A year before I joined a manufacturing organization the business learned that their largest customer (55% of their revenue) was going to begin to self-manufacture reducing their business over three years. The founder of the business hired a new CEO to manage the company through this transition. In the first year, they reduced their employee headcount from 80 to 50 in an effort to better orient their expenses. After a year, the CEO began to focus on growth. I was the first key executive that he added to his team. For the first two years, as the General Manager of a small division of the company, I turned it around from a break-even business to a 24% EBITDA business by growing the revenue by more than 50%, adding new products and right-sizing the sales and marketing organization.
During this 2-year time period, the market for their products shifted and a different approach was growing in the market that would make the products the company manufactured obsolete (declining over several years). Since I joined the company, they had been conducting an executive search for a VP of Bus Dev for the manufacturing business (the largest segment of their business). I expressed interest in this position and was promoted to this more significant role.
My first task was to assess the core competencies of the business and seek a diversification strategy that could lead to long-term growth opportunities. I conducted a 30-day assessment and researched various market opportunities before presenting my recommendations. I suggested that we pursue the diabetes market for our products. We had a core competency in hemoglobin as our core business focused on co-oximetry and how the blood (hemoglobin specifically) transfers oxygen and carbon dioxide through the body. Hemoglobin is the primary monitoring component for diabetes management so we were well-positioned to pursue this market. Our clients had other divisions that focused on diabetes but we had never focused on this segment of the In Vitro Diagnostics market.
I initiated an effort to enter this business and within one year we had our first significant client expressing interest in a new product developmental initiative. This new initiative built such quick credibility with the client, that they approached us to consider not only helping them with their new product but asked us to also consider the manufacture of their two other existing product lines currently serving the diabetes market. They eventually put their business out for bid competing with one of their own divisions for the business. They believed we were the best selection and paid a premium to work with us over their own organization. This led to many additional companies switching their production to us and within three years we were providing more than 70% of the world-wide supply for these products.
We launched more than 350 new products in a three-year period. The total revenue tripled from $6M to $18M while the OEM business increased from $4.4M to $15.7M. Most impressively we increased the EBITDA from $455K to $3.4M.
Oh, and did I mention that right in the middle of this we built a new facility and relocated the business triggering an automatic FDA audit that we passed without any findings. That is a story for another day.