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The Swedish Maestro
ENTREPRENEURS by Jean Gruss | Editor / Lee-Collier
Starting a hurricane-shutter business during a housing downturn is not for the faint of heart. But one Swedish entrepreneur is betting on a new business model for the industry.
Imagine moving to Sweden and starting a new business selling snow blowers. You have to master the language, the customs and develop new business networks in a foreign land.
Then, imagine further that it doesn't snow for two straight years.
That's what it must be like for Christer Kallstrom, a successful Swedish entrepreneur who moved to Naples three years ago to start a hurricane-shutter business called MaestroShield.
The housing downturn and muted hurricane seasons conspired to damp expectations. What's more, Kallstrom and two Swedish investors have spent $8 million, eight times what they originally expected it would take to get started.
But Kallstrom is unbowed. "We need to be prepared to run a marathon," he told his business partners.
This is nothing new for Kallstrom, who has built several successful European companies. Says Kallstrom: "To start up a company takes four times more than you expect, but six to eight times more money."
Kallstrom has a secret weapon: A hurricane-resistant, semi-transparent curtain of meshed steel and Kevlar called Maestran. It's a one-of-a kind product that was born in the engineering sanctum of Volvo's headquarters in Sweden where they use supercomputers to design some of the world's safest cars. That product will be the driver for his expectation of $50 million in sales this year and $100 million next year.
Still, it's not enough to have a great new product. Kallstrom says he built a business plan around what he calls his three stars. Star one: MaestroShield products must be 50% cheaper than the competition. Star two: the quality has to be 50% better. Star three: he's got to deliver his product 50% faster than anyone else on the market.
When he started the business, Kallstrom told himself he would dissolve the startup if he couldn't achieve these objectives. These advantages are now more important than ever as the housing downturn and absence of hurricanes has ravaged the shutter industry.
Keeping costs down is the key to it all, Kallstrom explains. The way to do that is to own the designs of every one of the 500 products the company sells, from shutters to motors. "If you have your own designs, the savings are 50% to 70%," he says.
Hurricane holiday
A tennis fanatic, Kallstrom regularly visited Fort Myers in the 1980s to play at the Jimmy Connors Tennis Academy in Punta Rassa near the foot of the bridge to Sanibel Island. Kallstrom, 53, who is the same age as his countryman and legendary tennis great Bjorn Borg, spent his honeymoon on Sanibel.
In 2005, on one of his many vacation visits to the Fort Myers area, Kallstrom witnessed the devastation of Hurricane Charley. "It looked like a war zone," he recalls. He was struck by the crude boards and junky shutters that had been haphazardly installed and got the idea for MaestroShield.
Kallstrom wondered whether there was a way to design a semi-transparent curtain strong enough to withstand hurricane-borne debris and be easy to install. So he discussed the problem with a friend who was the chief engineer for Volvo, the Swedish carmaker. Using Volvo's supercomputers, they simulated how various materials might withstand that kind of force. That led Kallstrom to aramid, which is the basic material for Kevlar, the same material used for body armor.
But the challenge with aramid is that it loses its strength quickly when it's exposed to ultraviolet rays from the sun. So Kallstrom and a team of seven engineers spent more than two years and $5.5 million to successfully test and design a mesh of aramid and stainless steel. They called it Maestran.
The problem they then faced was finding a manufacturer that could produce this mesh in bulk. It wasn't easy, but Kallstrom eventually found a German company that had built five metal-weaving machines. One of those machines was in Korea, while the other was in China, where low-cost production got underway. They filed for a patent in 2006.
Initially, Kallstrom and his partners had expected to spend $1 million to get the company started. But the first sales didn't begin until February 2007 because it took longer than planned to design and produce Maestran. In addition, the company made more-traditional aluminum shutters, motors to move them and remote control systems to operate them. Every one of the 500 products was designed from scratch. The reason is simple: "You don't control costs if you don't own it," Kallstrom says.
Kallstrom says his two Swedish investors are patient and have entrepreneurial backgrounds. One owns the Scandinavian Harley Davidson franchise and the other built a leasing-finance company. They know starting a business could take longer and cost more money than they anticipated. "To have intelligent partners in business is where you make it or break it," Kallstrom says.
Most investors today are better off investing in publicly traded companies, Kallstrom says, because they don't have that long-term commitment.
Amassing dealers
By January 2007, Kallstrom had finally developed the products, but he had no one to sell them. His goal last year was to sign up 100 dealers. He came close: 98 dealers signed up in 2007. Today, MaestroShield has 130 dealers, including 37 along the Gulf Coast from Tampa to Naples. MaestroShield itself has 15 employees but through the dealers it has more than 1,000 people selling its products.
The economic downturn on the Gulf Coast was one reason why Kallstrom was able to round up so many dealers, he says. "We started selling when the industry was really bad," he says. For example, a dealer that was selling $10 million worth of shutters three years ago may only be selling one-quarter of that over the last year.
But by owning the products outright because his company designed them, Kallstrom wrung out the cost of many middlemen. That allowed him to produce and sell his shutters for less than other manufacturers, giving dealers a bigger profit when they sell. "If you can't lower prices, you're not going to be in business," he says. "If you own everything you can control pricing." For example, Maestran costs about $15 per square foot but retails for as much as $60.
With lower production costs, Kallstrom can also afford to ship parts from Asia to an assembly plant in Lakeland by air freight (80% of the company's parts are made in Asia). To speed things up even further, Kallstrom plans to establish a shutter-motor manufacturing facility in Jacksonville or another Florida port city. "To cut down lead time is very important," he says. What's more, the "Made in USA" label is a marketing advantage.
But the U.S. is not the only country on Kallstrom's radar. MaestroShield is establishing dealers in the Dominican Republic, the Caribbean, Mexico and South Africa. It's also planning to launch in Europe. For example, Germany is a $6 billion market for shutters and France is a $4 billion market. By comparison, Florida is a $1 billion market. Europeans buy hurricane shutters for safety reasons. "They're not afraid of hurricanes," Kallstrom says. "They're afraid of criminals."
For now, one of Kallstrom's biggest challenges is finding reliable employees and professionals to help him guide his business growth. But taxes and regulations in the U.S. are a breeze compared to Sweden. He shrugs when Americans complain about high taxes and regulatory burdens. "They don't know what they're talking about," he says.
A Swede beginning
Christer Kallstrom's entrepreneurial roots stretch back to his childhood. His father was an artist and inventor who once built his own 35-foot boat out of a single chunk of steel and a hydrocopter that could land on ice or water using an old airplane engine. From his father, says Kallstrom, "I learned nothing was impossible."
At age 15, Kallstrom attended naval school where he learned navigation, a skill that would prove invaluable in business. For example, he learned there is never one solution for getting from one point to another.
What's more, Kallstrom learned one of the basic rules of sailing: "When you have your nose to the wind, bad weather comes behind you." Translation: surprises in sailing and business always come from the direction you least expect.
At age 18, Kallstrom started his first company, which specialized in cleaning oil spills in waters around Scandinavia. The company grew to 230 employees by the time he sold it in 1987.
He learned to be a successful entrepreneur on the job, growing his first company without outside capital. Not that he didn't try: "Banks talked about balance sheets and I was focused on profit and loss," he chuckles. Still, he learned valuable lessons early for business success: "It's not the volume of revenues, it's how much profit you can get on each dollar," he says. "Be more efficient than anyone else and you're going to make more profit. The key is to make money even if you have low volume."
After he sold his first company, Kallstrom had enough money to wander around Silicon Valley in California for two years to learn about the nascent software industry, a business that fascinated him ever since he took an IBM class in the early 1970s.
Then, his sister called from Sweden asking him for advice about her floundering accounting-software business. He bought her out and he shifted the focus of the business to helping companies achieve better quality through ISO 9000 certification, a rigorous process companies go through to standardize high quality.
Helping European companies navigate through the quality certification was good business because the competition for customers in Europe is much harder due to the fact that the market is smaller. "If you don't have good quality, you're gone," Kallstrom says.
From this came another business idea. Kallstrom got a call in the early 1990s from a construction company that needed help managing large projects, from developing a manual to procurement and follow-up with customers.
In 1992, that led to Kallstrom to start Project Planning Systems, which created software for construction companies to manage large building projects. In 1995, he got a call from discount furniture giant Ikea, which buys huge tracts of land of up to 500 acres and builds cavernous buildings in which it sells furniture and home products. Each Ikea store required 20,000 steps, from ordering screws to roofing. Kallstrom's company cut the laborious Ikea construction management process from four months to 10 minutes using his software.
Kallstrom says he flirted with selling his software company to Microsoft in 2000, but the software colossus was under attack by antitrust regulators and it wasn't in the acquisition mode. He ended up selling the company to a private investor in 2004.
REVIEW SUMMARY
Company. MaestroShield
Industry. Shutters and blinds
Key. Expect startups to cost eight times more than you think.
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