One Question: Overcoming Business Challenges With Tony Palo of T1 Race Development
The name Tony Palo resonates with anyone who has been into the hardcore import-car scene; as the proprietor of T1 Race Development and a partner (with Paul Yaw) in Injector Dynamics, Palo has a handle on what it takes to be successful in the performance car industry.
For those who don’t know who Tony Palo is, he and the T1 team built the first eight-second front-wheel-drive street car (a 2000 Acura Integra GSR) and subsequently entered the GT-R market, where he has positioned T1 as one of the world’s finest GT-R tuners. He’s eclipsed a number of performance barriers with that platform, including becoming the first racer to break the 230 mph mark in the half-mile and the first GT-R to break 210 MPH at the Texas Invitational. Additionally, he’s a member of the DSPORT Hall of Fame.
It is with these accomplishments that Tony crossed my mind as an excellent subject for our One Question segment, but rather than talk about racing, I thought it prudent to discuss business. After all, with two successful businesses and an excellent track record within the community, he’s clearly doing something right.
Front Street: What’s the most difficult business challenge you’ve ever faced, and how did you overcome it?
Tony Palo: I think the hardest part was definitely making it through the first couple years with T1.
A mid-20-year-old kid with a passion for cars who wants to open a shop and build race cars, isn’t exactly the situation banks are looking for for business loans. I knew that would be the case, but I also knew I could make it happen. I opened the business in 2005 on my own, with about $25,000 I had saved up, and a fair amount of available credit card spending power. I say a fair amount, in regard to credit cards and what people should put on them, it was a lot (roughly $45,000), but in regard to operating expenses for a business, it’s not much.
I worked by myself for the first eight months or so, handling the fabrication, mechanical work, wiring, tuning, bookkeeping, and cleaning. You could say I put in a couple hours the first year, and it didn’t change much for the first few years.
Anyway, I was pretty smart about things, only buying the equipment I needed to get started, and growing slowly, but I almost immediately worked through my cash and on to credit cards. It wasn’t long before I ended up with some pretty big credit card payments that were quite a burden to pay every month. At one point I missed a payment on one of the big ones, and it wasn’t even because I didn’t have the money, it was just due to me having too much going on and I got behind on paperwork. That took my what was a reasonable (for a CC) interest rate straight up to the max of 33-percent or so I think it was. I was still able to make payments, but barely over the minimum, which almost entirely went to interest.
I continued this way for almost a year. I’ve never been one that’s quick to ask for help, this was going to take a long time to work through, but I was determined to make it happen. Well, eventually my wife mentioned the situation to my mom, who looked into things a bit and found she was able to take a loan out against her house, which would have a much better interest rate. She offered that, I accepted it, and soon enough the credit cards were paid off and the payments were going to a consolidated loan, where I was actually making progress on the principal.
I’ve continued to grow the business at a rate I could afford to, and since then haven’t taken a loan for anything, other than the building we purchased and moved into this year. After 12 years of renting, growing as we could, we’ve refined what we do pretty well and settled into a good rhythm with the business. The new shop was a relatively clean slate, and I built it out to suit exactly what we do, it’s definitely been a big improvement from our previous homes!
Today we work exclusively on the R35 Nissan GT-R platform in the shop, which has allowed us to optimize our program there, and continue innovation on the platform.
Other than working on cars in the shop, we manufacture parts for the Nissan GT-R, distribute and support all Injectors Dynamics products, and wholesale and retail many different lines of performance parts for all platforms.
Thanks to Tony for taking time out of his busy schedule to answer our question! Check out previous installments right here.