Hit with 'triple whammy,' Hauppauge company makes comeback
The sudden death of its longtime leader might be enough on its own to derail a company.
But add to the mix a shrinking market and a recession.
That's what Mike McClernon faced when he took over as president of Hauppauge-based SmartSource Computer & Audio Visual Rentals in 2009 after the death of founder and president Julian Sandler, 64.
"This really charismatic leader we had was gone," says McClernon, 53. "And we realized as we got into 2009, we were in a horrible recession."
At the depth of the downturn, SmartSource's revenues fell between 30 percent and 40 percent year-over-year as its core market -- PC and tech rentals to companies -- contracted.
Like many businesses impacted by the recession, SmartSource had to make some critical changes to survive.
"The downturn forced many companies to focus on changing market dynamics and rethink their position in that market and their business plans," says Jeffrey Bass, chief executive of Executive Strategies Group LLC, a Great Neck-based strategic business adviser.
But SmartSource suffered "a bit of a triple whammy," notes Bass, pointing to the loss of its founder, a severe recession and a changing technological environment.
There was a period in the '80s and early '90s when "we could rent a PC at almost any price because of demand," McClernon says. Those were very profitable years for the company, which was founded by Sandler in 1984 as Rent-A-PC.
But by the mid-2000s, PCs became less expensive to buy, cooling the rental market as "companies completed the transition of fully outfitting their employees with computers," says McClernon, who previously served as president of All Service Computer Rental in Englewood Cliffs, N.J.
Rent-A-PC bought All Service in 2003, and McClernon became a vice president. In 2007, Kirtland Capital Partners, an Ohio-based private equity firm, purchased a majority interest in Rent-A-PC, which was renamed SmartSource.
Sandler became ill at the end of 2008, and McClernon, whom he had groomed for a leadership position, was appointed interim president by Kirtland in February 2009.
Sandler died in March 2009; McClernon was named president after his death.
By then, the shrinking PC rental market forced an organizational restructuring.
"Mike had a great deal of experience and knew the industry and had been with the company a long time," says John Nestor, chairman of SmartSource and senior managing partner of Kirtland, which worked with McClernon on the restructuring and cuts that largely took place in 2009 and 2010.
The company had to make some difficult cost-cutting decisions, says Nestor.
That included cutting 80 employees nationally but also "flattening the organization," McClernon says.
The company had five regions nationwide, with each operating almost autonomously. The individual regions were eliminated, and now operate cohesively under one national sales and operations umbrella.
The company also added key managers and made acquisitions including the 2012 purchase of California-based CRE, which has a strong presence in TV and movie production and conference technology.
During the past three years, by expanding its reach into the $1 billion-plus trade show and conference markets with audio visual equipment rentals and related services, the company has reversed revenue declines and grown market share. It's budgeting for 7.5 percent annual revenue growth this year.
"By acquiring Mike's company and grooming Mike for an executive leadership position, Julian was assuring the long-term longevity of the company and in the process its ability to withstand pressures of change," Bass says.
Companies should always keep their "finger on the pulse of the market and be looking for subtleties in the market that suggest that change is brewing," Bass says. That way, they can react quickly to market changes, just as SmartSource did.
For his part, McClernon says he hopes to expand SmartSource's reach in the trade show arena. "I think [that market] can be half of our business," he says. "I'm cautiously optimistic."