A Different Tune

A Different Tune

MANUFACTURING by Mark Gordon | Managing Editor

Not even a Gulf Coast-based guitar string company is immune to an off-key business climate.

The lurking feeling that Sarasota is becoming an increasingly unfriendly place to run a business isn't just a campaign sound bite or political scare tactic to John and Jim Cavanaugh.

It's a hardened reality.

The Cavanaughs, father and son who run a Sarasota-based business that manufactures and sells guitar and violin strings, as well as reeds and mouthpieces for saxophones, clarinets and other wood instruments, face it everyday.

The family's trio of musical accessory companies, which all fall under the Cavanaugh Co., have scaled back their employee base from 75 to the mid 50s over the past few years. And revenues have been flat for more than the past year, although company executives decline to release specific figures.

To be sure, the onus for the company's slowdown isn't totally on Sarasota's business climate, which is gaining a reputation in business leadership circles as difficult, if not downright hostile.

Indeed, the musical instrument industry has been struggling recently, say the Cavanaughs, as are many industries that depend mostly on leisure purchases. When times are tough, musicians tend to keep strings longer or put off a new guitar purchase entirely. It has been happening in the boating industry, too.

Overseas competition, particularly in China and Europe, weighs heavily on the company, too. "The whole industry has been in a holding pattern," says John Cavanaugh, the company president and Jim Cavanaugh's father. "It's not that rosy out there."

The situation only gets worse locally, though, hitting the Cavanaugh Co. from all sides. On the local level, it starts with the regular hurdles, such as impact fee hikes and permitting delays. And then, last month, Sarasota County voters approved a supermajority governing imitative - by 60% - that will only further slow economic growth.

It's not much better on the state level, either. There are big-picture issues, such as property taxes and insurance, and then there are industry-specific rules and laws that, at least to the Cavanaughs, can only be seen as anti-manufacturing.

"Sarasota isn't a friendly place to have a manufacturing company," Jim Cavanaugh says. "There's no incentive to be here anymore. Have we talked about moving? Yes. But right now we are not going to do that."

Top-heavy problems

The Cavanaugh Co. isn't the only Sarasota-area manufacturing business to have those thoughts.

Florikan E.S.A Corp., a Sarasota-based fertilizer company and Chris-Craft, a Sarasota-based boat company, are just two examples of local manufacturing operations that have either delayed expansion plans or expanded in another state, says Peter Straw, president of the Sarasota Manatee Area Manufacturers Association.

Lakewood Ranch-based cultured diamond manufacturer Gemesis also considered leaving the area over the past year. But after being guaranteed some tax incentives based on job growth, the company ultimately decided to expand its current location, announcing plans to build a 31,000-square-foot building earlier this year.

Straw says in addition to the known economic problems, Florida is top-heavy when it comes to recruiting and retaining manufacturing companies. It gives out job creation and tax breaks on the front end to get a company to come to the state, he says, but then it mitigates that with other stipulations, such as adding a tangible tax on equipment that puts companies in a bind when it comes to potential expansion.

What's more, Straw is worried the property tax crisis will further erode the state's manufacturing base. That's because if and when the state loses money from that source, it might look to get money from other areas. Says Straw: "There is a big concern on the part of the manufacturing community that the incentives we have gained over the last few years are now in jeopardy."

Musical roots

While Straw and other economic development leaders lobby legislators, the Cavanaughs are turning inward. The company is in the middle of a three-year restructuring plan designed to save money in the short-term and provide a road map for a more efficient company in the long-term.

While the stakes are high, tinkering with the company are easy notes for the Cavanaughs to play: John Cavanaugh, 67, has owned the company for more than 40 years, and while he didn't enter the industry as a musician, he is still the company's chief research and development guru, figuring out new ways to make a better string.

Meanwhile, Jim Cavanaugh, 33, comes to the business with both a music and a business background.

He graduated from Florida State University, where he majored in business and played bass in the school's symphony.

But the company itself, as well as many of its products, has been around for years prior to the Cavanaughs. Currently, it's broken down into three separate entities: The Super-Sensitive Musical String Co., which makes violin strings, including ones under the Red Label banner, a leader in the school market; Black Diamond Strings, a 117-year-old guitar string and pick label the Cavanaughs bought in 2001 that's now used in a variety of music genres, from country to classical; and Bari, a mouthpiece and reed manufacturer originally founded by 1950s jazz musician Wolfe Taninbaum that the Cavanaughs bought in 2005.

The company's roots are in Super-Sensitive Strings, a business initially founded in Chicago in 1930 by a local musician. By 1967, the company was on its second owner and it was sold again - this time to Vince Cavanaugh, then the company's accountant. Vince Cavanaugh's son John, having just finished a stint in the U.S. Navy, joined his dad in the venture.

In 1972, the elder generation of Cavanaughs moved the company to Sarasota. Most of the next 30 years were spent refining the company's core product, violin strings.

It expanded its product line, too, first adding teaching aids and maintenance kits for the strings, and then buying Black Diamond.

The company now manufactures three distinct product lines, all of which are made and shipped from Sarasota. About 75% of its customers are distributors, with the rest being a combination of music instrument dealers and individual consumers.

Jim Cavanaugh joined the business in 1997. By 2000, he had implemented several improvements, including installing a computerized shipping department, upgrading the company's quality-control process and supervising the construction of the company's current home, a two-floor 24,000-square-foot factory in an industrial park near Intestate 75.

Even before expanding into new instrument accessory markets by buying Black Diamond and Bari, the company had gone through a growth spurt in the earlier part of this decade. It was a finalist for the Greater Sarasota Chamber of Commerce's small business award in 2002 and 2003, for example, an award based partially on revenue growth. And it won the Chamber's Manufacturer of the Year Award in 2003.

Cutting costs

With the growth spurt behind it, the company is now focusing on its restructuring plan.

That includes looking at ways to cut costs in every department, Jim Cavanaugh says, including sales, production and inventory.

It's a difficult challenge because the business is ultra-hands on - even the machines that make the strings and reeds are manufactured and repaired in-house.

"We are always building something," Jim Cavanaugh says. "We are always experimenting with things."

Not surprisingly, cost cutting is a big priority at the company, given how much cheaper guitar strings and saxophone mouthpieces can be manufactured in China.

In the U.S, there are only a handful of companies operating like the Cavanaughs do, manufacturing everything domestically.

One cost-cutting effort has been through automation. The company is currently reviewing every piece of machinery to see what can be transferred over to a computer-based system, to make the assembly line process more efficient.

An automation system already in use is through a machine used to produce an internal part for a mouthpiece on the Bari product line. It has turned a five- or six-step process into one step, says Jim Cavanaugh.

The company is also experimenting with its purchasing systems, looking to buy more materials in bulk, for instance.

That can be tricky though, as the company's products are so sensitive, and in many cases refined, that materials such as gold and nickel need to be top-quality.

"There are so many materials we use," Jim Cavanaugh says, "and every one of them produces a different sound."

And finally, the company has been talking with officials at FPL about possibly being a test case for a worksite solar power system, to save on money on its energy bill.

"Right now, it's a cost factor," Jim Cavanaugh says. "The incentive isn't great enough for us to change over."

REVIEW SUMMARY

Business: The Cavanaugh Co., Sarasota

Industry: Manufacturing, musical instruments

Key: One of several manufactures in the Sarasota-Manatee market facing hard times, the company is seeking new ways to cut costs.