The small mom-and-pop type shops that pepper the Canadian cabling and telecom landscape can have a hard time competing with the big guys. But hard does not mean "impossible", and many of these businesses have found ways to stay alive -- and even flourish -- against all odds.
September 1, 2001
The banks would be glad to talk to Nasir Wazir now — but he doesn’t care to talk to them. When Wazir launched New World Telecom in 1991, he was looking for financing. “We got the cold shoulder because we were just starting out,” he recalls. “Nobody was there to help us.” So Wazir built the Mississauga, Ontario-based company, of which he is now president, by selling telecom accessories wherever he could — including at flea markets and by knocking on wholesalers’ doors.
With eight years of experience in the telecom industry behind him, Wazir had contacts and knowledge that helped. The early days were tough nonetheless. “We were even making our own invoices at first,” he recalls.
Wazir did what was necessary to bring in revenue, but New World’s goal was to design telecom components. Its first product was a jack for Category 5 cabling, followed by a patch panel. New World is still small, with just four employees, but it has products bearing its own brand name and cash in the bank. Now Wazir gets calls from banks seeking his business, but he doesn’t want to borrow from them.
GETTING OFF THE GROUND
Ask the founders of most small cabling manufacturers and distributors about the trials of launching your own company, and they will mention financing.
Nigel Arnold launched International Networking Systems (INS), a Toronto based cabling assembly manufacturer and distributor, in 1989. “The environment was right, in that there weren’t too many competitors,” he recalls, “but when it came to financing the business, to get it off the ground, it was very difficult.” Arnold found banks just didn’t understand the cabling business. He turned instead to the federal government, which provided a $15,000 new venture loan, and to a government-backed incubator program that provided his firm with 1,000 square feet of office space in a converted warehouse and access to support services for its first year of existence.
Andre Danford, president of Datcom in Toronto, says no bank would touch him when he launched the company in 1989. It was sometimes frightening for Danford, who had left a steady job to start the business. “You’ve got to be brave,” he says. But he maintains he never thought of giving up, probably because he grew up in a family of business owners. “My mother and dad always had their own business, and it was a mission of mine.”
For True North Technology Inc. in Mississauga, ON, the challenge was pioneering the role of manufacturer’s representative, which was unfamiliar to wire and cable manufacturers in Canada when the company started in 1986.
Marvin Strauch, VP of True North, describes his company as “a sales force for hire.” Initially True North represented electrical components, a line of business the company has since spun off as True North Electronics. As it moved into wire and cable, where manufacturers’ reps typically had not been used in the past, Strauch says, True North had to overcome some suppliers’ concerns about using a representative instead of their own sales forces.
At first, Strauch says, True North took on whatever business it could get, which often meant representing little-known brands. “You certainly have to have a lot of stick-to-it-iveness,” he says now.
ESTABLISHING AN IDENTITY
The biggest problem small distributors face is that they often lack the purchasing clout to get the best deals from suppliers.
INS executives realized early that they would get nowhere by going head to head with big distributors. “A company of our size simply could not sustain” pricing wars with larger companies, says Nick Triggiani, the company’s general manager. So, “we had to carve out our own identity.” One thing that helps define that identity is a diverse product line — for instance, 12 different colours of Category 5 cable.
INS also set up a full-service tool rental service for the contractors it supplies. And a few years ago the company introduced a plan whereby contractors who wanted to get into fiber, but were uncertain about their expertise, could pull the fiber themselves but have INS terminate it for them.
Extras like this help the company avoid getting into price wars with bigger competitors that it simply can’t win. Nonetheless, Arnold says the “really good” margins that were once possible are becoming harder to obtain. So INS is buying more from offshore companies. “We have to go directly to source, which is really China at this point, and purchase directly from them.”
Hall Telecommunications in Guelph, ON has put together a broad selection of consumer telecom products for people with special needs, such as hearing problems and visual impairment. While all these products are available elsewhere, says Don Beam, president of Hall, no one competitor offers the full suite. These products are the smallest part of Hall’s business — which also includes premises and outside-line gear — but also the fastest growing.
Beam finds it frustrating that small distributors like 25-employee Hall Telecommunications often do the work of developing an account, and then a big order goes out for tender. Bigger distributors compete for the business, Beam complains, and “we immediately have between an eight- and a 15-per-cent pricing disadvantage.” People may talk about value-added, says Beam, but in many cases the business goes to whoever offers the lowest price.
Sometimes the backing of a larger company provides the shot in the arm that a small venture needs in order to grow. CableTalk Systems Inc. of Brampton, ON was a small distributor of cable assemblies when the Bempro group of companies bought it in 1992. After becoming part of a corporate family that includes BMP Metals and BMP Electronics, CableTalk launched its own line of cabinets, racks and cable management products. Now CableTalk has about 54 employees and offices in Toronto, Montreal, Baltimore and Greensboro, NC, and is negotiating for facilities in Calgary.
“We enjoy the fact that we are owned by a much larger company,” says Colin Padley, CableTalk’s sales manager. CableTalk hasn’t chalked up annual growth of less than 38 per cent in any year since the acquisition, and last year the company recorded a 61-per-cent sales growth.
Money becomes less of a problem as a company grows, but there are still times when a small, privately-held firm is at a disadvantage. The bigger you already are, the easier it becomes to get bigger by acquiring other companies, for instance. “If we wanted to go and do a big acquisition,” access to capital might be a problem, admits Heather Gerrie, president of Oakville, Ontario-based Gerrie Electric Wholesale Ltd. The company is a distributor of electrical, factory-floor automation and data communications technology that her father Ken founded in 1957. In normal circumstances, though, the 200-employee company doesn’t find financing a problem.
There are good things about being a small company too. Owners and bosses of smaller firms that we talked to are virtually unanimous about the biggest plus: flexibility.
“We don’t have to go through layers of management,” Strauch says, and that means decisions can be made faster than in big organizations. “I’ve worked for a large company,” he adds, “so I know what it’s like.”
By contrast, “we can make a decision in the morning and start implementing it in the afternoon,” says Gerrie. And Beam at Hall Telecommunications says small companies can offer better customer service. In big companies, the 22-year IBM veteran says, “people on the front lines don’t understand what the company wants them to do.”
Arnold says INS fills many rush orders for contractors who have thought through the large-volume, commodity materials they need but who have left custom items to the last minute. Larger distributors simply will not bend over backwards to fill those orders quickly, he says, but his company will. For staff that can mean long hours and taking work home, but it also means loyal customers. “The good thing about it,” he says, “is if you can do it, they will remain your customers.”
There’s something about a
family-owned firm, too. Gerrie says many employees have known her and her sister Elaine — now chief operating officer — since they were children. Her father Ken, the founder, remains chairman and chief executive. And the Gerrie family is not the only one in the company; Gerrie Electric likes to have several members of a family as employees. For instance, three brothers have all worked at Gerrie for about 20 years.
Precor Fiber Optics is another family-owned concern. Bob Priestman is president of the Concord, Ontario-based distributor, which has about 35 employees. His wife Gail works in the business, as do his son Andy and Andy’s aunt Barb. Andy Priestman, a project manager, says it’s “very possible” that some of the next generation will join the family business as well.
Priestman says being a privately-owned firm means not having to worry about keeping investors happy quarter by quarter. “Your finances aren’t necessarily dictated by the public,” he says. That’s true even if the company is larger. Siemon Co., of Watertown, CT has grown to annual revenues of around $200 million, but is still owned by the Siemon family. “Long range planning is easier,” says Carl Siemon, the current president, “because there’s not the quarter-to-quarter pressure that public companies are subject to.” And Siemon adds that private firms typically have fewer layers of management than public ones, which makes decision-making quicker.
That doesn’t mean it is always easy. Danford says Datcom has had to cut jobs in the past few months thanks to a weak economy. Beam recalls that Hall Telecommunications was once the largest Mitel Corp. distributor in Canada, until Mitel decided some 14 years ago to stop using distributors and Hall went through a painful adjustment. Today, he says, customers take longer to pay, but creditors still want their money on time.
Whatever advantages these small companies have, they need them.CS
Grant Buckler has written about information technology and telecommunications since 1980. He is now a freelance writer and editor living in Kingston, ON.