Jeremy Powell, known as JP, is a mechanical engineer and co-founder of Radium Engineering in Portland, Oregon. In late 2016, when he talked with host Kevin Dubois just before the PRI show, Radium was best known for fuel system parts such as surge tanks, fuel rails, pulse dampers, filters and catch cans.
Radium was a small company with a big reputation. It had three full-time people, JP, his wife Tina and fellow engineer Aaron, working out of 3,000 square feet of rented space. They designed, tested and assembled everything in-house and sent the specialized manufacturing work to vendors nearby.
This episode is a practical look at building a parts company with very little overhead. JP covered why he kept a day job for years, how outsourcing let three people run a product line, what a wholesaler did for cash flow, how to spot fraudulent web orders, and why he fixes a drawing the moment a customer reports a problem.
From skate ramps to plug-and-play ECUs
JP grew up in Florida in a family with no interest in cars. He built about a dozen skate ramps as a kid and figured out early that he liked making things. His first car mods were on a Honda Civic. A cold air intake and header did almost nothing, so he went straight to a turbo kit, broke a differential, swapped in a GSR engine and kept going.
In his last year of a mechanical engineering degree at the University of South Florida, he went through his roommate's car magazines and mailed paper resumes to aftermarket companies in Los Angeles. The owner of AEM called him back. JP joined AEM and helped design the plug-and-play engine management system it launched in 2002.
In 2006 he moved to Portland to build parts for Horsepower Freaks, an online retailer that wanted its own BMW products. The cost of living and the schools were a big part of the move. There he brought in Aaron, a former AEM colleague, and the two built turbo kits for the E46 M3. By 2008 JP didn't trust the job to last and started planning a backup. In January 2010 he and Aaron started Radium on nights and weekends while Tina ran it day to day. Horsepower Freaks closed suddenly in 2011, and AEM hired JP back to work remotely from home.
Keep the day job as long as you can
Radium ran as a side business for years. Aaron and JP kept their engineering jobs, and Tina handled sales, shipping, receiving and accounts payable. Around 2014 the work got to be more than JP could handle on the side. In 2015 the business moved out of his three-car garage into a shop, and by 2016 all three were full time.
The partners wrote a business plan early on to get a bank loan. They never took the loan. Their day jobs paid the bills. The money they did spend went mostly into inventory. JP's top advice to listeners was to hold onto a full-time job as long as possible, because he saw people in this industry spend too much early and blow up.
Keep it simple. Outsource all the tasks or processes that you do not specialize in. Don't try to learn it all for yourself.
Design in-house, outsource the rest
Radium owned no CNC machines and had no plans to buy one. Anodizing, laser etching, powder coating, laser cutting, forming and machining all went to vendors within 10 miles of the shop. The machine shop was about two miles away and had also been a startup when they met, so the two businesses grew together. JP's reasoning was simple. He didn't want to hire someone and train them on a process, or learn it himself, when a specialist already did it well.
What Radium did keep in-house was engineering, testing, assembly, marketing and shipping. Early on they bought a large Faro arm and reverse engineering software that let the arm work directly inside SolidWorks. Later they built a custom fuel bench with a lift pump, surge tank, regulator and dampers so they could test any idea they weren't sure about. JP also pointed out how far 3D printers had come. One he priced around 2009 cost about $30,000. The one he had just ordered cost about $3,000 and was bigger.
The shop was frugal. They bought equipment only when they needed it, and when space got tight they added shelves. Part-time help, often high school kids, came on during the busy spring and summer. They did simple assembly the partners could easily check for quality.
How the product line found its niche
Radium set out to be a turbo kit company. The partners picked the Lotus as the first platform because the market was small, no large companies were in it, and the car had a good reputation. It also cost about $30,000, far less than a GT-R or a Porsche. JP believed it was easier to start with a respected car than to climb out from a low-end one.
The Lotus had a known fuel starvation problem in left-hand turns, so they designed a billet surge tank with the pump inside it. The tank was made from an aluminum extrusion, and the tooling meant they had to make about 300 at once. Not everyone owned a Lotus, so they sold it universally. That one decision turned Radium into a fuel system company.
For development cars they borrowed from local owners. Sometimes Aaron would spot a car parked down the street, knock on the door and offer parts in exchange for a few weeks with it. The Evo 10 fuel rail damper came from logging fuel pressure on BMW turbo kits and seeing it swing about 10 psi. Radium added a vacuum reference so the damper wouldn't bottom out under high pressure.
Wholesalers, dealers and fraud
JP said picking up Turn 14 Distribution as a wholesaler, around 2014, was huge. A wholesaler has to stock the whole catalog, and Radium's agreement set a minimum yearly volume. The purchase orders came in about once a week. Only once that steady volume was in place did JP feel confident enough to stop working for AEM.
Radium also sold to dealer shops. It had a minimum buy-in to filter out internet resellers with no storefront, and it kept a MAP pricing policy, a habit JP learned at AEM. He valued dealers for their feedback on new products, which he rarely got from end customers or the wholesaler.
Selling direct brought in better margin but also a lot of fraud in 2016. Tina screened orders for a few red flags.
- A freight forwarding address, which JP said was bad about 90 percent of the time.
- Address verification and CVV codes that didn't match.
- Next-day air shipping on an odd mix of parts that don't go together.
Marketing, copies and staying quiet online
Radium's marketing was mostly magazine coverage in MotoIQ and DSport, press releases, and sponsoring top race teams. Aaron screened the many sponsorship requests. JP said sponsorship is hit or miss, because a good-looking car with lots of followers may never push your product. When Facebook reach dropped, they paid for the minimum boost, around $12, but only on new product releases. PRI was where they found dealers. They had tried SEMA and felt like a needle in a haystack.
Copies of Radium's parts were showing up, some of them nearly identical. Radium held no patents. JP said the attorney fees were too high for the industry's sales volumes, and enforcing a patent costs even more. His answer was to keep releasing new products.
Never respond to anything publicly that is negative. Always take the high road. If your product is well designed, let your products do the talking.
He applied the same speed to his own mistakes. When a customer reported a possible problem, he stopped and fixed the drawing right away. Some Radium parts had reached revision H or I. He saw that as how the brand got better.
Key takeaways
- Keep a full-time job while the business proves itself, so you can fund it without a loan.
- Outsource specialized processes to local vendors and keep design, testing and assembly in-house.
- A wholesaler that stocks your catalog can give you the steady orders you need before going full time.
- Set a dealer buy-in and a pricing policy, and screen direct web orders for fraud before you ship.
- Fix drawings the moment you hear about a problem, and answer critics with better products instead of arguments.
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