At the age of 36, Rick Sontag set out to buy and build his own company, Unison Industries, which makes aviation engine components.
Sontag, whose full first name is Frederick, led the Jacksonville-based company through recessions, the 9/11 terrorist attacks and other events that affected the country and the economy.
After leading Unison for more than 20 years, he sold it a decade ago to GE Engine Services and used the proceeds to create an investment company and a charitable foundation.
Sontag, 70, has been sharing his story, especially with small businesses that are interested in his lessons.
The Daily Record interviewed Sontag for “First Coast Success,” a regular segment on the award-winning 89.9 FM flagship First Coast Connect program, hosted by Melissa Ross.
The interview is scheduled for broadcast this morning and the replay will be at 8 p.m. on the WJCT Arts Channel or online at www.wjctondemand.org.
The following are edited excerpts from the full transcript.
Before you bought Unison, you were fired three times. What happened?
Each instance was probably a little different, but if I had to pick a theme, it probably was that I was not geared to work for somebody else. I was probably more geared to work for myself and it took the third firing before I finally realized it.
What is your educational background?
I have a bachelor’s degree in physics from Harvey Mudd College in Claremont, Calif. I have a master’s in physics from the University of Nevada in Reno and I have an MBA from Harvard Business School. I’m probably overeducated.
You were 36 when you decided to buy Unison. You were in Illinois and moved to Jacksonville. Talk about the mechanics of that.
We had a fairly small company in Rockford, Ill. The company was in the aviation ignition parts business and we were one of three bidders on a very large division of Allied-Signal Company, which was the engine products division located right here in Jacksonville.
Through an odd state of circumstances and through perseverance, somehow we won that bidding contest. We were the little guys. It was a little $10 million business with about 100 employees and we bought the $50 million operation here in Jacksonville. Obviously, it was the tail wagging the dog.
So, about four of us from our Rockford, Ill., operation decided we were going to pack up with that transaction and move to Jacksonville, and that’s what got us here in 1989.
It was the Bendix Corporation, which was acquired by Allied-Signal and became known as the Allied-Signal Bendix Engine Products Division, a fairly long name.
What were your plans?
Our plan was to fix an operation that had been sorely neglected by a large company for quite some time. It was to find a way after fixing it to grow it and turn it into a much larger operation.
The first one to two years were tough years for the operation. We had to let a number of people go to trim it back to the size where it could actually be profitable and earn its way in the industry.
From there we intended to grow it, and that’s pretty much what we did. We suffered through a recession in 1990, one year after we were here, which caused us to drop our revenue by 25 percent.
When we made it through that, we then turned our attention to growing the company and through a series of acquisitions and internal growth, we got the company up to almost $200 million in sales, about 1,500 employees. Our plan was to grow it and that is indeed what we did over a long period of time.
There were a lot of other events during that time, especially 9/11. How did that affect the business?
We were in the aviation business and the aviation business took a severe turn down. A lot of people weren’t flying. We probably dropped in revenue about 15-20 percent just as a function of 9/11.
We were a fairly good-size operation in the aviation industry and we survived, but it was a traumatic time for us. It was a little uncertain because at that time we had thought about potentially selling the business, and that certainly set our plans back.
How did you anticipate major events that would affect the business, especially the people side of the business?
It is hard to anticipate what the economy is going to do to you or what your market is going to do to you. But every time we started thinking about our plans for the operation over the next few years, we would always think about what we could do to optimize the current business unit so that if something did happen, it didn’t affect people or the business in a serious way as it did earlier.
We tried to diversify the business, we tried to make sure that people were cross-trained and skilled in a variety of different positions so that if something happened, we could trim back and people could move from place to place within the company.
We always tried to keep our antenna up for opportunities when there was a serious dislocation in the market or in the economy.
It was more keeping your eyes and ears open and making sure you had the right people in place to take care of the problems when they came.
I heard you speak at a JAX Chamber group and you talked about the importance of people. Can you expand on that?
I’ve thought about this quite a bit. I think that any business is only a function of what all of the people in the business are able to do to make it successful.
Both as a manager and as an employee, you have to think really about what your contribution is going to be because you’re more like a baseball team trying to compete against the other teams in the league.
That’s the way I’ve always viewed the business. The baseball team needs the bat boy just as much as it needs the guy who’s going to hit the home run.
My view of management and the employees in a business situation is that everybody has a place in the business; everybody has a success in the business.
If you put the team together and you have the right people and the right organizational structure and the right communications, I always felt that the business won or lost as a function of what everybody did, not just a bunch of guys at the top. That’s always been my philosophy.
Perhaps you could start a consulting operation.
To some degree, I have a consulting operation because we have an investment business where often I wind up in the position of becoming a consultant to some of the businesses.
That’s a good way to talk about The Spring Bay Companies. What does Spring Bay provide?
We do a number of things under the banner of Spring Bay. We have a venture capital business, where we’re investing in generally smaller businesses. We’re in the real estate business. We’re in the financial services business.
What takes the most of my personal time is on the venture capital side of what we do because there is more than just providing money to small businesses. It’s providing our skills and some of the experiences that we’ve had as managers running a business.
When you first bought Unison, it was through a venture capital arrangement, was it not?
We financed the transaction with actually a very large company, Household Finance. They had a very large venture capital company and Household Finance financed the transaction with both a venture-style equity investment as well as all the senior debt. So in that instance, we borrowed $40 million to purchase the company.
It was a fairly good size for us in view of the fact that we were only a $10 million operation. It was a pretty good size risk but it’s one we had taken before.
The very first time I bought a company, we probably had more debt and leverage on that company by far than we did this time, so this time we knew how to approach it when you were loaded with debt and you had a losing business.
There are a lot of people who would like to be business owners who maybe aren’t comfortable with risk. What are your thoughts?
Over the years, I have heard a lot of people say, ‘I would like to be just like you and be an entrepreneur and own my own business.’ Lots and lots of people. And I have to say that honestly, a good portion of those people probably really shouldn’t be doing that because they are not geared to take the kinds of risks that you have to take sometimes as an entrepreneur and as a business owner.
There are a lot of people who like that comfortable income. They like to see a paycheck in the bank account at the end of the week. They like to go on the vacation. They like to have their weekends to themselves. They like to have a comfortable home and things.
Often that doesn’t happen when you’re an entrepreneur. Particularly when running a small business, you are at the whims of what happens in the business. You sometimes work a lot of hours with no compensation. On occasion, you are caught in circumstances where you don’t have an income or you have very little income.
If you’re not willing to take that kind of risk and you’re not willing to spend those extra hours, to forgo your family on occasion, to maybe not even have a vacation at all, not have that new car, maybe not have a car at all, you may not be cut out to be an entrepreneur.
There are a lot of people who’ve suggested to me that they would love to do it, but I will tell you of all the people I have probably talked to over the years, if 10 percent are really cut out to do it, I’d be surprised.
Some people find out the hard way. They go ahead and do it and they realize they’re just not geared to take on all the hassle and fight. Sometimes it happens within a year. People find out they’d rather have that nice comfortable position just paying the bills.
You built the business. What prompted you to sell it?
First of all, I would like to correct the fact that I built the business. We had a really good team of people. I would like to take credit for having hired all those people because I really spent a lot of time on hiring all the people. This is a team effort.
What led to selling the business was that the aviation business in the late 1990s started consolidating. Most of the bigger companies in the business decided that they wanted to integrate their product lines and they started buying the smaller businesses.
As a result, we found ourselves more and more competing with much larger organizations than some of the smaller midsize companies we had been competing with in the past.
We had to make a decision, are we going to be an acquirer or an acquiree? We tried being an acquirer and many times found ourselves being beaten out in transactions by the big companies with much bigger pocketbooks than we had and who were willing to pay bigger prices for some of the enterprises that went on the market.
After a few years of this, we came to the conclusion that maybe it was time for us to be on the seller side. That sort of happened simultaneous with our being approached by General Electric, one of our largest customers who had said they had an interest in potentially buying our company.
It was a combination of two things — the marketplace and a customer approaching us.
Can you say what the proceeds were from selling that company? What did you do with it?
I could say what the proceeds were but I will not, because it was a good price. That was 22 years of work and it wasn’t just Rick Sontag that walked away with something. It was all of our managers who participated in the profits of that. I like to focus on what did we do with it.
So now you’re sitting there with some cash in your pocket, you’ve done something with your life in the way of becoming an entrepreneur and in my case, I decided that I wanted to do two things.
First, I wanted to take some of the money and invest it and that is the investment company that became The Spring Bay Companies.
Second, as it turns out, my wife, Susan, in 1994, was diagnosed with a terminal form of brain cancer, inoperable, and by some miracle she is still alive today, probably less than 1 percent probability, but she is still here with us.
When that happened, I decided if I ever get the chance to do something about this horrible disease I was going to do it.
Well, the opportunity presented itself in 2002 when we sold the business because I was standing there at the end of the transaction with some cash in hand and I decided that was the time I was going to do something about this disease.
That is when we started The Sontag Foundation, which is the other half of what I do with my life these days.
Talk about the foundation.
A lot of people in Jacksonville don’t know about The Sontag Foundation because we tend to be below the radar screen.
It started in its business life giving money in the area of brain cancer research. We spent some time studying what we could do to be different from what other organizations did in the field.
I think we do something a little bit different today. We have sponsored 29 researchers in all of the major institutions for cancer research in the United States.
We likewise have a scientific advisory board of some of the best researchers in the field.
I am really proud to say that one of the important things we’ve done is fulfill the dream that I had back in 1994, and that was to do something about brain cancer. Today, we are probably the largest private funder of brain cancer research in the United States.
Even though people don’t know who we are, we’ve been doing this for 10 years here in Jacksonville. We stay below the radar screen but I will tell you, in the business of brain cancer research, they all know who we are.
Likewise, in the area of medical research, early on we decided we wanted to do something in the area of rheumatoid arthritis. My mother died of complications due to that disease back in 1993 and I made the vow that we would do something about that disease.
In the area of rheumatoid arthritis research, we have partnered with the Arthritis National Research Foundation in Long Beach, Calif., and we give grants through them in the area of rheumatoid arthritis research.
We’ve been doing that for about eight years and we gave them a fairly sizable grant as an endowment last fall to perpetuate this activity in rheumatoid arthritis.
We do other things in the foundation, too. For the past six years, we have been giving grants to a variety of nonprofits around Northeast Florida, many of whom you know and probably a heck of a lot you don’t know.
We differentiate ourselves in that we get to know the organizations that we sponsor quite well. We know the people extremely well, we know how they are working and sometimes we even help them with organizational or other problems.
And we sponsor a brain tumor support group. My wife and I meet with this group along with Kay Verble, who runs our foundation, and Maria Sullivan, who is our administrative assistant on the foundation side.
We meet with these people once a month at the Deerwood Campus of Florida State College at Jacksonville in the old Jacobson’s department store.
We have between 20 and 40 people that have been affected by brain cancer who visit with each other and we try to help them through the process of how you deal with getting that horrible diagnosis. It’s been a pretty worthwhile experience.
I really think I get a lot more pleasure out of what we do from the foundation than I do from the investing.
What’s the website?
The website is www.sontagfoundation.org and it pretty well tells the story there.
By being in the field and by knowing these major cancer institutions around the United States, we have helped a number of people get second opinions or get into major institutions and into programs that they probably could not have gotten into without (our) effort on their part.
What else would you like to share?
I did the entrepreneurial thing for 22 years and had some measure of success. I think a bigger measure of success is what you can do with what you have learned. Whether it is with the proceeds of what your enterprise has given you or it is the competence and capabilities that you’ve acquired through becoming an entrepreneur, if you can use those things to do something worthwhile for your life, you’ve found a measure of success.
That’s probably the major thing that I think I’ve gotten out of all of this.
@MathisKb
356-2466