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The Next Step
For Bermello and Ajamil, over-the-edge marketing is more than glitz. The Coconut Grove firm has enjoyed a five-fold increase in billings over four years, from high-profile public- and private-sector projects, and a spot on Inc. magazine's list of the nation's 500 fastest-growing private companies.
After four years of fast growth, Bermello, Ajamil has reached a crossroads: like many small service businesses that enjoy early success, it must figure out how to sustain growth. That's easier said than done. Florida is littered with businesses that failed to make the leap from entrepreneurial wonder to long-term prosperity. During Bermello, Ajamil's short four-year history, growing revenues hasn't been a problem. Ajamil, 46, a University of Florida-trained civil engineer, brought 20 years experience with Miami's prominent Post, Buckley, Schuh & Jernigan engineering firm when he teamed up with Bermello, 45, an architect with degrees from the University of Florida and the University of Pennsylvania. By adding engineering, land development, transportation and environmental consulting to the architecture practice, the firm grew billings to $17 million in 1995 from $3.2 million in 1992. But now the pace is slowing, with billings in 1995 up a modest 15% compared to a 72% revenue growth in 1994. Bermello projects 1996 revenues of about $21 million, up 18.9%.
International business
In 1995, the duo decided they would have to broaden their market to continue to grow. More than 40% of their business already comes from outside South Florida, including a significant international contribution. They considered opening regional marketing offices, but decided a faster way to grow would be through acquisitions of regional firms that employ 10 to 15 people and generate annual revenues of $1.5 million to $2 million. Bermello declares, "Our goal is to acquire a firm a year from now to the year 2000 and do $50 million in revenues by the turn of the century." Progress has been slow. One potential merger fell through; talks are under way for a second. "It's not a fertile time to do a lot of this," admits Ajamil.
Many successful small firms aren't interested in selling, or want too much money. Bermello, Ajamil did venture across the Dade County line in 1995 to open a satellite office in Fort Lauderdale. Since that move, the firm has landed a $22 million, multi-year expansion project at Fort Lauderdale/Hollywood International Airport as well as contracts with the City of Sunrise and North Broward Hospital District. A geographic diversification strategy likely will have rough patches, but it's the logical path for service firms, according to Raymond "Pat" Fishe, professor of economics and chairman of the finance department at the University of Miami. Noting that service businesses succeed by leveraging a core product, such as a training program, he says: "Very successful consulting firms develop products they can sell again and again."
Scrutiny by lenders
That's what the partners have in mind. Although Bermello, Ajamil's designs can't be cloned, technical and administrative knowledge, particularly their expertise in designing and building transportation, education and health care facilities, can be utilized in project after project. "We really believe in market niches that are exportable," says Bermello.
Whether they open offices or acquire them, an ambitious expansion will be expensive. Bermello says the firm, which finished 1995 with only about $10,000 in cash on hand, will offer sellers cash plus an interest in the business to pay for acquisitions of new firms.
Although the partners have discussed going public, there are no immediate plans for an initial public offering. "We're in the type of industry that's not necessarily attractive to the market," admits Bermello. But the firm could go public through an acquisition. Bermello cites Jorge Mas Canosa's merger in 1994 of his Church & Tower construction company with publicly held Burnup & Sims [FT, Nov. 1994], a Broward contractor, as a model.
As Bermello, Ajamil expands and prepares itself for scrutiny by lenders, controlling costs becomes crucial, which for service companies means controlling payroll. Last year, the firm's profits took a significant hit due to an increase in staffing and administrative costs. Profits last year fell 68% when labor, general and administrative expenses rose 46%, to $7.3 million from $5 million in 1994.
Keeping costs down
Arnold Heggestad, professor of finance and director of entrepreneurial programs at the University of Florida, warns that in seeking to keep costs down, fast-growing businesses frequently don't spend the money to add experts. "They often don't have adequate systems, controls and management skills," he says. "And the problems increase geometrically."
The two partners argue they've already made the right choices to avoid that problem by putting management support in place. The firm hired a new comptroller in 1994, continues to invest in staff training and office technology and to hold biweekly partners' meetings and monthly meetings with all employees. "I feel very confident that this management system will answer for 1,000 people," says Ajamil. When it comes to Bermello, Ajamil's organization, however, nothing is more important than getting and keeping clients. Small placards placed throughout the office reinforce the Bermello, Ajamil motto: "Whatever it takes to exceed our clients' expectations and help them succeed."
Everyone, from architects to secretaries, is encouraged to focus on clients and potential clients. Recent issues of Bermello, Ajamil's company newsletter feature articles with titles such as, "How to become an effective marketer," "Informed employees as public relations ambassadors," and "The spirit of involvement." Bermello and Ajamil practice what they preach. They credit involvement with a variety of professional, civic and community organizations as key to their success. The firm's reputation and contacts in South Florida won't help much as they expand to other parts of the state. So, as Bermello and Ajamil target potential acquisitions, their focus is on firms with principals who have been leaders in the local community.
Says Bermello, "We don't want to be carpetbaggers." Pat Fishe, the University of Miami professor, agrees with Bermello's premise that connections are crucial in a new community. "He needs to establish a reputation in a community that brings in business, that builds a level of trust." Alternatively, he says, architectural design firms often rely on a signature building, such as Arquitectonica's distinctive Brickell Avenue condominiums, to transfer their reputation from one community to another.
Growth spurt
While Bermello, Ajamil doesn't have a signature project yet, it does have an impressive list of clients. They include Miami International Airport, Portofino Group, NationsBank, Rouse Corp., the University of Miami and many of South Florida's large municipalities. The firm designed and engineered the Homestead Motorsports Complex; current projects include work on a new four-building campus in downtown Miami for Miami-Dade Community College and consulting for the Port of Miami's $750 million expansion.
For Bermello the biggest challenge facing his young company is one echoed by business people throughout Florida - finding good people. During the firm's initial growth spurt, as it vaulted to its current payroll of 170 from 32 in 1992, other firms were downsizing and there was talent around, says Bermello. That all changed in 1994 as the economy improved. Now, he is looking for talent at the state's universities by sponsoring lectures, hiring interns and conducting annual recruitment drives. To find specialists, particularly in the environmental field, they've had to go out of state.
As competition for talent intensifies, recruiting takes longer. Indeed, as the business grows, Bermello and Ajamil must devote more time not only to finding people, but to other management responsibilities such as marketing services, managing financials and negotiating acquisitions.
For many growing firms, this is the time the entrepreneur gives the company's reins to a professional management team. "At some point, the entrepreneur generally needs to get out," says University of Florida professor Heggestad. "The exception is the Bill Gates."
Bermello and Ajamil want to prove that they, like Gates, have staying power in building their business' success. Says Bermello, "We are in a race and there's no finish line."
