Corrections or additions?
These articles by Caroline Calogero and Barbara Fox were prepared for the July 3, 2002 edition of U.S. 1 Newspaper. All rights reserved.
Life in the Fast Lane
A long term marriage dissolves. The relationship between
the partners has grown distant. They don’t need each other anymore.
The split up is not unusual, but their decision to continue to live
under the same roof and their subsequent signatures on a two-year
lease is.
The scenario sounds like a love affair gone bad, but it is actually
a corporate history gone modern. Former FMC employees Jonathan
Chun and Anatoly (Tony) Nemzer formed Alliance Technologies
from the remains of FMC’s in-house analytical chemistry lab.
Located in FMC’s facility on Route 1 North, Alliance Tech provides
analytical chemists and their corresponding expertise and equipment
for hire. As niche marketers focused on inorganic chemistry, they
support manufacturers of active oxidants such as hydrogen peroxide;
persulfates used in the semiconductor industry; lithium needed for
batteries and pharmaceutical intermediates; agricultural chemicals;
and cleaning products.
Chun describes the four labs the company owns as his big toolbox.
Rather more than a collection of beakers and Bunsen burners, the labs
have the capability to detect contaminants — which can prevent
a batch of chemicals from performing as expected — down to 10
parts per billion.
The company can do real time testing during the manufacturing process
for product analysis or to achieve optimization. Sophisticated computer
data evaluation is offered to provide a statistical depiction of chemical
processes.
There are machines for chromatography that separate mixtures of liquids
or gases to name and quantify their components, and for spectroscopy,
including an infrared microscope similar to those used in forensic
labs. The scope allows the identification of particles in microscopic
amounts. Chun jokes another corporate name for Alliance Technologies
could have been Purity R Us.
Chun, the author of a chapter on detergent analysis in a technical
manual, shows off a defractometer that measures the crystalline structure
of powders. He explains that it is useful in evaluating phosphates,
a common ingredient in household cleaners. Phosphates have two different
crystal structures. One dissolves more slowly in water, not the favored
choice when you are filling a bucket, mop in hand, waiting for the
bubbles to appear.
The labs provide some interesting visual contrasts. A spectrometer
ray gun straight out of a sci-fi movie rests opposite marble mortars
and pestles similar to those used by medieval alchemists. The same
periodic table of the elements that adorns every high school chemistry
lab hangs off a counter.
FMC’s now defunct analytical group was founded 35 years ago. Nemzer
took over the group in 1997, supervising its 20 workers. Chun worked
within it. But its future began to darken when FMC merged its phosphorus
division with that of another company and launched a joint venture,
Astaris, based in St. Louis.
Nemzer estimates that 60 percent of the analytical group’s work had
been coming from the phosphorus division. But there was no assurance
of continued business from Astaris.
Chun points out that FMC divisions were not required to obtain their
analytical services in house and that FMC discarded the idea of allowing
the lab to sell its services to the outside world. “While we could
not get external clients, they could get external contracts for services
. . . there were more constraints,” says Chun describing the no
win situation.
The challenge for the lab is to make its services attractive enough
so that the FMC divisions would choose them over independent competitors.
Cuts in personnel reduced the number of potential billable hours.
Fixed expenses remained high and included depreciation charges for
costly equipment. To recoup those costs, internal clients paid inflated
prices.
“Neither entity, FMC Chemical divisions or Astaris, on their own
with their workload could justify sustaining or supporting this group,”
says Nemzer. The group was destined for further shrinkage, but any
more cuts would have curtailed its analytical capabilities.
In 2001 there was a decision to close the labs and lay off a number
of its workers. But rather than lament their fate and circulate their
resumes, Nemzer and Chun saw the demise of the lab as a potential
business opportunity.
“As soon as they closed the analytical group, all of the chemical
divisions, including Astaris, will be forced to go and identify contract
services out there to do what we’re doing — so why don’t we be
that contractor?” says Nemzer. “We approached FMC asking if
they would consider this option: for us to privatize the group. FMC
came back and said OK.”
By that summer the idea was well developed. “We registered the
name and the LLC in August,” says Nemzer.
The men felt confident the company would fly. They had a well defined
product that was cost effective, and they had a reliable, highly experienced
team.
“An overall trend in corporate America today is to outsource.
If you look at the outsource market, it is growing at an estimated
10 percent a year,” says Nemzer. Nemzer left FMC in September,
2001, to get the new firm organized.
The partners further predicted that by taking themselves out of a
large corporate environment they could economize significantly on
overhead costs. “We were able to reduce our hourly rate to a level
where we are very competitive to the outside contract labs,” says
Nemzer.
The initial push for starting the business came from Nemzer. “It’s
one of those things. If you wouldn’t have tried it, you would have
died wondering.”
Chun, with less of an entrepreneurial bent, made the leap only
because success seemed a certainty. “I didn’t think this could
fail,” he says, “at least not immediately, because we had
done a lot of homework.”
“It’s better than finding another corporate job and waiting for
the next layoff,” says Nemzer.
Their predictions have been accurate. FMC, Astaris, and Church & Dwight
are current customers. So are BetzDearborn, a water treatment firm,
and a company that makes sausage casings out of collagen. Alliance
developed improved tests to enable this Japanese-owned manufacturer
to check quality.
Chun, 35, is a graduate of the University of Hawaii who left his home
state for graduate school at Princeton University. He holds a Ph.D.
from Princeton and lives in town with his wife and two children. Chun’s
current focus is the technical side of the business, producing the
analytical services. Chun also designed the company’s website (www.alliancetechgroup.com)
and sales brochure.
Nemzer, who is concentrating on the business side of the new company,
describes his partner as “an excellent human being, plus there’s
his technical skill. I felt very comfortable.”
Nemzer, 43, is a Russian immigrant whose undergraduate studies occurred
at Moscow Institute of Fine Chemical Technology. He has an master’s
degree from St. Joseph’s College in Philadelphia. Nemzer has three
children and the family lives in Newtown, Pennsylvania.
Chun and Nemzer sought help in launching Alliance Technologies from
the Mercer/Middlesex branch of the Small Business Development Center,
a program partially funded by the Small Business Administration. It
provides management assistance to beginning business owners. They
were paired up with SBDC counselor Kenneth Horowitz, a CPA who teaches
accounting and auditing at Mercer County Community College.
Horowitz has lots of praise for Chun and Nemzer and calls them the
poster children of the SBDC. “Their attitudes are very positive.
They are in love with their business. They have a passion for it,
one of the keys to success.”
He initially offered advice on revenue planning, and later helped
the new entrepreneurs with non-financial issues. “They knew how
the business ran as a captive of FMC, but there was a large unknown
as it expanded outward,” Horowitz says. SBDC support can continue
beyond a business’ opening day. The subject of Horowitz’s most recent
visit to Alliance Tech was to review first quarter results.
In order to secure a bank loan, the partners produced detailed budgets,
and monthly cash flow projections for the first year. Each guaranteed
the loan by putting a lien on his house. No venture capital money
was solicited. Neither wanted to dilute his control of firm’s direction.
They had to come up with enough cash to maintain the 5:1 debt equity
ration dictated by the SBA. They got enough cash to cover the first
two months’ expenditures, plus some for initial expenses.
The bank loan was secured on December 28, FMC’s lab closed on December
31, and Alliance’s payroll began on January 1. Nemzer and Chun were
determined to offer this continuity of service. Failure would have
brought steep penalties: a loss of business from FMC and Astaris,
and a potential loss of their three full-time employees who sought
ongoing employment.
“If there were even one or two months’ interruptions, during those
months both customers would be forced to find another supplier. So
that was our deadline,” says Nemzer.
A worst-case cash flow scenario did materialize later. “We tried
to be very, very conservative in our projections. We said `let’s go
really berserk and say we will not start collecting until mid-March.’
And it was almost mid-March and we were just collecting,” recalls
Nemzer of a close call.
Having gone through downsizings themselves, the partners wanted to
create a profitable business, but also “a microenvironment where
people can feel a lot more secure,” says Nemzer. Quarterly profit
targets will not trump long term goals, they insist.
Chun says this desire is partially a reaction to watching how the
lab and other corporate areas were managed as “cost centers and
at the end of every month we were expected to have a zero balance,”
forcing rates to rise and fall in short cycles upsetting their customers.
They are projecting first year revenues at $700,000 to $800,000 with
hopes of 10-20 percent growth over the next year.
According to Nemzer, Alliance’s short term goal is to nail down business
practices, including managing cash flow and accounting procedures.
Growing the business without sacrificing quality, and re-evaluating
their current location, is next on the agenda.
Chun and Nemzer both hope for more growth over the long term although
Nemzer believes human resources will be the first bottleneck in plans
for growth. “We don’t want to grow too fast. One of the goals
of the business is not that we’re trying to turn around and give you
a number back. We’re trying to say `What are the problems that you
have? What are your headaches?’ and then we’re going to try and help
you solve them,” says Chun.
“Normally the way you really provide value to customers is you
integrate yourself with your customer, and rather than waiting for
the customer to tell you what needs to be done, you learn enough about
their business and then go to a toolbox and say, `What do we have
here to use and solve the problem,’” says Nemzer. The firm’s name
was chosen with thoughts of creating these type of partnerships.
Chun, more of a techie in his focus, puts it a different way, “We’re
chemists and we understand that chemistry and we’ll help you solve
that problem. We have a lot of tools to do that.”
— Caroline Calogero
Alliance Technologies LLC, Route 1 & PlainsboroRoad, c/o FMC, Box 8, Princeton 08543. Jonathan K.M. Chun PhD, principal,director of technology. 609-951-3145; fax, 609-514-0740. Www.alliancetechgroup.comTop Of PageExpansions: Credit UnionIn May the Healthcare Employees Federal Credit Union(HEFCU) located at University Square merged with the Christ HospitalFederal Credit Union located in Jersey City. HEFCU acquired 600 membersand over $2 million in assets, bringing its total to over 25,000 membersfrom about 175 institutions and assets to over $55 million.”We have been getting to know them over the past four years,”says John Dawidowski, who retains his job as CEO of HEFCU. “In1999 they asked me to be on their board and last fall the board chairmansaid that they thought it was time to seek a merger partner.”HEFCU — one of the fastest growing credit unions — has alsoopened its doors to workers at non-healthcare related companies inthe Princeton vicinity, or within 30 miles of its headquarters. Amongits members are a college, various trade associations, and some manufacturers.”We are considering the possibility of a name change so we arenot industry specific,” says Dawidowski, who has been CEO of thecredit union since 1985, when it was a two-person organization.He grew up in Ewing and graduated from Trenton State College, Classof 1977. After working for the county government he started at NewJersey Hospital Association in 1979 and has been there ever since.”In 1983 I brought my concept about offering a statewide creditunion to senior management, and we got it off the ground,” hesays.Credit union members can use any of the 15 hospital-based ATMs, andthrough a national alliance of credit unions they have free accessto more than 12,000 ATMs nationwide. Also available are Internet bankingand electronic bill payment.Five other hospital credit unions are left in New Jersey — potentialtargets for mergers. “Nationwide the landscape has really changedsince we started. Consolidation has brought the number of credit unionsfrom 14,000 to 8,000, and the demands on financial institutions continueto grow. Margins are shrinking,” he says. “It makes senseto consolidate.”Healthcare Employees Federal Credit Union, 101Campus Drive, University Square, Box 1, Princeton 08543-0001. JohnDawidowski, CEO. 609-951-0700; fax, 609-275-4194. Home page: www.hefcu.comTop Of PageSouvenirsZutty Associates, a manufacturer and distributor ofsouvenirs, moved its warehouse in April from 2,000 feet in Robbinsvilleto 3,000 feet at Windsor Industrial Park. In this four-person familybusiness, Louise Zutty is the president, Larry Zutty the vice president,and one of their two sons, 38-year-old Steve, is the sales manager.Looking for a $7 puffy vinyl cushion shaped like a New York taxicabor a $5 magnet showing last year’s New York skyline? Buy it at theEmpire State Building, one of the many Manhattan retailers that carrythe Zutty line, or go to www.zutty.com Need a memento for a weddinggiveaway? The Zuttys will design and make it.Except for two items, the Zuttys make all their products in the UnitedStates. The actual mug be imported, but the decoration is done here.”When we went into business, that was our approach — to sellAmerican and use American,” says Larry Zutty. “After so manyyears we know where to go and how to do it.”The exceptions are a gold-plated brass Christmas tree ornament thatis imported from mainline China ($6 to $10 retail) and a float actionpen from Denmark ($2.50 to $4.50). In one of the biggest orders theZuttys ever had, they put logos of a Fortune 100 firm on 325,000 ofthose pens.But the bulk of their sales consist of specially designed mugs, glassware,and keychains as souvenirs for special functions (such as the Musikfestin Bethlehem), amusement and theme parks, museums, and airports. Alsoin the Zutty lineup are spoons, magnets, pens, pencils, bags, hats,ponchos, flashlights, backscratchers, personal fans. Newly popularnow are polar fleece blankets. Seldom does he do umbrellas becausesummer is high season for souvenirs and, as he notes, “it doesn’train in the summer.”A company win, for him, “is when somebody we work with comes backto us because we did it right. It is a relationship operation,”says Zutty. He and his wife founded their firm in 1984, but they havebeen in the souvenir and specialty business for 35 years. “Wedon’t do any wining and dining, but we deliver what we say, and weare selling now to a second generation of clients.”Asked about pricing, he hedges. “Cheap is a conceptual thing thatdepends on your position in life,” says Zutty. “Somebody’scheap is $1, somebody’s else’s is 20 cents. But you generally getwhat you pay for.”Numerous Zutty souvenir items show the Twin Towers, and they haveadded one memorial item. “The majority of the people are in favorof it,” says Zutty.Zutty Associates, 92 North Main Street, WindsorIndustrial Park, Building 15G, Suite 15G, Robbinsville 08691. LouiseZutty, president. 609-490-0203; fax, 609-490-0250. Www.zutty.comPrevious StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
