The recession is a daily do or die battle for many Gulf Coast business owners. That's just fine for entrepreneur Steve Schwartz, who actually used to fight for a living.
Business. Quality Enclosures, Sarasota
Key. Company has increased profits through diversifying to new business lines and cutting costs.
Steve Schwartz had a difficult decision to make when he graduated high school nearly 20 years ago.
He could have spent the summer hanging out with his football buddies in Sarasota and then gone on to college. It's what all his friends were doing.
But he also had an opportunity to start a glass and shower door manufacturing business with his dad, Manny Schwartz, who had already run a similar company in New York. The business option, at least in the beginning, would be low pay and grunt work, in an apprenticeship sort of way.
Schwartz took the contrarian route: He chose the business over college.
The move paid off. The company, Quality Enclosures, is still around.
But now, two decades later, Schwartz finds himself in a new kind of education setting, one with higher stakes and riskier choices. Call it Recession University.
In fact, Schwartz runs two businesses. One is a Sarasota martial arts studio, a business where Schwartz, an accomplished martial arts trainer and onetime professional fighter, has followed his passion. He spent more than $500,000 to buy and retool that business in the last four years.
Schwartz also runs Sarasota-based Quality Enclosures, the company founded in 1991 by his father. Quality Enclosures still manufactures and fabricates glass shower doors. But in the last three years, all under the leadership of the younger Schwartz, it has moved into five other glass-related businesses and product lines.
Says Schwartz: “Now we offer everything but car windshields.”
Schwartz earns high grades in recession survival for those kinds of diversification decisions. Quality Enclosures, like nearly every other company connected to the homebuilding industry, is down in revenues. What was a $4 million or so company in 2007 and 2008 is now a $3 million or so company. Sales peaked in 2008.
Still, profits are up, says Schwartz, by at least double digits in 2009 over 2008. He declined to release specific annual revenue figures.
A portion of the profit increase is due to standard expense cutting every business has had to go through during the recession. But a major facet is the diversification.
That includes the late 2009 purchase of a small business that makes glass outlet covers and other decorative plates. It also includes new business lines for closet mirrors, glass powder coating and glass coloring.
The cost for all the new business lines and products, spread out over the past few years, has been well into the six figures. It cost $50,000, for instance, to buy a laser machine for the company's new acrylic glass division last year,
“We didn't want to just get by,” says Schwartz. “We wanted to prepare ourselves for the upturn.”
The company is also on a mini-hiring binge. It hired five employees last year, which brought the total employee base to 30. And Schwartz says he might hire at least three more people this year.
Quality Enclosures even grew in geography last year, when it opened a new facility in Jacksonville. That office follows one in suburban Atlanta Schwartz opened in 2007. Both facilities are distribution and warehouse centers and are also showrooms for local dealers and contractors.
A fighting gene
Nonetheless, when Schwartz set out to rent new space, buy a new business and generally seek growth any way he could last year, he went against the advice of a key adviser: His father and mentor in the business, Manny Schwartz.
The elder Schwartz says he thought his son took on too much risk. “But if he just stuck to shower doors,” Manny Schwartz says now, “I doubt he would be successful today.”
Manny Schwartz is no longer involved in the daily operations of Quality Enclosures. He gave that up fully to Steve Schwartz four years ago.
But while Steve Schwartz credits his dad for many business lessons and insights, the ability to make gutsy decisions in the face of a down economy likely comes from somewhere else. Indeed, that could stem from Schwartz' fighting genes: He is an accomplished martial arts participant, having earned several high-degree belts in the sport.
Schwartz even took five years out of working at Quality Enclosures in the mid 1990s to pursue a career in shootfighting, a cross between martial arts and caged human fighting that has grown in popularity the past few years. Schwartz and some fighting comrades traveled the country for fights and tournaments. They stayed in cheap hotels or sometimes in their van parked on the street.
But after lots of bruises and broken bones — and little money to make up for the pain — Schwartz returned to Quality Enclosures fulltime in 2001. “I realized I wasn't ever going to make any money fighting,” he says, “so I decided to focus on work.”
Schwartz also realigned his martial arts passion to his entrepreneurial side. For example, in 2006 he bought the martial arts academy in Sarasota he had trained at for more than a decade. The previous owner was a friend who wanted to get out of the business.
Schwartz paid $370,000 for the building that houses the studio, the West Coast Martial Arts Academy, according to Sarasota County property records. He also paid an undisclosed amount for the business, which at the time offered a series of three martial arts classes for children and adults.
The new owner invested in the martial arts business in the same gung-ho way he invested in Quality Enclosures. He gutted the interiors of the building and spent tens of thousands of dollars on new floors, walls and bathrooms — and of course, a new shower door in the locker room.
Schwartz also stuck to the diversification theme: He turned the lobby of the martial arts academy into a weapons store that sells a variety of knives and fight gear. He added six more types of martial arts to the class offerings, too. Enrollment is up 15% since he bought the business, despite the economy going into recession since then.
Stick to it
But even with all the time Schwartz spends at the martial arts academy, it isn't his main gig. His main job remains Quality Enclosures.
While Schwartz says diversification looks good now, it wasn't part of a genius master plan to survive the recession. Instead, it was a stubborn desire to try new things and keep at it until it works.
In that way, Manny Schwartz says his son is just like he was in high school, when he was cut from the junior varsity basketball team in 10th grade. The younger Schwartz, devastated, came home and immediately said he was going out for football the next year.
He did just that and he made the team. Schwartz played tight end for two years.
When father and son opened Quality Enclosures, it was more of the same stubborn mindset that led to success. The pair knocked on doors and combed through the yellow pages for clients, working on glass dealers and contractors from towns north of Tampa to Venice.
Steve Schwartz recalls his first large client was a glass dealer in Inverness in Citrus County. He drove up there with products at 4:30 a.m. almost every day in his own car for the first few months.
Those days have mostly given way to truck drivers, although Schwartz still does some of the basic sales and order work at the company — and he will also make the occasional delivery. In fact, Schwartz says an oft-heard recession-survival tactic is true: All employees should be crossed-trained, so everyone can stay busy during downturns.
That lesson is one of many Schwartz has learned from Manny Schwartz. “My dad taught me right,” says Schwartz. “He told me never to cut corners.”