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In our twelfth series Linda Pearson talks to Mark
Pugh and Ger O'Carroll founders of Arrotek
Medical, about their business’ crux at present.
| VITAL STATISTICS |
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| Ger O’Carroll, co-founder of Arrotek
Medical |
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Business Name:
Arrotek Medical
Year of Set Up: 2005
Founders: Ger O’Carroll and Mark Pugh
Location: Strandhill, Co Sligo
Business Type:
Medical Device Services |
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Arrotek Medical specialise in assisting companies and private individuals
bridge the gap between concept and market. They have the clean-room facility
and engineering experience to manufacture medical device for functional
evaluation and clinical builds. The company provides the regulatory expertise
required for the successful commercialisation of your medical device.
BACKGROUND
Arrotek Medical was founded in 2005 by two engineers, Ger O’Carroll
and Mark Pugh, who previously worked in the medical device industry. Their
company was formed due to a gap in the market left by their previous employer
who decided to focus on core business and cease trading in the development
of medical devices for third parties. The experience gained by the two
engineers was then of reduced value to the old employer so they decided
to form a new company focusing on developing medical devices.
Arrotek offers a service to medical device companies. They assist companies
in bringing medical devices to market. This is carried out in three stages.
The first stage is the design of the medical device. The second stage
is to realise the manufacture of this device, and the final stage is to
work for regulatory approval so the device can be openly sold in Europe.
The customer base of Arrotek is mostly based in Europe. Less than 5%
of the work carried out is for the domestic market. Their largest sales
areas in Europe are Sweden, Netherlands, and the UK.
CURRENT STATUS
The company has being trading for two years. The original goal of gaining
all the customers overlooked by our old employer has being completed successfully.
From this base of customers the company is now attempting to expand using
new contacts not previously known to the founders. This has given new
direction and methods in the field of marketing which the company is currently
undertaking.
The current marketing aim is to expand their footprint in the Irish market.
The company has moved to a more direct selling method in this market.
Put simply they will visit every company in Ireland who might be interested
in the services they offer. This is currently underway, and although Arrotek
have not received many sales yet they have made the domestic industry
aware of their presence.
EXPANSION
Arrotek Medical aims to expand in two ways in the coming year. Firstly,
the company aims to employ staff on a full time basis. Since the company
was founded the only full time staff are founders Pugh and O’Carroll.
They also use consultants on a contract basis and have employed students
as part of their learning experience. The company would now like to take
on full time staff to assist with the current work load, and to bring
new experiences and skills to Arrotek.
Secondly, the company aims to expand their range of services. When Arrotek
was founded its’ abilities, facilities and skill-set was similar
to that of the old employer and this range of capabilities was not particularly
unique in the industry. During the two years trading the company has seen
openings to provide newer and more technically advanced services to their
customers. These would offer a service not readily available from other
suppliers. This may also lead to a change in direction in marketing. Arrotek
currently markets itself against other companies offering similar services,
but hope to market with a more defined unique selling point in future.
FINANCING
The company was financed from three sources. These include the founders,
Sligo County Enterprise Board, and a bank loan. The split of funding was
36%, 36% and 28% respectively. The founders split the share holding 50/50
and raised the capital personally. Both share holders availed of a BES
Scheme in the forming of the company, and this proved greatly beneficial.
The county enterprise board supported the capital costs of the equipment
required by the company to begin trading. This was given in a part loan
and part grant and covered 50% of the initial cost of the capital expenditure
of the company.
An AIB Bank loan was used to fund the remainder of the required capital.
This loan was offered in an interest only option in year one and then
repayable over seven years. Due to the positive performance of Arrotek
this was repaid in full after year one. Currently the only outstanding
debt owed by Arrotek is the loan aspect of the County Enterprise Loan.
The company have no other debt obligations.
QUESTIONS FROM ARROTEK MEDICAL TO THE PANEL
- Employing personnel is something new to the founders, so how do
you judge the right person for the job?
- Should a company expand their capabilities or expand their knowledge
of the current capabilities?
- An exit strategy is something the founders discussed so should
this be the aim of the company now or should more ground work be carried
out to find a company direction first?
Kevin Sheehan, Partner, SME Services, Deloitte, heads up the panel
of experts below who give their advice on how best technical-ideas.com
can grow its business.
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| Kevin Sheehan, Partner, SME Services, Deloitte. |
Ger and Mark are really selling their time and experience. It is always
difficult for the shareholders in a business to expand and find people
who will give the same level of passion and dedication to the business
as the founders.
The potential for growth is currently limited due the restricted
capacity of two professionals. When the owners think of the ‘end
game’ and exit strategy, they must consider why a third party
would buy Arrotek. At this point the value is more likely in the
people than the trade.
Build A Strategy
Ger and Mark need to sit down and document a strategy. Central to
their plan will be how to grow the business and make it more valuable
and less dependent on the owners. Buyers of businesses value assets
such as assembled highly trained workforces, know-how or expertise
and a solid customer base. Anyone can build a clean-room, it’s
what goes through it that adds the value.
The owners have particular skills. They will need to invest in
skills outside their own ability – particularly in finance
and recruitment. Such investment should simultaneously be supported
by a business development plan to identify and win new customers
to earn sufficient revenues which will fund future growth.
Kevin Sheehan, Partner, SME Services, Deloitte.
Head of Panel for Crux of The Matter.
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| Brian O’Kane, Managing Director, OAKTREE
Press |
While increasing staff numbers is a ‘good thing’, and will
be much encouraged by Arrotek’s key external funder, the Sligo
County Enterprise board, it is not an end in itself. There needs to
be sound commercial reasons for doing so.
Question Yourself
Before deciding to take on full-time staff, Arrotek should ask themselves
some questions. Why take on staff and what for? How good are the
people we are looking at and what’s their attitude like? What’s
the cost / benefit balance? Then, and only then, should they recruit
staff.
Their current practice of taking students in for work experience
should give them a pool of people whom they already know in a work
environment to draw from. It makes more sense for Arrotek to hire
junior employees, who can take over part of the existing workload,
releasing the founders to explore new directions.
Capabilities And Strategies
The founders should be exploring new capabilities and expanding
existing capabilities – otherwise, their company will be left
behind. Their exit strategy depends on their own personal goals,
which need to be discussed and aligned between them. If selling
the business is the eventual aim, then it needs to be able to operate
independently of the founders.
Brian O’Kane, Managing Director, OAKTREE Press
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| Adrian Moynihan, Business Strategy, AIB |
Arrotek Medical has successfully established itself over the past
two years and is currently moving from the start-up phase of the business
lifecycle into the expansionary stage. While this is good news, it
does bring a different set of challenges for Arrotek’s owners.
Business Plan
Of primary urgency should be to review their current business plan.
A key factor that many business owners do not realise is that growing
an existing business can often require the same amount of planning,
work and effort as starting a new business – if not more.
Growing The Business
An important first step for Arrotek’s owners when seeking to
grow the business is to look at where Arrotek is now and where it
would like it to be. By exposing any differences between the current
and future business position, it is possible to spot areas that
will require attention and the need to devise plans to bridge those
gaps. Arrotek need to analyse the business’s key strengths
and weaknesses and the market opportunities available to it. This
will help the owners to decide on the most appropriate growth strategy
for their business.
Adrian Moynihan, Business Strategy, AIB
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| Mark Fielding, Chief Executive, ISME |
As the workload increases it is necessary to hire fulltime staff and
the partners need to be careful as the investment in personnel can
be by far the most expensive and far-reaching decision made in a young
company.
Choosing Employees
Entrepreneurs can agonise and fret for ages before making a decision
on investment in machinery or other fixed assets, but seem to hire
on a whim and risk long term agony over incorrect choices, remember
that today’s hiring mistake is tomorrow’s problem. The
best way to choose an employee is still the old fashioned way of
specifying the job and all its requirements then draw up a list
of the desired attributes that a potential candidate should have
and from that design the advertisement.
Hire Better Than Yourself
Set out with the intention of hiring better than yourself, with
the potential to replace you and then design a remuneration package
that reflects the importance of the job, remembering that people
require a challenge, respect and pride in their job as well as the
money. Savvy leaders need to understand their newmillennium employees
and shift the way they manage and mentor their golden assets as
the success or failure of many organisations is increasingly determined
by this issue.
Mark Fielding, Chief Executive, ISME
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| Mary Ryan, Assistant Director, WESTBIC |
The promoters of Arrotek Medical need to achieve the same success
indigenously as they have with select overseas markets and distinguish
themselves in this marketplace.
Market Research
Key to their development strategy is to undertake qualitative market
research as part of their present approach to the domestic market.
This will identify the additional capabilities and services that
Arrotek may need to differentiate themselves and their services
from competitors and will in turn identify additional skills base
that the promoters require which will impact on their recruitment
drive. It is also advisable that the promoters recruit personnel
based on adding a complimentary skills set rather than just a duplicate
of the promoters own skills base.
Exit Strategy
Any company aiming to acquire another business will give great consideration
to its uniqueness and differentiation in the marketplace. The promoters
should develop its position in the indigenous market through an
expanded and distinguished service, as well as developing its position
in select overseas markets, prior to considering an exit strategy
pitch. In addition to enhancing its core service offering to medical
device companies, Arrotek should also consider the viability of
providing similar ‘concept to market’ design and consultancy
services to other specialist market niches.
Mary Ryan, Assistant Director, WESTBIC
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