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For Fairfax metal trader, perseverance pays off

By Thomas Heath
Monday, May 17, 2010; A09

Second chances are everything. Henry Ford failed with his first motor-car company. F.W. Woolworth's first store was a bust. The Forbes 400 billionaire list is full of risk-takers who had multiple failures before becoming one of life's winners.

Ram Guru, 44, is a Fairfax entrepreneur who failed at a medical-billing business before he became rich trading scrap metal.

His Milestone Metals could rake in $80 million in revenue this year and is ranked by Inc. magazine as one of the fastest-growing companies in the United States.

Guru is from Chennai, India, and came to the United States to get a master's degree in computer science at City College of New York. He's a self-starter and an indefatigable networker (like most entrepreneurs), who uses his U.S. contacts to fuel a niche trading business staffed in the United States and India. He is also an interesting investor; he puts a portion of his profits into Indian real estate, betting that the billion-plus population will demand more living space.

His first stab at business was a computer company he started in 1991 that handled billing for U.S. physicians. The doctors would dictate their bills into a recorder or dictaphone, and Guru's company would transcribe them onto coded forms and send them to the insurance company for payment.

He tried to run much of the business from India, but there were problems finding and retaining employees who could speak English well, understand U.S. idioms and terminology, and type fast. The business closed in 1998, and Guru lost a couple-hundred-thousand dollars.

Fortuitous phone call

In 1998, Guru traveled all over the world and dove into the computer and software industry. After he had returned to the United States, a friend called him from India, asking for a favor. The friend needed high-quality scrap aluminum for his business, and asked Guru if he could find several tons from a U.S. scrap yard and ship it to India.

Guru said he would explore it. By coincidence, a friend who happened to be with him said he knew of a scrap yard, and they visited it the next day in Beltsville. Guru figured out how to obtain the aluminum and had it shipped to India. He barely broke even, but saw potential and Milestone Metals was born soon after in June 2003.

Growing demand for highways, homes, offices, factories and other parts of infrastructure in the BRIC countries -- Brazil, Russia, India and China -- was creating a big boom in metals. And Guru got into the business.

"My friend from India was doing well, and he wanted me to buy from various scrap yards and sell to him," he said.

Guru didn't know much about the business, but he read industry magazines such as Recycling Today, networked, asked lots of questions and found a mentor, who he refers to as Ben, in the scrap yard dealer in Beltsville.

Working from his Fairfax basement with a single phone line and a Dell desktop computer, he went on the Internet to find scrap metal industry conventions, and then started traveling to those conventions in search of people who might want to buy metal. At the same time, he started coldcalling at scrap-metal yards across the United States.

By the end of 2003, he had grossed $800,000.

He is constantly on the prowl for new clients, looking to turn any convention or introduction into a business opportunity.

"I am not shy," Guru said. "I will walk up to anyone and don't mind taking no for an answer. You could have met five people at a convention and not all work out. It doesn't mean you are a failure or should stop trying. You have to keep moving on. You can't be afraid of that. That's the way business works. It's just research and development. You could meet 100 companies and out of that 100, you could find five or 10 companies who will sell you good-quality metal."

A booming business

What Guru does is simple. He buys used steel, copper, brass and aluminum from about 100 scrap-metal yards across the country, negotiating a price based on the Comex Metal Exchange or the London Metal Exchange. Once the scrap yard fills the order and sends a photo verifying the shipment to Milestone, Guru wires payment to the scrap yard's bank. The shipments are sent to ports such as New York, Boston, New Orleans, Long Beach and Portland, Ore., and then sent on container vessels around the world.

Milestone pays for shipment, which can cost $1,500 to $2,000 per container from the United States to China. Milestone generally ships one to five containers per vessel, but sometimes sends much more. A steel shipment might include 50 containers when demand is greater.

About 80 percent of Guru's transactions are back to back, which means Milestone buys from a scrap yard and immediately sells the metal to a foundry, smelter or trader.

"We are traders, brokers and middlemen," Guru said.

Guru's business is booming, despite the recession. He had revenue of nearly $1 million in 2003 and 2004, and then it started to climb: $3 million in 2005, $9 million in 2006, $27 million in 2007, $40 million each in 2008 and 2009.

Guru is expecting to gross $80 million this year. Scrap-metal traders generally earn about 3 to 5 percent net profit margin on gross revenue. By that estimate, Guru's income this year could run into the millions -- if all goes well.

Guru runs a lean operation with low overhead. He has 10 employees in India, eight U.S. employees working out of their homes, and two employees who work in his Fairfax home alongside him and his wife. He reinvests profits back into the company to keep his debt down. He has only one bank loan for $300,000. When fellow traders tried to run from contract commitments when metals prices plunged in 2008, he said, "We never backed out."

In addition to his real estate in India, where he owns several-million dollars worth of vacant land in booming Chennai, he buys shares in Indian utilities. He also has investments in U.S. stocks and mutual funds.

Milestone's long-term goal is to set up its own scrap yard, which would mean spending $8 million to buy a shredding machine. Guru said he has his eye on the $60 million to $100 million in revenue that a good scrap yard can generate.

"Our goal is to have maybe about five shredding machines by 2015. Then take the company to a half-billion-dollar company and go public."

Follow me on Twitter at addedvalueth.

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