Applied Engineering Services Inc.: Engineering firm builds clientele slowly

May 9, 2005

Starting a new company is a tricky business, even if you've done everything right.

Applied Engineering Services had the funding, the contacts and the skills it needed when it started in 1998. Still, the first year or so was hardly easy.

"We didn't hit the ground running," recalled Terry DeBoo, one of the principals in the company. "The first year was pretty tough."

Applied Engineering is a consulting engineering firm that focuses much of its business on the central utility systems of customers such as Eli Lilly and Co., Indiana University and St. Vincent Health. It handles mechanical, electrical and instrumentation engineering services for such things as boiler plants; heating, ventilation and air-conditioning systems; and water systems.

Company President Frank St. John estimated that this kind of work makes up 70 percent of Applied Engineering's business.

"The other 30 percent is all over the place," he said.

St. John, DeBoo and John Yoder, the other principal, had worked together for a number of years, ending up in the Indianapolis office of Earth Tech, an environmental consulting firm owned by Bermuda-based Tyco International Ltd. Working for Tyco, St. John noted, took them to projects all over the country.

"We got worried we had lost touch with Indiana," he said. In addition, the three felt they'd like a chance to "steer their own boat," as DeBoo put it. As a result, they decided to go it alone as Applied Engineering seven years ago.

The three had adequate funding and years worth of connections to potential clients. They also had a good pool of talent to draw from, particularly their former co-workers. Even with these advantages, though, it wasn't easy getting Applied Engineering off the ground.

The problem was getting enough steady customers to keep the company self-sustaining. Growing the company to the size it needed to be to succeed took some time. After that first year or so, the company had enough business to generate the kind of revenue that allowed it to hire additional employees and offer competitive benefits.

Since then, the company has planned its growth carefully. The strategy is to continue expanding into its market without overextending itself.

"We're looking at the local market and we're seeing room for expansion," St. John said.

Applied Engineering's mainstay is providing services to medium-to-large industrial or institutional customers that have onsite central HVAC plants, water systems or electrical grids. The company can update a central heating system or replace it with a new one, for example. It also can do electrical systems, telecommunications and security systems, and automate existing systems.

The company makes a point of keeping its customer base as diverse as possible. It provides services to industries, educational institutions and governmental entities. It also tries to offer a range of other services beyond its core area, Yoder noted. For example, Applied Engineering takes on conventional architectural jobs from time to time, he said.

Besides Lilly, Indiana University and St. Vincent, clients include Citizens Thermal Energy in Indianapolis and Knauf Insulation Inc. in Shelbyville. Purdue University, the Indiana state government and IUPUI also are regular customers.

Steve Smith, the facilities director for St. Vincent Health, described Applied Engineering as very thorough and professional.

"The projects we give them work when they're done," he said.

While the present situation seems to be looking good for Applied Engineering, the company's executives have some long-range concerns. The biggest involves finding qualified employees in

Location: 7999 Knue Road, Suite 300 Phone: 585-8920 Web site: www.applied-e-s.comE-mail: info@applied-e-s.comFounded: 1998 Founders/owners: Frank St. John, Terry

DeBoo and John Yoder Service: engineering services Employees: 42 Revenue (2004): $5.7 million One-year goal: controlled growth to produce

$6 million in revenue by the end of the year Industry outlook: The industry market seems

to be strong overall.

the future, as many Indiana college graduates continue to leave the state to pursue careers elsewhere.

But Applied Engineering is doing more than just worrying about the "brain drain," St. John said. The company is active in three community outreach programs that encourage area students to become engineers. These include Purdue University's Science Bound program that exposes Indianapolis Public Schools students to technical careers, IUPUI's Minority Engineering Advancement Program and the Hispanic Education Center in Indianapolis, which helps support Hispanics interested in higher education.

From left, Frank St. John, Terry DeBoo and John Yoder operate Applied Engineering Services.
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