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In 2006, pharmaceutical giant Schering-Plough closed its manufacturing facility in Manatí, Puerto Rico leaving hundreds of people unemployed, among them, Armando Semprit.
The plant closing was partly due to the 10-year phase-out of Section 936 of the Internal Revenue Code, which provided a tax credit against U.S. taxes imposed on income earned by a U.S. corporation on the island. Pharmaceutical companies originally came to Puerto Rico over 40 years ago to take advantage of Section 936, turning Puerto Rico into a worldwide pharmaceutical center that currently produces 16 of the top 20-selling drugs in the U.S.
Nevertheless, Schering was one of dozens of manufacturing plants that ceased operations in Puerto Rico over the last decade, and Semprit only one of thousands of individuals who lost their jobs. His six years of experience as a medical representative and his Master’s degree in Global Management overqualified him against countless of line employees looking for jobs amidst the worst recession this economy has ever seen.
But Semprit was well prepared to take a hit. At the age of 28 he enjoyed a good salary, and had put away quite a bit for a rainy day. In order to keep himself busy while another opportunity arose, Semprit applied for insurance and securities licenses and spent the next two years hitting the pavement looking for clients.
“Because of my savings, I only worked the field part-time,” Semprit says. “But within two years, most of those savings had depleted, and I started to feel unemployed.”
What helped Semprit put an end to his “unemployed” feeling was reading the newspaper. As he explains it, one of his strategies when seeking new clients was to read announcements companies were making about new products that were sure to reap great revenues.
“I would visit them and advise them on where to invest their earnings,” Semprit says.
It was while thumbing through the newspaper one day in March 2008 that Semprit came across and ad for a company that was selling machinery and equipment for people interested in federal contracting. This caught Semprit’s attention and he paid the company a visit simply to offer his services as an investment broker, and to see first-hand the company’s operations and the type of equipment it was selling. The company was Rebmar, Inc. dedicated to the manufacturing of military uniforms and accessories in Morovis, in the heart of Puerto Rico’s central mountainous region. All of its industrial sewing machines and equipment were for sale. Rebmar’s owner --based on the mainland-- was near retirement and looking to close operations on the island, since his children had no interest in running the company.
Reading the newspaper again the next morning, Semprit saw an article about a Business Matchmaking event the U.S. Small Business Administration’s Puerto Rico office was conducting later that week with the Puerto Rico Association of Engineers and Land Surveyors.
“I went to the event to meet people and network, and also to learn about the federal contracting process,” Semprit says. “I listened as presenters spoke about the great potential of the HUBZone program, of growth opportunities in Puerto Rico, and the federal government’s investment in contracting.”
Within a couple of weeks of attending the SBA’s Matchmaking event, Semprit had visited the Puerto Rico State Department to read up on Rebmar’s corporate certificates and financial statements, and later visited the company again, this time making an offer to purchase the machinery as an individual.
“I knew nothing about manufacturing,” Semprit admits. “But I had to either invest the money I had left in a profitable business or find myself another job quickly.”
It took about a week of negotiations, but Rebmar’s owner finally agreed on a selling price that was reasonable to Semprit. The young man was becoming an entrepreneur. He incorporated his new business as Noliar Inc., engaging in the manufacturing of apparel, bags, pouches, vests, and tent and gas mask accessories for military troops. He also obtained Rebmar’s list of clients, who let him know they needed someone to fulfill the contracts pending.
On April 4, 2008, Semprit began operations with five employees at Rebmar’s facilities, which were housed in a building of approximately 40,000 square feet owned by the Puerto Rico Industrial Development Company (PRIDCO). Soon after, Noliar completed the contracts that Rebmar had left pending, and also landed two subcontracts from a prime contractor that was manufacturing commercial products for the federal government.
Within a few months, however, PRIDCO informed Semprit that it needed the facilities for another company, and Semprit relocated his business to another PRIDCO-owned building in Morovis – this time 21,600 square feet big.
But a cash flow problem led Semprit to visit his bank to apply for a loan. It was then he learned of the U.S. Small Business Administration’s 7(a) Loan Guaranty program, which provides long-term financing to acquire equipment and machinery, inventory, fixtures and accessories, renovations, purchase land, build new buildings, purchase existing businesses, and for the repayment of debts. The SBA can guarantee up to 85 percent on loans up to $150,000 and up to 75 percent on loans higher than $150,000 up to $5 million.
Semprit attended an SBA orientation session and was referred to the Puerto Rico Small Business and Technology Development Center for training, counseling and technical assistance.
“Like a good student, I took the SBTDC course on how to start a small business and went to all my classes,” Semprit says. “Because of my college major, I had basic knowledge of how to prepare a business plan, but the SBTDC helped me polish it. I also learned how to do my bookkeeping, and although I hire an accountant to review the company’s books, I still do all the numbers myself.”
At that time Semprit ultimately didn’t get a loan, but he recently obtained an SBA-guaranteed line of credit from Banco Santander Puerto Rico that is helping him establish commercial credit experience. Noliar Inc. has invested in more sophisticated equipment to be more efficient, and has fulfilled contracts for the Defense Logistics Agency Troop Support, among others. In addition, the company is also working as a subcontractor for Propper International, in addition to having six other clients, and foresees closing the year 2012 with $1.5 million in revenues.
Noliar –who’s named after Semprit’s mother “Noli”—recently obtained certification under the SBA’s 8(a) Business Development program, which provides eligible socially and economically disadvantaged firms with growth opportunities through federal contracts.
Almost four years after that fateful day in March 2008, Semprit employs 28 people, a fact that brings optimism to a town like Morovis with an unemployment rate of 21 percent. Looking back at the road he’s taken and the challenges he’s faced as an entrepreneur, Semprit sees the glass as half-full.
“I’m still here,” Semprit declares. “I’m creating job opportunities for people who probably wouldn’t have had another option. I look forward to what’s to come.”
As a child, Yoel Rivera never imagined that one day he would be the owner of a successful one-of-a-kind business.
Like most, upon graduating high school he attended college; in his case the University of Puerto Rico’s Mayagüez Campus, acknowledged throughout the world for producing some of the best engineers.
Shortly after obtaining his degree in Industrial Engineering in 2002, Yoel began working with one of the largest pharmaceutical companies in the nation, developing standard operating procedures, and later maintenance plans. The validation aspect of a manufacturing process had always interested him, however, and he moved on to a company that provided this type of service to the pharmaceutical industry. Yoel began conducting validation services in the area of packaging, the final quality-control aspect any production line.
“I loved it,” Yoel says. “Due to market demands, packaging is constantly changing so that products continue appealing to the consumer.”
During the next few years, Yoel continued working in this field and identified that FDA packaging regulations had been included as a critical aspect of every consumer product, regardless of the market. Now, there were companies out there that performed validation in general for various industries, but none that was trained to specifically conduct the service in the pharmaceutical, medical device and biotechnology industries.
Based on this need, in 2005, the young entrepreneur decided to go out on his own and, together with a business partner, started a validation company from home, with two full-time employees. Ultimate Solutions Corporation was born. Soon after, the business was employing 13 people. In 2007, however, his business partner developed a cleaning product and left to pursue another venture.
Yoel maintained his 13 employees and continued working on the validation contract they were performing at that moment. After the project was completed, Yoel realized he couldn’t afford a staff of 13, and had to let five of his employees go.
The businessman then had the opportunity to personally become certified to conduct validation for Johnson & Johnson’s McNeil subsidiary, and he was subcontracted under Ultimate Solutions Corp., conducting validation services for the pharmaceutical company.
“Around 2008, I realized the economic scenario was becoming a little complex for the pharmaceutical industry, and I began exploring other business alternatives,” Yoel states.
Yoel ultimately found a different niche to fill, representing lines of high technology equipment, such as thermo-formers, transfer systems, scan-ware, case-packers, and high-speed troubleshooting cameras, among others. His clients ranged from the pharmaceutical companies he knew so well as Amgen, Johnson & Johnson, Pfizer and Warner Lambert, to others such as local brewery Cervecera de Puerto Rico, also known as the company that produces Medalla Light beer.
But being an entrepreneur and handling all administrative aspects of his business, while at the same time managing projects, was becoming a little tough to handle. That is when Yoel visited the Puerto Rico Small Business & Technology Development Center’s Caguas Regional Office.
The Puerto Rico SBTDC, administered by the Inter American University under cooperative agreement with the U.S. Small Business Administration, provides management and technical assistance to aspiring and potential entrepreneurs. Every year, thousands of men and women like Yoel visit an SBTDC office to get help with their business plans, marketing plans, viability and market studies and loan packaging, among many other services.
After listening to Yoel’s situation, SBTDC Regional Director Lorna Báez recommended he develop a team of talented professionals and move the business out of his home; she also helped introduce Yoel to the New Innovation and Incubation Center (INNOVA), in Caguas.
“I needed a business plan in order to be accepted, and within a period of three months Lorna had helped me accomplish that,” the entrepreneur indicates. “I presented it and was accepted into the incubator program immediately.”
Since then, Ultimate Solutions has grown to 28 employees and continues growing. The business provides services in the following areas: packaging regulatory documentation; packaging equipment and automation; industrial engineering in packaging lines; packaging training; and packaging outsourcing.
Ultimate Solutions currently operates out of a 225 square foot office, and Yoel is looking to rent a 1,500 square foot facility where he can accommodate the office and a workshop, and develop new packaging projects. Yoel is grateful to the PR-SBTDC and the New Innovation and Technological Small Business Incubator for the support they have provided.
“As individuals, we have certain limitations, so you definitely have to develop a team,” Yoel declares. “They [SBTDC and INNOVA] have helped me overcome that conflict, to understand that the human resource is the most valuable asset an entrepreneur can have. You also have to find a product or service that is viable and keep on defining it as time goes by as something that is unique and that customers will trust, and hire you so that you are useful to their operations.”
Recently, Yoel was selected as one of Caribbean Business’ “40 under 40” entrepreneurs to watch. Although this recognition has brought much satisfaction to the businessman, he is quick to point out that “to see a satisfied customer and to see my employees progress while my business progresses are my greatest satisfaction. When I pay the payroll, I feel like I am contributing to society.
For more information on SBA programs and services, visit www.sba.gov/pr.
American author Napoleon Hill once said that patience, persistence and perspiration make an unbeatable combination for success. Perhaps no other words have rung as true for businessperson Michael González.
Born in New Jersey to Puerto Rican parents, González arrived in Puerto Rico at the age of six, when his father was transferred to the island. As any other child, González was involved in many after-school activities, and expressed great interest in music and theater.
Ready for college in the early ‘70s, González chose the Carroll College at Waukesha, Wis. to pursue studies in Education, and after obtaining his bachelor’s degree, he went on to the University of Wisconsin-Milwaukee where he obtained his master’s degree in Cultural Foundations of Education. In 1979, he married his wife Dolores, who’s originally from Mexico, and a year later they moved to Puerto Rico, where González began teaching at a top-notch private school in San Juan.
In the meantime, his father was an independent representative of a stateside company called that was engaged in the distribution of medical equipment. In 1982, the elder González recruited his son to sell the products he represented. In 1988, however, the company realized it was encountering too many difficulties collecting bills from hospitals, and decided to leave the island, but not before offering González’ father the option of manufacturing their products locally. They entered a contract under which the company provided the production know-how, in exchange for annual royalties to the Gonzálezes.
But after the González family was all set with a loan approval and a commercial building in Vega Baja made available by the Puerto Rico Industrial Development Company (PRIDCO), the company decided not to go forward with their deal.
“We sued them, but the ruling was for an amount of money that was not enough for us to go forward with the business,” González says. “We probably should have left it at that, but all of us –my father, my brothers and I—decided we could take a stab at the manufacturing business without any help.”
Over the next five years the business suffered continuous losses, and the family closed and turned over the plant.
“I wouldn’t change anything,” González assures. “We received a doctorate in life. We were able to run the first manufacturing plant of surgical kits in Puerto Rico, employ over 40 people at one given time, and produce a high quality product.”
In 1994, his business experiences –the good and the bad— led González to establish Modern Tech Associates, engaged in the sale of remanufactured hospital equipment, such as X-ray machines and beds. In 2002, González hired his first employee and three years later he hired another salesperson. In 2009, the same year González hired his first secretary, Modern Tech Associates began catering to neighborhood pharmacies, selling automation equipment such as robotic pill dispensers and a more compact version of a robot they call “intelligent cabinet”. This business move led González to hire a technician in 2010 to service and repair equipment.
By the time Modern Tech Associates reached its 10th anniversary, another business opportunity had come up, and which would define Gonzalez’ future success as an entrepreneur.
While visiting a client one day, González was asked if he could provide service to TV rentals, since their biomedical division had closed, and it was usually those technicians who serviced the equipment. González was not very familiar with the TV market, but thought he would give it a try.
“It was a very innovative system, controlled by a company that does not provide service locally,” says González. “I traveled to the U.S., where the company trained me and offered that I represent the product in Puerto Rico.”
What made the system so innovative? It was controlled centrally by a computer and could be activated or de-activated at any given time, with no need for the patient to wait for the TV rental staff to make its rounds. The interactive communication system also has other capabilities besides TV programming, games and on-demand movies that are offered at no extra cost to the hospital.
The system enables prescribed patient education and real-time communication between patient and the healthcare team. A barcode scanner provides an extra measure of assurance that clinicians are giving the proper medication to the patient, and doctors can access and update electronic medical records at the bedside. The system also provides educational programming for hospital personnel, and for patients, as required by the Joint Commission and the Health Department. Upon his return to the island, González approached Auxilio Mutuo Hospital in San Juan and made his sales pitch.
“They told me they were involved in many projects at the time, but asked me to submit a proposal,” the businessman says.
And so González did. In 2002, with seven part-time employees, a full-time technician and his son Gabriel as supervisor, González founded Modern Techealth Alliance Corp.
The system would cost over $700,000, since it required having a small computer installed in each hospital room. González visited several banks looking for financing, but was turned down, until someone recommended he visit the Puerto Rico Small Business and Technology Development Center. Administered by the Inter American University under a cooperative agreement with the SBA, the PR SBTDC provides individual counseling, training and technical assistance to existing and potential entrepreneurs.
“At first the business counselor looked at us a little strange, but then she became interested in the project,” González recalls. “She visited our office and helped us put together a solid package. I owe a great part of this achievement to her.”
Soon after, Banco Santander de Puerto Rico awarded González with a $584,500 loan under the SBA’s 7(a) loan guaranty program, which provides long-term financing to acquire equipment and machinery, inventory, fixtures and accessories, renovations, purchase land, build new buildings, purchase existing businesses, and for the repayment of debts. The SBA can guarantee up to 85 percent on loans up to $150,000 and up to 75 percent on loans higher than $150,000 up to $5 million.
Auxilio Mutuo ultimately gave González the contract, which included the installation, operation and daily collection of TV rentals. Modern Techealth Alliance was in business, providing its initial service to Auxilio Mutuo on November 1, 2003 and with very good results, according to González.
Another opportunity for Modern Techealth arrived in 2006, when González obtained a contract with Doctors’ Center Hospital in Manatí. Once again, he approached Banco Santander, who approved another loan under SBA’s 7(a) program, this time in the amount of $475,000. This contract allowed González to hire five additional employees.
Eight years after its founding, Modern Techealth generates almost $1 million in annual revenues and employs 12 people, including González’ sons Joaquín, Gabriel and Juandiego.
“My wife Dolores and I are still married and have six children, and I consider raising and supporting my family with love and happiness to be my greatest success,” González says.
Modern Techealth provides technical support and service eight hours a day, five days a week, as well as support calls on weekends. González continues to run both his companies with the following philosophy.
“One piece of advice I always have for my children is to never give up,” González says. “If one door closes, try to enter another way, even if it’s through a window. There is no formula for success, but there is one important ingredient – persistence.”
For more information on SBA programs and services, please visit www.sba.gov/pr.