Young Quest

Young Quest

entrepreneurs by Jean Gruss | Editor/Lee-Collier

Two twenty-somethings are building a medical-manufacturing business. They aim to build it slowly to avoid costly mistakes.

Harvey Youngquist and Paul McCullers are young enough to be making medical implants for their parents' aging bones.

Youngquist, 25, and McCullers, 27, recently established two affiliated medical-manufacturing companies in Fort Myers specializing in hard-to-make implants for hips, spines and other body parts.

Their strategy: Build it and they will come.

McCullers, president of Innovative Medical, and Youngquist, president of Youngquist Medical, are spending millions of dollars on equipment and highly skilled employees before knocking on prospective customers' doors.

Backed by the successful Youngquist family enterprise in Lee County, the pair hopes to break into a tight-knit business by focusing on parts that are difficult to manufacture. To do that, they've invested in pricey cutting-edge machines from Switzerland that can manufacture the smallest implants.

The companies only have a handful of customers now, but that's by design, their founders say. "It only takes once to stub your toe," says McCullers. "All you have is your name."

High school buddies

McCullers and Youngquist attended the same high school in Estero and obtained mechanical engineering degrees in college, McCullers at the Florida Institute of Technology and Youngquist at Tulane University.

Both men got management experience in the Youngquist family enterprises before venturing into the medical manufacturing field. Youngquist oversaw 100 people who worked at the rock quarry the company owns off Alico Road in south Lee County.

Meanwhile, the Youngquists sent McCullers in 2002 to the Mediterranean resort town of Malaga, Spain, to oversee the construction of 90 condominiums, a $60 million project. McCullers successfully completed the project without any prior experience in construction or any knowledge of Spanish.

When McCullers returned to the U.S. in late 2005, the Youngquist family decided to diversify. Most of the Youngquist companies are in or related to the highly cyclical real estate industry, including well drilling, mining and residential construction. "Medical is going to be slightly more stable in the long run," McCullers says.

Building the business

With their degrees in mechanical engineering, McCullers and Youngquist researched the medical-device industry by attending trade shows, speaking with suppliers and meeting prospective customers.

"When we come back, we'll be ready for you," McCullers recalls telling his prospects.

McCullers decided to focus on small parts such as spinal implants while Youngquist would make larger implants such as hip replacements. Because the products and the technology are different, McCullers and Youngquist each run their own company to remain focused. However, they share many of the back-office functions and they have the same sales manager.

Each company has its own building. Innovative Medical operates out of a 21,000-square-foot plant off Treeline Boulevard and Youngquist Medical's operation is in a 10,000-square-foot building off Crystal Drive.

Both companies share the same strategy, which is to deliver hard-to-make parts for the medical-device industry. The reason the companies choose to make the most challenging parts is because the easy parts have become commodities that are now made in China.

To do that, McCullers and Youngquist have invested undisclosed sums in machinery. At Innovative, for example, McCullers bought 15 Swiss-made precision-cutting machines. McCullers declines to say how much the equipment costs, but says each piece of equipment in the plant costs $50,000 to $600,000. Innovative's inventory of specialty steel to make the parts alone totals about $600,000, McCullers says.

Technology is key because the machines do most of the work. The operator typically needs just a few months of training. What's more, the machines lessen the potential for errors. "We're able to use the manufacturing technology to produce the part consistently," McCullers says.

The men recruited 27 employees at Innovative Medical and 14 people at Youngquist Medical to staff the operation. To do that, they traveled to Warsaw, Indiana, a town 123 miles southeast of Chicago. That's where three of the five largest medical-manufacturing companies are headquartered and there's a pool of 12,500 people employed in that industry there.

To recruit, they flew employee prospects to sunny Fort Myers and showed them the new facilities. They hired a general manager with 20 years of experience who was well connected with employees at Warsaw-based firms, inspiring some to leave and join Innovative and Youngquist.

The pair then hired a consultant who guided them through the maze of regulations and compliance with procedures and quality control. They developed systems that require the tracking of everything down to the last piece of scrap metal. That's necessary because customers and the government will audit a facility before contracting for work and allow it to operate.

Targeting customers

Now that the pair has invested in staff and equipment, they have to land new customers. But they're going about that task slowly because they don't want to take on so much work that it creates quality problems. "Everybody demands quality," Youngquist says. "We're very cautious about that."

Potential customers include 10 large and 200 smaller medical-device manufacturers. So far, Youngquist and McCullers have six small undisclosed customers.

Neither Youngquist nor McCullers will reveal revenue targets, though they estimate their businesses will become profitable in three years. The project is being financed by Youngquist Brothers, which also declines to cite revenues for its holdings (see related story).

One advantage to being a closely held company is that there's no pressure to grow profits at any cost. What's more, the company can spend money on new equipment without a board's approval.

One of the biggest challenges is pricing the implants. "We don't know the answer to that question yet," McCullers says. The world of medical manufacturing is secretive, highly competitive and rivals never publish prices.

The men acknowledge that their age is sometimes a factor when they visit customers. "We're upfront with our age and background," McCullers says. "We'll work hard to earn your business."

One advantage of youth, they say, is that they're able to deliver a fresh perspective to a customer's needs. "We're not thinking outside the box because we don't know what the box is," Youngquist jokes.

REVIEW SUMMARY

Industry. Medical manufacturing

Companies. Innovative Medical and Youngquist Medical

Key. Build the systems and hire the right people before chasing customers.

Who are the Youngquists?

Tim and Harvey Youngquist, two Fort Myers brothers, started a well-drilling business in 1971 after graduating from high school.

Initially, Youngquist Brothers drilled residential wells. Then the company expanded into drilling wells for farms and municipalities. Today, the company is the largest deep-injection well contractor in the country; a process that involves forcing treated sewer water deep into the ground.

The company builds sprinkler systems, makes cement, manages a 2,000-acre quarry that mines eight million tons of sand and rock annually and manufactures high-precision tools in a machine shop.

In addition, Youngquist Brothers controls these other companies:

• Texas Home Development. The company builds about 75 homes a year in five subdivisions totaling 3,000 lots in the Houston area. Home prices range from $135,000 to $250,000.

• Carolina Home Development. The company is building on 42 lots in Raleigh-Durham, N.C., and controls a 93-acre parcel in Boone where it can build 55 homes.

• Blue Ridge, Ga. The Youngquist family owns an 80-acre parcel north of Atlanta with a contract to buy another 183 acres on which to develop mountain residential retreats.

• Bayfront Inn on Fifth. The company owns a 101-room boutique hotel in downtown Naples along the Gordon River.

• Groves. Youngquist Brothers owns a 622-acre orange grove that it plans to develop into an industrial park.