It Takes Planning, Planning, Planning

Albert Luna traces his entrepreneurial drive to his grandmother, who in the 1940s owned a Latino grocery store in Southern California. After he became a machinist in the 1960s, he was determined to open his own business. It took 14 years of saving, planning and preparation before his opened in 1974. Today his company has sales of $4 million annually. He was recognized by the U.S. Small Business Administration as the Distinguished Federal Government Contractor of 1996. In order to succeed in business, Luna says, an entrepreneur must plan, plan, plan. He was interviewed by freelance writer Karen E. Klein.

In the 1960s, I was a machinist working first for the U.S. government and then for a commercial firm in El Monte. I started saving $20 from my paycheck every single week so I could start my own business.

Meanwhile, I got an A.A. degree in industrial supervision by attending night school. The struggles were large. I studied 55 hours a week, worked 10 hours a day and had young children and a wife who needed my time also. It took 10 years of saving and diligent study before I was ready to go into business for myself.

By 1974, I had saved $14,500. Through real estate and investments, that sum had grown to $25,000. That’s the day I started my business.

I wanted to do everything on a first-class basis. You hear about people being undercapitalized when they go into business--I don’t feel I was. I took orders, delivered my products and waited for normal accounts receivable to take their six- to eight-week course.

Eight weeks later, I had $200 in the bank. I had been giving my wife the same allowance I usually gave her each week when I was working for someone else. But this week, I started to worry that I wasn’t going to be able to give her the money.

The next day, Tuesday, the mailman brought in a check for $400--the first invoice that had been paid by a customer! It made me very happy. On Wednesday, I received a check for $2,000, and that was the real start of the business. Since then, I’ve been doing business exactly the same way, except that my accounts receivable are in the $500,000 range now.

Any company that has its accounts receivable flowing in regularly is a lucky company. I think if you start out having to borrow money on your accounts receivable, you’re going to go out of business.

Even after all these years, I find it is always a tremendous struggle to stay in business, especially when you’re continuously growing.

At any given time, you may not have any money in the bank, because as the orders get bigger, your expenses get bigger.

In my 22 years of business, I’ve never failed to make a payroll. At least a third of the time, I don’t have next week’s payroll in the bank this week.

That does not mean that the business is running on a shoestring, just that we have depended, 95% of the time, on our accounts receivable to run our company. All this takes a tremendous amount of planning and cash-flow management.

Quite often, people decide they are going to go into business. They have absolutely no preparation and no financing, so they borrow on the equity in their homes, and it’s just a disaster! No matter how many hours they work, they can’t make a success of it.

I would never, never tell somebody not to go into business for themselves. But I would advise them to prepare, think everything through, know what problems they will face in the first six months and have a plan for how to solve them.

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At a Glance

Company: Luna Defense Systems Inc.

Owner: Albert and Theresa Luna

Nature of business: Manufacturer of mechanical components and assemblies

Location: 5040 Calmview Ave., Baldwin park

Founded: 1974

Employees: 45

Annual sales: $4 million

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If your business can provide a lesson to other entrepreneurs, contact Karen E. Klein in care of the Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia 91016, or send e-mail to kklein6349@aol.com. Include your name, address and telephone number.