How Embassy Powdered Metals Grew 400%

Steve Aharrah remembers the first time he inspected his new office at Embassy Powdered Metals.

There was no computer on his desk, only a pencil and a notepad. There also wasn’t a company-provided cell phone, since the company’s owners assumed its new president would conduct business during regular working hours only.

This was in 2011.

“I don’t know what I’m doing here,” Aharrah remembered thinking.

While the lack of office technology tools gave Aharrah pause, he couldn’t argue with the successful track record on the plant floor of the Emporium, Pa.-based company. Embassy, a privately-owned company founded by four businessmen in 1996, was profitable, had a solid reputation for quality and reliability, and had a book of business from blue-chip customers such as Leggett & Platt.

Following the recession, growth had leveled out and Aharrah said he wanted to know the owners’ vision for Embassy’s future.  As Aharrah recalled, they said they wanted him to help grow the business and for Embassy to remain a vital part of the economy in the small northeast Pennsylvania community.

Grow it did. In a few short years, Embassy expanded from a $4 million company to $16 million in sales. And thanks to a recent acquisition, the workforce nearly doubled to 96 employees. In addition, investments were made in new equipment and training.

Nurture long-standing customers to maintain stability during high growth

The improvements helped draw more customers from all over the United States, China, Mexico and Europe. Embassy continues to nurture long-standing relationships with businesses such as Leggett & Platt, which is one of its longest-tenured, A-plus customers. Indeed, in that role, Leggett & Platt has helped the powdered metals company tap into payment acceleration provided by C2FO to bolster its short-term cash flow.

“Leggett & Platt is one of our best customers,” said Aharrah. “They understand our business. It’s a great partnership.”

Understand your market and your strengths to find a competitive edge and higher margins

Embassy is located in an area known as the powdered metals capital of the world. The region is home to more than 50 powdered metals companies in a 50-mile radius, according to Aharrah. And like Embassy, many of its competitors are small, locally-owned businesses.

“I can stand in our driveway and see five competitors,” said Alan Ramsey, Embassy’s financial officer and co-owner.

Embassy produces a wide range of components from metal powder. For Leggett & Platt, for example, Embassy provides latches and gears for adjusting chairs and other furniture.

This market — furniture, lawn & garden, and sports and leisure — is Embassy’s biggest, generating about 45 percent of sales. It also produces products for the automotive industry, including the undercarriage and spare tire components.

Being small can work to Embassy’s advantage, allowing it to tackle high profit-margin orders, Ramsey said. For example, it makes 1,500 parts a year for one customer, whereas a larger company wouldn’t bother with such a small order.

“We can pick and choose higher-margin business,” Ramsey said.

Ramsey and Aharrah were part of a new executive team that came on board to help Embassy refocus its business plan. In 2013, the four-man team bought the company from its two remaining founders.

All four owners are also hands-on managers with vast experience in manufacturing.

Ramsey said one of the first goals of new management was to obtain the much-coveted ISO certification. That was accomplished in about three months, a notable contrast to the longer time frames for ISO designation that many companies experience.

That was important because many companies won’t consider doing business with you without the ISO certification.

Embassy also focused on adding presses and other equipment, which required pouring time and money into employee training.

Embassy builds local economy and jobs while building global customer base

But perhaps the biggest expansion move was completed in April, with the purchase of American Sintered Technologies from its bankrupt parent company in a deal valued at more than $3 million. The state of Pennsylvania provided incentives to help Embassy complete the purchase of one of its neighbors, which added about 50 AST employees to the payroll.

Ramsey noted another way to look at the deal: Had AST simply been shut down, the impact of losing those jobs would have been devastating to the Pennsylvania county that is home to only about 5,000 residents.

Embassy’s owners have supported the region’s economy in other ways. Whenever possible, Embassy buys supplies, such as gloves and safety glasses, from local businesses.

And with an eye toward the future, the company also is involved in a cooperative program with local educators to teach teens the skills they will need down the road for manufacturing jobs at Embassy and other companies. Ramsey said Embassy is working with the state on some rule changes to make the job training more accessible for high school and college-aged students.

“We want to help youth, and help the town,” said Ramsey. “That’s the battle here and in any small town … giving people a living wage is tough.”

Lessons for other small to medium-sized businesses

For Aharrah, successful business owners must be good communicators — not just with customers but with employees.

“Communication is key,” he said. “It’s the ability to set plans and follow through every day.”

At Embassy, for example, there are monthly employee meetings where everyone has an opportunity to comment, he said.

And one of the company’s owners also works on the plant floor every day. “It gives us a heartbeat,” Aharrah said.

Put another way, “take care of your employees because they are the company,” said Ramsey.

He also offered this advice for any executive team: “Be yourself…Don’t waltz in with (former General Electric CEO) Jack Welch’s book and run things his way. You have to know who you are.”

Success strategy for rapid growth: control cash flow and stay focused on customer satisfaction

In all, over the last few years, Embassy has poured more than $7 million into training, equipment and acquisitions.

It is not stopping there. The former AST plant is more than twice as large as Embassy’s, but the equipment has been underutilized, Ramsey said.

Added Aharrah: “With more machines, there’s a lot of opportunity down the road.”

He foresees Embassy growing to a $20 million company with about 130 employees over the next five years.

Embassy uses C2FO to help control its cash flow as it rapidly expands and invests in employees and equipment. C2FO is the only such program Embassy uses.

“We were not forced into this program by Leggett & Platt. They merely suggested that it was an available tool,” said Ramsey.

“I’d recommend C2FO for any company that wants to control its cash,” he adds. “It’s easy to use, easy to understand, which makes me a happy guy. It gives me some flexibility in managing our growth, and it takes away some of the risk.”

Growth will be challenging in an industry where competitors often are willing to shave the cost of a contract to grab business. That’s not Embassy’s approach, said Ramsey.

The company’s mission statement emphasizes customer satisfaction — and it’s more than lip service.

“We always want to partner with our customers to make sure they’re successful. If they’re successful, they will buy more stuff with us.”

The focus on customers pays off. Embassy’s rapid growth continues, adding to the success of their company — and their community, too.