When used is better
During nearly two decades of selling machines that mold plastic, Taras Konowal looked down on the companies that dealt in used equipment.
"I thought of used equipment as Sanford and Son - junk dealers," he said in a reference to the 1970s television show.
That's all changed since a switch from selling brand new to used equipment that saved the South Elgin company Konowal founded almost six years ago.
After working as a salesman for other people for 15 years, Konowal bought the assets of an employer and went into business himself.
Three years into the enterprise, annual sales hit $3 million and Konowal was employing 18 people at Apex Plastic Technologies.
But then the 2001 recession hit, followed by a slow recovery that dragged on and on. At the same time, Apex customers were being squeezed by overseas competition that forced them to slash their expenses in an effort to match cheaper prices.
"There was a lot of talk of moving business to China," Konowal said of his customers, who supply companies like Hamilton Beach/Proctor-Silex and Sunbeam with plastic parts for their products.
"But it didn't happen immediately," he said. "It started as a slow trickle and became a downfall."
Revenues fell to about $1 million annually for Apex as profits dwindled to nothing.
Desperate to rescue his business, Konowal turned to consultant Scott Hallman at Barrington-based Business Growth Dynamics for help.
Hallman sat down to brainstorm with Konowal and found out that Apex had sold used machines a few times in the past.
Focusing the business on used equipment made sense because it allowed the company's customers to buy the machines at a more agreeable price. It also allowed Apex to take advantage of ongoing sales as plastics manufacturing plants were closing under pressure from competition, Hallman said.
"We were getting them inexpensively and able to go out and sell machines for pennies on the dollar," Hallman said.
Now new equipment sales account for just 10 percent of the revenue stream at Apex.
Although the switch from new to used equipment didn't cost Apex money, it has been a big change in the way the company works.
With new equipment, Apex staffers would sit down with customers and help design the machine that would fit their specific needs. The machine would be delivered months later with the manufacturer's warranties.
With used equipment, customers want the machine immediately because they've waited to the last minute to spend the money. And it's up to Apex to find the machine a customers wants and make sure it's still in good working order.
And then there's the price.
Instead of relying on retail prices set by manufacturers, Apex haggles over the price of the machines.
"Customers think they're in a Turkish bazaar," Konowal said. "You can put a price tag on it, but that doesn't mean anything."
Initially, Apex was getting the word about its change in focus out to customers via faxes. But Hallman pushed for a different approach including a Web site to market the machines Apex had for sale.
"It's an industry that is not Internet savvy," Hallman said. "It's old world manufacturing, operating with pen and pencil, phones and faxes."
Although Apex still logs most of its sales transactions over the telephone, the Web site still pulls them in and lets them browse the inventory.
About 70 percent of the inquiries Apex gets about various machines now come from the company's Web site, Hallman said.
Type in "used thermoset equipment" into a search engine and you'll probably get Apex's Used Thermoset Depot.
"People can find us," Hallman said.
And the Internet has allowed Apex to reach a whole new set of customers in the market for used equipment.
"We're becoming global, not on purpose," Konowal said. "We've had inquiries from Europe, Asia, the Middle East and Africa. We've had to tell them we're not ready to do business there yet."
Konowal is interested in expanding overseas, but right now its all he can do to handle the business he has.
Recently, the company logged $300,000 in revenue during one week, Hallman said.
Konowal expects revenues to be return to $3 million this year and is looking to hire.
"The fourth quarter was phenomenal and its still going on," he said.
Apex: Company going global