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Wednesday, Dec 6, 2023

Growing Pains: Labor Shortages, Supply Chain Issues Among Challenges Valley’s Fastest-Growing Companies Face

Allen Lund Co. has survived the pandemic and then some. The company posted $1.2 billion in revenue in 2021 — up 105% from pre-pandemic levels — and is on track to reach $1.5 billion this year. The La Canada-based transportation broker cited an increase in rates and in business volume as tailwinds that helped fuel its growth, along with several roadblocks it had to contend with along the way.

“The tail end of 2020 and the start of 2021 were really challenging as far as trying to turn a buck on the work that we were doing,” said President Edward Lund, whose parents founded the company in 1976. “We had enough volume going through, it was just that the truck market was so tight we were not able to get our contract rates adjusted quickly enough, and so the market outpaced what we were getting paid by our shippers … About 27% or 28% of the loads that we booked were going at a loss.”

The company was committed to “do things the right way” and continued to honor its contracts with shippers. It was able to renegotiate some of the contracts by the last quarter of 2021, and the truck rates got better as well. The labor market also improved — the company currently has about 50 openings, down from 120 in 2021, but still up from some 30 open positions in 2019. 

Allen Lund is one of 20 local firms featured on Business Journal’s list of Fastest Growing Private Companies, (see page 14 for details), a group that spans a variety of industries that thrived during and post-pandemic, but faced somewhat similar challenges over the past three years — supply chain delays, remote working, difficulties in hiring a skilled workforce, and maintaining company culture, among others. 

Labor shortages

Another company experiencing difficulties was Lief Labs, a Valencia-based developer and manufacturer of dietary supplements.

The company reported $112.3 million in revenue last year, an 86% increase compared to its sales in 2019. 

Like Lund, Lief Labs founder and Chief Executive Adel Villalobos also contended with hiring to staff its 220,000-square-foot manufacturing and warehouse facility.

“The consumer demand for supplements did increase, but so did the challenges,” Villalobos said. “We grew from 200 employees to over 300. During the pandemic it wasn’t easy to find labor because … people didn’t want to go to work. And also in some instances, it did not benefit them to go to work, because there was a lot of government stimulus money.”

The company collaborated with local colleges to find interns and develop workforce training.

“I think that was a win-win for the community, and for our company and also for the local community colleges,” he said. 

Jason Hennessey was another executive battling labor shortages. The founder of Hennessey Digital in North Hollywood adopted remote working as a business practice before the pandemic. It allowed him to expand the pool of job candidates, and his employee count is now nearing 150, up from 15 in 2018. But as other companies adopted remote work, attracting employees to join his digital marketing agency has become more strenuous. 

“That (limited) our talent pool, because now they can work for these big tech companies, especially engineers, and developers and coders,” Hennessey said. “Now somebody in Chicago can actually work for Facebook but not have to live in Silicon Valley. I think that certainly had an impact on our business and our recruiting.”

Hennessey Digital posted $10.3 million in revenue in 2021, up from $4.3 in 2019, and anticipates it will end this year at about $15.5 million in sales. The bulk of its work comes from law firms, which he said fared well during the pandemic. 

“(Our clients) wanted to continue to market their businesses, and being that we work with legal, there wasn’t that much of a downturn — people were still getting injured, there were still accidents and stuff on the road and there were lawsuits,” Hennessey said. “(The pandemic) didn’t really affect our business. In fact, we grew from it. That year we also buckled down and we started to recruit more senior leadership and we started to put more systems and processes in place in training and learning and development.”

Other difficulties

Another ongoing challenge for Hennessey Digital is Google’s tendency to change its advertising algorithms. 

“They don’t openly disclose that to us, we just get affected by it and we’ve got to reverse engineer and look at the patterns and see what was changed within the algorithm and try to diagnose it and fix it,” he said.

Hennessey’s also keeping an eye on investors looking to scoop up law firms.

“In Utah and Arizona, non-lawyers can actually own law firms,” he said, adding that if the trend spreads “we’re going to start to see Wall Street jumping into the legal vertical … They know that it’s a very high-margin (industry) and we’ll start to see a lot more billboards and advertising and TV commercials – they have money to invest.”

Blu Digital Group, based in Burbank, also experienced a surge in business during the pandemic. It posted $19.2 million in revenue last year, up from $6.7 million in 2019. The media technology company specializes in film and video content distribution to major video streaming platforms, including Disney, Warner Brothers, Pluto TV, Paramount, Stars and Showtime. It also provides content dubbing and subtitling, while its proprietary software offers cloud-based automation. The company will end the year with $30 million in sales, according to founder and Chief Executive Paulette Pantoja.

“We saw in the last few years a huge uptick in work for us,” Pantoja said. “Covid really had an effect on a lot of businesses, but video-streaming platforms just skyrocketed because people were at home and it was easy to watch content. Our company flourished during that time … 2022 (will be) the highest year ever in our history and we anticipate that to continue in the upcoming years.”

Pantoja welcomed growth, but the remote work took some getting used to, especially with 120 employees on the payroll.

“We were very close knit, and then with having everybody at home, how do you maintain that company culture and open communication, especially when you are in a period of growth, it’s very difficult to navigate kind of the new norm,” she said. “We really leveraged a lot of the collaboration online tools like Slack. Now, 95% of (the management team) is here, but 85% of (the) operations staff are still working remote. It’s important for those who are navigating the ship to be on site.”

Allen Lund has also had to deal with difficulties associated with remote work. The company employs about 680 workers, and “dealing with work-from-home or trying to get people back into the office was a challenge,” said Edward Lund, whose two brothers and other relatives are also involved in the business. “We’re a sales company, and for our sales offices, we definitely operate better with everyone in the same room.”

The company serves the food and produce industries, and worked with some 40,000 independent carriers to move 450,000 truckloads last year.

“The reason transportation brokers can exist is because there’s probably half a million trucking companies in the U.S. and the average fleet size is a handful of trucks,” Lund said. “Shippers need brokers like us to aggregate that fragmented truck market and bring it to them as one carrier. We try to find the best carrier for each and every load. And certainly, we deal with a lot of carriers multiple times —we’re loading them hundreds to thousands of times a year.”

He added that the company is “keeping an eye on AB-5,” which deals with what constitutes an independent contractor.

“How that relates to us is something we’re watching very closely,” Lund said. California is a great state and the regulations that are put on the businesses in this state can be onerous.”

While Lund’s company brokered the movement of goods during the pandemic, Villalobos of Leif Labs was one of the shippers waiting for their raw materials to arrive from China. 

“Our lead times were heavily impacted, and we’re still suffering from that,” Villalobos said, adding that the supply chain issues prompted him and his industry peers to “order more than we need,” creating excess inventory.

He also mentioned that while the labor market has somewhat stabilized this year, and “people are employed, we’re paying more for low-end wages, and we are also paying a lot more for professionals and high-end executives.”

He added that “if you’re in business long enough, there will always be challenges. What allows us to grow is a growth mindset. I believe it starts at the top and it works its way down … And when growth-minded culture is part of the organization, whatever challenges you’re confronted with, you rely on your people to help solve them.”

Hannah Madans Welk
Hannah Madans Welk
Hannah Madans Welk is a managing editor at the Los Angeles Business Journal and the San Fernando Valley Business Journal. She previously covered real estate for the Los Angeles Business Journal. She has done work with publications including The Orange County Register, The Real Deal and doityourself.com.

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