SOUTHINGTON — Many middle-aged executives-turned-entrepreneurs start working for themselves because they were downsized, or thought they might be laid off soon.
By contrast, Carlos Lara, 57, bought a business with a brother so that so that his wife could have a job and his brother could emigrate from Canada to the United States.
Lara grew up in Colombia and moved to Connecticut in 1997 to work for Capewell Horsenails, a company that started in Hartford and is now owned by a Swiss multinational named Mustad. At the time, the company still manufactured nails for horseshoes in Bloomfield.
His children had lived in Colombia; in Turkey, when he ran a horsenail factory there; and by the time he started shopping for a manufacturing company in 2004, he only considered Connecticut. "We liked the area, our kids were going to [high] school here. They were at the age we didn't want to move."
A precision machine shop, SSI Manufacturing in Bristol was spinning off its surgical instruments business to concentrate on aerospace and gun components, and Lara and his brother pooled resources and signed for a five-year loan to buy the business. Lara's brother did the computer programming for the machine tools until he exited Silex. Now they hire consultants if they're developing a design that will require different machining steps.
Silex kept two production workers who worked for the previous owner. Marta Marin, Lara's wife, took over administrative duties, and engineer Claudia Maldonado, also a native of Colombia, was hired within a year. Maldonado and Marin run the business. Lara still works full time for Mustad. He now oversees a factory in Colombia.
Silex makes graspers, dissectors, forceps, scissors and biopsy punches, all reusable tools for minimally invasive surgeries. Many tools sell for about $950 to hospitals or other end-users, though there are small volume discounts.
While disposable instruments have become very common because they are cheaper and there is no chance of transferring infection from one patient to another, each surgeon chooses what he or she prefers and tends to stick with it, according to professionals in the medical tools business. Giant corporations Johnson & Johnson and Covidien dominate the disposable market, while Aesculap and Stryker are dominant in reusables.
Silex sells about 2,000 instruments a year, and does about $650,000 in annual sales. Lara said that sales grew 12 percent in 2010, 8 percent in 2011, and have been flat for the past two years. They are hoping that engaging some outside sales people will increase their penetration in the hospital market. Now, 55 percent of their tools are sold to distributors, which is less profitable.
Alan Winfree, a salesman with SpecialtyCare, said his company has bought tools from Silex since before it changed hands. SpecialtyCare is outsource provider to the operating room for surgical instrumentation and surgical technicians, and serves 850 hospitals.
"A lot of it is driven by surgeon preference, and Silex does offer tools that other manufacturers have, but they have some unique features about their tools that make them desirable," he said.
"Being a small company, they're hungry for new business, they're always looking to grow their business," he said. "It doesn't take six weeks to get a prototype."
Even though Silex inherited the customer base of the former owners, the first five years were not easy.
"There have been times when we have said: Marta doesn't take a salary for two or three months," Lara said.
They were starting to see some decent growth in 2008, and then the failure of Lehman Brothers rippled through the U.S economy.
"When the crisis happened, we thought we were not going to make it," Lara said. "Orders were not coming."
They still were paying on the purchase loan, and had another loan for a new machine Silex bought in 2007.
In the third quarter of 2008, they'd shut down two weeks, run two weeks. Even into 2009, "We were shutting down at least one week a month," Maldonado remembered.
"We cannot lay off one person here, it is very important for the operation," Lara said. Currently, there are seven workers at Silex — four in production, Marin and Maldonado, and, three months ago, the couple's younger son, Estaban, joined right out of college to do purchasing, sales and marketing.
This past year, Silex spent $50,000 — half a grant from Connecticut Innovations, a quasi-public agency that provides financial support to technology companies — to develop a plastic handle for one of their instruments. It will cost about 25 percent less, and still will be able to be sterilized in an autoclave.
Winfree said the plastic handle has a familiar feel to disposable tools.
"The closer you can mimic a disposable in a reusable, sometimes that would sway a surgeon to use a reusable," Winfree said. His company helps hospitals convert from disposable to reusable instruments, which are more economical over the long run.
These kinds of refinements do not require a new medical device approval from the Food and Drug Administration. So far, Silex has not tried to develop an instrument that would have to go through that regulatory process.
"Just to talk to the attorney is a lot of money," Lara said. Maldonado said she and the owners keep saying "maybe next year." At current sales volumes, they believe it could take up to five years to make up those regulatory costs.
But while Obamacare is going to help the company in one way, the law hurts in another. Most of the company's employees have health insurance through their spouses, but Silex's cost for health insurance will fall so much that one employee's premiums will fall by 40 percent.
However, to pay for the larger Medicaid population and other subsidies, the government will begin levying a number of new taxes, including a 2.3 percent tax on medical devices.
Lara hopes the medical device tax is repealed — the idea has bipartisan support in Congress — because, he said, "small companies don't make large profits." If the tax was repealed, he said, that money could pay for new product innovation.
This is not a cost Silex will be able to pass along to its customers. "The market is very sensitive to pricing," Lara said. "Many times we have to eat our inflation rate because we cannot pass it on."Copyright © 2015, CT Now