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Against the odds Featured

7:11am EDT November 2, 2005
Most men wouldn’t think of quitting their job to start their own business when their wife is five months pregnant.

But Fernando Crosa did just that when he learned that the national petroleum services corporation he worked for was about to be acquired.

“My experiences with these types of acquisitions are that they (larger companies) come in and say, ‘Don’t worry, you and all your people will be taken care of,’” says Crosa. “But in reality, what happens is they come in and once they understand the business, they cut it down. I decided to prepare for that.”

By prepare, Crosa means he quit his job and used his savings to start a consulting company for underground storage owners out of his home in Austin, Texas. But although he resided in Texas, most of his business was in the Midwest, and when his customers told him he could get more work if he were closer to them, Crosa and his wife moved to Columbus.

The company took off, and it was soon too big for Crosa to handle by himself.

“I reached that wall that most small business owners reach where they have to choose between growth and profitability,” says Crosa, who chose growth.

He hired employees, bought equipment — and began running out of money. He met with bankers and venture capitalists, but bankers wanted nothing to do with him and venture capitalists wanted 55 percent of his business.

In 2001, Crosa solved the problem by merging with a company that performs testing and cleaning services for underground storage tank clients. But he didn’t give up his dream of owning the business himself - in 2004, he bought out his partners to take complete ownership of US Tank Alliance.

Today, the company employs about 50 people in five regional offices and grossed $4.2 million in 2004.

Smart Business spoke with Crosa about the challenges he faced buying the company and how he moved it from Massachusetts to Columbus.

How did you deal with having a growing business but not enough capital to support it?
I had been corresponding with a friend who used to work at the environmental company with me. He started a small testing company in Massachusetts. Basically, I said, ‘Hey, I know you are getting some tips from some larger companies who may have some gas stations out here. I would love to be your subcontactor.’ He said, ‘Vice versa.’

He started his company with the assistance of a larger $25-million-a-year environmental company. He had a salary, he had insurance, he had an office with human resources and accounting. I had none of that. I didn’t pay myself for the first year.

I went up there and met with him and his two business partners. At the end of the day, it made a lot of sense to take on the industry together. We combined both testing entities into one and it became US Tank Alliance.

When you were approached to sell your share of the company to a larger corporation, how did you switch the scenario ?
I sent an e-mail to everyone (with a stake in US Tank Alliance) and said, if anyone is interested in selling some equity, I would be more than willing to buy. I was looking to have more of a stake in the thing that I was running and pretty much carrying.

So Joel, my colleague and president of the company, called me up and said, ‘Are you serious about wanting to buy some equity?’ And I said, ‘Yeah, is anyone interested?’ And he said, ‘Yeah, me.”

When he threw his shares on the table, the other two, who were really in it for him, did as well.

What challenges did you face buying the company and how did you overcome them?
There are three phases. The first phase is convincing them to sell it to you. They wanted to buy me out. When I first went out there, they said ECS (Environmental Compliance Services Inc.) is going to buy US Tank.

I only had 15 percent equity — they could have done whatever they wanted to do. I said that was fine, but then I am out. I have worked for a bigger company and I didn’t want to do it again. I didn’t want to have to work and make a bunch of money for someone else when I was carrying the company.

I played the card that I thought would be the right card. I represented 65 percent of the revenue and 85 percent of the profitability. I believed that they thought if I walked and ECS were to buy US Tank, they would be buying nothing, because the work would go with me or it would go away. And that is what they thought.

Phase two was getting the deal done financially. The banking and the relationships with different insurances and accounting were all in the Northeast. I needed to move it all to the Midwest. First, I had to convince a bank to do it.

A lot of people think that just because you are a minority or just because you have a great business plan or you are a small business that SBA (Small Business Administration) and other agencies are going to throw money at you. SBA will not back any loan that they don’t believe they can get their money back on.

That’s what happened to me five years ago. Now the picture was better. We had five years of experience and were profitable. We finally got a bank to do the deal, and that was the most difficult part of it.

Phase three was building the new organization. I had to move all of the corporate functions from Massachusetts to Columbus. I had to go protect all of the sales. I had to get more sales.

What business strategies are you using to increase your sales?
My business strategy is to market to the major oil companies. We are a multiregional contractor. The majority of our competitors are regional. In other words, if the company is in Cleveland, that’s all they cover. They don’t have hotel costs or gas costs, but it limits their ability to work for larger companies.

Fuel basically has doubled since I have done my budget. Our costs are rising and my focus is to get more sales, specifically sales from the majors. It’s easier to work for one company that has a thousand gas stations than a thousand companies that have one gas station each. These larger companies pay electronically within 10 days. I am not chasing money.

We will and do service the smaller players, but our focus is the larger marketers, like Speedway. I can build a business around good companies like that because they’re strong, financially sound and there’s always a new project.

HOW TO REACH: US Tank Alliance, (614) 923-0154 or www.ustankalliance.com