Earning the American Dream

Earning the American Dream

ENTREPRENEUR by Janet Leiser | Senior Editor

EMSI outsources its medical device manufacturing to India, China and Taiwan. Its founder and CEO started with more faith, persistence and determination than capital.

Mario Garcia Jr. took over an ailing medical device distribution company after a friend ran out of money and gave up.

Garcia worked in the evenings after his daytime sales job, calling prospects in California, where it was three hours earlier than Florida. He grew revenue to $9,000 in 1995, his first year selling electrical pain management devices. Four years later, he was the sole owner and annual sales exceeded $1 million.

Today, EMSI employs 85, with 35 sales representatives in six to eight states, and Garcia plans to hire another 215 sales reps within seven to 10 years. He says EMSI has no long-term debt, despite a hefty average annual growth rate of 40%.

"We're private, we don't have to show crazy numbers," he says. "We can reinvest profit back into business and live modestly."

Garcia, 36, won't disclose revenue or profit figures, but he has made enough to invest $2 million in an upstart Tampa bank where he's chairman and he's in the process of buying a $24 million commercial real estate portfolio, in addition to the $14 million he already owns.

His formal education consist of a general equivalency diploma from Tampa's Jefferson High School. His parents, who emigrated from Cuba in the 1960s, worked hard at blue-collar jobs to make ends meet when Garcia and his brother, four years his elder, were growing up.

At 12, Garcia earned $4 a day, helping build cabinets and working at a small grocery store, to pay for his own clothes. As a teenager, he helped his parents pay their household bills after his mother became ill.

"Things are coming together, not that they didn't before, but they're really coming together in a grand way," Garcia says from his corner office at EMSI's east Tampa headquarters, a 54,000-square-foot building formerly used by Merck Medco in Sabal Industrial Park.

Garcia's real estate company, the Validus Group, bought the building about two years ago for $3.3 million.

Nosey pays off nosey

When Garcia first became involved in the business, EMSI distributed devices made by other companies.

"We felt the market was asking for more than we could give," he says, "and we went to the distributor to get the manufacturer to make or change what we needed. They weren't willing to do it. So we started designing our own products with another manufacturer."

How does a self-made Tampa businessman learn about manufacturing and overseas outsourcing in the highly regulated medical industry?

"There was a lot to learn," Garcia says. "If you hit your head against the wall 1,000 times, something is going to give."

In addition, he says: "You have to be nosey. It all goes back to being inquisitive. I always wanted to know what other people were doing to see if I could do better."

Still, he attributes his success in the business world to the strong work ethic instilled by his parents.

"My dad went to work always, no matter how sick he was," Garcia recalls. "He was sick for 20 years. He had heart problems and never skipped a beat."

Garcia says he learned about business as a hotel sales director for a boss and mentor, who had an MBA. It was Garcia's first office job prior to EMSI.

EMSI's line of about 30 products include electrical stimulation devices used by patients at home to control acute and chronic pain.

They're sold primarily through chiropractors, orthopedic surgeons, pain management clinics and physical therapists.

"Physicians make money in the sense there's a fee they can bill the insurance company for training the patient on how to use the device," he says. "They also have to reevaluate the patient. In our business it's illegal to pay someone [to sell your product]."

EMSI was initially called Electrostim Medical Supplies Inc. Supplies has since been changed to services.

Competitive edge

EMSI is in the process of modernizing its devices to digital from analog and it's outsourcing development of a bone growth stimulator for home use at a cost of about $1 million, Garcia says.

"You have to come out with new products," he says. "If you're not renovating, you're going to be left in the dust."

Bone growth stimulators are the fastest growing medical devices in the market, he says. They're costly to develop, but the Medicare reimbursement for a device is about $3,800.

The stimulators reportedly increase healing time by 50%, Garcia says, adding, "They keep a lot of people out of the hospital and off a lot of drugs. There's a big value to it."

EMSI expects to start clinical trials on its new stimulator within six months. Those trials will take a year or two to complete.

"On that one we'll probably going to get into some debt," Garcia says. "But up to now we've been able to stay out of debt."

The company was one of the first medical device manufacturers to become accredited by the Joint Accreditation on Health Care Organizations, he says.

"Our big competitors have followed us," Garcia says. "The reason we did it is because we didn't have a whole lot of credibility in the marketplace. We were growing so fast and going into new markets and now we can say, 'Hey, we're JCAHO accredited.' "

The medical device industry is heavily regulated, he says, adding, "When someone tells me in the banking industry, 'Oh you don't understand.' I have to tell them, 'No, I don't think you understand.' I chuckle at the bankers when they tell me their business is highly regulated.

"At least, the regulators come in and audit the banks. In our business, we have to comply the best way we know how and seek help. Instead of help coming to us."

Exit strategy

Garcia's recent $2 million investment in GulfShore Bank (in organization) is part of his strategy to create a second career.

He plans to continue growing EMSI at about 25% to 30% over the next seven years before eventually selling, possibly to a competitor.

"We're trying to grow the company, obviously for exit," Garcia says. "There are a lot of bigger type of private management equity funds that buy companies like ours and they build them to the next level, and in three to five years they double it and sell it."

The past several years have been especially challenging for EMSI.

Blue Cross Blue Shield stopped paying for EMSI's products in four states within the past two years. And workers' comp laws were changed in several states, including California, which no longer covers EMSI's products for work-related injuries.

"They felt the products we sell aren't effective enough so they pulled the trigger even though Medicare, which sets the standard for the industry, allows it," Garcia says.

Hurricanes over the past few years also hurt EMSI's growth. Customers, who were there one day, were literally gone the next.

Still, the company continued to expand, he says, adding, "Despite it all, we still grew, not a great rate, but we still grew."

REVIEW SUMMARY

Entrepreneur. Mario Garcia Jr., founder/CEO, EMSI Inc.

Industry. Medical device manufacturing

Key. Flat hard work. Garcia attributes his success, in part, to the strong work ethic he learned from his parents who fled Castro's Cuba in the 1960s.