BFTP-Funded Clear Align has a Good Problem
It’s hard to complain when your company grows by more than 1,300 percent. But for Clear Align, a maker of surveillance equipment for the military, success is proving to be difficult to manage.
Angelique Irvin isn’t your typical defense contractor: she’s a suburban mom who swears by organic products, and the daughter of the founder of the literary journal Calyx (which was started in her childhood bedroom). But these are not the only reasons Irvin, 43, stands out among executives in the defense industry. In the past five years, she’s grown Clear Align–a maker of custom surveillance equipment for national-security and military customers–by an impressive 1,305 percent.
The Eagleville, Pa. company is involved in an effort as complex as it sounds. Although Irvin isn’t at liberty to disclose nitty-gritty details–”80 percent of what we do is ‘black’,”–think of it as James Bond stuff: cameras mounted on the bottoms of planes and subs, lenses that allow soldiers to see from high altitudes at night, tiny sensors that can detect the presence of an explosive device or biochemical threat.
Last year, Clear Align took in $5.4 million, selling 390 of its surveillance systems at prices from $2,000 to $500,000 to customers that include Honeywell, L3 Communications, Lockheed Martin, Northrop Grumman, and Raytheon. The company has seen remarkable growth, especially because Irvin basically started the firm by accident. In 2003, she was taking six months off from her career in the optics industry to travel around the world. Two weeks into her trip, she received a call from a friend in the defense community with a request to build an optical sensor used for national security. She took on the task and built larger and more complex systems from there. “This company was not started intentionally,” says Irvin. “But you end up where you are supposed to be in life–everyone who knows me knows this is exactly where I’m supposed to be.”
Clear Align
PRODUCTS
Custom intelligence surveillance and reconnaissance systems and subsystems (Read: Black box gear and gadgets for the defense industry)
FOUNDED
2003
HEADQUARTERS
Eagleville, PA
NUMBER OF EMPLOYEES
52
MISSION
Defend human life with improved sensor technology
CUSTOMERS
Raytheon, L3 Communications, Lockheed Martin, Northrop Grumman, U.S. Army, U.S. Navy
2008 SALES
$5.4 Million
NEWSWEEK’S SMALL BUSINESS PANEL
Irvin asks NEWSWEEK’s Small Business Panel: “Clear Align has experienced dramatic growth, but it’s not consistent. Revenue was up 420 percent last year, was flat this year, and we anticipate we’ll grow 300 percent to $12 million to $16 million in 2010. How do you manage cash flow with this choppiness?
“Sales do fluctuate in our industry because the contracts are big and less ongoing. We are transitioning to larger contracts, but have historically not had five- to 10-year contracts, and it’s our objective to get those. We have five major customers; one is 30 percent of our revenue or more. We have a goal to diversify the customer base. It’s the difference between being zoo-fed versus jungle-fed. We go out and get a big lion or hyena and then we have to go back out and hunt for another meal. Eventually, we want to be 50 percent zoo-fed, so we are not always out hunting. For now, we are in a good cash position–we have 24 months of expenses in the bank. We know growth eats up cash since a lot of hiring is required and that requires plenty of liquidity. How do we grow without using up our cash? Do we dip into reserves or take outside funding?”
Roxanne Quimby
Quimby is the cofounder of Burt’s Bees, one of the most successful natural skin-care lines. She sold 80 percent of the company to AEA Investors, a private-equity firm, for an estimated $175 million in 2003. In 2007 Clorox Company bought the company for nearly $1 billion. She is currently working on an organic children’s clothing line called Happy Green Bee.
Clear Align has a lot of cash and is a very profitable company, so it can weather this erratic growth pattern. The company can grow without a problem, and it has a high margin to fund the business itself. Having a healthy bit of reserves means that you don’t have to panic when your business dips. We always kept three to six months of operating expenses at all times in our consumer business, but the sales cycle was much shorter than it is in this business. What she has socked away is very impressive.
However, I would find [this roller coaster] hard emotionally. With wild growth, there is a chance you can lose control. It would scare the heck out of me if I had a flat year. Clear Align is going from one extreme to another. I want to see them level out of that because this is very difficult to manage. Sales fluctuate so much that they can’t depend on cash flow and can’t plan on it. When the inflow of cash is unpredictable, you are always running after it and you take your eye off the ball.
They have to try to even out cash flow and get it as balanced as possible so they can go on to focus more on innovation and customer acquisition. It’s time to prepare for the future, and that requires working on a long-term plan. Clear Align needs to make a five-year plan to see clearly where the money is coming in every year. And one customer shouldn’t be more than 10 percent [of the revenue].
By Carlye Adler | Newsweek Web Exclusive
Dec 29, 2009 | Updated: 10:48 a.m. ET Dec 29, 2009
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