VANCOUVER, Wash.—When Sam Gagliano read on Craigslist that a machine shop was for sale, he was intrigued. He’d been working in CNC machine shops for nearly 20 years and owning his own shop had been a long-term goal.
As it turned out, the seller had several pieces of equipment in his garage—where he’d been manufacturing custom RV accessories under the name Bent River Tech for a number of years—but financial records and business systems were scant or non-existent.
Which meant, Gagliano said, “there was no basis for valuation.”
Individual machines—from grinders and lathes to mills and routers—can cost anywhere from $5,000 to $100,000 and up for the type of high-precision computer-programmed manufacturing Gagliano wanted to do. But, buying a machine is different than buying a business.
Rather than deal with hypotheticals on what the business might be worth, Gagliano offered to work the “shop” as his own after hours and on weekends for 13 months to create the necessary documents and then make an offer based on his revenue and expenses during that time. That information would also be key to getting a loan once they’d agreed on a purchase price.
At the time, Gagliano was managing a prototype machine shop in Vancouver, Wash., for a large, multinational, privately-owned corporation. He didn’t see this side venture as competition, but his superiors did. So, the same day he informed them of his plan, in late December 2017, he was out of a job.
Instead of having a year to figure out if he could make a business—and a living—out of seven machines in someone’s garage in Washougal, it was go time.
Gagliano filed for unemployment, and then learned about Washington State’s Self-Employment Assistance Program (SEAP) that allows people on unemployment to forego looking for a new job if they are actively working to start their own business.
One of the requirements of SEAP is that participants work with a state-approved technical advisor, and that’s how Gagliano met and began working with Jerry Petrick, a certified business advisor with the Washington Small Business Development Center (SBDC).
The Washington SBDC is part of a nationwide business advising service that has been providing no-cost, confidential, one-on-one advising to business owners and entrepreneurs since 1981.
The Washington SBDC is administered through a cooperative agreement between the U.S. Small Business Administration (SBA) and Washington State University. About half of SBDC funding comes from local and state sources, including institutions of higher education, economic development agencies, civic and business groups and municipal governments. The other half comes from the SBA.
A native New Yorker, Gagliano had spent a dozen years working as a CNC (computer numerical control) prototype machinist at Micro Instrument Corp in Rochester, N.Y., before moving to Portland in 2012 to manage the model machine shop for Sigma Design.
Over the years Gagliano has developed a strong network of colleagues and mentors in advanced manufacturing and was confident of his ability to run a prototype to production CNC machine shop and bring in new clients. But, working through the requirements of the SEAP program along with setting up business systems and financial spreadsheets for the seller’s business was a challenge.
When he needed information, tools or resources, Petrick was his go-to resource. “He’s been instrumental in helping me get hooked up with the right people,” Gagliano said. In addition to being a great resource, he said, Petrick also checked in from time to time, encouraged him along the way and provided sound advice when Gagliano had questions.
It ended up taking a little more than a year, but in May 2019 Gagliano became the owner of the assets, name and client list of Bent River Tech. He financed the purchase with an SBA loan for nearly $150,000, which included extra capital for startup costs.
Stories that start like this don’t usually lead to such happy milestones, said Petrick, who has been an SBDC advisor since 2002. Far too often, small business owners who don’t have an exit strategy end up just closing their doors and selling their inventory or equipment in a fire sale.
“When a successful business closes instead of transitions to new ownership, that’s lost opportunity for everyone,” Petrick said. “This story is remarkable in that the seller and the buyer were working together to figure out the value of the business.”
“It was a win-win situation,” Gagliano agreed. “The seller was able to get close to his asking price and it afforded me the opportunity to prove myself to a bank and get an SBA loan.”
It also gave him time to build his customer base and reputation as a prototype shop able to take on complicated, advanced manufacturing jobs in robotics, semi-conductors, consumer electronics and other industries.
“I don’t want to be a mom and pop shop,” he said. His father owned family restaurants, Gagliano said, and though he loved it, he was also trapped by it. “I wanted to do something different,” he said.
While Gagliano currently has one employee, and is about to hire a second, he anticipates growing his business to 12 to 15 employees with revenue of $3 to $5 million within about five years.
For more about Bent River Tech, go here.
For more about the Washington SBDC, go here.