in Oxford is no stranger to a challenge.
The one-time metal fabricator has been through its share of hardships but through the vision and determination of its president and CEO, Gus Andreopoulos, its dedicated employees and with the assistance of Oakland County’s Business Center, Steel Master has a brighter future.
“We are enjoying some success right now,” Andreopoulos said. “Sometimes when you’re having a hard time it works when you have a lot of people behind you and everyone works together.”
Andreopoulos credits the small business and entrepreneurial programs provided by the Oakland County Department of Economic Development & Community Affairs, which offers customized business counseling, referrals, help locating financing and classes such as Venture Forward, which helps existing business owners acquire the skills to move the business to the next level. The center is run by Lola Are.
“Oakland County has really good programs to help [small businesses].” Andreopoulos said, crediting Are for helping his business move forward.
Steel Master Transfer was formed in the early 1980s as Steel Master Fabrication. The company did metal fabrication and structural work for various manufacturing plants and buildings, including the hand and safety rails at The Palace of Auburn Hills. In 1987 the company changed its name to Steel Master Transfer.
In 2006, Andreopoulos was a minority partner in the business and planned to buy out his two partners within five years. By 2007, the company was worth $8 million and had diversified its accounts, ranging from automotive to the food industry and included names like Harley Davidson, John Deer and Polaris. A year later Steel Master had a $15 million backlog, the biggest in company history.
“Life was pretty at that point,” Andreopoulos says.
But fortunes can change quickly in life and business. A $5 million order was cancelled by an automotive supplier early in the project but not before Steel Master incurred $50,000 in out-of-pocket expenses. Companies such as Steel Master are typically not paid before the finished product is shipped. There was more bad news to come.
In 2009, a construction machinery manufacturer had placed a substantial order, which was to be released in three phases. Steel Master had completed 80 percent of the first phase, 60 percent of the second, and hadn’t yet started the third when the order was cancelled, leaving Andreopoulos with outstanding bills for wages and materials.
Andreopoulos worked with a bank for a line of credit to pay his bills while trying to recover what was owed him. At the time, Steel Master had a $2 million line of credit but had $3 million invested in the project. The bank froze his line of credit.
Four months after the project was stopped, Steel Master got the go-ahead from the company to complete the first two phases, shipping the product quickly to expedite payment. Unfortunately, its line of credit was reduced from $2 million to just over $1 million. When Steel Master ultimately got paid, the bank was waiting, taking about $2 million. They next day the company laid almost everyone off and closed the doors.
For six weeks Andreopoulos, along with 10 employees who worked on faith, kept operations running. He bought out his two partners and absorbed $1.5 million in payables due. The deal was struck in late 2009; he reopened the business a month later. Slowly, the company began to recover.
“In 2010 we were a fraction of the company we had been before,” Andreopoulos said.
It went from an $8 million company with 48 employees in 2008 to a $3 million company employing 10 people in 2010. In 2011, things improved. It was a $5 million company employing 32 people and even made a profit.
The future is brighter in 2012. The company has about $4 million on the books for the year and is looking to hire eight more people – three engineers and five in the shop – to bring their total employees up to 40.
Steel Master now works with a different bank but cash flow remains a challenge. Waiting as long as six months for payment while tying up millions of dollars in labor and material costs remains a huge risk for Steel Master.
He is working with Chris Olzem, Finance and Strategy Specialist with the Michigan Small Business and Technology Development Center (MI-SBTDC), which partners with Oakland County’s Business Center.
“Chris is going to help us get some of the money we need and I’m confident he can help,” he says. “We were going OK self-funded for a while until the business started growing. Now we’re constantly scrambling to get money in here…”
“We used to have a $2 million line of credit; now we only have half a million, Never in my 30 years of life in this business have I said ‘no’ to so many projects. It’s frustrating. The work is definitely there… You’re constantly dumping money in. You need a cash flow.”