Changing the Trajectory of your Business
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Video Transcript

Paul:

All righty. Good morning everyone. People are streaming in here. Good morning, everybody. Happy, whatever, Tuesday, March 21st, 2023. Good morning, Alex and Andrew and Ben and Craig and Dale and Dan and Dan and Daryl. And Elle and Elle and Eric. There’s two Elles. That’s cool. And Irina and Jack. All right, Jack. There’s Jack. All right. Jack is here, David. All right. And Jim Carter, hey. And Jeremy, good to see you all.

So I’d love to start out, as we often do, please put in the chat where you are joining from, where in the world. Make sure you’re chatting to everyone. There you go. Thanks, Ripley. Is that one of your team? Casey. Is that one of your team, Andy? All right. Awesome. Costa Mesa, Wisconsin, Colorado, Richland, Washington, Ontario, New York, Sparta, Wisconsin, Leander, Texas. Hey, Ben. Langley, BC. Fantastic. Meridian, Idaho. Mukilteo, Cincinnati, Indiana. North Idaho. Hey there, Seth. Good to see you. Hey, Eugene, Oregon. Hey, Dad, good to see you again. Thanks for joining all the webinars. Iowa, Wisconsin, again. All right, fantastic.

Well, thank you all for joining. I’m very excited about this webinar. We have two fantastic and super wise shop owners here. They’re going to share some of their experience with us and appreciate all the enthusiasm to share where you’re from. This is awesome. We have a great crowd today. And we’re going to learn some things about changing the trajectory of your business.

So a little housekeeping first, I’m sure there will be questions of Dave and Andy and possibly myself. So as you come up with questions, please put them in the Q&A part of the webinar, not the chat. It’s a little harder to catch them all in the chat. So put them in the Q&A. If anything resonates with you as we go, throw that in the chat, like, “Heck yeah, that’s cool,” or “No, I don’t know,” or whatever it is it might be. And hey, John in San Luis Obispo and in Austin. Good to see you both here.

All right, well, let’s get into this. And I’ll formally introduce my guests. So we have Dave Hannah from G-Zero CNC Machine near Boise, Idaho. And Andy Reinwald of Ripley Machine up in Upstate New York. And we’ll learn a little bit more about those two guys in just a second here. But yeah, again, thank you both so much for volunteering to do this with me. So I always like to start off these with our mission statements. We deliver powerful manufacturing software by deeply understanding our client’s challenges in order to meaningfully improve their businesses and in turn their communities. And I hope some of the wisdom we share today can meaningfully improve your business, whether you’re a pro shop client or not. And Dave, let’s start with you. Let’s learn a little bit about you. You’ve been a client with us since 2018. Thank you so much. And just, yeah, tell us a little bit about yourself and G-Zero.

Dave Hannah:

Sure. I’m Dave Hannah, I’m the owner of G-Zero. We started G-Zero back in 2007. I had two machines and one employee, and now we’re up to, I think, we’re now 16 employees and 11 machines. So it’s been great trajectory and going really well. I’ve been enjoying it for all these years.

Paul:

Awesome. Fantastic. Now, when you and I met at a small trade show in Eastern Washington, I think, or Idaho, whatever, five years ago or so, you had told me that, although you certainly enjoyed running the shop, it wasn’t quite what you originally had expected when you started the shop. And you’ve obviously made some huge shifts in the last five years. But I’d love to have you just give a little bit of background on where your mind was at the time and what was going on in your business before we met.

Dave Hannah:

Sure. At that point, I was kind of looking at what it would take to sell the business, and I really kind of wanted to get all the ducks in a row because I had been kind of tired of putting in a lot of work every day. And enjoyed it, but I thought it would be running a little smoother, and I wouldn’t have to participate as much. So I was kind of on a trajectory at that point to sell the business. And so when I found the ProShop software, I thought, Hey, this would be great. This would make it look a lot better and make it more appetizing to somebody that would come in to buy it. And then after, oh, probably about a year and a half or so of ProShop, it was things were really going well, I could see a lot more what I wanted to see and understand a lot more. And that’s kind of when I made a shift that I would just turn it over to people and make more time for myself to do the things I do, golf and hunt, spend time with family.

Paul:

Awesome. And you told us as we were prepping for this, that you had to turn down a skiing trip today to attend this webinar. So thank you very much for doing that. And we will learn more about your five year plan a little bit later, but it sounds like it’s going exceptionally well if you’re only working 10 hours a week at this point. And then you had shared this picture, I think on Instagram or somewhere, where you were out down in Mexico poolside checking in on ProShop and the shop. And so we’ll learn a little bit about the tools that you use to keep tabs on your business while you’re vacationing. So thank you Dave. And then let’s learn a little bit about you, Andy, and Ripley Machine.

Andy Reinwald:

Yes. So Ripley Machine was my grandfather’s business. He bought an already established machine shop 29 years ago Sunday, actually, and expanded it. And I purchased it from him in January of 2015. We’re a 18 person shop, primarily work on production, CNC turning production, CNC milling, centerless and internal grinding. And we’re located kind of in between Buffalo and New York and Erie, Pennsylvania.

Paul:

All right. And you’ve got Swiss machines recently too, right? You got a Swiss machine now?

Andy Reinwald:

Yeah. Yep. Swiss machine. And we just added a horizontal a few months ago, so we’re excited about-

Paul:

Oh, congratulations.

Andy Reinwald:

… both of that, and where that’s going to take us.

Paul:

Yeah, fantastic. Automation. Awesome. Well, I love the story of you buying a business from your grandfather. Who does that? That’s incredible. And a young millennial, I guess. Is that your generation? Gen Z, whatever you are. Pretty early.

Andy Reinwald:

Yeah, I’m pretty millennial. I’m a millennial.

Paul:

Awesome. Awesome. And Andy’s been with us since 2020. And as we were prepping for this webinar, and so Dave had done us the favor, this is Dave’s second webinar with us because he did one just for ProShop customers, we do a monthly webinar just for ProShop clients, and he did one on delegation and some of the tools that he uses to delegate, and we’ll learn a little bit about those. But as we were planning for this, Andy on LinkedIn shared some pictures of his recent trip to South Africa. And he had written a blog post, which we will share in the chat, there’s the two blog posts, preparing for his two week trip, which Andy, you said is the longest trip you’ve ever taken since you bought the business.

Andy Reinwald:

Yep.

Paul:

Yeah. So I’m sure many of you can relate to that. As you are running your shop, running your business, it is tough to even conceive of leaving for a couple of weeks. You’re afraid that things will go sideways. People won’t know what to do with your customers. You might have customers get angry with you. Who knows? Whatever. So Andy, yeah, I’m glad that you shared those pictures because it was an opportunity to loop you into this and have people learn from your experience. So awesome. So grab those URLs in the chat and go read those later after the webinar. All right.

So we thought this would be a great little gif to demonstrate the concept of your business is running you, you’re just getting dragged along. So I know certainly, when we had our shop, there were times where we 100% felt like we were just along for the ride. It was this crazy train that was just doing its thing, and we were just there barely keeping it on the rails every day, right? Firefighting, emergencies coming up, trying to respond, trying to be responsive to customers. But I’m sure, as most of you know, and it’s certainly something that I say all the time, that running a machine shop has got to be the hardest business in the world. It’s just incredibly technically complex, high capital intensive. It’s like fighting fires all day long often.

So what we’re hoping to talk about today is how to see the light at the end of the tunnel of getting out of that daily grind and working more on your business and less in it. And these gentlemen are going to share a little bit about how they have done that. Because it’s not fun to be in the weeds every day fighting fires. So some of what we’re talking about today has been coming from a series of blog posts that we’ve been publishing. And one of the concepts is that you really need a destination for where you ultimately want your business to be.

I know Andy, for you, that’s very far down the future because you are a young man, Dave, that’s a little closer for you, but it is really important to get clarity on what you want out of your business. Most business owners start or buy a business to achieve some means, whether it’s financial independence, whether it’s leaving a legacy, whether it’s building a business to have your family take it over, whatever that might be, whether it’s just to get involved and support manufacturing in North America, if that’s where you’re from, or whatever country you’re from. There’s so many reasons why people start businesses.

But sharing your ultimate vision with your team, and then setting a path and a way that you’re going to achieve that goal is oftentimes something that people just don’t do enough of. They just get right into business, start making parts, making ships, and figuring out how to ship orders. And that all consuming process just kind of sucks you in. So it is important to have an end game, and share that with your team and then build systems to do that. All right.

So oftentimes, and we’ll get more into some of the details of this, but trying to decide where to even start with things that you can have other people help with is a challenging task. So when I thought about, and when we were running our shop, sometimes we would just be so overwhelmed by everything that we’re doing, it’s hard to even know where I can start delegating or things that I can start building systems on to start having other people do.

And one of the things for us that was really sort of a turning point was reading a book called The E-Myth. And I’ve shared this many times in lots of blogs and webinars, but the E-Myth is a fantastic book written by a guy named Michael Gerber. And it defines the process of thinking about your business as if it were a franchise, as if you were going to open multiple locations of your same business, and you aren’t going to be there to run it. And as you start thinking about that, and how you can look at the things that only you do that maybe aren’t even critical for you to do as taking a huge amount of skill or a huge amount of knowledge, but it’s still something that you do on a daily basis that consumes a lot of your time, that low-hanging fruit are the things that we can start to see ways that we can pass those on to our team.

So as we work through this process, there’s a few questions we want to ask ourselves. Am I focusing on the things that are really moving the business forward? Are there things that I can delegate to someone else so I can work on more important things rather than in the sort of minutia of the details? What can I do to be more proactive? I hear a lot of shop owners as we were onboarding and implementing ProShop with them, they realize how reactive they are generally being, and how getting a little bit more proactive and thinking more strategically, planning things out a little bit better on the front end, can really help to eliminate firefighting that happens later down the road.

And then of course, documenting those things. I’m sure every shop can relate to you make the same kind of mistake over and over again because things aren’t documented in how you would like it to be done. And when you do document and have things go more smoothly, that absolutely can affect your bottom line in a very positive way. And then as you build these systems, start getting things in place, you need to start making sure that you are hiring to meet your end goal, to stay on track with your plan, whether it’s revenue plans or whatever that might be, it’s important to do that. And one of the sort of sayings that I like to come back to about this topic is, failing to plan is basically a plan to fail. And without getting your head above the clouds and working on some of these things, it’s going to be tough to succeed.

So this actually came from a book. So I saw this basic concept from one of my mentors, but I know it’s from an actual book, which I can’t think of the name of. But essentially, and this, I’d love for you to make a grid, grab a spreadsheet, whatever it might be. And this is actually one of the practices that I was taught, was keep a log on a daily basis of how much time you’re spending. So starting at 7:00 or 8:00 AM, whatever time you start work, through the end of your day, put it into hour long buckets. And put in those slots, what am I actually doing? Am I spending an hour doing email? Am I spending two hours entering purchase orders? Am I spending time booking a trip to go visit a customer? Whatever that might be.

And then put dollar figures on that time. And at the end of the day, multiply that out for how much value you generated in your business. So if you spend eight hours… Yep, buy back your time, Steven. Exactly right. And if you spent eight hours doing $20 tasks, you generated $160 worth of value for your business. And if you have a goal of being a $10 million business one day, it’s going to be hard to get there by doing 160 bucks at a time. So if you can spend more time doing the things that really only an owner can do, or ultimately possibly you can work your way out of all of these things. So as Andy suggested, we throw in this last slot, enjoying life, that is priceless.

If you can launch a marketing campaign to bring in new customers, doing strategic planning, building your systems, actually going out and doing sales. Oftentimes owners sort of have that founder magic, they can do sales better than anyone else. Whatever those things might be, those are going to bring a lot more value to your business. So definitely I would suggest go ahead and try doing this, make that little spreadsheet, multiply out what you’re working on, and decide what’s so important that you can’t start delegating that to other people. And where we’re trying to get to is spending our time all up here instead of doing this. Actually, I’m going to come back to this. Oh yeah. So one thing as we were prepping for this, Andy, you were saying to me that you have not formally talked about this with your team, but that is something that you are planning to do this week. Is that right?

Andy Reinwald:

Yeah, it’s definitely something that… We’ve informally, I think, really started to delegate these tasks and tried to work towards this. But it’s something that we’re going to be diving in now that I’m back from my trip and able to see the impact it had on our business.

Paul:

And Dave, obviously you’re a little bit further along on your five year path, and we’ll talk a little bit more about that later. But yeah, when did you start really realizing this was something that you needed to do to move your business forward and set you on the path that you are on now.

Dave Hannah:

Yeah, probably a year ago is where I knew that I needed to start getting out of the weeds and doing the $20 tasks, and let other people do it and trust them to accomplish what I was doing. I could focus on the big money stuff. Or do nothing.

Paul:

Or do nothing. Yes. Even more to the point. Fantastic. All right, so let’s move along. So this one is an important slide, and we talked about this as we were prepping. So Andy, you said something I thought was particularly pertinent about being humble and swallowing your pride. Can you talk a little bit about the thought process you went through as you were realizing that you are not the end all be all, and other people can do things that you can do?

Andy Reinwald:

Yeah, I remember saying to one of my guys a few years back, and he mentioned it to me a couple of other times that I said, “Oh, if I missed a day, it costs us X amount of dollars.” And I think that was kind of a pride thing. That you guys need me here. And so it is been a challenge. I mean it’s just something I’ve walked through in my religious life as well by just trying to humble myself and recognize that I’m not anything special, and there’s no reason that there’s tasks that I need to be doing. I think it’s a challenge that we’ve got a God complex, that we think that only we can do it so good. And even there’s some things that it’s like if it’s a task that maybe somebody accomplishes 90% as good as I can do, if I’m able to spend that time doing a higher level task that is worth so much more, as that last table showed, that 90% is a lot cheaper than what the cost of me doing the task was. It’s something that definitely has been humbling.

Paul:

And Dave, you mentioned you felt like you always had to have your fingers in everything. Can you share a bit about that?

Dave Hannah:

Yeah, I mean I always took pride in knowing what a part number was, and I knew what customer that went to. And I can just tell you anything walking around the shop. And just to let that go and let other people take care of things was a very hard part. Being humble is tough. That was probably the hardest thing in this transition was to trusting someone else and let them do it. [inaudible 00:21:26] a little different, but the result is the same, and that was the tough part. Because well no, I do it this way, but the result was the same the way they did it. So just let that be.

Paul:

And was the fear that they weren’t going to do it as well as you would and therefore the customer wouldn’t be served as well? Or was it something different than that? Was it just feeling like-

Dave Hannah:

It was disappointing the customer. And I had my hands in it, then I knew it wasn’t going to happen. But letting that go and the realization now at times there’s things Jack does way better than I do, especially communicating with the customer. Just little issues that he’s on top of. And it’s interesting, he doesn’t have the fear as much as I did of disappointing the customer. He has that ability to say, “Oh, it has to be this.” And he can say no to work, which I had a tough time doing. I’d be like, “Oh, we can do that. Sure.”

Paul:

Sure, sure. So you’ve found then that not only is it okay to let go, it’s good to let go, but some of the people you let go to are actually better than those things than you were.

Dave Hannah:

I don’t know if they’re better. Exactly. Exactly. That’s it. Someone can do something better than I can and helps the business tremendously.

Paul:

Right. Yeah. Andy, have you found that there are aspects of different tasks that some of your team, they’re actually better at it than you are as well, and it’s letting them own that and giving them the autonomy to make decisions or do those things has actually bolstered, I don’t know, your culture, or just your relationships with folks and how they feel empowered?

Andy Reinwald:

Yeah, I think it’s definitely the case that just it comes back to the humility thing. We’re all built differently, and we all have our strengths and our weaknesses. And there’s areas inside of my life and my work ethic that I recognize as areas that I tend to lack on. And I’ve got team members here that tend to pick me up in those areas. And I’ve tried to strategically allow those people to handle those tasks and step away from them because I think it’s an area that I would’ve struggled with the task, or it’s something that I wasn’t really trained to do, and they knew better than I did. So it’s definitely been something that’s happened here.

Paul:

Yeah. So we’re going to share in the chat here. This is a video, it’s only nine minutes long. Definitely go check it out. It’s a book by a guy named David Marquet, and he was a nuclear submarine captain. And he wrote this incredible book, and this nine minute video is kind of the summary of him taking over this ship and making a really conscious choice to basically not give orders anymore. And it was a very different thing because that’s normally in the military, the superiors give the orders and everyone just follows those orders. But he realized that that was not the way he wanted to run his ship. And so definitely grab that URL and go check that out. It’s a fantastic video. Very inspiring. Great speaker. All right, well fantastic. Let’s move on.

So once we realize that we do have to delegate, we do have to write things down, we do have to build systems that will get you to that end game that you have have planned and written out and shared with your team, this is really where the rubber hits the road. This is where you need to start figuring out what systems you do want to build. How are we going to systematically do sales to make sure we have enough business coming in every month? How are we going to make sure that we are confirming our orders with our clients and making sure everything that they are telling us they need gets back to them in the form of parts, paperwork, delivery dates, quality, whatever it might be. That’s the hard part of a machine shop is there’s so many thousands of little details that one of them going wrong could scrap your whole batch of parts or make you laid or who knows what.

So yeah, so this is one, this is really where the work starts. Now I will say this is where some of the logistical work starts. Some of the more difficult mental work may have been on that last slide about delegation, realizing that it is okay, and it’s even better to give up control and trust in your team and decide, as Andy said, be humble about the fact that you’re not the only person that everything pivots around.

So as you build these systems and as they start to actually work, you will find yourself with more free time. Just that’s inevitable. If someone is doing something that you used to do, and hopefully you’re again working from that lowest hanging fruit, what are something that I’m doing every day that just clearly I shouldn’t be? Maybe it’s packaging parts, maybe it’s driving them over to a customer, whatever it might be. Starting from those really most obvious ones and kind of working your way out.

One of the things that another customer of ours shared with me not too long ago is that, as they decided to go through and rewrite all of their processes and procedures, he said, “If my name is listed in that new procedure, we have to go back and rewrite it because it’s not scalable.” I do not know if Jamie is here on the call. I don’t see him. But Jamie Marzilli from Marzilli Machine Works. Just such a insightful thing to say. My name cannot be listed as part of the solution for a process. If it is, we need to rewrite it and have it be someone else, or some other system that’s in place.

And Jamie also told me yesterday on a call that he’s taken way more vacation this year than ever before in his business life. Just demonstrating the results of being able to write yourself out of those procedures. All right, Andy, I’d love to share a couple of quotes from your blog. These are very tactical questions. I’d love for you to share a little bit about this process as you were prepping for your trip, and maybe even prior to that, just trying to get yourself out of being the only person that knows all these answers.

Andy Reinwald:

Yeah. I think as we began to identify, and we’ve heard a lot of the E-Myth and some of the other webinars where Paul has talked about, and I know the EBITDA System guys have talked about the importance of not having that one key person or maybe two key people that your shop is always coming to for every single question. We started to identify that. I think at one point in time we had four work instructions in place at one point in time. And most of those are just directly tied to our quality management system. We’ve worked since then to either add work instructions, or else some of these questions here were just items where we utilized ProShop to better serve us and answer questions like these, and just have it spelled out so that way we’re not even delegating the task to another level of our management, but it’s just empowering our operators and our users to be able to quickly see the answer to that question.

Paul:

Yeah. And here we’ll share that. So this is a snapshot from one section of the contact module, which is basically where you can identify all the requirements that a customer has for you, all the flow downs they have, all the preferences they have, that you kind of do business with them. And quite honestly, this page in this section was very much built from the concepts that we learned in the E-Myth. The idea that when they open a new McDonald’s somewhere, they’re not trying to figure out how to run that machine. They have fully established processes. There’s manuals, there’s procedures of exactly how you run a McDonald’s.

So the idea that we took from that was, if we were going to have another location of Pro CNC, how are people going to know whether the jobs need to ship via what carrier? And was it okay to send five extra parts on an order of 100, and how early could we ship, if we’re early or late? And so we just built some of these tools. We built some of these fields where when you’re setting up that client the first time, whether you send them a survey or just ask them on the phone or whatever over a conversation, and document all of these things.

And then from there we push those onto every single work order for those particular clients. So this is a snapshot of the sort of final inspection shipping operation. And we can see those notes that were built at the contact table are pushed right down to those work orders. So again, someone’s not coming up to you, Andy, and saying, “Hey, we have five extra parts. Is it okay if we send these?” Right? It says right here it’s okay to ship plus or minus 10% from the order quantity. Is that an example of some of the things that you would get interrupted with maybe every day as you’re trying to do more important stuff?

Andy Reinwald:

Yeah. We definitely were seeing a lot of, I don’t remember if it was included in the questions, but how do we package these? And that same question, like you said, can we ship extra? And then even in some cases questions that maybe we don’t have an answer for and we need to reach out to the customer, we were able to put contact information into those customer pages. That way our team knows who they should contact for what. If they’ve got a question about shipping, here’s the shipping and receiving person. Or if they have a technical question, here’s the technical engineer for that customer. So they knew who to reach out to and contact.

Paul:

Yep. Yeah, yeah, great point. Yeah, back on this other page, in the upper right hand corner of this page, there’s a table of contacts with phone numbers and emails and notes about whether this person is a buyer or a shipping person or a quality person, or whatever. So yeah, you could have the full directory of your different client contacts so people know who to reach out to.

And then of course, there’s always exceptions to the rule. So there will be particular part numbers that you have to package a certain way or ship a certain way, and those flow down as well from the part module. Though you can kind of have a hybrid of both the default requirements and the customer requirements for any particular part number or work order.

And some of these details seem kind of mundane, but quite honestly, it’s those details that I think really matter to customers. Humans, they like to have things be very consistent. And if you are a vendor for them, they want for you to do business with them in a very consistent manner. Just like when you go to McDonald’s to get a burger, you want it to taste the same as it was the last time you bought it. So the more consistency we can bring to our operations, to the contacts, the touchpoints we have with our customers, the more consistent you make that experience, the more they’re going to perceive you as a steady, consistent, safe supplier. Dave, does that resonate with you? Any stories or ideas to add to this concept?

Dave Hannah:

Yeah, I mean, just the effort to put in this extra work here pays off dividends. I mean yesterday, our shipping person was out, so whoever comes up next, they don’t have to go, “Oh hey, I’m doing this, what do I do?” We put pictures in or whatever like that. They can know exactly how it goes. My biggest one is are we shipping on their account or my account? So [inaudible 00:35:27] from the bottom line. If we shipped it on ours and we could have shipped it on their account, then that’s what they expect.

Paul:

Yeah. Yeah, absolutely. Yep. Absolutely. Yeah, sometimes it’s those tiny little details, just it’s that whole death by 1,000 paper cuts. I remember we even put in this days early window feature when we shipped something too early to a customer and they dinged us on our quality report because they didn’t want those parts 10 days early. Seven days is their established early window. And if it’s three days earlier than that, they’re going to ding you, and maybe even send the parts back. And it’s just friction. And the buyers don’t like it, and everyone doesn’t like it. So definitely some of these came from our hard-learned lessons, doing things the wrong way. All right.

So as we start to put all this stuff together, just kind of summarizing here, it’s important I think to cast a vision for where you want your business to be at whatever point in the future. I think it’s universally true of all humans, but especially young folks these days, younger people, which hopefully in your businesses you’re doing things to recruit younger people, which is hard, but important. They really want to know the vision of the organization, what they are there working for every day.

And I shared at the beginning of this webinar what our mission statement is, and our team absolutely rallies around that. And at our machine shop, it was a different mission. It was providing our customers with excellent quality parts, on-time delivery, great communication, so they could keep their supply chains flowing, their assembly lines running, and then they relied on us to deliver those parts. So sharing that vision, I think, is a critical part of this process.

And then sharing that with your plant, with your team. And you can’t say this too often. Sometimes I hear people say, “Yeah, we put a goal up and it’s like we shared it at a meeting once.” But that’s not enough. You need to keep re-sharing it. You need to keep restating your mission and why you’re doing what you’re doing is important with your team. That’s what helps build that alignment. So everyone’s rowing in the boat in same direction. And then finding the right people and putting them in the right seats. And Dave, I’d love to start having you share now here with us. So can you share a little bit about your five-year vision for your company?

Dave Hannah:

Sure. Yeah. So like I said, back in November, a year and a half ago, I decided that I was going to create a system to where I could step away from the company in five years. I won’t have to be involved anymore. And the biggest thing was finding that right person. And luckily Jack, who works for me, expressed some interest, and so moved him into a purchasing position and just really started taking off.

Paul:

What role was Jack doing at the time?

Dave Hannah:

He was a machinist out on the floor.

Paul:

He was a machinist on the floor a year and a half ago. So I know Jack is with us today.

Dave Hannah:

[inaudible 00:39:07].

Paul:

Might be blushing right now.

Dave Hannah:

Yeah, I embarrassed him in our last video.

Paul:

Well, I kind of got clued into this last fall when, not a year and a half ago, but six months ago or so when the EBITDA growth systems guys, Dave and Mike, did a summit, a workshop in Golden, Colorado there. And Jack showed up rather than you. And I’m like, that’s very interesting that Dave sent Jack to this event rather than himself. So yeah. Can you share even your thought process around sending him to that event?

Dave Hannah:

Yeah, I mean, Jack showed the initiative of wanting to do more and be more. And so I figured, well, I’m not going to be around after a while, so he needs to start attending these things. So I thought sending him to that would be great so he can get more of an idea of the big overall picture and understand a whole lot more of what every penny means to a company and what it does to your bottom line. So yeah, I need to send him, although I love traveling, I was like, let’s get him more involved. Let’s get the rest of the team more involved with what’s going on.

Paul:

Right. Awesome. And that was a doubling your business value event. And maybe our team can throw the EBITDA Growth Systems website in the chat here. Great people, great partners of ours. Yeah, pretty cool. All right. Establishing an accountability structure. That of course is critical as… Oh, thank you, Sarah. Fast on the draw there. Yeah. I mean whether or not you plan to eventually exit the business, which everyone will one way or another, that’s guaranteed, unless you’ve found the fountain of youth, you’re going to exit your business one way or another.

And so having accountability structure to make sure that the goals, the tactics, the strategies and objectives that you put in place to make sure that you’re meeting your goal are happening on a schedule, on the plan that you’ve set out is super important. We definitely are fans of org charts and there’s an org chart built right into ProShop. So as you define different roles and say who those roles report up to, and the job descriptions and the key metrics for those roles, and what training is required to be trained up in those roles, that all helps build that structure. I’m curious, Dave, I haven’t asked you about this before, do you use the org chart and the training modules in ProShop to kind of define the roles and the accountability there?

Dave Hannah:

Yeah, we do have our org chart set. It’s kind of a part of our management meetings we have. It’s in there. So we don’t use names, of course, we use titles. So somebody might be that person later down the road. They’re the production manager, they’re the scheduling manager. Yeah. But no, we use the org charts.

Paul:

And Andy, do you use that part of the system?

Andy Reinwald:

We do not at this time, but it’s definitely on our to-do list.

Paul:

Awesome. Very good. Yeah, it’s definitely a journey. There’s a lot to do. So deputizing your team, I think basically, we’ve been talking about this already. And one of the key points about this is really, and maybe this is that mentally tough part of trusting that you’re going to put responsibilities on different folks and get out of the way and let them do their thing. I’ve even recently put some responsibilities on other folks that I was doing in the past, and just being sort of floored by how quickly they come up with ideas that were better than ideas I ever had for those areas. And I think when you have the right people in the right seats on the bus and really empower them.

And I’ve talked about this on other, I forget where, but creating a safe place for people to share their ideas, knowing that you’re not going to shoot them down. If you don’t like the idea, you’re not going to fire them or demote them or anything like that. I think that’s a key step of this process is, like you said, Andy, being humble, being open, making sure that you are communicating with your team that mistakes will happen, right? No one ever gets it right the first time, but what we’re looking for is their best ideas, their collaboration, and together you’re going to build that process, build your company.

And then it requires feedback. Constant improvement, constant change. Again, nothing’s ever perfect the first time, but when we build systems and we start measuring the outputs of those system, that’s what allows that incremental process of improvement. If you’re not measuring it, you can’t improve it. There’s that old adage. So having one-on-one meetings with employees is a great way to go. We’ve done that now for, I don’t know, 15 years or more, all the way back into the Pro CNC days. We started doing very reliable one-on-one meetings with every employee every single month, which is different than performance reviews. So one-on-one is just a little more informal check-in. If you look online for one-on-one formats, there’s lots of great examples out there of questions to ask, ways to structure those meetings. And then looking at the metrics, looking at the tools that you have in place.

So Dave, I’d love to have you share, again, you had a few different tools that you use in ProShop. So now that you’re a year and a half into your five year plan, and you said it’s going better than you expected, and you’re now working about 10 hours a week or so. Yeah, just kind of share a little bit of some of the things that you use to check in with the team and make sure things are kind of going according to plan.

Dave Hannah:

So Paul hasn’t touched on most of this since, but ProShop was a huge part of the success we’re having now and the ability to step away. And so being able to see things has been so vital to letting me relax and be more comfortable with what’s going on, and not be totally out of the loop, of course, is some of these tools that ProShop offers. So sales breakdown is a big one. Just looking at where we’re at, the booked orders, and what’s going on so you feel a little more comfortable. The big one is when job ship. Down from this page a little bit is typically recent job shipped. And so I can check the profitability on them, see where they’re at. If we have a big loser, I can look into it and see what’s up. Typically there’s really good notes from the shop floor of what might have happened, programming issues or whatever. So then we can take those, some of the top items that we’re having and focus on them later. So late and scheduled to be late is a big one.

Paul:

Yep. So I’ll jump to that one. I first want to mention this is not Dave’s actual dashboard. This is a fake template dashboard from a demo system. So Dave is not sharing with us his backlog and how much he has past due.

Dave Hannah:

[inaudible 00:47:10] due 12 months ago.

Paul:

This is also not Dave’s system, this is a demo system. But this is one of the things that you use, one of the pages?

Dave Hannah:

Yep, yep, yep. This is a big one. Really nice. Because if you have everything set in there, you’re outside processing days and all that stuff, this will let you know real soon what’s going on. And the team uses this quite a bit too. But I like to jump in there just to see if we’re going to be needing to put overtime on something, or what’s going on because it’s a big driver. And like I say, customers, they want it on time when they wanted it, and it needs to be perfect. And so we’re very good at giving them a perfect part. We haven’t had any escapes in a long time. We found problems. [inaudible 00:48:05] about that. But it’s great. We find them ahead of time because we have in-process checks and all that stuff we can do. But yeah, this just gives me a real good snapshot of where we’re at and how the schedule’s looking.

Paul:

Yeah, and one of the key parts to this is scheduled to be late. So this will tell you, even if a job is not late yet, but ProShop is predicting that’s going to be late in the future, that’s really where you can start making more proactive decisions on overtime, or let’s run a weekend shift or whatever for this weekend to get caught up before it’s too late and you can’t do anything about it. So I think that’s an important concept.

And then here’s a detail, again, not Dave’s actual jobs, of what it looks like to look at the job costing from a job. And as Dave said, at the bottom of that sales dashboard, there’s a rolling list of jobs that have recently been invoiced and it shows the summary of the profit. So you can just see right there any things that really jumps out at you. And if you click on the little dollar sign icon, it takes you right to this page where you can see how much the job was worth there’s live links to look at the cost of goods for purchase items like material, I would say processing bum items, whatever that might be.

And then a direct link to the labor, which will be rolling up the actual labor cost of everyone that worked on the job and basically giving us gross margins. And then we can look at our net profit on the job. And so Dave, you use that to kind of drive your improvement activities or make decisions about repricing? Or I guess maybe that’s more Jack at this point. Can you just describe a little bit more what you do with that?

Dave Hannah:

Yeah, that’s just so we can keep a pulse on that we are at a good shop rate that’s giving us our profit that we look for. And just, it’s really nice just because it’s a quick snapshot of parts that went wrong and what was it. So I mean typically the red bar will be out too far on something if there’s an issue, and that’s another indicator, but I don’t look on that one too much. Dave’s ProShop is broken.

Paul:

Again, these are not Dave’s real system. This is a demo system with all sorts of erroneous data in it.

Dave Hannah:

Well, on the red side, what is driving that, and do you have shop rates on your machines different, and everything? And then the overall profit is a great indicator too that this gives you an idea sooner of what’s going on. I mean, we have trouble with lathe jobs. It’s always something on a lathe job, it seems like. But mill jobs and horizontal jobs go great and are always very profitable. So that’s what we focus on right now is what we need to do.

Paul:

So also might that inform you about the types of jobs you want to find in the future and the types of machines you want to buy?

Dave Hannah:

Exactly. So our lathe issue is the types of machines we’re currently running and what their capabilities are. And some of the jobs we get are just difficult. We get a lot of tight tolerance jobs, especially over four or five inches of holding a half a bough. We need a good machine. So we’ve really noticed that, that it is part of it, the quality of the machine.

Paul:

Right. And I know Justin, you’re poking a little bit of fun, but truly if your numbers are always red here, that one of two things is happening. Either the inputs going into it are incorrect and your system thinks things are more expensive than they are, or things are actually unprofitable because they’re taking too long, or you’re not charging high enough hourly rates. You didn’t hit the estimate, you’re estimating too low. There’s all sorts of things.

But generally if you drill into the details, that will reveal what the problem is. Looking at the difference between your estimated hours and your actual hours. Looking at whether you’re spending more in outside processing or raw materials than you quoted. Or even if you are hitting targets and still losing money, that means you either have too much overhead expense for your amount of capacity.

At our shop, there were times in our history where our breakeven point, let’s say we had to ship $500,000 a month just to break even, but our capacity was only $520,000 a month. That’s not enough of a gap. It’s a very risky place to have your capacity just barely over your breakeven point. So I know ideally, you have a lot more capacity in terms of available revenue to build and ship with your hours of people and machinery than your breakeven point. And the bigger that gap is, the safer it is, the more likely it is you’re going to make money every month as opposed to having those months where you don’t ship enough and you’re just way below and you have a huge loss, and that wipes out possibly months of profit. So again, this is why this is the hardest business in the world.

All right. We have a couple of questions coming in. We’ll start to wrap this up here. Obviously we all know this phrase. So this is not an overnight process. There’s no doubt about it. As you And was talking about, you’ve been using ProShop for about three years now, Dave, for about five. But taking time to build those systems, get those people in place, build that level of trust, really learn to let go. But once you have a foundation, once you have a good system, and of course we think ProShop is a great system for building that foundation of processes and accountability and visibility for everyone to know what they need to know to do their jobs effectively, you can really start to build your team and build up that system around you to do what you want to do.

All right. So let’s get into some of the Q&A. Thank you to Alex and Ben and Jeremy. All right Alex. “The certification process, whether it’s ITAR or AS9100 is a tremendously time consuming process. Would you advise achieving a certification prior to moving to ProShop or after?” Thank you Alex. That is a wonderful question. I’m going to defer to these two guys to start with. Dave, what would you say to that question?

Dave Hannah:

I would get ProShop in place first. Our certification gentleman came in, and literally, he was supposed to be here a day and a half, he was done in a half a day, and was just so impressed with what was there, how easily… He didn’t have to go places. Everything was you can see it all right right there, just clicking around. He was geeking out on it pretty good. So definitely get ProShop in place first.

Paul:

And you are AS certified, right, Dave?

Dave Hannah:

Yeah. [inaudible 00:55:39].

Paul:

And Andy, you are ISO?

Andy Reinwald:

ISO. Yep.

Paul:

Yeah. And did you have your ISO before ProShop? You did.

Andy Reinwald:

We did, but I wish I would’ve had ProShop before. I mean it would’ve made our life so much easier. And it makes our ISO audits, and then even some more stringent customer audits, so much more simpler just because, like Dave said, everything, it’s just ducks are all right in a row and everything is just linked together. And it used to be pull out a bunch of binders, and then find old work orders and old paper that’s probably a little bit dirty because it’s been out on the shop floor. Now it’s just click a few buttons and look over my shoulder as I click the buttons and show you what we’ve done.

Paul:

Right. Yeah. So Alex, I mean think you’re spot on that, in a traditional way, ISO and ITAR and AS are tremendously time consuming. But because ProShop was designed and built in our own shop that was ITAR and AS9100 certified, we basically designed all the processes within the software to be compliant to those regulatory requirements. So like Andy was saying, instead of having a ton of binders and Word documents and PDF files all stored on your network or stored on your filing shelf, it’s all digital, it’s all linked together.

In fact, we have what we call our Flying Start package, which comes with a complete AS9100 system already kind of built into ProShop in terms of the documentation of your quality manual procedures and tasks and training and all of that. So we absolutely have helped clients go from no certification whatsoever to passing their AS cert in not much more than or even less than six months after they got ProShop in their company. So yeah, not only is it just much easier when it’s all digital, but we can help you as well. We have folks on staff that can actually work right alongside you. In fact, Jeremy, who just asked another question, our team was at his shop, whatever, two weeks ago and he’ll be going for his certification in just a month or two, his AS9100. So great.

Dave Hannah:

We did the Flying Start, and that was well worth it.

Paul:

Thanks, Dave. So Ben asked, “What type of accountability and consequences have been found to be most effective?” That’s an interesting question. Yes. Do either of you want to take a stab at that first?

Dave Hannah:

Sure. I think, well, ProShop users, and some of you out there aren’t, I guess, but the ability to get people to log in, track, write descriptions, and everything is a huge help to just identifying problems. Because getting the shop floor involved is, of course, important. And then using the tool you have is important. And everybody, we’ve been on it for quite some time now, so they really follow after it. But just inputting information is the biggest thing.

Paul:

Yeah. And do you have anything to add to that, Andy?

Andy Reinwald:

Yeah, I think that when we’ve had conversations internally here, a lot of times we say, oh, well it’s kind of a person problem and how do we get this person to do this? And I’ve responded back a lot of times and said, “The problem is that you could train that person to do this, but then what happens when the next person comes along, that you’re still going to have to retrain that over and over again.” So trying to get systems in place.

I know some of the things we’ve been doing lately is just utilizing the first part checks and the first articles inside of part levels more and more. So it’s, hey, in order to do the first article on this, you need to verify that XYZ has been done. That has nothing to do with the quality of the part, but it’s just more so the standard that we expect to keep our processes and our production moving forward. And if that isn’t achieved then it shows up red in ProShop.

Paul:

Yeah. So yeah, great comments on actual practical tools. So hopefully that helps you, Ben. I’d also add that most, if not all, employees come to work wanting to do a good job, wanting to know what’s expected of them and hit those goals. And that being a lot more carrot than stick, I have found to be a lot more effective. When people do make mistakes, they generally feel bad about it. They generally were trying to do their best, and beating up on them too much or having a negative consequence is not as effective as trying to be empathetic, and realize that probably it’s the system that led to that failure, not the particular person doing something on purpose bad. So anyway, I think shifting your thinking around that can be really useful. Hopefully that’s helpful, Ben. Thanks for the question.

And then last question, as we need to wrap up here, Jeremy, you mentioned… Oh Seth. You mentioned overhead versus capacity. How do you go about balancing that charge more per hour? It really does come down to having enough bandwidth and capacity in your shop in terms of the machines you have and the people you have, or systems, robots, whatever, to run those machines and generate revenue compared to your overhead costs. So you can certainly charge more per hour to get more revenue for the same amount of hours, or you can try to really minimize your overhead costs. I know that many of our clients, including some that are even 20 people or less, have been able to free up overhead positions that were strictly overhead burden, adding an extra cost on every hour that they work just by some of the efficiencies in ProShop. Being able to free up someone from a purchasing role that could now do something more directly value added rather than strictly overhead.

So yeah, it’s just a matter of really balancing your capacity in your overhead. And capacity, again, could be revenue generation by more hourly rate, and you can tell whether you need to bid more based on how much of your work you’re winning. If you’re winning 80% of your quotes, you’re probably quoting too low, and you need to raise your rates, and get to 30 to 50%. It’s always different for every shop, but that is one way to tell.

And then Seth, I think this needs to be our last question. “Recently we’ve found a few customers that are becoming more demanding about price. Customers that have had us for years doing businesses at certain price level are now using bottom dollar shops to beat us down.” Wow, that’s tough. “It’s becoming difficult to satisfy customers, and grow, delegate, and improve. We are already doing the parts in very fast machines, running them effectively. I’d be curious to hear how everyone deals with this issue.”

I think we can’t dig too deep into that one today, especially given our time. But I would say, Seth, please throw that in the ProShop forum and throw that on LinkedIn as a question. I know there’s tons and tons of shops out there, lots of garage shops, lots of shops that have really low overhead costs that can charge 50, 60 bucks an hour, or think they can, and do that. So yeah, it’s a tough one. It’s a very tough question. Well, thank you all. Thank you Dave and Andy so much for your time today. I really appreciate the wisdom you shared. And if people want to reach out to you, either to send you work or to ask you questions, here are their websites, here are their emails, and phone numbers. And again, yeah, guys, thank you so much. I really genuinely appreciate the time you spent today.

Dave Hannah:

You bet.

Andy Reinwald:

Thanks for having us.

Paul:

Of course.

Andy Reinwald:

And the impact ProShop’s had on us.

Paul:

Thanks buddy, I appreciate it. All right everybody. Thanks for joining us this time. Hopefully we’ll see you on the next one, and have a good rest of your day.

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