This Couple Bought A Cleaning Equipment Business For $535K And Grew It To $8.5M/Year
Hello! Who are you and what business did you start?
My name is Frank Pedeflous and my wife Sandy and I bought a small business named Ultrasonic Blind Cleaning Systems twenty-five years ago. The business originally manufactured hard window covering cleaning equipment and sold it as a business opportunity to new start-ups and retailers selling window coverings.
Within six months, we changed the name of the company to Omegasonics and began creating equipment to address industrial cleaning using water-based detergents instead of environmentally toxic solvents. The Montreal Protocol, signed in 1987 by the international community of nations, essentially began eliminating several solvents used in industrial cleaning due to their ozone-depleting effects. Our industrial ultrasonic equipment utilizes high-frequency sound waves to clean parts with soap and water which is better for the environment.
We initially developed products selling to Indy race car teams, then expanded to motorcycle repair companies, the U.S. military, the 3D printing industry, aerospace, semiconductors, and the PPE market to help combat high cancer rates in firefighters to name a few.
We bought the company originally for $535,000, and today our revenues are approximately $10,000,000 annually.
What's your backstory and how did you come up with the idea?
I have an electrical engineering degree from Cal Poly San Luis Obispo and had a keen interest in the business from my college days. Once I graduated, I took a job in sales engineering intending to go into a marketing position as my career advanced. After several company changes in the first fifteen years, it became apparent that I would never advance high within a Fortune 100 company without transferring from California. My wife was also a native Californian and had no interest in leaving the state, much less Los Angeles. This prompted me to look for a business to purchase centering around distribution or light manufacturing.
I spent months working with business brokers, visiting multiple companies until I found the business I ultimately purchased. We put our house up as collateral to secure an SBA loan and took every dollar we had, plus a $75,000 loan from my parents, and bought a profitable, but the very limited manufacturing company. Most of my business associates thought I was crazy to leave a solid six-figure job to go into a field I had absolutely no experience in. I thought I was crazy as well to take a fifty percent income reduction and mortgage our house on a big gamble.
My wife was a stay-at-home-mom, both of us in our early thirties, with two small children under the age of seven. I knew nothing about window treatments. I knew nothing about selling business opportunities. We were under-capitalized and started the business in their slow season. It was a very challenging start and we honestly could have been out of business before we were able to revamp the company and take it in its ultimate direction.
As a self-taught graphic artist, Sandy designed our original logo and helped create our initial marketing campaign for the business opportunity side of the company and eventually the industrial marketing campaigns. Our entire focus was capitalizing on the changing environment about the trend to a green planet. We even painted our initial machines green, and marketed them as “the green machine for a green planet”. I took some verbal abuse early on from potential clients calling me a “(insert bad word here) environmentalist”. I knew it was the future, I just wasn’t sure how to get there. This was still the mid 90’s and electric cars, global warming, etc. were not mainstream topics at the time.
Honestly, if I knew then how hard this would be for us financially the first ten years, I am not sure I would have ever taken the chance.
Take us through the process of designing, prototyping, and manufacturing your first product.
Product design starts with clients telling us about a problem cleaning project they have and we quote the application. If we secure the order, we build this unit as a custom design. We always get feedback from clients on custom designs so that we can make modifications if the particular style comes up again. Internally, we also get feedback from production on how to make the design easier to build.
If we see this same style or size machine sold a couple more times, we turn this formerly designed custom machine into a standard offering. Or if we see that a particular design meets a specific industry, we create this machine as a standard machine. We have over sixty standard designs, with several models taking on multiple product models with minor differences and names depending on the industry served. An example is our 5224UW sold to the disaster restoration industry under that trade name, industrial applications with the same trade name, Music Pro Plus for musical instrument cleaning, and FSE Pro Plus for the PPE market. Same tank and frame, but four different markets.
We use common components throughout manufacturing regardless of whether we have some higher costs for particular components. Ultimately we are looking to reduce material SKUs to garner better component costs to reduce cost, reduce purchasing requirements, and make troubleshooting easier. Our equipment is very reliable, to the point where I handle the troubleshooting calls which we use as a sales USP “our equipment is so reliable, the owner of the company personally handles you during downtime”.
We have a patent on our ultrasonic generator which we also white label for other Original Equipment Manufacturers known as OEMs. Our specialty is single and multi-batch ultrasonic cleaners, but we do not do robotics. We give these leads to our partner OEM’s that specialize in robotic automation and more complex systems.
Describe the process of launching the business.
Our launch was really more taking over the business and learning about the business which at the time was very simplistic, but not in our wheelhouse. The existing owners stayed on for under six months to get us up and rolling.
One of the first things we did was upgrade the internet site. This was 1996 so the internet was in its infancy, and websites were very simplistic at the time. We took the existing website and improved it - I think it was maybe ten pages at the time. Today our website is over seven hundred pages.
Control your expansion so that you stay in business. Most businesses fail because they run out of money. Most businesses fail because they try to do too many things, have too many income streams without being good at any one thing.
The main strategy for the first six months was to improve the marketing pieces and marketing message to make it more modern. Photos were upgraded to make the machinery look more exciting than it really looked. Our equipment is basically stainless steel boxes of various sizes, so they aren’t photogenic, to say the least.
The main thing I learned is that starting and creating a successful business is difficult and takes a tremendous amount of energy, vision with a few sprinkles of luck. Whatever you think it will cost, multiply that by a factor of three, and figure it will take twice as long to get there as you had hoped. In the early days, there will be absolutely no balance in your life.
Since launch, what has worked to attract and retain customers?
What put us on the map over time was our early adoption of the internet. We put large investments into our website, worked strategically at maximizing Search Engine Optimization (SEO), and spent money on pay-per-click (PPC) when our competitors didn’t. Most of our competitors were established, were slow to adapt to the internet, and we snuck upon them. It didn’t happen overnight.
Another marketing principle we adopted was to keep spending on advertising. Not all advertising works, but you have to try different things at different times to see what works for your industry. Trends do change, so something that works today, may not work tomorrow.
We used to do a tremendous amount of trade shows, today, very few. When you are in a growth mode, you may spend upwards of ten percent on marketing. As you become established, this can drop to five percent. That is why the early years can be lean on profit as you expand and grow your market share.
We never drop our advertising budget, regardless of the business climate. Most companies immediately drop their spending. While this does help short-term profitability, it impedes long-term growth. Every time there has been an economic downturn, we spend on advertising as if nothing has changed. Coming out of every recession, we’ve gained tremendous market share.
Look for solutions, not problems. Look for the opportunity, look for the positive, especially when things are not going well.
We’ve tried social media, trade shows, direct mail, email blasts, distribution sales, public relations, print ads, directory ads, and a few I’ve forgotten. The one consistent advertising we have done and continue to deliver is internet marketing - SEO and PPC. 60% of our business comes from the internet with the balance being repeat business and a small amount through distribution.
How are you doing today and what does the future look like?
Our company went from essentially being a startup in the industrial segment of our space to being the second-largest dollar manufacturer of ultrasonic equipment in the United States. In terms of units produced in the 12 gallons and higher range, we produce more equipment domestically than any competitor.
We have been profitable every year since inception, except in 2019 during that recession. Our gross margins are generally in the lower to mid forty percent range. Advertising percentage is five percent of gross revenue - three percent plus for internet advertising.
Our internet advertising is our biggest driver of revenue as stated previously and our unique weapon versus competitors. Our traffic is fifty-six percent organic, thirty-three percent paid with the eleven percent balance split between direct, social media, and backlinks. Currently, our bounce rate is at fifty-three percent and we have an estimated conversion of just slightly over five percent. Our average client spends one minute, fourteen seconds on our site.
We use the internet to bring in clients for equipment leads. We do not post any pricing of our equipment on our website and you cannot purchase equipment on our site. Occasionally we get negative feedback on this strategy, but it is rare. We sell an engineered product that needs to be properly matched for the application. Plus it gives our sales department a chance to interact with clients. During normal business hours, our sales staff will respond to “request for quotes” within fifteen minutes.
Detergents, filters, accessories, and spare parts are directly sold on our online store (we do not take orders for these items directly over the phone) - these of course have listed pricing. We have troubleshooting guides that ship with each machine and instruction manuals are also found on our website.
We control our growth in the range of five to fifteen percent per year so that we keep our profitability consistent. High growth takes more capital and stresses margins. We are in the cash cow portion of our business cycle due to my age and though we are constantly expanding our product line and markets, we are careful about what we take on.
Though our business is a good acquisition target with large growth potential, and I am at that mythical retirement age, I don’t plan to retire anytime soon. Cut back yes and I have already started the process by not going in on Fridays. Because the staff I’ve assembled over the years is so strong, I am afforded this flexibility. If you’ve worked hard your entire life for a purpose, there has to be a reason to get up in the morning or you’ll age quickly.
Through starting the business, have you learned anything particularly helpful or advantageous?
A famous saying in business is to hire slow, fire quickly. I haven’t always adhered to the second half of this with my higher-level staff. I’ve always known that seven months or more before I let someone go, they were no longer a good fit for a variety of reasons. You feel bad letting someone go because they depend on the income you pay them (again higher level, higher-paid). In the long run, those employees for the most part have come back and thanked me for letting them go as it improved their lives.
The best marketing decision was embracing the internet and never cutting back on advertising spending. The best decision was hiring a high-level employee fired by a competitor years ago that I couldn’t afford. That acquisition has more than doubled our business and put us where we are today. Subsequently letting that person go after four years was almost equally as good a decision. Hiring people to replace yourself is also a key - see potential in your people that they cannot see in themselves.
Hire smarter people than yourself, people that will argue with you and tell you, you are wrong, and don’t feel intimidated by their strengths. Give your employees all the credit and never try to hamper their financial growth. The more your employees make, the more money you will make. Hire competent business coaches to help you navigate because as business owners we operate in a vacuum.
There is a certain amount of luck involved in succeeding. They say the harder people work, the luckier they get. It is true - I have experienced this first hand. Lastly, follow the mantra of “bending reality” made mainstream by the biography on Steve Jobs. This can be done without being despised by your staff.
What platform/tools do you use for your business?
We run our business with Quickbooks. We aren’t big on social media. Our website is our strength and is considered the Wikipedia of our industry. Our site is a WooCommerce site, but again, this is ten percent of our revenues.
We had a CRM for years, but our sales team stopped using it. Hasn’t hurt us, but we need to implement a CRM going forward.
What have been the most influential books, podcasts, or other resources?
My number one book is Busting Loose from the Money Game by Robert Scheinfeld. This book is literally my operating bible. It’s pretty out there and I only recommend it to people who ask and whom I think are open enough to get it.
My number one movie is The Secret. I’ve watched it over one hundred times. Again, pretty out there for the mainstream.
And my number one influencer is Dr. Joe Dispenza who my wife turned us onto during the pandemic when our business took another huge leap in market share.
Advice for other entrepreneurs who want to get started or are just starting out?
My top tips are to read good business books, good marketing books and actually apply them. Go see smart people speak. Hang out with smart people. Expand your knowledge. Don’t watch the news - you will always think the world is crumbling. Look for solutions, not problems. Look for the opportunity, look for the positive, especially when things are not going well.
Control your expansion so that you stay in business. Most businesses fail because they run out of money. Most businesses fail because they try to do too many things, have too many income streams without being good at any one thing. Stay focused on your primary goal and make daily personal decisions to achieve that goal, then you can expand to the next thing. Know what your product is and how to make it profitable.
Are you looking to hire for certain positions right now?
The only jobs we are currently looking for are in the production side of the business.
We are looking for a mechanical drafting person with knowledge of Autocad Inventor.
Where can we go to learn more?
Our website is the best place to learn more about our technology, our story, our product line, and the markets we serve.
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