Russ: This is the BusinessMakers Show heard here and seen online at theBusinessMakers.com. I'm at PKF Texas, and doing business over coffee, and it's guest time, because with me this morning is Ron Farmer, founder and CEO of US LED. Ron, welcome to the Businessmaker Show.
Ron: Thank you. Glad to be here.
Russ: Alright, tell us about US LED.
Ron: Okay, well, first of all, US LED is a lighting company. We started out in 2001 doing lighting for signage, and we've migrated now into lighting for convenience store refrigeration, for parking lights, under canopy lights, industrial lighting, warehouse lighting, and so on. And we're actually doing the fluorescent tube lighting replacements for office lighting as well. So, LEDs are coming of age.
Russ: Okay, now let's say that there's somebody listening that hadn't kept up to date with lighting. Tell them about LED lighting.
Ron: Okay, well, it stands for Light Emitting Diode, and it's just a little wafer that you put electricity to and it lights up in a particular color, depending upon what has been attached to the wafer. Now, I'm not a physicist, so I can't help you too much beyond just giving you the -
Ron: But it's a very efficient way of doing lighting. And signage, when we first started, we were kind of astounded to find out that we would save up to 85-percent of the electricity costs, and the lighting lasts for so very long that there's no maintenance, virtually no maintenance that's involved. The newer applications in parking lots and such as that are lasting 16 years without maintenance. That's incredible.
Russ: Okay. I am sort of a fan of lights and the technology in general, and everything I read about LED is that it's definitely the future. It kind of even makes the CFLs, the compact fluorescent lights look old fashioned.
Ron: Actually, they were old fashioned when they first came out, to be real truthful with you.
Russ: Okay, alright, alright.
Ron: Because all they did was make what was already available, which was a fluorescent tube -
Ron: Into a smaller package, and that's all that really was. It still had mercury. It still had glass. Still had disposal issues and so on. So I was not a fan of it. I didn't buy them for my home.
Ron: You're right. This is making all other technology, lighting technology obsolete.
Russ: Okay. Now, when you first started talking about getting into LED lighting, you keep referring to lighted signs, and that's because, of course, your background - you were the founder and CEO of US Signs, correct?
Ron: Exactly. Exactly right.
Russ: Okay, and it was the lighting, which I think was mainly - what? - neon lighting for a long time?
Ron: Right, yeah. Originally, ten years ago when we first started this, the only LEDs that were efficacious at that time, that put out enough light to actually light anything, were red.
Ron: So even our logo was red back then, and it's green now, for obvious reasons. But yeah, we were taking neon out of channel letters and putting in LED lighting in a replacement of it. And really, it was a matter that my sign company wanted to buy LED lighting, and we were having trouble with the provider that we had. And then I went to another one, and it took him three weeks to get me a quote. The quote was incomplete, and it took him another three weeks. And I said, "Oh, I can do this better than this." And so, that's how we started this whole thing. I just needed product for myself.
Russ: Okay, that's another one of those cool idea triggers about what stimulated an idea. That is real cool. Now, have you continued to look outside of signage for LED applications?
Ron: Yes, absolutely. As a matter of fact, it was a little over two years ago that we started developing a new product, and it was for refrigeration. And what I mean by that is, if you go into a convenience store and you go to buy a bottle of water, and you open up the door, all of that is lit by fluorescent tubes. And so, we developed a product to replace that. And late last year, about this time last year, we got approached by a company that had an entrée with a client who was having trouble finding the world class product that they needed. They asked if they could represent our product, and we're just completing a $10 million deal that we sold about a year ago with them -
Ron: And we were up against - GE was the finalist. It was US LED and GE in that.
Russ: And you beat GE?
Ron: We beat GE.
Russ: Well, congratulations.
Ron: Well, and also about that same time, about October of last year, we did the Staples home office parking lot, and we were also the finalist there against GE, and our product put out twice as much light for about the same money, was installed by one man in 25 minutes, versus two men and 45 minutes for the GE product. So we kind of did a good job on that one.
Russ: Way to go. Way to go.
Ron: Yeah, yeah, I like competing with GE.
Russ: Alright, now -
Ron: They're about our size, you know.
Russ: Yeah, yeah. Now, you mentioned first sort of refrigeration lighting, and it seems like the application there would be real cool, because even - LEDs are not as warm even as fluorescents, right?
Russ: And they last much longer.
Russ: But are you actually replacing fluorescent tubes with some sort of LED tube?
Ron: Well, it's linear, but it's not a tube.
Ron: It's not a tube. It's not round, so.
Russ: Okay, does it go in the same kind of fixture?
Ron: No, no.
Russ: You have to change the fixture and the bulb?
Ron: Yeah, you take out the socket, you take out the bulb, you take out the ballast, and all the wiring -
Ron: Put in something new and easier to install. And we can do - I think the change out average is something like 12 minutes per each. So they can -
Ron: Strip all that out and put ours in, in about 12 minutes. So it's very easy to install.
Ron: That's one of the things that we pride ourselves in, is we don't just make a good light, we make one that's easy to install and easy to work with.
Ron: And very modular.
Russ: Okay, talking to Ron Farmer, founder and CEO of US LED. And we'll be back with more with Ron after this. You're listening to the BusinessMakers Show, heard here and seen online at theBusinessMakers.com.
Russ: This is the BusinessMakers Show, heard here and seen online at theBusinessMakers.com, and continuing on with Ron Farmer, founder and CEO of US LED. Well, Ron, I sense a little bit of passion and excitement in your voice about the growth. Is that accurate, or - ?
Ron: Oh, yeah, yeah, it's accurate. As we've made the transition over from the sign industry - the sign industry was getting pretty well done. I mean, the margins were starting to shrink and so on. Last year, for instance, in 2009, we actually dropped back for the first time since we've been in business. We dropped back by about nine percent, but our piece count sales actually were up 50-percent.
Ron: So that just shows you, you know, ___ ___ ____ is moving.
Russ: Margins went down, right, right.
Ron: And so, in anticipation of that, last year we hired in a lot of R&D staff, and we started developing a new product line, some of which I mentioned earlier.
Ron: And so, we've got a full cadre of products in the general - what we call the general lighting space, or the professional lighting space, meaning commercial mainly.
Ron: Commercial and office.
Russ: How many employees do you have now?
Ron: I think it's 45 now.
Russ: Okay. Now, I mean, it sounds real exciting, but the quantity went up in all these new lines, I mean, there's a lot of challenges in growth. Has it been overwhelming, or have you - ?
Ron: No, it's not overwhelming, it's fun.
Russ: Alright, cool.
Ron: Yeah, and the growth this year is gonna exceed 300-percent.
Russ: 2010 over 2009? My goodness.
Russ: Now, you mentioned parking lot lights as well. So now I know about signs, refrigeration, and parking lots. Is there more?
Ron: Oh, yeah, there's more. There's wall packs. Meaning, if you go out in a parking garage, on the outside of the garage sometimes, or on the outside of a commercial building, there's lighting that comes on the edge of the building.
Ron: So there's parking garage lighting. There's also under canopy lighting in gas stations. So if you were to go into a gas station, for instance, we could light the cases, the refrigeration cases. We could light the ceiling inside the store. We could light the outside exterior of the building. We could light the parking lot, and we could light under the canopy. And we could light the carwash as well.
Russ: Okay. Now, let's just say that I have one of those facilities. Would the up-front cost to do it with you, with LED lighting, be a lot higher than standard, traditional lighting?
Ron: That's a very good question. I'm glad you asked it that way, too, because when we talk to people, we tell them that if our product is not free to them, then they shouldn't buy it.
Ron: What I mean by that is that we've got a 16-year life product, and it gets a payback of 2.5 to 3.5 years. So if you - let's just say it's a three year return on investment.
Russ: Right, right.
Ron: And you've got - you know, you've got 16 years, you're getting five turns on your money.
Ron: The best thing for you to have happen is that it costs a lot.
Ron: Because then your returns are for a higher dollar amount.
Russ: Okay, specifically to my question, it might cost a little bit more up-front to install your product, but clearly, the return happens quickly, is that right?
Ron: Very quickly, yeah.
Russ: Yeah, alright, alright.
Ron: Very quickly, yeah.
Russ: Alright, well, what about, you know, residential home lighting? I mean, would you even consider that as well?
Ron: I haven't considered that. We aren't considering that right now. To be truthful with you, the largest install base of lighting on a dollar amount, or on a piece count, either one, is a troffer light, which is what above most people's desk in their office. It's a - you know, a two by two, or a two by four -
Russ: Fluorescent, right, right.
Ron: Fluorescent light above your head. There's more install base of that in an office space and commercial space than there is anything else.
Ron: So that's where we are right now. And we've got - on October 6th, we're installing our first location with that, and it's a test location. And they've got a second test location. And it's interesting, they're so sold on the product, based on the ROI and the tests that we've already done on a single fixture, that they've ordered six locations - they've ordered six locations, and we haven't finished the tests yet.
Russ: Goodness, goodness.
Ron: And so, you know, it's up to us to get that deal or not. But if we get the deal, the full potential is about $54 million.
Russ: My goodness. Way to go, Ron.
Russ: Now, you mentioned these office fixtures, and we're all familiar with those, but what is the actual LED globe look like, that goes into your fixture?
Ron: Well, actually, if you were in your office and we had installed this product, you'd look up and all you would see is a sheet of light. There'd be a two foot by four foot -
Ron: Sheet of plastic -
Ron: That we use, and you can't see the dots of light at all.
Ron: It's just a - it's a glow. It's so much better looking than fluorescent.
Ron: If you put it side by side, you wouldn't even - you'd never go back to fluorescent again.
Russ: You seem hesitant to tell me what it would look like if I took that sheet of plastic off.
Ron: Oh, well, if - we do it two different ways, but the way that works best right now, it looks like, is gonna be a direct lit, which means that there'll be LEDs in a big sheet, two foot by four foot sheet on a certain grid above that shines directly down on the diffuser plastic.
Russ: Right. I'm talking with Ron Farmer, founder and CEO of US LED, and we'll be back with more with Ron after this. You're listening to the BusinessMakers Show, heard here and seen online at theBusinessMakers.com.
Russ: This is the BusinessMakers Show, heard here and seen online at theBusinessMakers.com, and continuing on with Ron Farmer, founder and CEO of US LED. Now, Ron, I've kind of hinted at the fact that I pay attention to light a lot.
Russ: I mean, even when I go into the hardware store and stuff. And I've seen these - and not only have I seen them, I've bought a couple of these lightbulbs now, that are like an old incandescent shell, but they're LED little lightbulbs, like, maybe 20 of them. And I had two observations. Number one, they're extremely expensive right now. I went ahead and bought a couple to try them. But number two, after screwing them in and turning them on, in a very short period of time, the number of little LED lights that are working diminishes quickly.
Ron: Yeah, yeah.
Russ: What's going on there? Is that the way your product operates?
Ron: Well, that's - it's a good application, but it's a difficult application, and I think it's just plain too early.
Ron: I mean, I think it's just plain too early. I would love - I mean, I've got high ceilings in my home. I would love to replace them all with - I wouldn't even care who I had to buy them from.
Ron: But some people are buying these products because they're green.
Ron: That's not the right reason to buy the products. I mean, that's one of the reasons you should buy the product -
Ron: But if that's the only reason you're buying the product, then you're probably making a mistake.
Ron: Especially if you're doing it in a business.
Ron: So, we want to make sure that there is a business reason to buy ours, that there's a return on investment -
Ron: So that when you - you know, two years out, three years out, when you the human being who works for the company that bought it -
Ron: Won't lose your job, because you did it for a green reason and not for a business reason.
Russ: Right, right.
Ron: I want the businesses to do the green thing, but they should do it with the right products at the right time.
Ron: Because now, what you've done is, you've bought a product that is gonna go into a trash heap someplace -
Ron: And is - did nobody any good whatsoever.
Ron: Now you added to the trash. You didn't reduce the trash whatsoever.
Russ: Right, right, right, right, right.
Ron: The beauty of LED lighting and green products in general is it's supposed to be that you're saving the environment, not that you're adding to the trash in the environment.
Russ: Right, right.
Ron: And so, you know, we don't do things that are before their time. We only do them when they are - so ever product we have right now will give you a return on investment.
Ron: Every product right now will - has a very long life. We give a five year warranty on our product. If that was our product, and we had done that product, we'd give you a brand new one. But we're not doing the screw-in lightbulbs yet, because - well, frankly, we haven't had time.
Ron: I think we could actually do it, and do it right.
Ron: I really believe we could, but we just don't have time right now. We're too busy on the commercial side.
Russ: And you're saying that those that are doing it now are just too hasty and it's just not ready to have a screw-in application?
Ron: There might be one. We haven't tested them all. So I can't say that as a blanket statement. I can tell you that, just yesterday, one that we were testing in our environment at work, I unscrewed it and gave it to our R&D chief and I said, "Whatever we do, we don't wanna do it like this, 'cause it only lasted two months."
Ron: And in two months, you know, heck, an incandescent bulb will last two months.
Russ: Right, absolutely.
Ron: So what's the point?
Russ: Okay, cool. Well, this sounds so cool and exciting. What do you see in the long term? And I guess long term, in your case, could only be two, three, four years. I mean, you have to be building a company that's a real cool acquisition target for somebody.
Ron: That's not what I have in mind, though. No, I'm a young guy, can't you tell?
Russ: Yeah, yeah, I can tell. I can tell.
Ron: No, I wanna work for a long, long time. So, I'm not up for that at all.
Ron: Yeah, I wanna build a company that's exciting, it's fun. I'd rather do this than almost anything in the world, so.
Russ: Okay. Now, before I let you go, Ron, let's imagine we have a young, aspiring entrepreneur that's tuned in right now, hearing your story and seeing your excitement, and maybe even seeing mine, too, because this is really cool. What kind of general advice would you give to him and her about diving into the entrepreneurial world?
Ron: Well, I give talks sometimes at entrepreneurship classes, and I realize that some of the people I'm talking to in the audience are entrepreneurs, and some of them are not.
Ron: So the advice I give them is, you know, if you're an entrepreneur, do it. If you're not, you know, don't. I mean, it sounds kinda basic and kinda silly, almost, but the point is, a lot of times, people get caught up in the allure of being an entrepreneur -
Ron: When in their heard, they're really not. And if they just wanna, you know, retire rich, you can do that buy just living on 90-percent of your money and saving the other 10-percent and doing a good job of investing it.
Ron: And for the ones that are entrepreneurs, you don't have to tell them anything. They're gonna do it whether you tell them to do it or not, 'cause that's the way an entrepreneur is. They just do it. They don't need to be told.
Russ: Alright, Ron, I really appreciate you sharing your story with us.
Ron: My pleasure. Thanks for having me.
Russ: You bet. You bet. And that's Ron Farmer, founder and CEO of US LED. And this is the BusinessMakers Show, heard here and seen online at theBusinessMakers.com.