The Right Plan Yields Funding, Key Partners

Ed Lopes, 49, started working in the meatpacking industry 30 years ago as a cleanup man. He worked up to operations manager and then general manager before starting his own company. Though he did not have the funds to buy expensive equipment and lease a facility that would meet strict federal standards, Lopes designed a funding plan that not only brought several key players into his company but also provided start-up money, let him retain control and gave his partners an extra incentive to help make his company successful. Lopes was interviewed by freelance writer Karen E. Klein.

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I had a couple basic business courses, but most of what I knew about this industry came from years in upper-management positions with food-processing companies. I had learned basic managerial skills, negotiated two union contracts and was very familiar with the workings of a plant.

I forced myself to get up at 6 every morning and started working on finding a facility, designing labels, creating new sausage formulas and getting all the detailed approvals I needed from the USDA. It took about three months.

I made a plan and priced used equipment. I figured out what it would cost to lease a facility and buy insurance. Once I had a solid handle on the dollars and cents, I contacted the sales brokerage and distribution companies that had worked for the company I left and I called a previous employer. I told them I was opening my own company and I offered them the opportunity to invest. I went to people who trusted me and who I trusted. I offered each of these three partners 16% of the company for $75,000. The $225,000 would allow me to buy reconditioned sausage stuffers and linkers, pay rent, get proper liability insurance and have enough left for capital and payroll for a few months.

I structured it so I maintained control of the company though I didn’t put up any capital. I promised to repay the partners $70,000 of their original investment within five years, with 10% interest. That way they would get a fair return and I would only pay interest for five years. I put in a clause saying I could renegotiate the loans after five years if I needed to.

We lost a few thousand dollars the first year, but that was the last time we had a profit-and-loss statement with negative signs on it. We’ve been profitable since and I paid off the loans within the five-year window.

Since these partners came on board with me, they had a twofold interest in seeing me succeed. The salespeople worked as hard as they could and distribution doubled their efforts. Very soon, the brokerage company and the distribution company began participating in our profits.

Because we started the company in October and had lots of start-up costs with very few initial sales, the partners all took tax write-offs on their investments that year.

Relationships are as important in this business as they are in any other. The buyers I had worked with in the past knew and liked me and they knew I was capable of delivering on my word. I sent my first product to Albertson’s on the very first day we opened for business. Now, we sell close to 6 million pounds of fresh sausage every year to major supermarket chains in seven Western states.

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If your business can provide a lesson to other entrepreneurs, contact Karen E. Klein at the Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia 91016, or send e-mail to [email protected]. Include your name, address and telephone number.

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AT A GLANCE

Company: Heatherfield Foods Inc., doing business as Villa Roma Sausage Co.

Owner: Ed Lopes

Nature of business: Manufactures and distributes fresh sausage

Location: 245 W. Pomona Blvd., Monterey Park 91754

Founded: 1987

Employees: 45

Annual revenue: $10.5 million