Laser Fast Growth

By Business Observer Staff
| 6:00 p.m. May 11, 2007

Entrepreneurs

Laser Fast Growth

UPDATE by Janet Leiser | Senior Editor

The No. 1 procedure at Ideal Image continues to be the removal of facial hair for women under 30. As the CEO says, beards haven't been fashionable on women since before biblical times. Hairy men also make Ideal customers.

Ideal Image Development Corp. CEO Dean Akers put brakes on the Tampa-based company's expansion in August after the company ran into problems with several of its newly opened laser hair removal clinics.

"We didn't know if there were problems with execution or what," Akers says of the stumbles at the new St. Louis, Mo., locations.

At first glance, he worried the difficulties were caused by the effect of rising fuel prices on consumer discretionary spending. Turns out, it was a problem with execution: the right managers weren't in charge.

"We had to work on getting the best people on the bus," Akers says. "We had people that just weren't the people we needed."

After the managers in St. Louis were replaced, the Missouri locations soon became some of Ideal Image's top performers, Akers says. Now the company is back to full-growth mode.

"We're running at 100 miles per hour," the CEO says.

The company now has 58 franchises since the first one was opened in Sarasota in 2004. By year's end, Ideal Image is expected to have about 80 locations, with about 20 owned by the company. All are in the United States, except two in Australia.

While an impressive number, it's less than Akers projected two years ago. In late 2005, Akers told the Review the company planned to open 120 clinics by the end of 2006.

Still, Akers and other investors aren't complaining.

"We had growth of 115% last year," Akers says. "Our investors are real happy."

Akers says Ideal Image and its independent franchises are on a revenue run-rate of $70 million this year, up from $50 million a year earlier. Net profit is in the 20% range, he says. And year-over-year same-store sales are up about 13% on the average.

To grow even faster, Ideal Image is looking at acquiring other companies for the first time since Akers took over the business from its founders, Richard Mikles and Joseph Acebal, in October 2004.

"If it makes sense, we'll do it," Akers says of acquisitions.

He declines to identify what companies Ideal Image might purchase, but he says he's confident the business's investment partner, H.I.G. Capital, would support outside growth.

Last year, H.I.G. Capital invested $16 million in Ideal Image to help pay for new company-owned locations.

Akers also expects continued organic growth: Ideal Image has captured only 8% market share of a highly fragmented $3.5 billion industry.

"As best as we can tell we're the largest in the industry," he says.

It's a growing market that's expected to grow to $5 billion in 2009 as consumers continue to spend more on self-improvement services, from plastic surgery to hair removal to getting physically fit. At Ideal Image, the most common procedure is the removal of facial hair on women.

Akers often jokes that beards on women haven't been popular since before biblical times.

"Our consumer is getting it done because they want permanence for their confidence and self-esteem," he says.

Ideal Image's board now has five directors: Akers, Mikles, Acebal and H.I.G's Craig Burston and Brian Schwartz. H.I.G. owns the most stock at about 41%, while Akers owns about 6.5% and Mikles and Acebal together own about 35%.

Ideal Image is among more than 50 companies in H.I.G.'s portfolio. The firm has about $3.5 billion under management, including $550 million in venture capital.

Decisions about Ideal Image's future are board-driven, Akers says. Since the company doesn't have a majority owner, any one of the five directors could potentially cast a deciding vote.

The two venture capitalists on Ideal Image's board, he says, are "bright guys" who are helping the company position itself for a possible initial public offering.

Ideal Image might go public to create liquidity for its shareholders and to provide cheaper capital for faster expansion, Akers says. That hinges, of course, on whether the company would be big enough to cover the costs of complying with all the requirements of Sarbanes-Oxley.

While public companies are increasingly going private, many will probably also go public again, Akers says, adding: "I'd be highly shocked if they don't come back in a few years."

A decision on going public will probably be made by the directors after the second quarter of 2008, he says.

Ideal self-improvement

When it comes to permanent hair removal, Ideal Image bills itself as the industry leader in the United States and it intends to become the global leader, with much of its growth fueled by clusters of franchises.

After Akers took over about 2½ years ago, the company narrowed its focus from providing various services to laser hair removal only. The CEO says it was an important step that helped the company grow fast and remain healthier than other competitors that offer additional services. Medi-spas, which provide many services, seem to have suffered more financially, according to news accounts.

Akers suspects that's because the medi-spas tend to target the 40 and older crowd, while Ideal Image's target customer is 30 and younger.

After Akers temporarily halted the company's growth in August, he made another important change.

Employees that work at new clinics no longer travel to Tampa for a month of training. Instead, a team made up of what Akers calls Ideal Image's "best of the best" spends 30 days at each clinic training new employees. The new employee works alongside the more experienced worker.

"That made a huge difference," Akers says. "We'd train them exclusively in Tampa at the training center and send them away. As soon as they got live shots taken at them, they had challenges."

The restaurant industry has relied on veteran servers to train new employees for years, Akers says.

A recent new clinic in Wilmington, Del., was Ideal Image's most successful opening ever, Akers says. He attributes that success to the change in training methods. Same thing for an Albuquerque, N.M., clinic that did so well it covered its operating costs in its first week.

Whatever obstacles arise, you can bet Akers plans on keeping Ideal Image at the top of its game.

"Our whole future hinges on our ability to execute," he adds.

And it looks like an IPO is in the company's future.

REVIEW SUMMARY

Company. Ideal Image Development Corp.

Key. Positioning the company for a possible IPO.

Next. Acquisitions might fuel growth.

BY THE NUMBERS

IDEAL IMAGE

Year Revenue Run-Rate

2003 $3 million

2004 $8 million