Williams and White Machine Inc. has history on its side, but it's thinking about tomorrow. A third-generation family business, the Burnaby, B.C.-based company was founded in 1957 by the grandfather of current chief executive officer Justin Williams.
Mr. Williams oversees three divisions. The oldest and biggest is a manufacturing shop offering services that range from computer numerical control (CNC) machining to fabrication and welding. The manufacturing equipment branch builds machinery for clients such as sawmills. Automation, the smallest and newest division, includes an industrial robotics venture called Remtech Systems.
Business is good for privately held Williams and White, which states its annual revenue as between $5-million and $10-million. In the past two years the company has almost doubled in size, to about 45 employees from 25. "We've found areas that were growing," Mr. Williams says, pointing to mining in particular. "The guys in the mining sector had a really good tear the last few years."
One of the company's biggest challenges is how best to use its capital. "There's a limited resource of funds," Mr. Williams explains. The manufacturing shop accounts for much of the company's revenue, but Mr. Williams notes that each piece of big machinery costs about $1-million. "The machine shop probably has a limited amount of growth that it can have, just because it's such a capital-intensive business."
In the equipment division, research and development is the main expense. Williams and White spent several hundred thousand dollars on a recent R&D project. "We're very bullish on it," says Mr. Williams, an electrical engineer by training. "We think we've developed a technology that's game-changing, but it definitely takes a capital-intensive investment."
Then there's robotics, which could be the future – or maybe not. This business started to take off only in the past two years. So far, Williams and White has sold about 20 robots to customers in B.C. and Alberta that include manufacturers and postsecondary institutions.
Although automation has the highest personnel and training costs of the three divisions, it tends to require less capital. But Mr. Williams thinks educating potential customers about robotics would call for a costly marketing effort with no guaranteed results. "Machining tends to be a bit safer," he says. "Whereas with the marketing, it's an investment, of course, but it could pay nothing."
So, where to invest for the future? "It's easy to say, 'Oh, put it where it's making the most amount of money,'" Mr. Williams says. "But that's not always the most forward-looking way of approaching it. Because something that makes money today might not be the best thing to invest in for tomorrow."
The Challenge: How can Williams and White best allocate its limited capital?
THE EXPERTS WEIGH IN
Gerry Humphries, associate, Western Management Consultants, Vancouver
The No. 1 thing to do is make sure they've got a very, very good financial analysis of where they're making money now in each of those three divisions and where their best return is.
And then secondly, look to the future. Where are the three divisions going? And it may be that, in fact, the new robotics side is about as big as it's going to get and the forest sector is starting up again, the machining side and the saw blades and whatnot actually has a future to it that they didn't see five years ago. … So they're probably due for a strategic planning session.
And then they've got some decisions to make on whether those opportunities down the road are going to involve an infusion of capital. It's probably going to come from a couple of sources, either their own resources, or secondly, maybe opening up the ownership and bringing in a partner who brings capital with them. And that can be still in a private situation with somebody they know, or even opening up their ownership base to some key employees and having them invest in the company, too.
Or thirdly, the venture capital companies or the private equity companies will get involved in providing the capital and some business expertise, which is pretty important to a company of this size because often you're not reaching out into the broader business community for advisory help. … But that comes with a price, and the price is that they give up part of the ownership.
Gerry Simpson, chief executive officer, Polaris Group Management and Consultants, Windsor, Ont.
Looking at the internal issues is really important. Do they have the financial resources to support growth of the core business and expand into robotics? Do they have people with the appropriate skill sets to maintain the core business and develop robotics? Also, what risks are attached to securing robotics business? Do they risk losing core business if they focus on new business?
They also might use the federal Scientific Research and Experimental Development tax incentive program to offset the development costs for robotics. They could also improve cash flow for investments by leasing equipment or using the Business Development Bank of Canada for financing.
They should also look at the external marketplace. Who is the target audience for robotics? What marketing resources do they need, including financial and personnel? Do they have the marketing skills or do they need an outside agency?
Management must establish priorities. Do they need to enhance the core business by expanding the customer base and increasing business with existing customers, or should they replace the current core business over time with robotics and new technology?
Peng-Sang Cau, president and CEO, Transformix Engineering Inc., Kingston, Ont.
Looking at Canadian manufacturing in general, the key question for the robotics team is, are any of the owners of Williams and White engineers themselves? Do they create innovative technologies? Because if they don't, then I wouldn't spend any more time on it.
It's very difficult as a Canadian company to get your name in the international arena unless you have something compelling to sell. And compelling means that your technology has to be sexy. It has to stand out on its own so that international clients are willing to come look at you.
I wouldn't do mass marketing because robotics is quite niche-oriented. I would spend the money on visiting clients, having that face-to-face, and try to market it that way.
The question is, what technology are you creating? Is it innovative and is there a market for it? Talk to a couple of your clients – they are going to tell you right away. Get some non-disclosure agreements signed, talk to key customers, and they'll tell you. At the end of the day, what you want to do is sell, so why design in the dark? It's a good time to talk to key customers and find out what it is they like or don't like and what you can do about it.
THREE THINGS THE COMPANY COULD DO NOW
Hold a strategic review
By looking at new business opportunities from an internal and an external perspective, you can make clearer decisions.
Secure more capital
Whether it's from a new business partner or a venture capital firm, a cash infusion will create more room to grow. Investigate federal tax incentives.
Talk to key customers
Rather than launch a big marketing campaign, find out what existing clients think of your robotics technology.
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