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Fabricating a business Featured

6:29am EDT February 24, 2005
The former owners of Akorat Metal Fabricators had retired and were sunning themselves in Arizona, enjoying the monthly checks from the new owner. Then, one month, no check arrived.

It wasn't too much of a worry; the metal fabrication business had its up and down cycles like any industry. But when one month stretched into several, and phone calls went unreturned, the pair returned to Chicago to find the operation closed down.

"Basically, the business was shut down," says John J. Dombek, owner of JJD Industries Inc., the umbrella corporation under which he owns five companies. "Whoever bought it from them couldn't make a go of it for whatever reason. (The owners) came back and brought back a few of their customers."

They then put the business up for sale again.

"My father actually saw it in the (Chicago) Tribune and said, 'I looked at this business a few years ago, and it might be something you're interested in.' That's how I got started."

Single and just 27 years old at the time, the man who had been a consultant at Peat Marwick (now KPMG), bought Akorat Metal Fabricators, which has since been rolled into Dombek's Smithco Metal Fabricating. Now 41 years old, Dombek owns five enterprises in and around Chicago under the umbrella of JJD Industries Inc., and he is looking to expand his offerings.

"I went into consulting because I wanted to look at a variety of different businesses to get a broader-based background," he says. "I always wanted my own business. (This opportunity) came along at the right time. The longer you stay in the world of consulting sometimes, the tougher it is to actually leave.

"You don't make a lot when you start off in your own business. It's tough to give up that income. I was single at the time, so I had a big advantage. If you're married with kids, going into a business with one employee is a big commitment."

Smart Business spoke with Dombek, a 2003 regional finalist in Ernst & Young's Entrepreneur Of The Year awards, to learn how he turned a small metal fabricator with one employee into a $70 million enterprise.

Did Akorat's troubled history concern you?

No, I figured it was a platform to build off of. The former owners and I got some of the customers back. Then I went out and bought a laser.

There weren't a lot of them around at the time. That opened a few more doors. It already had some form of structure in place -- customers and accounting systems -- no matter how basic they are.

Has your goal always been to be a one-stop shop or did that plan evolve?

It's been a little bit of both. The goal has always been to have businesses that can meet a variety of customers' needs. I've diversified from what I was planning when I started.

I was looking more for the metal products side, with maybe some electrical assembly along with that. We've gone more into some of the plastics. The basic plan was there. The details are being developed as time goes on.

What drives those changes?

I view manufacturing as a service business. I know that's the wrong terminology for it, but it really is. To differentiate yourself -- it's really the level of service and quality you can provide -- especially with the off-shore competition.

I never want to compete strictly on price. We (earned) a number of vendor awards because we really focus on trying to service the customers.

What makes a company attractive as an acquisition?

A couple of things, and they don't all have to exist on every deal. The first thing we're looking for is, does it advance us in the marketplace a little bit? Can it help serve some needs, or does it tie in to what we already do? Does it make sense financially? And then there is the intangible side, which is, is it a good business or not?

Just because they have sales volume doesn't mean they're in a position where they can make money. That doesn't necessarily stop you, but going into a deal, you have to know you've got to replace a lot of their existing structure. Some businesses we buy just to pick up the volume and move it in.

It's a whole variety of things. I guess the first thing you look at is, can you make money at the business. The second thing, is it a business you want to do.

Have you made troubled companies a specialty?

We feel that's one of our strengths. Because of the size of the businesses that we target, there isn't a huge (number) of people targeting businesses that size, at least around Chicago. We had some pretty good success doing that. As we get some of those foreclosures, then other business deals make sense fitting in with them.

I feel we've got a real strength to go in and identify what are the real key drivers to the business and how can we address those between personnel and equipment. We take, maybe, a little different approach to turnarounds.

There's the typical financial aspect, but we're looking at it in terms of driving the business forward. What are the core strengths, and how can we bring those to the marketplace? Turnarounds are all different; they all have a life of their own, but you usually can get the assets at a pretty good price.

Then it's just how much additional funding and resources are going to have to be put into the business to get it going again.

Is it a challenge to meld the business cultures?

Some businesses we've taken over we've kept pretty much the entire management staff, with just a little change here and there. And then there are other businesses where pretty much everybody was gone.

We put some of our personnel in place in certain positions, but we pretty much leave who's there -- give them direction, give them our management philosophy, our reporting structure, and see how they operate, see how they fit in or not. It's not uncommon to have someone that we take out of a company that we take over and move them into an existing business. They may not fit with what we need for a turnaround, but they might be a good day-to-day manager.

They just work at two different paces. They may have a skill set we have lacking. Sometimes, the management group just doesn't fit in with the philosophy or they don't like what we do.

Will you ever look outside Illinois for acquisition opportunities?

There're a couple of out-of-state possibilities that we're looking at. We're looking into moving into adjoining states to give ourselves a little more geographic presence, along with something possibly in Mexico and something off shore. We're going to be customer-driven in terms of doing those things.

How has manufacturing changed in the past several years?

Manufacturing is not going away. It's going to be around and it's going to be strong going forward. It's just going to be different than what you saw five years ago or from what you see today. I'm betting my future on it.

There's a lot of manufacturing that makes sense in Western Europe and the United States -- the high labor-dollar countries.

Where will your business be three years from now?

We're definitely going to be consolidating some of the operations over the next few years. As we grow, we're consolidating into some larger facilities to handle some of that growth all in the same geographic area. There's definitely going to be one, possibly two, international plants or locations that we'll have.

We've been doubling our revenues every 24 months (for the last six or seven years). We've done a little bit better than that during the (recent) economic downturn. I don't see any reason why that can't necessarily continue. Part of that is internal growth and part of that is through acquisition.

We're not going to force that issue. If we can't keep the profitability up, I'm not interested in growing just for the sake of having more dollars going through.

HOW TO REACH: JJD Industries, www.jjdind.com or (847) 678-1600