Economic Center to the Rescue : From Aerospace Firm to Eatery, VEDC Helps Damaged Businesses Regain Their Footing

Convinced there was still money to be made in the Southern California aerospace industry, a few years ago French entrepreneur Michel Szostak raised $1 million from an investor friend in France and started a small airline fastener company in Sylmar. He purchased the machines he needed to make the little bolts that help hold aircraft engines together and opened M.S. Aerospace in June, 1992.

The company thrived until the Northridge earthquake last January. The quake hit Szostak’s headquarters hard: The roof caved in, and several of M.S. Aerospace’s 100 machines were severely damaged. And like many small-business owners, Szostak did not have earthquake insurance.

When his employees trooped in, “Some people started to really cry, so I told them, ‘We’re going to start again,’ ” recalled Szostak.

That was a nice goal, but as Szostak quickly learned, he needed everything from a quick loan to a new headquarters to stay in business. He also needed someone to guide him.

The guide turned out to be the Valley Economic Development Center, or VEDC, in Van Nuys, a nonprofit management consulting organization that assists small businesses. VEDC has 20 business consultants, many of them former business owners, and operates on an annual budget of $2 million funded by federal, state, county and city government agencies. “Our main goal is to help small businesses thrive, and to create and save jobs,” said John Rooney, VEDC president and chief executive officer.

Szostak attended one of the quake-disaster assistance seminars VEDC co-sponsored. He knew his company would be out of business if he had to wait months for a loan or financial aid from the Small Business Administration or the Federal Emergency Management Agency. Facing an estimated loss of $600,000 in orders from what he figured would be four weeks of lost production, he needed a new facility and immediate financing.

Szostak said that a VEDC consultant took up his case and “introduced me to the right people from L.A. County and the city of Burbank,” who quickly toured his damaged plant. “I explained the problem, and everything went very, very fast,” he said. VEDC helped him file the documents required to secure the loans he needed.

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Within a month, Szostak received $490,000 in low-interest loans from the county and Burbank, and he moved the company into a spacious facility in that city. Without VEDC’s involvement, “I am sure the company would be closed today,” Szostak said.

Last year, M.S. Aerospace did $4.8 million in revenues, up 50% from the previous year, and today it employs 62 people.

“Helping small businesses after the earthquake really put us on the map,” said Rooney, who has been with VEDC for seven years. Previously, Rooney, 33, co-owned a medical supply company with his wife, was a consultant to an investor helping him buy companies and worked for San Diego State University’s Foundation, running a similar program to VEDC’s.

Since its inception in 1978 as a community revitalization program, the Valley Economic Development Center has shifted its emphases to providing consulting and business training and being a guiding hand in lining up financing.

VEDC’s staff includes former bank presidents and venture capitalists. It preaches that small businesses are the lifeblood of the San Fernando Valley, and if given the assistance they need, these businesses will help revitalize the community and create thousands of jobs.

Another small company VEDC helped keep in business after the quake was Michael J’s Kitchen in Sherman Oaks. In the restaurant business since age 16, Michael Ourieff was devastated by the damage the Northridge quake left behind. He had no earthquake insurance for his restaurant. Gazing at the rubble on his kitchen floor in Sherman Oaks, he saw broken dishes and glasses, pizza boxes and pasta he had emptied out of a deep fryer. Like Szostak, he didn’t believe he would reopen.

“Besides food spoilage, we had about $15,000 worth of damage to the building,” Ourieff said.

Although his restaurant received approval to reopen from building inspectors, many other buildings in Sherman Oaks were red-tagged, and the nearby area became a virtual ghost town. Business dropped dramatically. Ourieff tried to negotiate a lower lease with his out-of-state landlord and asked her to repair the building and parking lot. She did not want to do either.

Ourieff tried, unsuccessfully, to find a new location. When his landlord suddenly gave him 30 days notice, he panicked.

In desperation, he contacted VEDC. “They helped me to negotiate my lease at the existing location,” Ourieff said.

VEDC’s senior management consultant, Jim Jacobs, began talks with Ourieff’s landlord and persuaded her to lower the rent by $500 a month. Although Ourieff said she still refused to do most of the repairs, she was persuaded to fix the parking lot.

During the six-week negotiation period, Ourieff stayed open for business and was then able to secure a less expensive lease half a mile away in a Sherman Oaks area less affected by the earthquake.

Ourieff did get a loan of $50,000 from the SBA on his own. And VEDC helped him obtain approval for a second SBA loan of $39,000 to help in moving the restaurant.

Today, Ourieff’s restaurant is open, and he’s hoping for a good year, in part because the offices near his new site were not hit as hard during the quake, so there’s more customer traffic than he would have had at his old place. “I’m an optimist now,” Ourieff said. “I have to be.”

Another business owner who turned to VEDC for help was Chuck Novak, president of PACE Engineering in Chatsworth. Since 1967, his company had provided design and planning services to commercial and residential developers and contractors. In 1992, he took a training program to help him create a new service for a new market: inspections of buildings for insurance companies.

During the 10-week course, he developed a business plan and was helped in designing and writing brochures targeted to insurance companies. He also made sales calls on insurance company claims managers. The training helped, and his timing was right because after he decided to get into building inspection, the Northridge quake struck and his business boomed. He hired eight new people.

“Prior to the quake we completed over 100 assignments for insurance companies,” he said. “Since the quake, we’ve completed in excess of 500, some of which will be ongoing for years.”

Rooney and his staff at VEDC say keeping a small business open in the growing San Fernando Valley is critical to the area’s economy.

One example Rooney cites is M.S. Aerospace. Instead of shutting down the plant and adding 62 people to the long list of California’s unemployed, Szostak now plans to hire about 30 workers at M.S. Aerospace, and he’s in the process of opening a new aerospace company across the street.