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SMALL BUSINESS | BUSINESS MAKE-OVER

Machine Shop Works on Its Long-Term Fixes

November 11, 1998|CYNDIA ZWAHLEN | SPECIAL TO THE TIMES

The company has a reputation for quality among some of the most demanding customers in the world, the owner is known for his integrity, the market for his products is growing and yet, year after year, sales don't budge past $500,000.

Ripa Engineering Co., a family-owned machine shop in Chatsworth, has carved out a successful niche making small parts to exacting standards for fighter jets, military cargo planes, even tanks. It hasn't grown faster because Anthony Della Ripa, who founded the company in his garage while working at Hughes Aircraft Co. in the late '60s, didn't want it to.

"Ninety percent I did myself for so many years," said Della Ripa, 62, his native Italian still coloring his speech. "If you get a lot of work on your shoulders and don't have enough helpers, you get sick, destroyed, upset, frustrated."

His solution has been to limit how much business he takes on. He does that partly by setting aside a few months each year to return with his family to his small village in Italy. He also has shunned debt, paid cash for $100,000 machines and resisted hiring help to do what he feels he can do better himself.

"His old European ways," as his son Tony fondly calls them, have laid a solid base for the company. But now the 33-year-old, who joined Ripa Engineering two years ago at his father's urging, is eager to build on that foundation and boost sales at the government contractor.

Tony doesn't pretend to have his father's mechanical ability. Instead, he has used his computer savvy to find new business faster, pushing company sales toward a record $1 million this year.

Tony would like to hire more employees to handle the extra work, but he said he worries that he may run up against his father's reluctance to "relinquish authority." The Della Ripas also need to double their current space and want to decide on a plan that allows the father to retire soon. Tony wants help finding new customers outside of the U.S. government, perhaps commercial airlines or customers in the medical or electronic industries.

Consultant Likes 'Great Market Niche'

The company is on the right track and has the competitive advantage of a "great market niche," said business consultant Paul Ratoff, after visiting the shop crowded with the large lathes and mills, some now run by computer, that turn copper, stainless steel and lightweight alloys into pins and pistons for Pratt & Whitney engines, landing-gear parts and other small metal components. The company has won blue-ribbon vendor status for its ability to meet the military's exacting specifications.

Ratoff advised Tony against giving up that advantage to pursue nongovernmental sales, at least for now.

"I don't think they have exhausted the market," said Ratoff, a management and financial consultant at Moss Adams in Los Angeles. "Even within his own category, he could do another $1 million or $2 million. That would make him a very profitable business."

He also recommended that the company position itself for additional growth by creating expansion and succession plans, fine-tuning financial reports and landing some outside financing.

At the current pace, sales could hit $5 million within three years, Ratoff said. At that point, the company will be ready to go after commercial clients.

Right now, Ripa Engineering needs to make a few critical additions to its financial reports, the consultant said. During his review of the company, for example, he found that it did not have an accounting of work underway in the shop.

"He had $160,000 of work in process that wasn't on his books," Ratoff said. "That makes a big difference in profits for a little business."

Lacking information about work in progress also gave the father and son a falsely negative picture of their finances, helping to convince them they couldn't afford to hire help or pay for their other expansion plans.

The final pieces of the company's financial picture can be filled in with the addition of a production backlog report and a proposal backlog report that includes the estimated success rate for each outstanding bid, Ratoff said. These tools will help Della Ripa and his son track and schedule future work, an important task in a business where missed delivery dates mean financial penalties.

Unless they create a proper expansion plan, their company's growth could also carry hidden financial costs, Ratoff said.

"It's one thing to plan it out verbally and list all the tasks, but each task has a financial implication," the consultant said.

For example, moving the machine shop to bigger quarters--and Ratoff recommends they find a spot with adjacent space they can take over in the future--means production and revenue generation will be interrupted while employees still must be paid. It can take days to set up equipment at a new site. New power sources may need to be installed, fixtures bought and other improvements made before the business begins to hum again. Without careful planning, a move can bring a business to its knees, he said.

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