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What Am I Bid for
This Used Forklift?
Stratford startup offers new life
to tired industrial equipment
Company: Greenwich Industrial Services,
611 Access Road, Stratford
(203-380-9367, www.greenwichind.com)
Principals: William J. Gardner Jr., president and majority stockholder; James Gardner, vice president marketing; Scott Lonkart, vice president auction division; and Michael DiProspero, vice president appraisal
No. employees: 24
Locations: Stratford; Atlanta, Ga.; and San Juan
Capistrano, Calif.
Startup date: March 1997
Startup costs: $650,000
Financing: Partners, private financing
Written business plan?: Yes
1997 revenues: $13.6 million
Profitable?: Yes
Principals drawing salary?: yes
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Business New Haven
12/29/1997
By: Kevin Wheeler
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How marketed: Worldwide trade journals, direct mail, targeted faxes, newspaper ads
Market: Banks, presidents and purchasing managers
of industrial-related manufacturing companies, and manufacturing equipment dealers
Clients: Pratt & Whitney, Zenith, Gandalf, Design to Distribution (UK)
Service: Auctions, appraisals and asset management for companies with industrial equipment and machinery
Manufacturing companies live or die with their equipment. And few know that better than the four partners who started Greenwich Industrial Services.
GIS is part appraisal consultant, part auctioneer and part asset management company. It specializes in knowing the value and market for industrial-related manufacturing equipment, particularly for the printed circuit board industry, the plastics industry and the metalworking industry (which in New England means metal components for the aircraft industry).
The appraisal component is what president William J. Gardner Jr. calls GIS' “day-to-day business - the base.” Appraisals are employed primarily for asset-based lending. Gardner says GIS “gets a lot of business from banks.”
Another way to help companies get cash is to auction used, idle or surplus equipment. The needs of GIS clients vary. Some must liquidate equipment due to bankruptcy. Other firms, such as UK printed circuit board manufacturer Design to Distribution, decide to close a division or a facility and sell off unneeded equipment to free up cash and space to pursue more profitable business.
Whatever the reason for auctioning off equipment, there are three ways of getting the cash: outright purchase, commission or partnership.
When GIS purchases equipment, the seller gets a check immediately and agrees to let GIS have 60 days to clean out the facility. Working on commission or in partnership takes a little longer to raise cash, but GIS tries to hold auctions within 60 days of entering into a contract with a company.
On commission, the client is responsble for covering an agreed-upon marketing budget, say $10,000, and gives GIS the standard ten percent of the sale proceeds.
The third option, partnership, is the most popular because, as Gardner says: “The client is protected, and it's in our best interest to maximize the dollars.” In partnership, GIS guarantees a client a minimum cash yield, and then the two split a percentage over that minimum, typically in favor of the client.
What's the benefit to buyers? “Buy today at a reduced price.” As Gardner explains, if a company orders special equipment for a job, it may take four to six months to get it on the floor. But through GIS, it's on the floor next week. And although the equipment is usually a few years old, that is reflected in the price. GIS sold a four-year-old drill machine that cost $250,000 new for $130,000. Not only did the buyer save money, but it was able to meet the company's production crunch.
Positioning itself as an international company while having offices only in the U.S. demands more than a modest investment and expertise in marketing. It's one of the company's biggest operating expenses and the strategy has several components.
First, GIS advertises in worldwide trade journals to tout its services and announce auctions. Second, it mounts direct-mail campaigns with brouchures featuring equipment, terms and conditions of payment, and vitals such as directions, airports and lodging. Third, it runs general announcements in newspapers to attract buyers for standard equipment like forklifts and office furniture. Lastly, it gets the word out to former auction attendees and buyers, typically by fax.
Business has been good for GIS in its first year. It surpassed its goal of $10 million to close out 1997 with sales of $13.6 million. Most would expect the company to fare better when the economy is dragging and bankrupt businesses are liquidating assets. But business is better when the economy is strong. There may be fewer bankruptcies, but there are more buyers. BNH
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