Updated: Oct 12, 2021
By Chuck Pisciotta
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I acquired HB Products & JR Buck Industries in September, 2020, at the height of Coronavirus (you can read some of the fears that kept me up at night that I ultimately overcame prior to and right after the acquisition, here.)
We were going to be the minority that grew post-recession
You take the recessions of 1980, 1990, and 2000, and “17% of the 4,700 public companies…went bankrupt, went private, or were acquired,” while, “9% of the companies flourished, outperforming competitors by at least 10% in sales and profits growth,” according to the Harvard Business Review.
What they didn’t do to be successful: cut costs.
To be like the 9% that will bounce back after Coronavirus, I’ve focused in on three areas in this first year.
1. Productizing & clarifying who we were in the market
When we started in September 2020, Samantha Mooney, our sales leader, started by defining what we did. Custom manufacturing can be a beast to define with people saying, “we’ll do anything,” which translates to a customer that you do nothing well. She productized what we did into four categories:
While doing account-based, bottom-ups sales planning with the existing accounts, she didn’t have any salespeople & needed to build out marketing campaigns. She went about hiring two salespeople by creating a sales profile and learning how long it would take to ramp them up to full time (six to eight months, we now know). Prior to this time, the owners played dual roles in sales and had one full time salesperson in Lexington, who was promoted into the GM role.
The sales team didn’t believe in the marketing strategies at first, and didn’t fully sell them to their customers until they started seeing the customer response rates, which were right in line with industry standards for a strong campaign.
Lastly, we’ve had to break down barriers to sell on value, not price. It’s a more consultative sales to require salespeople to go farther with scoping. Ultimately, the the customer gets a final product that is usually above and beyond the original idea in mind and we can expand to meet growing needs.
As we've gained confidence, we've been afforded the opportunity to start focusing on the customers who are growing. We now look for strategic partners who want someone to improve the end product, rather than buying solely on price. Everyone is a loser in the race to the bottom.
BOTTOM - LINE: Get the messaging right first. Nothing will be right until you can write it down & are able to teach it to others.
2. Plant balance – matching capabilities to market
When you start to do a great job, it’s like a snake eating a ball, whole. You created the demand. Now, you have to improve the capacity putting in processes to hire more people using agreed upon standard profiles. Then, you need to increase capacity through better processes.
We put in planning tools like getting structured about reviewing backlog and forecasting from the sales team. The guys only did what our current inventory management software program provided, but they didn’t look at what still needed to go in the system, which was quite a lot. They never looked at their full planning horizon of 0-30, 30-60 and 90+ days. And looking at it as a rolling calendar.
Once we found out the demand. We added more work centers to breakdown which machines were in use. We found that we had a tremendous amount of laser work so we added a third shift for just the laser. Additionally, we've been hiring quite a bit across both factories.
Lastly, having a shared sales team across both factories has allowed us to decide which factory should receive the work by looking at three factors:
Capabilities - if it is high tolerance machining, we'd send it to Lexington. If it is high tolerance sheet metal fabrication, it would go to Sidney, for instance
Demand planning - customers are looking for fast turnarounds so we balance delivery dates across both
Shipping costs are always something that we have to keep in mind to be cost competitive
BOTTOM - LINE: it's not just about analyzing reports or improving process flow on the floor. A lot of it is ensuring GMs & Sales are communicating better.
3. Cash flow – more people, inventory, equipment
All my employees say to me is more, more, more
The pain point is that you need more working capital and it is a big drain on your cash flow. Our cash was getting drained off at the beginning of the year because:
The factories were carrying too much inventory
Vendors were asking for too short of times, and now that we were a larger company, we should have gone back and asked for more --which we did
We began reminding customers of receivables
When managers said, "oh, it’s a big order." Workers slowed their work down thinking that they were going to need to do overtime automatically instead of setting the expectation that work needed to get out in the allotted time with margin reports being used
BOTTOM - LINE: Cash is king. Make sure each person in operations knows how they impact the bottom line, and keep nudging them until they start saying it proactively.
How Valence started
I wanted a regional company that would allow us to service customers in a 500-mile area. I also wanted short and long run production capabilities where consultative, customized engineering and precision manufacturing were the hallmarks of the company.
When I retired, I didn’t need to go back to work. I came back because of how much I loved manufacturing. I wanted to find companies to invest in that were well run, with people of good principle—and focus on hiring more people in a community I grew up in.
Read Chuck’s full story of how he’s been successful in similar companies.
*2x revenue refers to 9/20-1/19 revenue when company was acquired compared to 1/20-6/15.