In the early 2000s, Jim Inzalaco and four others worked for a $120M NASDAQ listed IT services company. They saw potential in the business model, but the company struggled to remain competitive as the market changed. So, Inzalaco and his partners left the company and started Core Technology Solutions in 2003.
The Challenge of Growing a Business
Inzalaco’s previous employer became Core’s first customer, and for a while, remained the only customer. Following a similar model, Inzalaco and his team hired and coordinated a remote workforce to install devices such as routers, switches, and other technology systems, eventually expanding to self-checkout systems, menu boards, and more. Starting with only one customer, things were simple. According to Inzalaco, “[we] do the work…they paid us, and life was good.”
Scaling Quickly
As the company grew and took on more customers, it became challenging to manage receivables. Most of the work they performed was project based, with a workforce vastly composed of contractors. These projects were often with national chains, such as Home Depot, Lowes, or other large enterprises, so it was common to install systems in hundreds or even thousands of locations across the US over the course of a few months. For a small company, this created scaling challenges. For example, having grown to a $3M company, they suddenlywon a four month, $1M project. This was huge for their company. While Core’s remote workforce model could scale quickly, it required capital.
Cash Flow Alignment
Project-based business models also face challenges in cash flow alignment. Projects start and end at different times throughout the year, which creates hills and valleys in revenue and expenses. A project begins, and you see a spike in costs, and a project ends, finally repaying the capital the company laid out at the beginning.
But exacerbating this challenge further, payments often lag for 30 to 60 days. This is sometimes manageable, but much of Core’s remote workforce needed to be paid within a week or two. So, by 2005, the challenges of managing growth over short periods, navigating project to project fluctuations, and balancing top-heavy expenses led Inzalaco and his team to a conclusion. “We needed to figure out a [financing] solution, and it couldn’t be just waiting for customers who were unpredictable” In their payment cycles.
Finding the Right Financing Solution
Initially, Inzalaco and his team targeted SBA lending. They assumed that a line of credit was the best fit. During their search, however, they met with a Flexent Sales Representative to learn more about a unique solution offered by Chesapeake Bank.
Flexent offered an accounts receivable factoring type product that could scale up and down as AR rose and fell. Core’s business model needed that flexibility and scalability. Inzalaco also wanted a partner with strong customer support, who understood the business and where it was going.
A line of credit, while cheaper, couldn’t provide the necessary flexibility or scalability. Larger institutions could have provided similar products, but they lacked the personal touch, and often worked with much larger companies. So, in 2005, Core signed on with Flexent, securing a $1M accounts receivable facility.
The Results: All About Relationship
From 2005 to 2023, Core worked with Flexent, navigating the financial crisis of 2008 and 2009, the unique challenges of the COVID Pandemic, as well as their own changing needs, ultimately growing from $3M to $21M in revenue. With fast funding, clear and accessible reporting, and real people ready and willing to help, Inzalaco said that the “…relationship [was like] an extension of my business…like they were part of the team.”
Managing Growth: Scalable Working Capital
As mentioned above, Core often landed projects that quickly and drastically increased their volume. This challenge sprang up again when Core landed a $3.5M project with a multinational producer of photography equipment. At the time, Core generated $5-6M in revenue annually. This project, slated to be completed over the course of 3-4 months, would launch their volume through the roof. But that growth required more capital that the initial $1M Flexent provided. So, after quickly reviewing the contracts, Flexent increased the AR facility limit fast enough for Core to take on this new project, and continue to grow. According to Inzalaco, “…in growing a small business, your lifeline is your banking facility.” Without Flexent, the capital demand would have forced Inzalaco and his team to either pass on the deal, or take a leap and hope for the best. These weren’t options. As Inzalaco says, running out of cash “…could kill your business,” but with Flexent, Core scaled fast enough to meet the need.
Waiting on Payments: A Flexible Partner
After landing another deal with an international provider of print and digital document products, Core faced another challenge. While AR financing and factoring solves the problem of slow-paying customers, the industry standard is to hold invoices for only 90 days. After that, if the invoices are still unpaid, the financing company returns the receivables to the business. While not an issue in most cases, this international company consistently extended payment beyond 90 days, causing Flexent to withdraw funding to mitigate the risk of nonpayment. Core couldn’t turn down the business, but also couldn’t lose funding for the receivables aging beyond 90 days. So, Core brought up the issue with Flexent, showing that the customer did pay, just slower than usual. Seeing the proven history of payments, Flexent worked with Core to accommodate the customer and extend the factoring terms to 120 days. This is a common issue small to medium-sized businesses face and waiting 3-4 months for payment just isn’t viable. Core steered through these challenges with flying colors by leveraging Flexent.
Strong Relationships: Above and Beyond
When trying to grow a small business, you must build relationships. Relationships with employees, customers, vendors, and financial partners. Though this is becoming a lost art, especially in larger corporations, still, as Inzalaco says, “it is about relationships, period.” Core’s strong relationship with Flexent helped them navigate nearly two decades of sustained growth, numerous multimillion dollar projects, the Great Recession, COVID-19, financial fraud attempts, four-month payment delays, changing customer types, and more. For businesses that “…need that personal touch; need that customer service; somebody that has your back”, Insalaco finds Flexent to be a great fit.
The Next Chapter
So, having grown the company from nothing to over $21M in annual revenue, Inzalaco and his partners were ready for something new and opted to sell. They received four strong offers, and in February 2023 they sold Core Technology Solutions to a private equity firm. With the sale came a transition to a large commercial bank and Inzalaco stayed onboard, facilitating the transfer from Flexent to the new institution. According to Inzalaco, “…that transition went really, really well. Much smoother than I thought it would go…anything like that is typically not that smooth.” By June 2023, the transition was complete. Inzalaco continues part time with the new ownership as a CFO and advisor as the company continues growing.
