Shocking Lessons From A 90-Year-Old Business | S2E29

[00:00:00] Speaker A: You. [00:00:00] Speaker B: Hello. Welcome to the Love and Business podcast. I'm Mick Arnold, president of Arnold Packaging. [00:00:05] Speaker A: And I am Britt Arnold, president of Tagler Construction and supply. So today, after my meeting with my team, as we talked about all the new things we want to implement in 2024 and improve upon, they asked me, well, have you ever asked your husband, who has a 90 year old business, some of these questions? And I thought to myself, no, we've never sat down and just had a question and answer as a eight year old company and a 90 year old company. So today, that's exactly what we are going to do. [00:00:38] Speaker B: Welcome to Ace broadly Tod for the Silver Stars tonight. [00:00:41] Speaker A: Tonight. So I know I'm catching you a little off guard, as I tend to do, and this is just going to be a really fluid conversation and totally live and off the cuff. And I just thought it came to me because as I was meeting with my team today, so the first part was a 2023 reflection of things we did well, our biggest wins and opportunities for improvement. And then we took it a step further. We're like, okay, so opportunities for improvement. What are we going to do this year? To try to really, we were identifying them and the next step is to take them. And what are the strategies to actually put these into place? We don't want to just identify the things we needed to prove on. So how do we actually do that? And as we're all like, my team is very small, right. And we are all very empowered and all have a lot of responsibility. And I'm sure there's small company business owners listening or just small companies that can relate to this. This is for you. So none of us necessarily have that expertise. We're all evolving and learning as we go. So while I've been in the business the longest and it's my baby, I'm still new to this as well. So it's funny because we're all batting stuff around, but really we're all just shooting from the hip. None of us know, right. And it's been a great evolution and we figured things out organically, but at the same time, why always reinvent the wheel, which we don't? And my team was like, okay, so have you ever asked Mick, your husband, any of these questions because you, as a business owner, the Arnold packaging is 91 years old. [00:02:26] Speaker B: Correct? [00:02:26] Speaker A: You've run the business for 20 plus years? [00:02:29] Speaker B: 30, 30 years, actually. Going on 30. [00:02:31] Speaker A: Going on 30. Yeah, 20 plus was right. [00:02:34] Speaker B: But it'll be 30 years this year that I have been responsible at the helm. [00:02:39] Speaker A: So you have been through so much of what we're going through. And I thought to myself, while we are talking constantly and we are always sounding boards for each other, rarely are we sitting there and I have your undivided attention where I can just ask you these questions for an hour. And I selfishly am going to take that opportunity to just ask you the questions. [00:03:04] Speaker B: Great. Well, I should know the answers since I lived it. [00:03:06] Speaker A: I think you'll know the answers. And I think this is going to be really beneficial for a lot of people, the first one being. And also, I hope some of your answers are like, I don't know, or we're still working through that. That's fine, too. [00:03:20] Speaker B: Oh, yeah, absolutely. [00:03:21] Speaker A: So not that I have to tell. [00:03:22] Speaker B: You that, well, look, evolution takes a long time, so 90 years, 91 years. I mean, evolution takes a very long time. So, yeah, of course I'm not going to have, I can at least share with the audience and you what we experienced in certain moments and the choices that we made and some really early ones. I was having flashbacks as you were talking. I'm thinking, oh, my God, I'm excited to do this. So sorry, I'll shut up and start answering. [00:03:44] Speaker A: So what I did was the questions I'm going to ask you are a little bit broader. So they're not going to be unique to our business or industry. So I'm going to ask you the ones that are a little bit broader and more relevant to any business. So anybody that's listening can apply it. First one, as in the beginning, we've talked about this many a time. We were really hungry. We did a lot of things that were outside our lane, and you eventually find yourself doing way too many things. So while we have gotten better at defining who we are and being clear on what kind of projects we want to do, what customers we want to work with, what products we specifically want to be experts in, we still are a lot of things to a lot of people which we need to get better at. And it's just that mentality of saying yes and being hungry and scrappy. But we definitely have gotten better. And this year we're really going to get clearer on who we are and really narrow down. And I have niche written on this paper, really find our niche, which we know is in the heavy civil infrastructure side of things. We're really going to actually limit or limit, I would say hone in on focus, right. On very specific products, good work. And in the process, that's going to mean we're going to be cutting out a lot of the things that we've done for a very long time to help customers. And so I am struggling with this because I think one of the reasons we've been able to create so many strong relationships is because we have that mentality, whatever the customer wants, whatever the customer needs. But at the same time, I think we take away our credibility when we can't possibly do all of these things and be really good at it. I think we're good. I think we could be excellent when we really hone in on who we are and where we want to be. So how do we figure out what that fine line is and how do we balance that and figure out how to keep our customers happy, but also how to cut out some of that fat that we no longer want and just start getting very specific? Do you want me to ask the second question or do you want to answer that one first? [00:06:13] Speaker B: Go ahead, throw the second one. Maybe we can wrap it all together. I imagine they're related. So, yeah, let's do it. [00:06:19] Speaker A: Yeah. And the second question being, looking at it from a purely financial standpoint, when we do that, we're probably going to cut out, and I haven't looked at the reports that's part of this process, we're probably going to cut out. When we figure out, like, these are just products that we no longer want to sell, it's probably going to be a third of our revenue stream. And that, to me, is taking a step back, to be able to take a step forward, which is fine, but you got bills to pay, you got people to pay. So how do you do that in a strategic manner where you can financially do it and get to where you want to be, but understanding that you're probably going to be taking a step back. [00:07:04] Speaker B: Yeah, two great questions, and they're related. So having been through, I'm going to give some examples along the way, too, of just things that we've experienced that had us making choices. I'm going to go back because when I got into the business, gosh, this is in the early 90s, we actually had long before automation and some of the things we talk about, we actually had a business unit that sold spray equipment. No one knows about it and quickie background. My father always wanted to sell spray and finishing equipment to the, you know, not that long ago, we made a tremendous amount of things in Baltimore, heavy, heavy manufacturing, whether that was shipbuilding on this exact plot of land. But actually, now that I think of it, the reason my father wanted to get into that part of the business is he wanted to sell to Bethlehem ship because they were spraying battleships and spraying heavy, heavy industrial, and his father wouldn't let him do it. Said, no, absolutely not. So again, father, strong entrepreneur, he said, the hell with it, and went out and started an entirely separate business called Arnold Sales and service. You may or may not even know some of these stories, but we were in the spray equipment and sandpaper business. So sand down the metal, shoot paint. Very simple. And when my father passed away in the mid 90s, here I am with a packaging business that also had a janitorial component. We were also selling toilet paper. There was this thing that would go on in packaging where you'd have the ability to distribute, right? You had a building, and you had trucks. So why wouldn't you just distribute every single thing your customer would ever want, which is part of what we're talking about. So roll me in, and I'm looking at the packaging group, and, yes, it's packaging and rather technical. We're making containers, but we're also selling toilet paper, which didn't really jive with me. And then I had this whole other business, completely unrelated, that was selling spray equipment, and we got forced out of that business. And I'll tell you what happened. We talk about technical expertise a lot, and I think one of the things we'll wrap into this conversation is, what do you want to be? Do you want to be a supply specialist, or do you want to be a technical expert? And we were very good, technically lost a couple of salespeople. Some things happened, and our biggest supplier decided to 80 20 their supplier base, and we got cut out as a supplier. They literally took us out of the spray finishing business because they stopped supporting us, and we didn't have enough internal technical expertise to carry on our own. So very shortly thereafter, I folded that entire business, just completely walked away. Now, here's the thing. They made us leave that business. I was sitting there watching it rot from within as this person left. As the manufacturing base of business started to dry up in Baltimore, it was leaving. Fortunately, they did me a favor by throwing us out of the business, because I was just watching this slow burn. So I lost the business slowly. Like your comment about. And it could be a sizable chunk of our business that we walk away from as we're rebuilding it. They forced us out. So there's a couple of things I learned in that moment. One, as related to packaging. That was never going to happen to us. We were going to build ourselves into such a strong technical expert that if every manufacturer stopped supporting us completely. It wouldn't matter. We'd have enough technical expertise in house to go do what we wanted. We would have even been okay if manufacturers stopped supporting because they would also stop supporting our competitors and we would have built the infrastructure, the technical infrastructure to go take all of their business in that moment. And that's how we executed around that. So it happened to us. We had it done to us along the way. Also pulled out of the toilet paper business, that janitorial piece. We just said, Mr. Customer, there are people that are better at this janitorial component. Here's some names, even, and we gave them names of suppliers that we're not going to compete with in the packaging biz. And we just gave those account relationships over. Kept the packaging, but got away from it in the process. We cleaned up space, we took that space back, we replaced it with more valuable items that had higher margin or more technical in nature, which were stickier and had a better value proposition wrapped around them, which made them a better part of our product offering. So I think if I'm sitting in the room with your team, one of the things that you'd want to ask and make sure that you're very aligned around is do we want to be supply experts or do we want to be technical experts? So supply experts, think Granger, think MSc, think catalog houses. Right where I would encounter Granger salespeople. And we have a salesperson on our team now that came from Granger. They had this massive, massive book. I mean, the Granger book. I mean, I don't even know if I could jump over it in my old age, but there was no way they could ever be experts on that entire catalog. What they were good at is getting you the thing in that book that you needed, but you needed to know what you needed because they had no technical expertise. [00:12:11] Speaker A: So to answer your question really quickly, that's exactly what we don't want to mean. Obviously, nothing against Granger. Those businesses, I mean, they do a fantastic job. That's not us. We're not in the retail space, as we're calling counter sales. We don't want that. [00:12:26] Speaker B: And you also don't want be to. [00:12:27] Speaker A: Very much so project based. [00:12:28] Speaker B: We also don't want to be in the transactional space, and that's where they are. Right. [00:12:31] Speaker A: We really pride ourselves and want to be part of the project management. [00:12:35] Speaker B: That's right, yes. So if that's the case, then, yeah, then you're going to have to look at some of those parts of the business that are very transactional in nature, where the only value you're adding is. I'm not sure that's the question would be the team is all right. If we identify these segments of our business that are more transactional in nature, I would imagine if I look the margin structure, they're probably lower. Right. You're not doing anything that's very differentiated in those moments. And if that's the case, it's hard to command margin or a premium if you're not doing something that has some differentiation associated with it or if the customers won't recognize it or assign value to it. So I think as you're looking at those pieces of business and you're quantifying them, it might be easier than you think, because a lot of times that transactional business tends to be a little bit lower in margin, but it takes the same amount of bandwidth for your time, for your team, excuse me, for your team to manage it, convert it. And we talk about opportunity costs on our podcast a lot. What are they doing while they're managing that lower margin business that's transactional versus what they could be doing if they were going after something that had more technical expertise. And I think you're on it. Right. And we're in the same room a lot. That project management, part of what you do is connecting the supplier and the ultimate end user, but also handling some of the logistics, making sure, I mean, I'd really be honing in on what is our value prop, what do our customers value? Because they benefit from it and would be willing to pay a little bit of a premium, not because you just want to price it as a premium, but because you're taking some of that burden away from them. And instead of them paying someone on their side to do it who also has opportunity cost, you're taking that part of it and saying, you know what? Let us do this. We're excellent at this, you're excellent at that. So let us take that on, and you share some of that savings in the form of margin for us, and we'll just take that over. So I think that first cut, as you're looking at that business, would be, what are we great at? We touched last thing about the strategic analysis and opportunities and strengths. Right. Strengths being internal and then converting them into opportunities external. Those are the things that you would look at. And I will tell you that this is all retrospective for me. Far too many times we had it done to us, but really I had it done to us because I was calling the shots. We had it done to us like the spray gun situation where the manufacturer decided to draw an 80 20 and the lower 20% of suppliers or distributors weren't getting coverage. They drove us out of the business. There was really nothing we could do because they moved us to phone support, and we didn't have the technical expertise, and we could not service the customers without the manufacturer helping. So I think those pieces, if you're doing that analysis, it would be to understand internally what your strengths are and then how to correlate those to opportunities that you would leverage in looking to do more of what you decide your strengths are. [00:15:46] Speaker A: So one of the pieces that you brought up was, so you're talking about looking at the, it's really opportunity cost, which is time invested versus time invested and profit margin. So one of the questions was, well, first I said to my team, first, we have nothing to talk about until we run some of these reports. Until we look at the projects, we break them out. We're looking at revenue and profit. So there's two pieces to this, and this is what I'm looking for. Your opinion on or your perspective. We run the reports, right? I'm talking simple. Like, let's look at the profit margin of every customer over every job, job specific. And let's say, okay, we could go through that. And that's the objective part. Right? They're the numbers. They're the numbers. They're black and white, yet we could be making an 8% on a customer, yet they are wonderful to work with. Frictionless, easy. Then we have a customer where overall, overall, all the projects blended rates caught 10% markup, 15%. Yet they're a total pain in the ass. We're putting in three times the amount of work is at 8% of so called. And by the way, we don't refer to our customers by the markup we make. [00:17:16] Speaker B: Right? [00:17:16] Speaker A: No, but I'm just putting this into perspective. [00:17:19] Speaker B: And, yes, of course. And these are relative, right? You're talking about this versus that versus actual market. [00:17:26] Speaker A: But that's the subjective piece, right? So you just can't look at the numbers. Like, we've got to dig deeper. And I told my team, once we get those reports back, then we have to sit down in the room and we have to talk about, okay, Georbi's running this job. Georbi, what does that look like from a work perspective for you? How much time are you putting in? How hard is it? How challenging? Where are you deciding what's most important? How are you valuing that? Because it's not all about the numbers and some of that matters. Of course, we'd run a business, but also taking into perspective the time and the opportunity costs and the hassle or the ease, how do you balance that? How are you making decisions? Because what's going to happen here? You talked about 80 20 a lot, which we talked about the 80 20 rule, and I'm not going to read anybody. Most people listening to this know if you don't, you can google it or read the book. But that's a real thing. [00:18:26] Speaker B: Sure. [00:18:26] Speaker A: And something worth thinking about, of course, to make decisions. [00:18:29] Speaker B: Yeah. So 80 20 simply is the idea that 80% of your business usually comes from 20% of your customers. [00:18:37] Speaker A: That's how I look at it. Somebody on my team, theirs was, 80% of your problems come from 20% of your customers. [00:18:46] Speaker B: Well, so I was referring to what is known as the paredo principle. I don't know what that principle. [00:18:50] Speaker A: They were calling it the salus or the salius. [00:18:53] Speaker B: I do not know that one. I only know Pareto. [00:18:55] Speaker A: And if I just made that up, I didn't do it. One of my teammates did it. So I know it was interesting. I'm like, well, that's inverse. [00:19:04] Speaker B: Well, the good news is it's political and president season, so they're too busy fact checking that to fact check us. So I would even go one step above to answer your question. I would go one step above, and I would look at the segments first. So, yes, the customers are going to fall into the segments, but I would look at the segments like you've said a bunch of times in the podcast, we've talked about you making a very conscious decision to leave contracting and the construction, the direct labor and that delivery piece. So I would look in favor of heavy civil. Right. We talked about Dot, you just mentioned that heavy civil, the pieces that really seem to align with what you're doing versus, like, multifamily. Yeah, maybe. But I would look at those segments first. I would segment that business and say, heavy civil is here. [00:19:53] Speaker A: Can I throw another, because I need your perspective as you're talking about this. [00:19:57] Speaker B: Yeah, of course. [00:19:58] Speaker A: So that's another thing. We are having a hard time how to look at these. So one of the ways it could be, it could be, as we're calling them, like, a one time sale, countersale types, transactions, project based, and then, like, multipo, project based. There's four ways. Or you could look at it by industry, or we could break it up by product because our bread and butter is lumber. Well, we have a lot of multifamily projects. But we don't love multifamily in general. We'd rather be in the infrastructure world. But lumber is our baby, like our bread and butter. So it's very hard to figure out how we're breaking these jobs up. Or is it by product or is it by project? [00:20:39] Speaker B: Yeah. Again, I would go back to at least as it relates to. I would start with the segments. I'm staying there very intentionally. I would start with the segments. So you just mentioned a couple. Right. We talked about Dot, heavy, civil and multifamily. Right. Those are three unique. Right. Because I don't think. [00:20:55] Speaker A: Well, dot is infrastructure work. [00:20:57] Speaker B: A lot of it is heavy, civil. Okay. So that whole bucket. [00:21:00] Speaker A: Right. [00:21:01] Speaker B: That bucket, multifamily. Give me another bucket. [00:21:03] Speaker A: So office. [00:21:05] Speaker B: Okay, office. Great. So I think I would start by breaking. And this is what we do inside of Arnold. Packaging. So I'm actually telling you, we do execute healthcare. Yeah, whatever those segments are. So we take it so far as to segment by. So manufacturing is a segment. And then we drop into the sub segments. People making food, pharmaceuticals, cosmetics, whatever those different those groups are. But it starts at that upper level, manufacturing. And then we get one click down into the segments. So, for example, we know that aerospace is a great segment for Arnold, packaging, whether it's the things we make, the general level of technical expertise that they require for the type of products that they're building. We know from our history and our data that we align very well with that segment. Therefore, we are hyper focused on penetrating more customers that look like that. So if you do that segment work and you break that out and you start to hit on something that says, oh, gosh, we do a great job with this segment, then you'd align the customers. And that's not to say that there's not some crossover. There could be. I don't think so. Like people that we have that make aerospace parts, they also don't make bread. Right. I mean, they are in that segment lane. So you might find a little bit of crossover, but not much. But after you align, and we talked about, let's say, a multifamily. Right. So for the group, multifamily apartments and condos. Right. So if you hit on that and then you run that analysis of your revenues and profitability, both. Right. And you line that up, then you can start to understand the value of that segment and the gross margin. I mean, let's make the assumption that you're getting what the market will bear and maybe you're not. Maybe you identify through that, you look at it and go, well, wait a minute. In this segment, our gross margins range from, I'll just pick up, make numbers up three to ten. Well, the question be, well, why is there such a margin gap? Could be volume, could be size, could be that you're just not asking for enough or you're not explaining or articulating the value prop to get the three to the ten or the average of six or seven or whatever it is. But that segment piece, I think, is if you're trying to do that work and you're trying to split out, let's call them heroes and zeros, in your customer base, then the segment piece would be one that I'd really be in tune with and I would start there. [00:23:28] Speaker A: That makes sense to me. Now, another piece of this conversation was a debate we had, which was actually the best part of the meeting, was there were so many things we debated and so much stuff where I hated until we got into the conversation, which is good because it means I loved that, because it clearly means my team is not, like, yesing me, because I think that's a really. Not to say I'm a great leader, but a really good test for a leader. If you're in a room and you're a manager or you're a leader and you're realizing nobody in your team is saying anything to disagree with you, you might have to internally look at yourself because it probably means you're micromanaging or you don't let your teammates make decisions or they're not empowered. So I've actually been using that as a gauge of whether I'm doing a good job as a leader. And there are so many things today that we just went back and forth on, but the great thing was, on majority of them, we both were able to see each other's point and come to, well, maybe this will work where we were both happy with the solution. [00:24:32] Speaker B: Not always, but, yeah, that's great. What you would never want to do in that situation is shout down a challenge, and that's something that goes on. There's any number of businesses that I've been associated with. It seems to have turned the corner a little bit. I think that has a bit more of an older approach that might have been appropriate, because if you do that to great employees now, they will find somewhere else to work. [00:24:54] Speaker A: Well, they should. [00:24:55] Speaker B: They absolutely should. If you found great people, then you don't want to do that to them anyway. If you want to hire a bunch of yous, then what's the point? [00:25:02] Speaker A: Oh, yeah, for sure. [00:25:04] Speaker B: We have enough for. [00:25:05] Speaker A: I'm not looking for people to be disagreeable. To be disagreeable. Devil's advocate, that's a real thing too. And we've experienced it. Yes, we have. And I know we're thinking of the same people, but here's the other thing that made me laugh. So somebody on my team brought up the idea of like, well, scrappy was our motto for six years, but now that's not us. Like scrappy. I equate that to desperate. And I was like, oh, hold on, that is not what scrappy means. And somebody else in my team said, yeah, I agree, that's not what scrappy means. So it was almost like this definition got in the way. And it was something like, we stayed on. Because I love that. I mean, it's on the freaking door. I love that. Literally written on the door. And to me, I'm like, oh, we need to be scrappy, like always, no matter what that period. That is what helps us win. Scrappy doesn't mean desperate. Scrappy. I'm like, scrappy to me, means doing things at all costs to get the job done. It doesn't mean that we don't have to. There's a very clear difference of being defining ourselves and being very disciplined and being very specific. We can still be scrappy within that. How do you view scrappy? Because I'm interested. I was so taken aback that in someone's head, they almost equated scrappy to desperate. I'm like, well, that's not at all. I don't put that connection together, clearly. [00:26:36] Speaker B: Yeah, no, I definitely don't. And this is not biased by you using neither. This was my definition, because I've even said that we're not scrappy enough at times. To me, it would be more correlated with hustle. Hustle, hustle and energy. Let me tell you what also for me, correlates or where I realized that we had taken some liberties. It's not being as grateful for your resources as you need to be, or even taking it one step further, being disrespectful for resources, right. And not really working and maximizing those resources, even partially throwing them away at times, because you don't value them the way you should. That's what scrappy means to me. Or not finishing that negotiation, or not getting the vast majority or the most out of it. And by most, I don't mean leaving the other side a lifeless carcass either. I don't mean that. But I mean, you've given it the right amount of attention and that you didn't just gloss over and waste a resource in the process. That's what that word means to me. And nothing about desperate, nothing at all. [00:27:43] Speaker A: But at the same time, I learned a lot from what they were saying because I did understand it. I did understand the idea of not being so scrappy, that we are going to eat everything that we can because we're hungry and we need it at all costs. [00:28:00] Speaker B: Right. So they have this mental picture of you digging in the trash can. [00:28:02] Speaker A: Yeah, but it made sense to me. And then I further went on to say, well, guys, listen, if we decide that we're really going to be hyper focused on a small amount of things, you have to realize we've got to make up for the other third or whatever that is of revenue and profit and hopefully more if we intend to grow. So do you know what that means? That means that now, because to the date we've been very lucky. A lot of jobs come to us. [00:28:31] Speaker B: That's right. [00:28:32] Speaker A: Now we are really in the sales game. You got to get really scrappy. We got to go out and find these projects because we have now limited our scope so much. There's not enough that's just going to be coming in the door like it has been. [00:28:45] Speaker B: Right? [00:28:45] Speaker A: So now you're going to have to get scrappy in a different way. You're going to be sales on the street. [00:28:51] Speaker B: That idea, if you decide collectively, you do the analysis and the segment called multifamily is really attractive. And you look at your customer base and you only have three people that are buying, let's say they're all big jcs, right. And the nature of your business, you could have a small number of customers spending a tremendous amount of money depending on the projects that they're engaged in. So you'd have to look at that and say, okay, that's great. We love multifamily. Did you know we have exactly three customers in that space now? Who's going to go get that three to ten or 20? And what's that base look like and where are they? How many are local? So that would be the next part of cracking that nut and understanding. After you segment that out and breaking through that it would be all right. If we decide this is great like we're doing. We're talking about aerospace. Aerospace is a great target segment for Arnold packaging. How do we find them? Who are the other people in that space? And then once identify is easy, we talk about the sales process. And I got off my rant. About sales that I was going to get into. But if you just think about the sales process, right, it's identify, penetrate. Present identify is pretty easy in today's world, right between Google and databases and whatever, you could run an sic code or a NAICs code up against multifamily and it would spit out for you the people in that space. Let me tell you where the rubber meets the road. Penetrate. How the hell are you going to get in there? And how are you going to get in front of that person and say something that's inspirational enough that they're going to give you a look or a shot at the next piece in getting from three customers to four to five. And that's going to be the trade. And I think until you segment that business and then you're going to have a big other bucket and that's going to be really telling. How big is the other bucket? We talked about, again, multifamily and we talked about heavy civil and we talked about office. And then at some point as you run out of segments, you're going to have another bucket over here. Does that end up being the biggest bucket? [00:30:47] Speaker A: So that's what we're going to find out. [00:30:48] Speaker B: That's going to be very telling. [00:30:52] Speaker A: We already know without the running, like the heavy civil, it's really all the road work. I mean, for the most part, it's definitely where we're generating the most money. We know that and we're also the most interested in that for so many reasons, which I'm not going to go into. But here's about that other bucket. So that other bucket that we're saying we're no longer going to touch that other bucket. We don't want to be a part of that. That is going to take a massive amount of discipline because you're going to have customers that we really like that want us to do stuff in that other bucket. You're going to be used to. We just take everything. And a lot of them have turned into great opportunities that have been outside of our typical scope. Are you going to be disciplined enough? Are we ready to piss off a lot of long standing customers and vendor partners? Because that's going to be part of this. And how do you manage that? I mean, these are people who have helped us get started. [00:31:52] Speaker B: Well, listen, I think you have to lean heavily on the data. We're very data centric at our companies. Not to the point we are not approachable or completely objective. Right. There is some subjectivity. The question you asked a little bit earlier that I didn't get into was. All right. So we segment our business and we look at the margin return. That's a number. Those are just numbers. Sales minus cost equals margin. Then you talked about, well, but this one customer, although the gross margins look solid, they're hard to do business with. [00:32:26] Speaker A: Or their pay is slow. [00:32:28] Speaker B: So you would assign a cost to serve factor underneath of that, and it should be as quantitative as you can. Right. There's a cost to serve. So it's sales minus cost equals margin. And then from that margin, what you're. [00:32:38] Speaker A: Going to subtract, I'm literally taking notes, cost to serve. Okay, cost to serve. What was that equation? [00:32:44] Speaker B: So it's going to be sales. Your sales minus your cost equal your margin. [00:32:48] Speaker A: Well, yeah. [00:32:49] Speaker B: And then from that margin, you're going to subtract that piece you were talking about, which is cost to serve. [00:32:53] Speaker A: Okay. [00:32:55] Speaker B: They make us do things multiple times. They don't pay us. Their attention to detail is poor, which makes us double back and makes us give back some of that margin that we thought we were securing, but we don't because nothing ever flows through easily with XYZ customer. So you'd assign that cost to serve piece, and it'll be part objective, and there'll be some emotional stuff, too. Oh, my God. If you wince at the sign of their name, then probably their cost of service is going to be on the high side. Won't be perfect, but at least it'll give you some type of reasonable metric or measurement where you can value the customers in the segment. Right. And I think one of the things that will be really telling, there's going to be some customers that fall into the other that you're going to love, and it might change your thought around where your value prop is. You may have gone into it thinking, oh, we got to wipe all these others. You might learn from this exercise that there's a completely untapped portion or segment. Say, did you know that while ABC customer falls in the other, this is a great customer? The next question would be, well, what segment are they in? And why do we only have one customer in that segment? [00:34:07] Speaker A: Yeah. And this is exactly what's going to happen. We're going to find a bunch. I'm short of great customers in that other bucket. It's like, we want to do this, we want to stay in a lane. And now we're identifying all these great customers that are in the other. What do you do? Because you're not able to do all at all or you just continue to do what we've been doing. [00:34:34] Speaker B: What if you learn that you were wrong about the lanes that you thought you should participate in? [00:34:38] Speaker A: What if I'm not? [00:34:39] Speaker B: Well, then you'll end up having to make a mathematical decision around that. Because if it is not productive, whether that's profitable or. And really we're talking about profitability, right? If it's not worth it, then despite loving them as human beings, then you can be friends. And you don't necessarily have to be working part. You don't have to have a customer. [00:35:03] Speaker A: Supplier relationship, but it could be worth it. They're in the other bucket. [00:35:07] Speaker B: That's okay then. If it works, it works. There's nothing wrong with that. [00:35:13] Speaker A: There's nothing wrong with that at all. But then we're getting away from the whole point, which was to start getting very specific and start getting technical, because now we're still doing all these other things over here. [00:35:24] Speaker B: But what we talked about too, though, is you said the technical piece or the real value prop was about the project management. Does project management in multifamily have to look terribly different than project management in other. Because the value prop is project management. I'm sorry to interrupt. If the value prop is the project management piece, is there significant differences in what it takes to manage a multifamily project versus what it takes to manage another? And I don't know who that is, but another project, that's what you told me the value prop was. [00:36:00] Speaker A: No, not if you have the same product. That's what I'm talking about. Right. [00:36:09] Speaker B: We haven't talked about you wanting to be a technical expert in product. Right. Getting deep into the performance of the product. [00:36:18] Speaker A: So to be great at project management, you do have to be technical and know what you're talking about on the product side. So that's an important. In my opinion, that's a very important piece of being a great project manager. I'm not saying we've got manufacturer partners where we're learning a lot from and we're leaning on, but I think part of my vision and reason and intention behind wanting to get very specific with our products is so we can bring that technical expertise to our project management. Now, herein lies the problem, or what I'm challenged with is if you break it up to segments, well, then it's not by product, and we're not going to say no to a multifamily project where they're slinging a bunch of two x fours and thousands. That's really good opportunity because it's in a particular segment when that's a product, that is our bread and butter. [00:37:14] Speaker B: Right. [00:37:15] Speaker A: This is the challenge, and I'm getting into the weeds of our specific challenge. And I'm sure a lot of other people, though, could look at what they're selling and what their services are and having a hard time of categorizing and figuring out where you want to go. And this is a real challenge. [00:37:30] Speaker B: Right. Well, for example, though, we came off of segments for a little bit and started to talk about a product driven strategy. Right. Then you would think then if a wheelheist item for you, wheelheist, if a wheelhouse item for you is lumber and multifamily is a huge consumer of lumber, then you're likely going to love that segment, too. Right. It's going to be a valuable segment for you even if you only ever decide to sell lumber into it. But it could also create a question around, well, what else? We're great at this segment. They seem to love us. We have their attention because of the great job we do with lumber. Are there supplies or things that they are also consuming that we don't have in our base that we could just take orders for? Because we own the relationship and we've created the credibility. How do we identify the demand and then go find the supply? [00:38:30] Speaker A: So that's what we're doing now. And that is what has brought us to the point of we're everything to everyone. It's exactly what we don't want to be. [00:38:37] Speaker B: Okay. Yeah. Then I think then you would love the multifamily and you'd love lumber because it's something that you're great at, but you wouldn't approach any other products and. [00:38:50] Speaker A: It wouldn't be, I mean, certainly we have other products, but I guess what I'm saying is maybe we're getting to the point where it is product driven and not as much segment. Naturally, you're going to have more of one product being sold. We're not selling pipe that goes in the ground or that's infrastructure work. You're not going to be. Once you get into a multifamily job and we're on the building side, they're not going to be asking for pipe. We've already done something. [00:39:27] Speaker B: But understand something. If you decide to sell fewer products to more people, the transactional intensity goes up different than selling lots of products to fewer people. So I'm not sure that what you said is completely accurate, meaning that whole idea of everything to everybody, that's actually everything to very valuable segments where, you know, you have a very strong value proposition and therefore can compete very well and very aggressively in those segments. That's what that is. [00:39:58] Speaker A: I think that's one way to look at it. The other way to look at it is when you are selling so many products, it means that you have a lot of manufacturer and vendor partners, or whether you're in the construction space, no matter what space you're in, if you have a lot of products that you're selling. If we do narrow our focus and get very specific, it allows us to take the time to really nurture those vendor partnerships. And that is where I find that we might be able to pick up whether it's okay. Can we get more competitive on this pricing if we drive more business to you, can we get more of a discount? Can we get more of a distributor? Those are the things that we haven't been able to dig into because our bandwidth has been so spread. So I'm thinking, like, if we get very specific now, we can really learn the products. Now we can bring talk about value proposition, more technical expertise to our customers. Now we can create better relationships with our vendor and manufacturers and see what we can do on a price point and in other ways, not just about price. Those are the things I really want to do that I feel we've been missing. We can create more distributor partnerships with manufacturers in that particular lane that we haven't established yet. These are all things that we just haven't dug deep into, and I don't know how we would do that until we get focused. [00:41:24] Speaker B: Well, then one thing, you can name them or not name them. Think of a manufacturer that you have a great relationship with and you love doing business, either because they have quality products, they're technical experts, they deliver on time. Right. They are a very valuable partner for all of those reasons. Can you think of one or. [00:41:45] Speaker A: We have plenty. Yeah. [00:41:46] Speaker B: Okay. Then I promise you they know the segments of their business. So if it's that you like that business or you love that supplier, then the question to them would be which segments are you most focused on and which segments do your products go into? Because we want to market there, because we love working with you and we know we have a high success rate. So we do a great job over here. What other markets are you selling into? Because we want to go attack those also. [00:42:15] Speaker A: A suggestion would be align with the vendors and manufacturers that you love working with and come up with a strategy with them as opposed to. So it's almost like bottom up, push, push. [00:42:28] Speaker B: Yeah. So that has a push feel to it, right. Go to the supplier and identify the segments and push out to them, versus a pull would sound like going to your valued customers that you have great relationships and asking them about other things they buy and then identifying the suppliers and pulling it through to them. So one more of a push mentality and one more of a pull mentality. [00:42:54] Speaker A: And one of the things we talked about, which we actually left a note about to bring up in a podcast, this is perfect segue was, how do I identify great partners or customers? And one of them is, are they testing their loyalty to you? Are they willing to go? Or your vendor partners? Your vendor partners. Excuse me? So if you bring a customer to them, so I'm bringing a GC to my manufacturer partner for a job or a project that they would never be a part of, or a customer they have no relationship with, and they could sell direct to that customer, but I am bringing it to them. A great test of your partnership with that vendor manufacturer is are they willing to at some point, go around you and sell direct? If that customer were to call them tomorrow and say, hey, Mr. Manufacturer, we love your product, we want to buy it. We know we've been working with Arnold, but really, no point. We can just buy direct. Would they sell to them? [00:44:05] Speaker B: Right. [00:44:05] Speaker A: And if they do, it's a shitty partner. That's a bad partner. I would never do that. I would ever, ever allow my company, if somebody brought us a partnership, we would never sell around them, period, point blank. [00:44:18] Speaker B: Yes. Well, I think the other way to say that is, are they willing to lose together? Because in that situation, let's just say that you take the manufacturer into this opportunity and their competitor is indirect, and that happens a lot. Right. We've talked about situations where you're representing brand A and you're in there as a partner. Brand B, their competitor is in there direct. Or maybe Brand B is with a distributor partner, too. Right? And both of you are in there together. And at the first sign of your team losing, you and your supplier partner, what do they do? Do they lose with you, or do they call the other distributor who they have a relationship with and try to cut it in? Or do they whisper to the customer that they could just take that order direct? So one of the biggest tests is, are they willing to lose with you. [00:45:08] Speaker A: Now in that process? Because we are set up in a way that as a distributor, as most distributors are, we are in position where we are a distributor, and that manufacturer only sells through distributorship. We're also in positions where we buy from manufacturers that will sell direct to customers. So how do you create a value prop? Because that's going to be part of this piece. Many of our manufacturers could sell direct to our customers in the segment we want to be in or the product lines we want to be in. So how do we figure out how to ensure our customers still want to buy from us? Even understanding, yeah, there is going to be some kind of markup on it. Now maybe we can get to the point where we're getting better pricing. So even with our premium on top, it's going to be the same price they would get if they went direct. That's what we would work on. But if not, why would they pay for that premium? So how do you create that value prop? [00:46:05] Speaker B: I was just going to say you have to create enough value on both sides so that everybody's engaged on the customer side. We've talked about the project management piece, and I think to this point, correct me if I'm wrong, but technically your team isn't super deep in the weeds on the technical side, right. If they had to get really deep on concrete spec, I'm picking something goofy, right. I don't believe they're to that level yet. But on the customer side, it would be the technical expertise, it would be the project management component. Because you're right in a lot of the situations when you're drop shipping, like in these moments, we're talking about some large products that generally move from the mill to the customer, regardless of how many people happen to be involved in the transaction. The lumber side of the business is really interesting in that regard. But your job is, what you have to do is you have to be valuable to both where the customer said I would never go around you because ABC value, and the supplier said I would never go around you because ABC value. And it could be because you own the customer relationship, because you're in Baltimore, whatever number of reasons, right. But it would be based around owning the customer that could have a geographic component. You've got customers that are here in Baltimore and you are in a social setting with them, and you have a lot of physical contact. You're in the same place. There's a huge trust level, a huge credibility level. A lot of these manufacturers run lean. They run really lean. They could have a rep, but that rep might cover six states. And their simple value in you being here and having feet on the street and then go one level, we've got 100,000 square foot facility, the next way is inventory. Right. Those are all differentiators because what you'd say, we have the same thing in the cargated industry, right? Cardboard box manufacturers will sell to me, but they'll also sell to the end user if it makes sense, right? They will. At some level, there's no room for us. If the customer is going to buy a truckload of boxes, there's no room for me to buy the same truckload of boxes, put it in my warehouse and deliver it on my trucks. There's no way to create margin or any value prop in there. Therefore we get cut out of that transaction. But as you get to different end users or smaller end users, maybe the end user has space constraints and there is value to you delivering on a smaller increment while leveraging the cost advantage of buying the big truckload. And you can create your margin in that space. But the short answer is you do that by creating enough value proposition on the customer side and then also on the supplier side, where neither would dream of you not being part of the transaction because you're so valuable to both. [00:48:46] Speaker A: And again, that is where more specific allows us to dig into figuring out those value props. If we're doing too much, it's impossible to do. And these are all reasons I think it makes sense. It's going to be challenging, but makes sense. [00:49:03] Speaker B: Well, you might also too. Something just occurred to me. It might be that because I'm in and around your conversations and hear them, I do know that part of what customers love about working with you is you do handle some of that hard logistical piece, right? Where what you might be trying to get out of, or the thing that you have to be careful of is what you might be trying to get out of is the exact thing that your customer loves you doing for them because it is hard or it is sticky. And that's exactly why they love you so much, right? They'd say, I don't really want to take that back. So I think that'll be a really eye opening part of your investigation, because what you're getting ready to do is launch an investigation on these things. A really interesting part of that investigation will probably be around why do they value us? And you might find that certain customers, they don't care about your technical expertise or lack thereof, in a moment, or they don't care about this or about. They just love the fact that when they give you the order, the stuff gets to site on time. It's right thing, right place, right time. And that's of the biggest value because of the things they can do while they're not worrying about that supply component. And that's the soul searching that you'll do around that is going to come back with some very interesting answers. And how many purchasing customers do you have? Ballpark, you know? [00:50:23] Speaker A: No, I don't. [00:50:26] Speaker B: Yeah. So that's going to be one of your biggest things too. The first thing is when you start to segment them. [00:50:32] Speaker A: So I do. But currently active, like active in the last year, I would have to look. [00:50:37] Speaker B: Yeah. So that rolling twelve is a great start. It's an elephant. How to eat it one bite at a time. Rolling twelve is a great way. Who are rolling twelve? Who bought in the last twelve months? Let's look at that list and let's start by segmenting them. When you start to dig into that soul searching and then from there you have conversations because you have to go to the person that owns a relationship and say, why does XYZ buy from us? If I ask you a question, why do they stick around? Because they buy pipe and it always ships in truckloads. And we know that that supplier would just as soon take that order and go right past us. Why don't they? Why doesn't the customer go to them directly? That's where you'll find the answer to your value proposition for those customers. And those are strengths. And then you will leverage them into opportunities. That's where it comes from. [00:51:24] Speaker A: Yeah. Okay. I could go down this road a little bit more because while I hear that, I hear you and I get it. [00:51:37] Speaker B: Well, look, I mean, I think the biggest part of this is starting, right? Because we could sit here and bat hypotheticals around for a really long time. Well, what if? Well, what if? Well, what if? Then I find one of the most fulfilling parts of what we're talking about is that actual investigative journey and doing it together. And your team will learn so much through going. Let me give you a simple one, right? We have these 91 year aha moments a lot. It's crazy. Like, oh, well, 91 years. You must bullshit. We don't have a lot of it figured out. That's why evolution takes billions of years. And inside of the half life of older companies, there's evolutions going on all over the place. Do you know this will blow your mind? We just started tracking the total number of purchasing customers, right? I mean, if you listen, we're big CNBC fans and it would be monthly active users. That's one of their big triggers, right? Maus. How many maus? How many maus? Big metrics for them. Similar one to us is rolling twelve purchasing customers right. If I look back twelve months, how many people bought something? And then when you click forward the next month and you watch the change, did we net positive ad purchasing customers or net negative? We had a month. I'll give you a case in point. We had four net positive customers. You know how we got there? We gained 156 and we lost 152. Positive. Four. I mean, those are just mind blowing data points that when you start to dig into it that way and you say, how many purchasing customers? And then you segment that out, I think it could be one of the most important things you do at this moment of your evolution, especially with the great team that you have. Their eyes are going to pop out of their heads. [00:53:18] Speaker A: And I think part of this is going to be, our vision of this is not going to be perfect and there's going to be things that don't work out. It's like you got to keep testing it. So we could be testing down a dead end for six to eight months and realize this is not where we want to be and have to turn around. Which we can do. [00:53:41] Speaker B: Can happen. I would say that the type of diligence that you'll do, I think you have much too great of an understanding and your fingers on the pulse of the business far too much that would have you doing diligence. That would have you that far off the mark. I don't think that's likely. I really don't. [00:54:01] Speaker A: Okay, let's get off this topic because I got a couple more I do want to get to. So one of the things we've also talked about, which we covered, we just covered it. We talked about the topics itself, but didn't get into the weeds is creating with a very small young team. Lean team is redundancy. And part of that is cross training to a degree. I don't need everybody in our companies unrealistic to know everything. I don't want that. But having redundancy in every single position, and I came up with, which we won't talk about, again, a method to be able to do that. But how do you do that? How do you do that within your company is creating redundancy. Because one of the things I cannot stand is when we reach out to a company and they say, well, John isn't here. And until John gets back in two weeks or a month in his sabbatical, we can get you an answer. And these are behemoths of company. I'm like, really? Nobody else in your company knows how to do this. And even as a very lean team, where that would be more understandable. Doesn't matter to the customer or vendor who needs answers. They don't care, but would be more reasonable. We don't want to be that. So how do you do that? [00:55:12] Speaker B: God, Bret, that is one of the single largest challenges. And there's another thing that goes along with that and still very small business like you, we have roles in our company where we have one of that person, right? Just one of that person. I can think of three or four or five of them right now. One person in that role. And it's really hard to get that type of cross training. I don't have a great answer for you. You asked me to be honest and tell you, when I don't have great answers, I don't have a great answer for you. The other place where it runs into challenges in small business is creating the appropriate checks and balances. So think about payroll, think about things. Multiple check signatures, things that sound so simple, but how do you create, because checks and balances are created by spreading certain tasks among enough people that nobody has possession of something that's critical or important, signing checks, things where you could fall victim to fraud or theft and happens to businesses all the time. And part of that challenge is not having enough people or enough with in the organization to be able to spread the checks and balances. So both of those are the exact same type of risk where if Joe Schmo, the engineer for that division, let's just say it's a small division and you only have one of them. If they leave, it's going to be a disruptive event like no others. And I think that comes down to how specialized you want to be if you have three great project managers, and they might not have to have absolute tribal knowledge of each customer to keep the ball know, mix out sick. And he's a project manager and brits across the way. And while she doesn't work with ABC directly, she too is a great project manager. And that's the biggest part of the value prop. And here's where it happens. And we've built systems where everybody can be successful. I go to pick something, I go to the CRM tool that we use, and I can at least go into the customer XYZ and say, all right, there's John, who's on the phone. I got who John is. It looks like Mick was working on looks like the supplier is, or you go into the order entry system. At that point, the only thing I found that works is to wrap process around it so that your weakest player can still be successful and drive an acceptable outcome. May not be a 90 yard catch, but it can drive an acceptable outcome. And it doesn't sound anything like, well, mix out today. Do you mind waiting until tomorrow to see if he actually is well enough to come in? And if not, you get to wait another day, too. Something I've ever found that works there is to expose as many people as you can and not to the point where they're diluted, right, where they can't function or be a specialist of any kind, but then wrap great process around it so that there are tools to go to where if mix out, then Britt, who's also very talented in her job, can pick up that tool and say, I can run the ball. I can run it from the 40, I can run it from the ten to the 30. I can't run the whole field with it, but I don't need to. You need an answer today. You need the ball back in your court. As a great project manager, knowing the process and the tools that I have, I can run it 20 yards until you get back in the game. And that's the other thing I found. [00:58:38] Speaker A: Yeah. And that was one of our strengths in 2023, is starting to refine our processes. As simple as just really getting shared folders together, but making them very organized and streamlined so our accounting team can look at Jorby's folders and look at Connor's folders and know exactly where to go, and they're the same and just really streamlining. And that's also an improvement area. A lot of our strengths were also like, we did a great job starting to implement this, and room for improvement is further refining that. [00:59:11] Speaker B: Sure. [00:59:11] Speaker A: So I'm with you. I think processes, the only way to do that, like we said, we just need to have somebody to backfill to that can at least bat the ball back. They may not get it across the finish line, but knows enough. And this also goes back into which I'm very interested for my team and for myself, quite frankly, is to be able to have some type of peace of mind, quality of life. I don't want one person that only knows how to do this so they can't go on vacation for a day without a worrying or b coming back to a backlog that is just unmanageable. [00:59:51] Speaker B: Yeah, that's terrible quality of life for everybody, right? [00:59:53] Speaker A: It is terrible. And there are components to that within our company, 100% right now. [00:59:57] Speaker B: Well, look, that is such a hard part of the younger cycles. And listen, 91 years later, with 75 people, we still have those same holes. We have those exact same holes and we do everything we can. The first thing is to acknowledge it, though. That's a big part of it, right? To say, hey, let's not forget we've got one player in this position, and if they're out, we can't run that play. Are we in trouble if we can't run that play? And if we are, what are we going to do? Are we going to teach that play to somebody else? Are we going to bring in another player? There's only so many options to be able to handle that situation, and once you value it, we're okay. We don't have to run that play every day. Okay. You sure? I'm sure. Great. That's awesome. Then that's fine. As long as Mick's not out more than two days, can we not run the play for three days? Three days is a lot. Okay, then we need to have a two day backup plan if the player, Mick, is going to be out for that period of time. [01:00:53] Speaker A: And I would take that a step further in saying it's also part of, while acknowledging it in a reactive manner, it's being proactive and saying during the hiring process, hey, you're coming into a team that is rather young and lean, and part of that means you may have sole responsibility for that. Part of that means you're not going to have a nine to five. You are going to be away and on PTO and still have to keep an eye on your phone. And while that comes with that piece of it, it also comes with an opportunity for unlimited growth. [01:01:28] Speaker B: Sure. And freedom and autonomy. [01:01:30] Speaker A: Freedom and autonomy. So if you don't want that, it's not that you're not a great talent, but you're not the right to fit here. My teammates, I believe, and that was part of the conversation up front, still doesn't mean we want to work on it, but it's an understanding and setting that tone from the beginning, which I think is really important. [01:01:48] Speaker B: Yeah. And that's so much of it, right. Is having the right horses for that part of the race. And part of the race could be three years, five years, ten years. Right. It's about. I mean, we have had to grow into the talent of certain people, and we have also grown out of the talent of certain people as we've grown and gotten more technical, as we've launched systems. I know when we brought our first legit ERP system live back in 2013, it drove our then purchasing manager out of the organization, we outgrew him the day that we brought that system live. And there are other people in the organization that we absolutely weren't good enough to vy for and capture their talent two years ago, four years ago, five years ago. So that's the cool part, too, is you evolve into people and you evolve into talent where you finally become attractive enough to really great, talented people. And that alignment becomes so important, right. Because part of that is you need to find people that are diverse and they like to try new things and they like to have a wide range. If they come in into a smaller organization with tunnel vision, it's going to be hard to find a spot for them because you're not going to be able to just do this or just do that. Some days you're going to get called on to support a buddy and you're going to get called on. You might have to move from guard to center and you're going to be okay with that because the guard's out with a banged up ankle. Right. And that's part of that is we've finally starting to do a better job as we evolve new positions inside the company. Doesn't mean you always get the first player right. We've had some failures recently with players because we created a position, but we didn't absolutely nail the type of player that we had to have in that position. And that's one of the really big challenges for smaller organizations, too, is it's one thing to say, I think I know the position, but man, and then identifying and capturing the right player and getting it right the first time is really hard. That is not easy. [01:03:51] Speaker A: No, that's one of our actual strengths. Every single one of us said we feel like we have the right team in place right now, which was amazing. We all feel so good about our team, every single person. [01:04:03] Speaker B: That's great. [01:04:04] Speaker A: Which is crazy. [01:04:04] Speaker B: That is huge. [01:04:05] Speaker A: Yeah, it is. Last point here, you just got into it a little bit and we can finish off with this one. Part of this is figuring out so we have a particular platform we use for accounting, purchase orders. It's all the same platform. And one of the things we haven't done is explore the capabilities of that platform. So my thing is no need to change until we fully explore all the things, all the capabilities of this. If we do that and realize it is not any longer built to do when we got it from day one to now, day seven and a half years old, that's fine. Let's figure out what the right solution is. However, the thought of transitioning to a completely new system is unimaginable. And I know you've done it many a time, and I know many, many companies are going to go through this where you just simply outgrow again. You have to explore and dig in to make sure this is not. Because I think it actually, what we're using now is a good solution for us right now. I think we just need to figure out what it does and actually execute. But when you get to the point where it's no longer, how do you even make that transition without go? I mean, it's unfathomable. It's unfathomable. [01:05:25] Speaker B: You look exhausted thinking about. [01:05:26] Speaker A: Because all the information is just there. Yes. [01:05:30] Speaker B: Yeah. I'll tell you, I did this personally. We bought our first legit software system in 1997. I was there, and coming out of the old as 400, some of our older listeners will know the As 400 and got into an ERP, like ERP Enterprise resource planning software. As a family of software products, brand new was hardly a thing in 1996. So brought it live in 96. We bought a company in 2011. And the second we closed that transaction, we obsoleted our ERP system. We were too big for it that day. Guess what? I didn't know. It never crossed my mind because the company that we bought, despite being similar in size, revenue, way more intense, way more transactionally intense for our listeners. [01:06:21] Speaker A: Listen to I think it's the bombs that almost took us out. [01:06:23] Speaker B: Oh, yeah. [01:06:24] Speaker A: I'm not sure what episode that is, but you really talk about that a lot. [01:06:27] Speaker B: Yeah, I do. I talk about the moment that I was standing. I was on my 7th day in a row of working 20 hours a day and I was sleeping on the couch and showering in the sink. And I thought, this is too big of an animal for me anymore. I can't just come in on a Saturday with my budy John Coward and clean some things up and go into Monday clean. But I do know that we outgrew our ERP system that day. But it was two years where we closed that transaction. In April of eleven, two years later, in October of 2013, we brought a new ARP system live. And the first thing is recognizing that you just can't go any further with your platform. And then the very next thing we did was we went to each department and we had them write down what they loved about the current system and what they hated about it. And that was the starting process because the goal from there was to keep everything that we loved and fix everything that we hated so, for example, we loved how it handled blanket orders. We took a lot of blanket orders in our business, so we loved how it handled that. We hated the transactional intensity, how many things we had to do to process an order through the system, and we mapped it and whatever. But a really simple start was identifying what you love, identifying what you hate, trying to keep all the loves and fix all the hates. And that was really broke it down and took that to each group and then started to aggregate all of that information, looking for crossovers, similar problems. And then we went to three different potential suppliers and posed that to them. Must have this, must fix this. Tell me how you're going to do it. And laid it out to three suppliers and narrowed it down and went through it that way. So I'm oversimplifying. There was certainly a lot of pain and agony in spots. Had to change the operating system out of one type of language into SQL. But I would say that we got it right. But man, those two years. And also too, it becomes excruciating the pain level. You talk about elective surgery sometimes, I hope people don't wait this long, but sometimes the pain gets so high, like when you have a bad shoulder and you finally get it operated on because it keeps you from sleeping. That elective surgery usually comes at a point where the pain is so excruciating that there is no other choice. You're happy to go under the knife to make it stop hurting. That was the ERP experience that we had. And I know a lot of other people. [01:08:57] Speaker A: I'm laughing because that's how Jorby explains my hiring process. He's like, gets excruciating and then we hire. That's how we do it. That is our process. [01:09:08] Speaker B: If they didn't fail out between here and there. [01:09:10] Speaker A: And he made me laugh because when he said that, it was a couple of months ago, I was like, that's kind of right. [01:09:14] Speaker B: They demonstrated their metal. Well, you're still around, I guess you have the job. Oh, man. Good questions. Brings back a lot of memories. Some good, some not so good. [01:09:26] Speaker A: No, that was really helpful. It was also, I'm not going to lie, it made it confuse me even more at times, just because when you play more options on the table, it's like, yeah, I didn't think about that. Which is good, which is good. And it's all things I need to think about. I think we just need to start to sum this all up. So much of this is about doing the proper due diligence on the front end it is. I mean, that's like, really, if you look at everything we talked about, it's like, well, first you got to dig in and do the due diligence and then start making decisions based off that. And you'll probably make more right decisions than wrong if you do the proper due diligence. [01:10:04] Speaker B: Right. Look, we use this word, these elephant moments, and, gosh, to sit back. If you could grind yourself to a halt based on the size of this undertaking. [01:10:17] Speaker A: Yeah, I'm having a hard time breathing. [01:10:18] Speaker B: No question. It has an overwhelming feel to it. And I still, to this day, having done this for a long time, I still experience that anxiety at times. And it's almost this combination of. It's overwhelming. I feel like I'm letting the world down. I'm waiting for the other shoe to drop. Those are all little colloquialisms that fit in there. And then I get back to the elephant conversation. It's an elephant eat it one bite at a time. I love the scene in the matrix where neo slows down the bullets. It starts to, you just, all right, relax. This is all self imposed. Approach it in a pragmatic, not slow, not procrastinating, right. But approach it in a pragmatic way and figure, know, how do you eat an elephant one bite at a time. And then when you start to break it down that way and then invite your team in, you don't have to do it by yourself. So young McArnold would have attempted to do many, many things on his own. Versus my first knee jerker is, how many people can I invite to the party that are really smart and really engaged? And I've got five awesome people in that regard. How do I get them in as fast as humanly possible? Because one of them has the answer that it'll take me forever to figure out. But that elephant piece has served me well later in life where before I would just, and I did have the ability to outwork it. Not as much anymore. I don't have that same energy level out thinking. It usually means inviting other people in that you trust and are highly engaged and committed and listening. Shutting up and listening. [01:11:49] Speaker A: Yeah, we wrapped up our meeting, and this how I'll wrap up this with saying at the end, as we went through all these and then all felt a little overwhelmed, we ended with, but we're in great shape. We're in great shape right now. [01:12:00] Speaker B: That's right. [01:12:01] Speaker A: This is only a matter of, we all care, we all give a shit, and we want to evolve. [01:12:05] Speaker B: You still had the option to do. [01:12:07] Speaker A: Nothing and we would be okay that way. [01:12:09] Speaker B: Do nothing is an option, which is great. [01:12:10] Speaker A: Absolutely. And then we could dig into these and be like, put ourselves in a worse position. I don't think that's going to happen, but it's possible when you start testing and trialing. Last thing I do want to give out a shout out to my team because I'm definitely going to require that they listen to this. But it's like such a cool feeling to have such an awesome team and a little plug for us because we are building our team here and going to be building our, building a DC team. We're going to be looking for a couple more team members eventually that fit in with this group and it's going to have to be great fits because right now our team is killer and I'm so proud of them. After this meeting I was like, I have such a kick ass team. [01:12:52] Speaker B: That's cool. [01:12:52] Speaker A: But we are going to grow. And so if you listen to this stuff and it resonates with you and you think maybe there's value there, let's have a discussion. Reach out to us, anybody on our team because it's all forthcoming. [01:13:06] Speaker B: Yeah. Look, a players want to play with a players and both of our teams. We have no intentions of letting anything but a players onto our teams. [01:13:15] Speaker A: Yeah. [01:13:15] Speaker B: So great conversation. Love the questions. And boy, this one flew by. Brought back some painful memories. I appreciate that because those are important. That's how we talked about scrappy. I mean, part of staying scrappy is remembering those moments that weren't so comfortable. [01:13:30] Speaker A: And we'll continue talking about it and giving feedback as we go and start implementing this. That's important. We're not going to just talk about it here. Let's talk about the end result or the result as we're going. [01:13:42] Speaker B: Yeah, sounds good. Great talk as always. Cheers. We hope we'll put our cups. [01:13:47] Speaker A: Cheers as always. Thank you to all of you listening and to our awesome production team. Happy birthday, Tommy today. [01:13:55] Speaker B: Happy birthday to you. That's all you're getting. I'm not ready yet. Soon though. Soon. I'm putting in the time. Don't forget you can watch us on all the platforms. YouTube, Spotify, Amazon and Apple. Yes, thank you. All the platforms. Please subscribe. Doesn't sound like a lot, but we love when you subscribe, let us know you're out there, take a look at the show notes, drop us any questions and we will wrap it into the podcast. I promise. [01:14:18] Speaker A: As always, we will be dropping a new episode every other Wednesday, so you can expect that from us. And thank you again. We appreciate you and we love you guys. [01:14:27] Speaker B: Can't wait to see you soon. Welcome to Rob.