How Andres Ruzo turned Link America around by switching from products to services Featured

7:00pm EDT November 30, 2012
How Andres Ruzo turned Link America around by switching from products to services

Five years ago, Andres Ruzo was on the verge of pulling the plug on Link America Inc. The company, whose operations revolved around manufacturing and refurbishing telecommunications switching equipment, had fallen on hard times.

After riding the wave of the telecom boom in the late 1990s, Link America had been slammed by the dot-com crash in 2001 and had been on the decline since. Its revenue, which peaked at $12 million in 2001, had plunged to $3 million by 2007. Many manufacturers, unable to compete with China’s dirt-cheap wages, were moving their operations to the Far East.

Ruzo detected that trend gathering momentum and consequently was trying to transform Link America from a telecommunications equipment manufacturer to a provider of related services. But the plan wasn’t working well and time was running out.

“We were losing money, cutting costs, racking up debt,” says Ruzo, who started Link America as a one-man operation working out of his son’s bedroom in 1994. “The demand kept getting smaller because people were learning to dispose of equipment and replace it as opposed to repairing it or refurbishing it. Up until then, I had always thought repair was a recession-proof business. It turned out to be the opposite.”

Link America kept sinking, and Ruzo wondered how much further down rock bottom might be.

“It was painful,” he says. “I saw that we could no longer manufacture four lines of products and be successful. We couldn’t compete with companies in China paying workers $2 an hour when we have to pay $14 bucks an hour here. It’s impossible.

“So we went from four buildings down to one, and from 100 employees down to five. I even cut myself for six months without salary to keep the other four people working. I was just trying to stay in the game. That was 2007. I think we touched bottom there. I almost bankrupted the company.”

Turn the tide

At about that time, Link America won a contract to build five communications towers at a military base in El Paso. That tided the company over for a while as Ruzo looked for strategic partners to help him convert Link America from manufacturing to services.

Eventually he concluded that his plan to gradually convert the company’s operations from manufacturing to services wouldn’t work. Link America had to bite the bullet and plunge all the way into services, head-first.

“I started looking for an opportunity to sell all of our manufacturing and repair assets,” he says. “We had to jump all the way into the pool and swim — swim into services. After a while, we found a buyer. We sold our assets to a company called CTDI, and that company became our partner.”

CTDI not only bought all of Link America’s manufacturing assets, it also permitted Link America to leverage its balance sheet to obtain lines of credit to help it pursue its plan to become purely a service provider.

“CTDI came to the table and bought a piece of our company and bought in to our vision,” Ruzo says. “They gave us the funding necessary to do the turnaround, and they gave us the financial wherewithal and lines of credit so we could start doing large transactions and grow quickly.

“In reality, they saved us. It’s like building a 15-story building: We knew we had the footprint. We knew we had the design. But we needed someone to help us build the foundation, someone to say, ‘OK, I will fund the construction of the first floor. You do the rest.’ If we hadn’t found that, I wouldn’t be here.”

Ruzo’s vision included converting Link America into a service provider in two market segments related to its already-established expertise in manufacturing telecom equipment: No. 1, offering warehouse management solutions for large telecom carriers such as AT&T and Verizon, and No. 2, building wireless communication networks for public and private emergency service providers.

“The warehouse management solutions part of our business is basically logistics,” Ruzo says. “We support logistically the deployment of hundreds of networks nationwide for optical gear, and we also provide heating, rack and stack, and many other things. That’s one of the two main types of service we provide.

“The other type of service we provide is we build networks for first responders — police, fire, EMS. We build their networks, we provide their radio, we do the installations, we do the engineering, we do the provisioning of all the radios, and we do the support and maintenance.”

Leverage technology

The conversion of Link America from a product-based company to a service-based one has worked remarkably well. Once the new model was in place, Link America started growing again immediately. Revenue bounced back from $3 million in 2007 to $12 million in 2008, then leaped forward to $40 million in 2009, $136 million in 2010 and $214 million last year.

“How do you know you’re doing well?” Ruzo says. “Well, I’ve always followed the money. You know you’re doing well when the money starts coming in. And that started for us in 2008. We started landing some contracts — some serious, sizable contracts.”

Among the earliest of those sizable contracts was a pact with a router company called Redback Networks, which has since been acquired by Ericsson. Other large clients quickly came on board, including Fujitsu, Ciena, Dallas Area Rapid Transit and Dallas County Community College. All along, keeping abreast of the latest technological trends has been a key element in Link America’s success.

“We were able to invest in a lot of technology to enable us to be profitable,” Ruzo says. “A large portion of our business is big-volume, low-margin, and what you have to do to be successful in that type of environment is you have to leverage technology in a big way.

“Technology is your enabler. We do thousands and thousands of shipments, and with those types of volumes, everything has to be digital. All of our invoicing, our receivables, our payables, our notifications — everything is electronic. We don’t do anything on paper. If we did, we would need 10 people just in accounts receivable to do invoicing. We have two.”

Link America is committed to keeping its operation lean and scaling up with as few newly hired employees as it can manage.

“We have systems such that, if we scale up on the back-office side, we don’t have to add much,” Ruzo says. “At one point, we added $10 million a month in sales, and we only added one person in accounting. Of course, we had to add a few more people to move the physical product, but we only added one in accounting. That’s crazy. That’s unheard of. And that’s exactly what I mean by leveraging technology.”

Partner strategically

Ruzo attributes Link America’s success to its approach of forming strategic partnerships with its clients by showing them how to use cutting-edge technology to manage their inventories more efficiently and, in so doing, to become more profitable by increasing their sales, cutting their costs or both.

“A big part of it has to do with moving a lot of product using just-in-time inventory systems,” Ruzo says. “You have to move the stuff very quickly so that the carriers can order hundreds of thousands of products and you can drive costs out of their supply chain.

“The other part of that is showing them how to increase their sales incrementally. It’s about increasing incremental sales on the top line, and then driving costs of their operations by doing everything cheaper, faster and better. If we do one or both of those things, we increase their profit. And when you do that, you become not only a vendor, you become a strategic partner, because you’re bringing constant innovation to their processes.”

Faith — in the spiritual sense — has also played a major role in Link America’s turnaround, Ruzo says.

“My spiritual life has helped me,” he says. “If you want my secret recipe, it’s human effort and the grace of God working together. I try to be a spiritual person and to always strive to do the greater good — to help our community, to help other people, to treat the world good.

“Paul Coelho has a book called “The Alchemist.” In it, he says that if you always try to do good and to do the right things, the universe will conspire to help you, because the universe is always looking for those kinds of people and for the type of positive energy they’re putting out. When you do the right things, other things will start to flow for you. I believe that. I’ve seen it happen.”

Perseverance has been another key driver in Link America’s success.

“You have to persist to see things through,” Ruzo says. “There have been times when it has come to the point that if the door was shut, I would open a window. If the window was shut, I would go through the roof. If the roof was shut, I would dig a hole. That’s what it takes. You can’t give up. You have to be extremely persistent.”

Be decisive

Recognizing future trends and being willing to cut ties with one type of technology and move on to the next is essential, not just in the telecom business but in many other markets driven by technology.

“It’s good to be in love with your business, but don’t fall in love with the technology,” Ruzo says. “You have to constantly morph yourself and keep up with innovation and collaboration and value co-creation, and you have to always be ready to jump onto the next wave.

“Business comes in waves. You catch one and you ride it for a while, and then that wave starts going down and a new technology starts coming in. You have to constantly be on the lookout for what’s coming next so you can decide where to put your time and resources and when to staff up with the right people to stay successful.”

Courage and decisiveness are other key traits that have helped Ruzo shift Link America and drive it back into growth mode.

“Business changes constantly,” he says. “If you see that writing on the wall and you don’t act, you’re doomed to failure. You’re going to be a dinosaur. You have to keep a close eye on the situation, and when you see it’s time for change, act immediately. Make the decision, formulate a new strategy and implement it — now.

“The other thing is do not be afraid. Sometimes leaders are afraid to call it like it is and make hard decisions. You have to be decisive and make the right decisions ahead of time. Don’t assume things are going to get better. If you have to cut, cut. Don’t wait until the last minute. Don’t keep saying, ‘It’s going to get better,’ and then another month passes and another, and before you know it, you’ve racked up millions of dollars in debt. Take the pulse of your business monthly, weekly, daily. Be smart, be shrewd, be fast. Make strong decisions from the get-go.” <<

How to reach: Link America Inc., (972) 463-0050 or www.linkam.com

 

THE RUZO FILE

Andres Ruzo

CEO

Link America Inc.

Born: Lima, Peru

Education: Bachelor’s degree in engineering, Texas A&M University

Looking back over your years in school, what important business leadership lessons did you learn?

The main thing I learned was that when you don’t have the answer to question, you have to have the discipline and the know-how to go find the right answer. That’s the key thing the university gave me: If you don’t have the answer, here’s how you go find it.

Do you have a central business philosophy that you use to guide you?

Basically, our tagline says that we are in the business of powering sustainable solutions through innovation, collaboration and value co-creation. Those are the three things that are very dear to us.

What trait do you think is the most important one for an executive to have in order to be a successful leader?

Laser focus and persistence. If you can be laser-focused and persistent, you’ll get there. Another important one, especially for entrepreneurs, is you have to be careful not to drink too much of your own Kool-Aid. I’ve had partners and have known people with companies that have grown incredibly, and they start thinking that they can do everything and be everything, and they don’t watch the ball, and eventually they lose their company. Entrepreneurs in particular have to watch out for this. You have to find people to challenge you, in terms of your beliefs and your vision. People that ground you. People that don’t think like you. It’s important to always have somebody who can help you keep your feet on the ground.

What’s the best advice anyone ever gave you?

Live in the present and do your best. Also, invest in yourself and invest in the things that you can control. Believe in yourself. That advice was given to me by a guy I knew when I was working in the real estate business many years ago.