Couple Turn False Start Into $1-Million Business

If they were daunted by failure or long odds, Aaron and Teresita Sayers would never have built a $1-million business and been named Small Business Persons of the Year.

Their first entrepreneurial effort was a $13,000 lesson in failure.

And they’ve had to shift gears with their second business, New Age Pulmonary Diagnostics of Covina. They are now concentrating on selling medical supplies, cutting loose the respiratory services part of the business to survive in the fiercely competitive health-care industry.

“We never thought we wouldn’t make it,” says Aaron, who started New Age after leaving a job as a respiratory therapist at Kaiser Permanente in West Los Angeles.

He could read the writing on the wall: Medicine’s shift to managed care was accelerating, and hospitals caught in the squeeze were laying off staff. So he hung out his shingle as an independent contractor, providing respiratory therapy services to hospitals, convalescent homes and home-bound patients.

Soon Teresita, a registered nurse, signed on. She kept the books while working part time and taking classes to become a respiratory therapist.

Since then, New Age has reached nearly $1 million in annual sales, consistently posting a profit while demonstrating an ability to adapt quickly to change.

Its future isn’t assured, however. Some analysts question how any small firm can survive in the highly competitive and consolidating Southern California health-care marketplace.

The Small Business Administration is apparently a believer. The regional office recently named the Sayers as 1997 Small Business Persons of the Year.

How they got there is a story of hard work, risk-taking and flexibility.

The Sayers came from different worlds, but in the ways that count they have similar backgrounds. They are not quitters.

Aaron, 43, the son of an aerospace machinist, demonstrated a flair for salesmanship as a child, earning pocket money by selling avocados door-to-door and by mowing lawns and raking leaves.

After high school, he went to work in the mail room of Blue Shield of California. He soon advanced to a job as a claims examiner, which sparked an interest in medicine.

After enrolling in a course to become a respiratory therapist, he got a job at Martin Luther King-Drew Medical Center, working his way into a supervisory position while moonlighting as an insurance salesman to earn extra money.

“I was very aware I wasn’t making enough money,” Aaron says.

It was at Kaiser that he met Teresita. The couple married in 1986.

Teresita, 41, came to the United States from the Philippines in 1980, when a Boston hospital recruited her for a $5.95-an-hour nursing job that provided free board.

The newly minted nursing school graduate knew how to work hard. Her father died when she was 5, and two years later she was stocking shelves at her mother’s convenience store.

Eventually, the harsh Northeastern winters got to her and she moved to Los Angeles.

When Teresita interviewed for a nursing post at Kaiser, the hospital recruiter asked her the inevitable “Where do you want to be in five years?” Teresita answered, “I’m going to save up and start my own business.” She meant it.

There was a false start before the couple found their niche. In the late 1980s, they took out a $10,000 home-equity loan to enroll in a business start-up program they learned about at a franchise show.

It was a maid service, a business with potential in the time-pressured 1990s, given the demands on two-career couples. Teresita hoped this would be the ticket.

It wasn’t. The business never turned a profit, and after eight months they got out, losing their $13,000 investment.

“At the time, we didn’t know at all how to start a business,” Teresita says. But she said the experience was worthwhile, teaching the couple how to get a business license and manage their time and personnel.

For their next venture, they decided to focus on what they knew, health care. In its first year, New Age had gross annual sales of $136,607. By the next year, sales more than doubled and kept growing steadily. At its peak as a respiratory therapy service provider, New Age had eight full-time employees, 16 subcontractors and contracts with 15 facilities.

But by 1995 the health-care marketplace was constricting again, and tiny New Age’s bottom line started coming under pressure. That year the company’s sales grew 46% to almost $915,000, but expenses more than doubled. Profit dipped to $61,548, tumbling from $322,259 in 1994.

“We kind of panicked,” Aaron recalls.

The couple took the painful step of cutting costs and sought out a related business that they hoped would set the firm on a new course.

The Sayers looked at their ballooning payroll and laid off the respiratory therapists they subcontracted with. They also eliminated support staff, from delivery personnel to clerical help.

“It was very difficult,” Teresita says. “But what could we do? Our business had to go on.”

Today, New Age has six employees, including the Sayers.

The couple phased out the service business and instead became a retailer of medical equipment and supplies--an idea Aaron had been mulling.

The trends point to medical supplies as a growth business: The population is aging and there are more disabled people. And as hospital stays grow shorter, more patients are receiving medical treatment at home.

Today, New Age rents and sells nearly 5,000 items--from hospital beds, wheelchairs and oxygen tanks to more commonplace health-related items such as herbs and vitamins--out of the Covina showroom they recently purchased.

They try to keep prices low, but it’s difficult to compete against the big chains that buy in volume. So New Age’s strategy is to offer unusual items customers can’t always find elsewhere, such as plastic cast protectors.

So far, the company’s new direction seems to be working. Profit was up 79% in 1996, to $109,894.

Meanwhile, the Sayers started another enterprise--a transportation service for patrons with special medical needs.

In contrast with the other ventures, this business had substantial start-up costs. The company spent $60,000 to purchase three used vans and equip them for the disabled. Plus, it had to hire drivers and buy liability insurance.

Thomas Gray, a Washington, D.C.-based small-business expert, said the transportation service sounds promising if costs are held in check.

“That’s a prime example of the kind of service a hospital will have nothing to do with,” says Gray, noting that New Age’s best strategy is to concentrate on niches shunned by health-care giants.

Jack Kyser, chief economist with the Economic Development Corp. of the County of Los Angeles, is skeptical that a small player will be able to survive as an independent health-care retailer.

“Probably the worst sector that any small guy can enter is retailing, and health care is a close second,” Kyser says.

There are still many small health-care companies in Southern California, but Ron Shinkman, a reporter with the trade journal Modern Healthcare, says they are an endangered species.

“We’ll see fewer and fewer mom-and-pop operations,” Shinkman predicts.

If New Age continues to build its market share, it could emerge as an attractive takeover target, he says. But that seems unlikely until the company achieves the $3 million to $10 million sales range, according to industry observers.

The Sayers have already fielded inquiries, including one from a large health-care company and a small competitor. But Teresita, determined to build the company, says, “We have other plans for this business.”