Sit Down With Success, Legacy Edition: A Conversation with David Raby of STI Electronics

Cover image credit: Steve Babin

Talk to David Raby about his business STI Electronics, and he’s quick to point out that his dad, the late Jim D. Raby, P.E., was the brains behind the operation. David Raby, along with his parents Jim D. and Ellen Raby, founded STI Electronics in 1982 in San Dimas, Calif., to provide training and consulting for contractors building electronic components for NASA and the Department of Defense.

The family relocated to Madison, Ala., in 1993, and along the way expanded STI Electronics to include not only training and consulting but also laboratory analysis, microelectronics assembly, prototyping, and small to medium volume PCB assembly.

David Raby recently sat down with the Huntsville Business Journal to share his experience owning a family business and how he has weathered the challenges of rapid growth.

How has your business changed in the 40 years since it was founded?

We started out in San Dimas, Calif., doing classes. Dad was going out doing consulting and education. We had somebody say, “I came to your class, where do I get those parts that you used in it?” It was probably one of the smartest things that ever came out of my mouth. I said, “I can get those for you,” and since then I don’t know how many millions of dollars worth of those we have sold over the years. That became a product that we had, where your company would send you to us to get trained and then we’ll provide you with all the parts to go back and train everybody. That’s 15 percent of our business now; 85 percent of our business is something we’ve grown into since we’ve moved to Alabama. We now are a contract manufacturer.

What is unique about your business?

I used to tell people we build everything from transistor radios to nuclear warheads, and 90 percent of the time when you look at them you can’t tell which one is which.

We do military. We do space. We do all kinds of government agencies, Department of Defense being the largest but other departments also. We’re also doing more and more medical. That just fits our niche, which is, we want something small, and we want it reliable. We’re building some things right now that are a combination defibrillator and pacemaker for premature babies. It’s extremely important that it works. That’s a life or death situation. All of our systems are designed for high reliability.

How have you managed your business’s growth?

I don’t know that we ever planned on getting into contract manufacturing, but after a while realized we’ve got all the equipment now because we’ve had to buy it to do this, and that’s really expensive equipment to only build one thing at a time, so we gradually went into that.

We started out in 2,000 square feet in California, expanded to 4,000, then came back here (to Alabama) to 8,000, expanded to 12,000. Then we built this building and it’s 54,000. It gave us the ability to spread out and do things the right way, and once we did that, then our capacity increased, so business kept growing and growing. We made the INC 500 in 1998 and 1999, then again in 2008 and 2009, as one of the fastest growing companies in the country. I don’t recommend three years of growth at that rate, but we got into kind of a new business, and it really took off to rapid growth.

What challenges have you experienced as a business owner?

Just about any business owner wants to grow. The problem comes in when you get a new customer or an existing customer that doubles what they’re doing. Or you get two customers that do that. For example, we’re really good at building 100 of these but we don’t have the right equipment to build 500. But the customer all of a sudden says you’ve done such a good job building 100 that you got to build 500, so you need new equipment, you need more employees, you may need a bigger building.

Our growth was a curve. It went straight up for a little while, and then luckily, it kind of leveled back off. Part of that was by design, we had to catch our breath and get caught up financially, facility wise, equipment wise, people wise, because you can ask an employee to put in all this extra work for a little while but that can’t be a forever thing. You gotta get them help, but until I get the cash I can’t hire somebody else. I’ve never been one to say, let’s go out and hire 20 people because we think this is gonna happen. I’m like let’s see this happen and then we’ll go get 20 people because the last thing I want to do is convince you to leave your job and come work for me, and two months later it’s like, well, this didn’t work and I don’t have anything for you.

What do you enjoy most about being a business owner?

I have about 60 employees that work for me. I absolutely love that people trust us, that we’re going to help them provide for their families. We’ve had people move across the country to come work here. I love that it feels like we’re actually doing something for somebody. We’ve got two babies that are about to be born, so you just see a family growing and we’re playing some role in that. That’s nice to see.

The downside of it is the stress that comes with it. Not every day is a great day, whether it’s problems with a customer, an employee, some change in the laws or whatever. My whole livelihood is here. Your investment person always tells you how you need to diversify so my stock portfolio is nice and diversified. But 99 percent of it is in this building. I haven’t for 41 years, but as a business owner, I’m one stupid decision away from all that going away. That’s a lot of weight on your shoulders.

How do you manage the stress of being a business owner?

I think over 40 years I’ve gotten better at it. It doesn’t get to me as much, but part of that is also I’ve got a good team of people here, and they’re really good at taking care of things. We were having some crisis one time, and I’ve got two vice presidents that report directly to me and I realized at like 2 a.m. one morning that they’re as worried about this as I am, and if they’re as worried about this than as I am, and they’re smarter than I am, why should I worry about it? That was a very free moment. It doesn’t work well when you’re very small, but as we’ve gotten bigger I’ve been able to spread it out more but with more people, so a good team of people is my best stress reliever.

What’s it like to be in a family owned business?

Working with your parents can be the best thing ever or the worst thing ever. Best thing ever because you trust them. In the early days, it was me mom and dad and whatever the world threw at us. We knew the other ones had our back. There was never any lack of 100 percent trust in anything, which was great. The bad thing was that at Thanksgiving dinner we were talking about company stuff. Christmas morning we’re talking about company stuff. There were a couple of times before we were big enough to stagger vacations that we would just close the company down for a week and go on vacation and we talked about the company. If you don’t love what you’re doing, that’s going to get on you real quick.