adding the political direct mail business to its roster of client industries and stabilizing its bottom line.
Until the Great Recession of 2008 dealt the entire commercial printing industry a devastating blow.
The Eye of the Storm
By the end of 2009, The Mercantile Press’ sales had fallen 29% compared to the previous year. While better than the printing industry average decline of 33%, these sales figures cast a shadow of uncertainty on the company’s future. Surviving this crisis would take leadership, innovation, and a healthy dose of business savvy.
With SCORE’s help, Coleman and his Mercantile Press team were up to the challenge.
The Road to Recovery
By 2010, Coleman had his company on the recovery track. In 2009, he landed a promising federal government purchasing agreement, paving the way for a new and lucrative business stream. That year, Coleman’s new market growth strategy expanded as he identified the label market as having great potential and approached SCORE Delaware to help him develop a business plan to tap into it.
Together with his SCORE Delaware counselor, Robert O’Brien, Coleman drafted a Strategic Business Plan, along with a Business Case that would guide The Mercantile Press’ way to recovery. The company’s new plan re-focused its business strategy on new markets innately insulated from the online and overseas outsourcing trends seducing Mercantile’s traditional customer base. The new plan provided a step-by-step roadmap to sustainable growth, and it wasn’t long before a new trickle of customers had grown into a healthy stream.
Thanks to the vision and perseverance of its President, Coleman Bye, and some strategic perspective from SCORE Delaware, The Mercantile Press had reclaimed its future and was, once again, “here to stay.”
Today, The Mercantile Press is the oldest printing company in the State of Delaware. The company is a full-service print communications company specializing in product labeling, direct mail printing and packaging.
From Humble Beginnings…
Delaware’s 2012 SBA Small Business Person of the Year
First State Manufacturing owners Eli Valenzuela, Sher Valenzuela, and Ashley Wolfe have been selected as the U.S. Small Business Administration’s Delaware Small Business Persons of the Year. This is the story of the genesis and growth of their business.
It began in 1998 with a man, a woman, a sewing machine, and a dream in a Milford, Delaware garage. A humble beginning that today has become First State Manufacturing (FSM), a thriving business employing more than 40 technicians working in a new 66,000 sq. ft. facility funded by a $650,000 Small Business Administration (SBA) 504 loan.
As an Army communications technician, Eli Valenzuela took a correspondence course on upholstery while serving with the Second Armored Division in Germany. Little did he know that the course would lead to a second career and ownership of a multi-million dollar business. After his military service, Valenzuela returned to Texas and first worked in civil service upholstering military aircraft and later moved to Delaware, where he secured a position at Dover Air Force Base upholstering the C-5 Galaxy, one of the largest aircraft in the world and the largest airlifter in the Air Force inventory.
Oftentimes, as he discussed his work day with his wife Sher, he would think out loud about how much American taxpayers paid for upholstery work contracted out for the C-5, specifically how he knew ways to provide a better product at a better price. Together the husband and wife decided that they should start a business to do just that.
With help from SBA resource partners SCORE and the Small Business Technology and Development Center the Valenzuelas composed a business plan and opened First State Manufacturing in their garage with an old but reliable sewing machine named “Betsy.” Rapidly outgrowing the garage, they secured financing through a SBA $20,000 Express loan and leased space in a 2,000 sq. ft. warehouse.
Providing higher quality at lower costs led to rapid growth and with assistance from their local Procurement Technical Assistance Center (PTAC) they secured more and larger contracts. Earning an SBA 8(a) certification enabled FSM to leverage a number of long-term contracts from 2000 to 2009 as the business expanded to include military and commercial contracts across the country.
Mr. Valenzuela, president, is known for his ability to create, design and manufacture textile products to meet a commercial or defense customer’s exacting specifications and has led FSM to more than $10 million in government contracts. Ms. Valenzuela has significant experience in public relations and marketing campaigns for FSM and a variety of Fortune 500 companies. The important addition of Ashley Wolfe to the ownership and management team brought a different area of expertise to the business as executive director. Wolfe contributes his 30-year background in manufacturing and production with an emphasis on efficiency and innovation. Together the three principals have developed a strong management team with a workforce that produces and delivers quality products while providing above-average wages to more than 43 employees.
By 2001 FSM was ready to grow again, with a $96,500 SBA backed 7(a) loan to modernize and expand their inventory, with recurring business from national restaurant and hotel chains. Their reputation grew for quality, cost effectiveness and innovation. Through extensive testing with Chili’s restaurant chain, FSM developed a trademarked seating product, Speedy Cushion, made with environmentally-friendly cushion foam and a “green” maintenance protectant that reduces fading from the sun.
The 9/11 tragedy brought a massive downturn in business to FSM and challenged their very existence. Once again FSM turned to SBA for assistance, with a $65,800 SBA Disaster loan they were able to maintain their business and employees until revenues returned.
The heart of FSM’s business lies in unique, customized, military aircraft solutions. FSM has consistently demonstrated its ability to provide quality, durable products to meet customized solutions. A small sampling of innovative products FSM provides and awards won include:
- FSM was chosen by the US Air Force to participate in a joint venture to standardize manufacture and installation of all C-5 insulation due to its innovation and knowledge of C-5 Galaxy fuselage insulation characteristics.
- During reengineering of the V-22 Osprey aircraft, FSM provided custom-made fabric oil plugs and engine covers needed for the tilt-wing aircraft to remediate several issues including durability, safety, storage ease, and timely installation.
- FSM developed a customized watertight cover, now in use throughout the military, for the Joint Air to Surface Standoff Missile (JASSM).
- Recipient of the Lockheed Martin Small Business of the Year award in for superior quality and early completion of work.
- SBA Minority Small Business Person of the Year for Delaware and Region Three.
- U.S. Defense Logistics Agency Vendor of Excellence for Small Disadvantaged Businesses.
- Named by Delaware Today as one of the “Best Places to Work” in Delaware.
Using virtually every SBA program and resource partner available, FSM reached out to the state of Delaware’s resources as well. With funding from the Delaware Economic Development Office they trained staff to receive AS9100 Quality Certification, which allowed FSM to secure contracts for the commercial equivalent of the military aircraft it supported, such as the Boeing 737, in need of insulation and upholstery. FSM also worked with the Delaware Manufacturing Extension Partnership to improve processes and efficiency and after receiving support from the Delaware Workforce Investment Board, FSM’s owners now serve on their executive board.
Through good economic conditions and bad FSM has a history of growth and job creation. From two employees in 1998 to 43 employees in 2011, FSM has continued its growth while many companies were reducing staff. With the recent expansion of facilities, employment is forecasted to continue to increase steadily over the next three years.
Revenue growth over the last four years has more than doubled. FSM’s revenue growth has been generated through the expansion of its sales from primarily local markets to national markets, national chains, government contracting, and international markets. Consistent with the growth in revenues, FSM has also demonstrated growth in profitability. Profits declined during the recession and due to increased occupancy costs, personnel and administrative expenses absorbed while transitioning to the plant’s new facility. However, throughout the first six months of 2011, FSM reported net income that placed them on track to double their pre-recession profits.
FSM’s owners actively give back to their local community and the state:
- Supports Junior Achievement expansion in Delaware: FSM speaks to and supports area students to broaden their perspective of career and entrepreneurial paths, and donated 13,000 sq. ft. to establish a Junior Achievement campus.
- Partners with City of Milford and State of Delaware (Department of Labor) to establish “First State Moves the Nation,” a Small Business Manufacturing Accelerator, and donated 15,000 sq. ft. of space to establish a non-profit virtual center to guide manufacturers to state and federal resources.
- Serves as executive board member of Delaware Workforce Investment Board
- Received First Place in “Megabizfest,” SBA-supported Business Plan competition for GrowUSA, a line of information products that enables small businesses to succeed through leveraging of small business state and federal resources.
- Co-creators with State of Delaware: first Governor’s Entrepreneurial Business Conference in 2009.
- Monthly financial supporter of local family-oriented radio station and orphanages throughout Africa, India and the Philippines to provide basic necessities and advanced education degrees to children who would not otherwise succeed.
- Provides free sewing and upholstery classes to the local community.
- Chair, City of Milford Economic Development Panel.
First State Manufacturing, Inc. is a financially sound small business that has demonstrated consistent growth and sustainable employment in a highly competitive field and difficult economy. Through the creative use of resources, technical knowledge, experience, thorough understanding of Delaware and national markets, FSM has competed successfully, won competitive projects against significantly larger firms and established its niche as a premier provider of textile manufacturing products.
FSM was built on the concept of doing more than what is required. When asked where that extra effort originated Valenzuela said, “As a second generation Mexican-American, I grew up very poor in the projects of Corpus Christi, Texas. My father told me “Eli, never be like a wheel barrow… it only goes as far as you push it.” This instilled the belief that hard work is rewarded and that hard work would be his only path to success – clearly expressed in FSM’s moniker and business practice: “AND THEN SOME.” From humble beginnings and hard work, great things can come.
The 2012 observance of National Small Business Week is May 20-22 in Washington, D.C. where more than 100 outstanding small business owners from around the country will be honored and the National Small Business Person of the Year will be announced.
The Delaware District Office’s Small Business Week event, to be held at The Executive Banquet and Conference Center at 205 Executive Drive, Newark, Delaware on Monday, May 14th, will honor Delaware’s Small Business Persons of the Year along with seven other business and business champion award winners. Additionally, seven lenders will be recognized for their support of small businesses in Delaware by making loans for business startup and expansion. Nominations for all of the awards were accepted last fall, and winners were selected by an independent panel of judges. Contact Jim Provo at (302) 573-6294 x227 for more information.