My guest on this episode is Jason Hill. Jason acquired Precision Stoneworks, a custom countertop fabrication and installation business, from his father-in-law and now runs it as the CEO. Since acquiring, he’s been relentlessly focused on customer service, improving efficiencies in the company, and making sure employees have the tools they need to do their jobs. I loved learning from Jason’s experience constantly searching for a better tool and better way of operating. And if heavy machinery is interesting to you, you’re in for a good one.
Live Oak Bank – Live Oak Bank is a seasoned SBA lender focused on search funds, independent sponsors, private equity firms, and individuals looking to acquire small companies. Live Oak has closed billions of dollars in SBA financing and is actively looking to help more small company investors across the country. If you are in the process of acquiring a company or thinking about starting a search, contact Lisa Forrest or Heather Endresen directly to start a conversation or go to www.liveoakbank.com/think.
Hood & Strong, LLP – Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. Hood & Strong is highly skilled in working with search funds, providing quality of earnings and due diligence services during the search, along with assurance and tax services post-acquisition. They offer a unique way to approach acquisition diligence and manage costs effectively. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at [email protected].
Oberle Risk Strategies – Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and Employee benefits programs. Over the past decade, August Felker and his team have engaged with hundreds of searchers to provide due diligence and ultimately place the most competitive insurance program at closing. Given August’s experience as a searcher himself, he and his team understand all that goes into buying a business and pride themselves on making the insurance portion of closing seamless and hassle-free.
Thanks, Jason, for joining us. It’s good to have you here. I’m looking forward to chatting about countertops. It’s something I haven’t talked about before or had on the podcast, and of course taking over your father-in-law’s business, any family business is fun to chat about as well, so excited to hear about that. Would you talk a little bit about your background and then how you got into this business through your father-in-law?
My father-in-law, they purchased the business, him and a partner, in 2006. That would have been my junior year of high school. I’ve known my wife at the time, but we weren’t together, so I didn’t really know the business well. I knew he had bought a countertop business, but 2006, the timing was not good at all. It was mostly you hear the headaches and the horror stories of the housing market was crashing in Atlanta. By the time we had started dating was probably 2009, 2010, so that was at the bottom of the business. I was at school down in Atlanta. School is not my forte. I made it through, but I made it through in five years, and then took the year after that just to recover. I drove across the country, and did a lot of other things to waste time.
My wife was going to get her master’s, so between me taking five years and then taking a year off, she was done with her master’s degree and found a job in Atlanta, which set up for where we’re going to live. Then I started looking for a job after we knew she was going to be in Atlanta. I got into selling forklifts for a brief period of time. I enjoyed the job, because similar to this podcast, you’re just reaching out to every small business that has a loading dock or warehouse space and anything from food production to… We met guys that would recycle old computers into the copper glass and plastic components itself for recycling material.
You just got to meet a ton of different businesses and business owners doing that, but I did not enjoy the company I worked for, and my father-in-law was aware of that. It would have been probably 2013. He called me one day, I was at lunch, and just said, “Would you like to tell your boss to have a good life?” He knew I was going to start looking for another job. I was like, “Yeah, I’m listening.” He was well aware that’s what I was looking to do. He’s like, “Well, we need an extra set of hands.” There are some machines. I’ve worked on a lot of cars and different machinery growing up.
He’s like, “There’s stuff you could repair and work on while you’re here, but in the off hours, whenever you need it, you could have the flexibility to go look for another job, instead of trying to do it while you’re currently working for the forklift company,” which sounds like a great opportunity, because the best time to find a job is when you already have one, but it’s tough to do interviews and phone calls. This is back when everything was in person, so it’s not easy to leave all the time and have an answer as to where you’re going. When you’ve just been in a sales job for six months, you’re expected to be there all the time.
I said yes, and I went there. I just started working in the shop. Whatever they needed, a machine that was broken, people needed to carry stuff, take stuff to job sites, drop stuff off, whatever they needed me to do as the labor, I was happy to do it because I was happy to be out of my other job. From there, the person that was doing all the installations was starting to upset some customers. He had been with the company for a long time. He was a subcontractor, but I think the years had worn on both sides. He had disagreements with my father-in-law. My father-in-law had disagreements with him.
We would get a phone call from a builder of like, “Hey, if you guys are going to keep doing our countertops, make sure the current installer is not the one installing it,” so I would start going on to more job sites and doing more of the installations until I was basically doing all the installations. That would have been 2014, 2015. Things were starting to turn around. People are starting to build houses again, and we were starting to push trying to get into production builder, so our business was picking up as well. We got fairly busy to where my father-in-law and his partner just couldn’t handle the call volume, the office work.
It was just the two of them in the office for a long time, because times were so slow. We interviewed some other installers, and it was either we were going to hire someone for the office, or I was going to come into the office, and someone else was going to have to do the installations. We interviewed some installers. Found a guy that was, I mean, just really good at what he does. He’s still working with us today. I came into the office. Over the next couple years, we got busier, and I got my hands in more of the business sides of things. Then one of the partners was looking to retire.
The first thought was to sell the company. The second thought was me to buy only his portion of the business, and that was something I was interested. I’ve always had the drive to do my own thing. The six months I was working for someone else was not what I would consider an enjoyable experience, and really, fundamentally, he ran a great business, but the disagreements and how some of the things were happening, it was very frustrating to me. There’s nothing I could do. Well, at the time, I was a year and a half out of college, but I was only half a year into the working force, and he’d been running the company for 40, 50 years at the time.
It was very successful, but I knew I would like to get into owning my own business, so the opportunity presented myself to buy half the company. I was excited, because it would be in my mind fairly easy, because we can keep all the debt structure everything in place. I just basically had to come up with enough money that he was willing to sell his shares, but I didn’t have to buy the whole company. I didn’t have to worry about taking over all the debt. We’re a C Corp, so I could take over his stock for whatever he thought was a fair price. He wasn’t looking to retire.
He was just at the age where he had been through the worst of the housing market while owning a countertop company, and he knew at the age of retirement, and he knew if he got a fair price for his shares that he would be set to retire whenever the time came. He didn’t want to stay involved from a financial perspective to where if he had to weather another storm, he didn’t want to be tied to it financially. He just wanted to work. We started the process, and it’s like some of the other podcasts guys that you spoke with basically buying a small business. I was 29 at the time. I didn’t have any money.
I went down the path of, “How did someone who was that young at the time come up with…” I believe originally, it would have been somewhere between half a million and a million dollars, and I didn’t have it, so we started looking at loan options, things like that. We got the nod from a couple of bankers we talked to like, “This qualifies for an SBA loan.” The current owners had bought with an SBA loan, and had a poor experience with the bank, so they were really against it. But unless someone else was going to come up with the money, I don’t have a lot of options. I don’t have collateral, so my wife and I had bought a house, fixed it up and sold it, and that I had some money, and then we had bought our second one from fixing that one up.
We were in the middle of the second flip when all this was going on. Basically, all our money was tied up. We started talking to a SBA lender. I made some poor bank pitches at the beginning. Those weren’t the guys that wrote our loans, but it was a learning experience. The small business, I think a lot of them are like, “This was always…” The two owners knew everything about the business, so they didn’t make the very diligent effort to keep all the financials very clean and in order to where you can go to a bank and say, “Hey, this is a business. Here’s all the numbers.” They understand the money in the cash side of everything, and then the accountant’s job will make everything fit, file taxes.
For a long time, they were just trying to keep the business afloat. Time passed. We realized the SBA was probably one of the only options, but the stipulation with the SBA 7a loan was that you had to buy 100% of the outstanding shares of the company. They wouldn’t fund purchasing a portion of a small business that was a C Corp. There might be other rules. But for buying the C Corp, they said you had to transfer 100%. Then it was the conversation with my father in law. Well, if Wayne wants to exit, are you willing to exit at least financially to where I could buy the whole company?
His answer is yes. He wasn’t looking to retire, but I think he also saw the opportunity to where if the company sold for a fair value, he would be fine. They had been through 2006 to 2016 when the conversation first started of very poor housing market. Both of them were almost weighing. The other owner was actually retired before he bought the grant company. Doing that basically put 10 years on to his working career. It wasn’t the 10 years they had planned for when they bought it, and my father-in-law was not quite there. He was a little younger than the other partner, but a similar situation to where he left a great corporate career and wanted to do something different.
At the time, maybe he could have got by without working anymore, but they said, “Hey, let’s purchase a small business, run it for a few years, add some value, get out of it, and we’ll be set up, and we’ll be at the age of then we want to retire.” Obviously, buying into the construction industry in 2006 isn’t how the story went. But at the current time, we’re always looking at purchasing. The math worked out, where as long as the numbers and purchase price was fair, they would be able to retire. Like I said, because of the loan situation, the whole company had to be sold. That was 2017, I guess, that everything finally got set up, finalized into the due diligence.
My banker at the time said they call it a 7a loan, because you’re going to kill seven trees doing all the paperwork to get the thing to the finish line, but we did. We had a couple issues going through with some insurance stuff. We had to close in 2017, and we closed, I think, December 29. The last hour, we were all sitting at the closing table waiting for a life insurance policy to get underwritten for me to cover the unsecured debt in the deal. We basically just sat at the attorney’s office until that phone call came through that it had gotten through underwriting, because if it didn’t, we weren’t going to close.
The SBA was changing rules for 2018, and our loan would have qualified. I mean, we woke up that morning, none of us knowing whether the company was going to get sold or not, and luckily everything went through. That’s how I’ve got to be in the driver’s seat of the company.
Yes, so you obviously had experience going into the business. How different did it feel now being in the driver’s seat, and you’re the one in charge, and you have the whole business now? How different was that compared to your previous role in the company? Do you feel like it prepared you enough, or was there still this learning curve that maybe you didn’t anticipate?
I believe, on any day you ask me, I would say working for the company and seeing it from the inside out. When I installed, I was face to face with all the customers. I knew a lot of the builders really well. I was always on the job site, so they knew me really well. On some days, I would say, yeah, that put me in a great position and set me up for success in other days. After we sign the documents, you sit back in your chair and say, “In what world is a 29-year-old with no money allowed to borrow seven figures of money to buy a company with no business experience?” I didn’t study business in college.
Until that time, I’d worked as a granite installer for most of the time. I sold forklifts for six months before that, and then I worked in the office mostly with the builders. Some days, I was confident that things were going to go well, and other days, I just could not believe that anyone would write that loan.
You said you couldn’t believe the loan happened. Is that because you felt like you didn’t have the business experience and just felt like a lot of money, or you were shocked that this just happened at all?
All of it. I was 29 years old. I hadn’t studied business. I had to come up with 5% down, which, honestly, the number I’d calculated was 5% of the loan value. Then at the day before the closing, they told me it was 5% plus some of the fees. I believe I ran my credit card on the company machine, and then wrote myself a check from the company to get the money to come up with the last couple thousand dollars to make the closing even happen. I mean, I don’t have any money. I didn’t have any collateral. My house was being renovated. It’s like I just bought it, so there’s no equity there.
They didn’t even wrap it into collateral, because they’re like, “You owe 95% of the home’s value, so if we have to shut sell it at foreclosure, we’re not even going to get your money back to cover the mortgage.” Then because the business was a decent size, and we didn’t operate with a lot of… We used a lot of labor, but we didn’t use a lot of assets. I mean, I think about half the loan will had collateral to it. A small portion had some the inventory and stuff, but I’m sure like a lot of other businesses, if you have to sell off the very industry-specific inventory in a foreclosure, it’s going to be pennies on the dollar.
There was just a lot that was going to be on the line for the bank at the time. For a 29 years old, it was a lot of money. I mean, for today, it’s a lot of money. I still have the business loan. I still look at it often, and it’s still a lot of money. We’re only about three years into it, so we’re paying a lot of interest right now. The principal is not moving as fast as you’d like to see it.
Can you share a little bit about how that felt taking on a loan of that size and the feeling between you and your wife as you were looking at just the size and knowing that you didn’t have collateral, and then entering your credit card? There’s got to be a lot of different emotions flying around with that all going on.
There was for my wife. I’m sure she’ll listen to this, so we’ll keep it as kind as possible. She was not a fan of the beginning of mixing business and family when I went to work there. Then she’s always been very supportive and confident. I’ve kind of always… Like I said, school wasn’t my forte. She saw me get through school with one of the lowest graduating GPAs you could have, and still make it through. But she was always confident that whatever I chose to do and put my mind to, I’d be successful. She has always had her own career and is very successful, so she just said, “You do the best you can do. I’ll do the best I can do. That’s your company, and I’ll support you, but it’s your company, and it’s up to you now.”
She was very supportive, but the feeling of taking on the loan was, I think it was a lot more overwhelming than I expected before. When you’re going through all the months of diligence looking at numbers, and there’s forecasting models and cash flow models, we actually knew that we were going to dip down as soon as we bought the company from the cash perspective. We thought we could handle it with line credit and everything, but yet it bared more weight than I would have thought before I actually signed for the company.
Then talk about your first three to six months in the business. How did it feel getting acclimated, and then what kinds of decisions did you start to make that were perhaps different than the previous owners might have done?
The biggest decision we made, and would have been actually before we closed on the business, business was picking up. We were still doing everything manually. When I said when we were closing on the business, we didn’t have a lot of assets to tie in for collateral, because we were cutting with two primitive manual saws. One of them was actually newer, but it was still like the manual version with a purchase price around 50 grand. They depreciate pretty quickly, so there wasn’t a lot of value to it. Then we used a lot of manual labor to get the countertops through the production facility, so cutting things out was all done by hand.
All the polishing was done by hand. We had a forklift to move everything around, so one of the things I started looking into before the closing even happened was like, “What were the digital options that would allow us to reduce labor or even just get labor back?” We just limited some of the overtime. We weren’t interested in… We have a very stable workforce. A lot of guys have worked for us for a long time. I didn’t have any interest in getting rid of anyone. I certainly didn’t want the feel of the transition to be, “I had purchased the business now, and now we’re going to start cutting employees,” but we were looking for something at the time.
We were running probably 20 hours overtime a week, so even if we cut our labor by 10%, everyone kept their job. They just didn’t have to work so much at the time. I think everyone was excited about that. A lot of our guys love… If they’re working some overtime, they’d like to be in that pay scale where it’s time and a half. But even with the increased pay rate, there’s only so many hours to where it’s just not worth it anymore. We were starting to push those hours more often than we wanted to, and more often than the shop guys wanted to, but we had a very loyal crew, so they would do whatever was needed to keep the business rolling and keep the customers happy.
We started to look at some options, and decided to go with basically a robotic arm that can do most of the cutting for us. It’s got a saw blade as well as water jet, so where our old equipment can only cut in straight lines with a saw blade. This could do all the downstream labor of all the sink cutouts and faucet holes and any of the arcs or earpieces or inside corners, anything that other saws couldn’t do. You can get the shape of a countertop finished, and then the only thing left to do downstream would be to polish and finish the pieces. We found something we thought that was a good option.
I had all the contracts written up signed, financing lined up. In that package deal, we also financed overhead crane, so instead of using a forklift to move everything, one guy could just use an overhead crane. Instead of always moving one slide at a time, the overhead cranes could unload the full bundle, which is about seven slides at a time. On top of that, the overhead cranes would sit over the new machine because you needed some crane device to be able to lay the slabs flat on the new machine. We bundled that all into one package, teed everything up, found people that were willing to finance the equipment, knowing that the documents were going to get signed the day after I signed the documents to take over the company.
Because the current owners, they were getting ready to retire. They didn’t want to sign. It was going to have to be signed with a personal guarantee. They didn’t want to sign it because in the event something happened with the purchase between all the equipment, it was around $400,000. That’s not something they were looking to do when the company was going to get sold. That was the biggest change. To date, it’s probably still one of the biggest changes we’ve made. We’re extremely happy we did it. I don’t know. We have a relatively small footprint for the volume of countertops we cut, and without going down that path or a similar path, we couldn’t be where we are today without taking that first step, because you just don’t have the capacity.
Not only does it work faster, it can do it in a smaller footprint. Instead of having to add in more and more equipment, we added more expensive equipment that does it quicker. Not only is it robotic, but it also cuts off a CAD file as opposed to we would lay wooden templates on top of the slabs and trace them. Then the old saws would trace all those cuts, which is how we did it before. We do it off just dimensions, but that’s still you’re going to make one cut, trace out all the dimensions and make the rest manually. With the new equipment, you just load the file and hit go, and it’ll go until it’s done.
Then you unload it and load the next job. That’s the biggest change we’ve made. Like I said, we made it before I made that decision as soon as I knew I was going to take over the company. I made it a little extra groundwork, because we had to find someone that was willing to finance a deal. Like I said, they also had to finance a deal on top of a company that was now one day into a new business loan. That was unsecured, but they came and looked at our volume. They knew the industry. It was a lender that works with our industry all the time.
They looked at our business, saw what we were doing, saw the equipment we wanted to bring in, which also gave us the nod of approval that we thought we were going in the right direction, because they said, “Yeah, this is going to help you bring your cost down, and paying for the equipment won’t be an issue with the time savings, the labor savings you’re going to have because of the new equipment.” That helps just convince us that we’re making the right decision.
That made obviously your production a lot more efficient and labor costs more efficient as well. Then if that’s taking your expenses perhaps lower or at least more effective, how did you start to go about increasing your top line in your sales?
We cut countertops for mostly the residential segment, and as much as that’s a tangible good, I’ll tell anyone that ever asked we’re in the service industry. Because if you get a natural stone from Brazil for me, or in Brazil or California or my competitor, you’re getting the same material. The only thing that we can do to differentiate ourselves is be competitive on price, but more importantly for the builders is we’re going to be there when we say they’re going to be there. If we ever have a mistake or an issue or something comes up, we’re very responsive to fix it quickly.
For the sale side of things, at the time, we had a pretty good customer base. We’d gotten in with some production builders. The industry was certainly picking up. The construction market was picking up. Houses were being built quickly, and the biggest thing I would think we did is we didn’t make mistakes, and if we did, we corrected it. That helped us in multiple ways. One, our current customers were starting to build more houses, so someone that did 80 houses in 2017 was going to do 90 or 100 houses in 2018. There was a lot of companies that were buying other companies. If a housing company acquired another smaller housing company, and we were the parent company’s vendor, we would typically get all the business of the new companies coming in.
I mean, knock on wood, I don’t know of us ever losing a big customer to this day. I also don’t think we have ever have two companies merged. We always came out as a countertop vendor, so between companies merging our current set of business growing from our current customers growing their businesses, and then the other thing that helps us a lot is a lot of the purchasing managers or vice presidents of construction, a lot of those guys change jobs and pretty frequently. If we have a good relationship with someone, and they’ve been the head of purchasing for company A, and they moved to company B, and they’re having issues with their countertop vendor, I would say more often than not, we get a phone call.
I’m going to send you what these guys are doing, or what the pricing looks like. Can you guys offer the same colors? Can you match your pricing? Can you be competitive? Can we do this program that you guys were doing for the other company for this company? The answer for us is yes, so we’ve done a lot of work to get in with a lot of the production builders, but we’ve had a great reputation of basically word of mouth, but really, employees would go from one company to another. We’ve always maintained a good relationship in the industry. A lot of times, if everything goes well, and someone else has an issue, they’ll call us to help solve their issues and reduce the amount of headaches.
In maintaining that reputation piece, what things do you do with your business that you feel are different than your competitors that allow you to have that reputation?
I’ll stand by the fact that it’s a service industry. There’s a couple of things, I think, our customers like. We’re still a fairly small company. Most of the customers we deal with day to day, there’s only three or four of us, maybe four or five of us now in the office. They’re going to pick up the phone when they call, so they don’t have to chase someone down or get in touch with the scheduling department, or call this department because it’s a warranty issue. We’ll just call up and say, “Hey, is Jason there,” or, “Hey, is Ross there?” “Yeah, he’s here. What do you need?” “My painters came in and chipped the top. Can you guys send someone out to repair it?”
“We’ll get there tomorrow.” That’s what it is, a perfect relationship. The purchasing agents or heads of companies in the building construction, they really don’t know us, because the only time they’re going to hear about the countertop vendor is if things aren’t going well. We’ve had people that we’ve dealt with, or we’ve might have done a couple $100,000 or a million dollars of business with them, and we’ve never met them in person because the only time you have to go there and meet is if they’re having issues. Someone calls and then say, “Hey, can I talk to you about your countertops?” They’ll say, “No, because we have zero issues with our countertops, and we’re not willing to make a change.”
That’s the base thing for us as a service. You see it a lot. I mean, you just talk to people that are remodeling, and people don’t call you back, or they don’t show up. The idea that you’re going to run a company and not show up when you say you are without calling the customer, I mean, even if you’re calling the next day and say, “Hey, something came up, or I just got a notice that one of my guys got delayed.” We do a lot of countertops and work with a lot of guys, and we’ve heard every story in the books of why jobs haven’t been complete. We had a lady pull out in front of one of our installers, and [inaudible 00:29:43] the vehicle, but the countertops that he was towing.
We had a guy that got pulled over, and he didn’t have the right card with him at the time, so they took him in and then he called his mom, and his mom didn’t return his call, so it was two days before he was able to get out. They held him overnight. We can’t get ahold of him. His phone’s off and everything. We’re trying to figure out what’s going on, where our countertops are, where he is. Is he okay? In today’s world, it’s very unusual to not get ahold of someone. Certainly, if you’re going to hear from them again, every now and then people just disappear, but the guy worked for us for years. After the first day, you’re like, “Something’s going on. It’s not just a broken phone or something.”
We can’t get ahold of him, or people that know him can’t get ahold of him. That was just so unusual. Like I said, everything in the world is going to come up as an issue, and issues with material or issues with our suppliers or issues with machinery going down, but just call the customer. I didn’t enjoy my first job in sales, but the owner would always say, he’s like, “There’s no good news or bad news. There’s just news. There’s only the facts of what happened,” so if everyone hates to make a phone call in something that they perceive is going to be a negative situation, but I might call a customer and say, “Hey, I’m sorry, but the slab cracked, or it came and it was damaged. I don’t want to take the chance of putting that in your house and you not being happy with it.”
They’re like, “Oh, well, tomorrow’s better anyway, so that’ll actually work out better for me.” The phone call you were dreading is a relief to the customer, because they’d gotten caught up, and now they weren’t really ready to get their countertops, or their painters were a day late, so now, everything was going to be wet if we got there on the day we’re supposed to, but it’s just pick up the phone call and let the customer know what’s going on, because the worst phone call you get is when they call you and say the countertops aren’t here. It’s 100 times worse than you making the phone call to them proactively to say, “Hey, here’s what’s going on. The countertops aren’t going to be there.”
It sounds simple just running a business and picking up the phone, calling customers, but it must be slightly more complicated than that, so why do you think more people don’t answer the phone or don’t show up as timely as you might?
Like I said, we’ve seen 100 different reasons where things can go wrong, and they do go wrong. Why people don’t call, and do something that sounds so simple? I don’t know if they’re afraid to deliver what they perceive as bad news, or I think sometimes they just don’t have the procedures in place to where if something’s not going to get done, there’s some chain of command for someone to let them know. I mean, we’ve certainly made mistakes before ourselves, but it’s a lot easier to be proactive if things aren’t going right than it is to get that phone call from them. Because for us, we’re in new construction, so if we don’t give them a call, the tower guy shows up, and then the tower guy’s calling the builder to tell him that there’s no countertops there.
We see it all the time with cabinets not being in place when we’re supposed to be there, so we don’t want people to do it to us. We’d like them to call the builder, so the builder can give us a heads up. We just wish everyone had that same courtesy. I really don’t know. The idea of running a successful business in construction or the service industry, I don’t think there’s a lot of companies that show up when they say they’re going to show up and do what they say they’re going to do, and not have a good business. You just don’t see it. Very rarely do people have a lot of quality issues or anything.
Stories you hear from friends and family, it’s like, “Oh, the guy never came back, or the job was halfway done, or he came in quoted and everything, and then I never heard from him again. He was supposed to start last Tuesday, but now it’s Friday, and I can’t get ahold of him.” All the stories are the same. I think a huge portion of it is just be there when you say you’re going to be there. Do what you say you’re going to do, and if you make a mistake, own up to it and correct it. You’re right, it sounds simple, but common sense is just not that common.
What other elements of customer service do you feel that you don’t currently do that well, or at least you only do to an average degree that you’re trying to get better at going forward?
We’re still growing. We’re getting busier as the years go on. Historically, there was a time period where we really shied away from retail business. At the beginning, we didn’t, and we realized we were getting frustrated because retail jobs weren’t going well. We were late to jobs, or the customer didn’t tell us they wanted something, or they explained one thing, and we interpreted it a different way. For a while, we were so busy, we just basically put a sign on the door that said we’re not currently taking any new business or any retail business.
We were only servicing contractors in new construction, which turned a lot of people off. It was always hard to have a conversation with someone that you weren’t willing to give them an estimate, and they would get frustrated. They’re like, “Well, I have a kitchen that I need.” What’s hard to convey to them is that, “Listen, if I do your kitchen, you’re not going to be happy. My level of service for a retail job right now is not good, because I don’t have the time. I don’t have the manpower, and we’re just not set up to do it well.”
At first, we would say yes to anything because certainly with a new business, it’s hard to turn down work, but the realization that if we said yes, the outcome wasn’t good for the customer. It was better for them to be disappointed for us not doing the business than to say yes, and disappoint them. Since then, we’ve taken on a little bit of the retail side, and opened our doors back. But before we did that, we tried to put some things in place to where a lot of times, if you’re a retail customer or a local customer to us, you’re going to be the first stop in the morning, because if everything goes super smooth, maybe an install take an hour.
If there’s an issue, or the cabinets have to be adjusted, it could take two or three hours. Well, that makes it very hard to schedule the second job, and because a lot of our work is still new construction, the builders don’t care when we get there, as long as when they show up the next day, the tops are there. They’re really not time sensitive, but the retail customers are, so we’ve tried to put more procedures in place to get all their selections upfront, and verify that what we think they want is what they want as well as get the timing to where we’d like to do it first thing in the morning, because that’s easy for us to do the time slot.
But if someone has to be in the afternoon, we try to set the expectation upfront. When we give you a window, it’s going to be a big window, because if everything goes smoothly ahead of you, our guy is going to be there at noon. If everything takes a little time, it might 4:00, but setting the expectations with those customers on the front end gives you much happier customer on the back end. That’s one of the things we’ve been working on. We’re still not perfect. There’s a lot of companies that have really set themselves up to handle retail business really well.
We’re trying to do better with it as we do more of it, but that’s one of the things we’re trying to improve. We’ll be the first ones to say we’re not perfect. If you walk into our shop on any given day, it’s organized chaos. If people that know the industry walk in our shop on any given day will say, “Hey, it’s fairly clean, and I’m really surprised you guys do what you guys do in this facility. But most shops I see doing your volume are twice the size, or they have this much equipment, or whatever the story went, but we’re trying to improve the organization and minimize the chaos, but it’s definitely still there.
We’ve grown maybe 20% to 30% a year since we’ve purchased the business. We do about a million dollars of sales additional every year. When we purchased it, we’re doing around four million a year. The year we just closed out, it was right around eight million. We’ve constantly have a lot of growing pains, and it’s hard to fine tune your processes when you gotta figure out how to do just 20% more of everything every year. Te equipment helps. We’ve bought more equipment. We’ve put more cranes in. They just got finished installing this week. We’ve bought some more machinery to help with the labor downstream, but we’re doing everything in the same footprint.
Back when the company was originally purchased in 2006, you’re talking about a volume that was maybe one and a half million. I think in the slow years, that number got closer to 1.2, $100,000 a month. Then November last year, we did 800,000 a month, and the facility hasn’t gotten any bigger, so a lot of our time and energy is also figuring how we do more volume in the same footprint, but it’s organized chaos. We’d like to think it’s organized. It might not look like it from the outside coming in, but we constantly meet and discuss of how we could try to make it better.
We’re not going to sit here and say, “Hey, we’re doing everything right, and we’re the model countertop company.” We will sit here and say, “We have very good service for our customers, and as far as they know, we’re organized,” but all the mess on the back end, we’re trying to clean up.
Do you have any stories from any of these growing pains that you’d be willing to share?
There’s a lot of them. At the beginning, the growing pains, a lot of it was financial. I bought the business. I didn’t have any money. Receivables was always growing. The inventory was always growing. If you looked at the books, we were a profitable company, but the growth was outpacing the cash flow, so we drew a line of credit very early on. We used it for a long time and often, because we were busier and busier, we needed more inventory. We had just put more equipment in. I think part of me didn’t realize if I’m putting a $300,000 robot in, that’s going to cost me 300,000.
I know what the loan looks like. I know what the payment looks like, but one of the surprises that came in later than it should have was we didn’t have the power to run it. Not only do you have to get set up, we had to go from 240 to 480 voltage, which was a new drop from the power company, but to run that much power from one side of the building to the other was $8,000 a wire. There’s things like that. It’s just the lack of experience, both the lack of experience and the growth side. We are constantly having to upgrade. For instance, our water system, that was something that before I bought the company, we were always working on.
Now, we do everything wet, so we consumed a lot of water when the company wasn’t recycling. I think we’re going through about 75,000 gallons of water a month, which is a ton, and it brings up a lot of environmental questions of, “What do you do with all the water?” I mean, the short answer is you have to recycle it. As you grow, and you add saws and you add guys down the line, you have to be able to recycle more water more quickly, and remove a lot more the sludge, dirt, debris, whatever you want to call that gets in the water from all the cutting. I went through and looked at other water systems, and the stuff was just wildly expensive at the time.
There’s no way with buying everything else that we could afford some of the more expensive systems, so I went through my head and I was like, “Well, if I go directly to these container manufacturers, I can get these tanks, and that should give us the capacity to do twice the volume.” This might have been 2016. We put in this huge system. We went from be able to store 1,000 gallons of water to storing 3,000 gallons of dirty water and 6,000 gallons of clean water. In my head, it’s just like, “This is the end all be all greatest solution the world has ever seen through recycling water for a countertop facility. We should be able to double our volume and not have any issues, and save all our water headaches and keep us compliant with the environmental regulations.”
Sure enough, last year, I got to look back and say, “Hey, we doubled the volume. The water system is not adequate anymore.” What seemed like a solution that we would never have to cross again, at first, I was like, “How is this possible? How can we not get enough water through here? We designed this thing to be the answer for twice the volume,” and then I just sat back and I was like, “Well, that was four years ago,” so we’re at twice the volume. We went from doing a $18,000, $20,000 DIY system to a… We just put an $80,000 recycling system, which when I bought the company, I never would have believed would be something we’d be doing, but you learn.
I’d say the biggest thing you learn from the growth is do things correctly the first time, because any corners you cut are going to come back to bite you. A lot of guys in the shop and the guys I work with will say, “Ask Jason what he wants you to do, because if you do it your way, there’s a good chance you’re going to be doing it again.” I’d like to think I don’t carry that mentality, but I think history has taught me if it’s not right, even some might be, hey, it’s a lot of work to go around this post to set this new equipment, and just put it in front of the post. Well, six months later when you need that space, you’re going to be setting that equipment around the post anyway.
It’s like, “Instead of cutting the corner and just doing it, maybe it sakes you a day, or maybe it saves you some money or whatever it is.” Certainly with the growth staying, it’s like all that stuff that we’ve tried to do halfway are the easier option or the cheaper option has come back to not to bite us, but when you’re out there after hours, one weekend, or whatever the time is doing it again, it really sinks in quickly of, “You should have just done it right the first time.” You’re never going to look back and say, “Hey, you did this too correctly. You did this too much of the right way to where it’s just too perfect.”
You’re always going to look back and say… Even for customers who walk in some of the electrical and stuff I got, it was right and it passed code, but it looks sloppy. Going through the utilities the other day, and when we put the new water system, I could step back, and it’s like every power line, water line, recycled water line, almost every utility in the building has been replaced since I got there. A lot of it’s just volume or doing it correctly. We did a big push last year for voluntary OSHA compliance, which was terrifying. You basically make a phone call, invite them to your place and say, “Hey, guys, look around. Make a list of what you see, but then it’s my obligation. Whatever you find, I have to fix it.”
That’s the stuff that the growth, it’s just like… We spent a lot of years trying to make everything right before we even felt close enough to ready to make that phone call. Because at the beginning, there was stuff that we would always try to do stuff safely, but as you learn some of the rules and everything, you’re like, “Hey, because of this, that’s not going to fly.” It’s like, “If you call them in early, you have to be able to handle whatever lists they present you.” It burns through a lot of money to do it, but it’s definitely the right thing to do, but we started chipping away at the things we thought would be on the list before we even said, “Hey, we’re ready to actually make the phone call.”
In terms of growth, I would say the big takeaway is just if you know you’re growing, and you have to make changes, do it to the best of your ability what you deem the best way to do it not at the time, but even in the future, because there’s a lot of projects that we’ve done twice at this point.
Do you think those are projects you’ve done twice because you weren’t optimistic enough for what your growth would eventually be, or was there a little bit not consciously, but perhaps mentally, you were thinking a little bit about controlling cost or trying to over optimize for the time it would take to implement a solution?
I think we’ve had the fortune of making so many mistakes that we’ve almost crossed every bridge. Some of the stuff, I mean, you have to be cost conscious. Certainly, like I said at the beginning, one of the biggest issues with the growth was just the money and the cash flow. I mean, the cash just wasn’t there. Some of that was… You can’t spend money that doesn’t exist. I get that. We’ve definitely been in this situation. Some of it was just ignorance. When we designed the water system, it’s like, “Oh, you could do anything you want at the time.” I don’t even think any of us would have believed that we could be at the size we are now in the same facility.
Maybe you could say we weren’t optimistic. I don’t think we’re optimistic that we could get to this size, but in our head, we’ve always had… Before I bought the company, say it was three million, it’s like, “Man, to do four million in this facility is going to be tough,” and the new equipment came in, and it’s like, “Oh, well, that makes four very easy to do with the current situation,” but then that year, you did five million. The next year, you did six million, and you start to step back and say, “If you’re going to get to seven million, you’re going to have to make some changes,” but then seven million comes and goes.
That’s what has led to a lot of the redoing projects. We had some guys come in and fix a lot of stuff. A lot of the tools we use are air tools, so if you told me early on what it would cost to run new airlines in the building, I would either not believe you, or just say, “Maybe, but we’ll never do it,” because it’s so expensive to do it correctly. The problem is if you don’t do it correctly, you’re getting water into tools, and a polisher is $300, which is certainly to smaller companies a lot of money, but we would sit there with 10 polishers stacked up, because water is getting in the lines because the lines aren’t right.
Well, for 10 polishers, you could have fixed the lines, or you could have put a air dryer so that these tools will last longer. That was one of the things where at first, we fix airlines because they needed to be fixed. Then the second time we fix the air lines, it’s because we needed the space, which means the air compressors had to go outside. It would also make it nice for the guys in the shop not to have the noise of the air compressors inside. Then the third time we fixed the airlines was because we were going to have so many more people in the shop, that we need a more volume downstream.
All three are legitimate reasons to replace the air lines. Now, we’ve gotten better about I don’t know if you call it optimistic and say, “What’s the best case scenario, or from the difficulty side, what’s the worst case scenario? But in what scenario do we need more air lines?” Let’s do it for that scenario now so that in the future, a lot of those things, especially the utilities, are harder to work on, because you can’t work on the shops running, and if you’re constantly growing, the shop’s running all the time so that you set yourself up for a lot of after hours work.
As we get busier and I get busier, the after hours work gets more tedious and always weighs on you. It’s even more reason to do it right the first time, because if you’re going to have to stay on weekends or late one night or on the off hours when the shop’s not running, you certainly don’t want to be doing that two years from now. The reason we’ve had to redo stuff are numerous. I don’t think it was ever a lack of optimism. I don’t know if it’s being optimistic or arrogant or some blend, but we’ve always done a great job with our service to the customers. We’ve always stood beside the belief that that will keep our customers loyal, and allow us to gain new customers as people have the need for a better countertop vendor.
I mean, a lot of it is just… A couple years ago, we didn’t think it was possible to do what we’re doing now without moving. That’s a bridge we haven’t crossed yet. With all the equipment and all the utilities and everything we’ve done and redone, it’s extremely expensive to either move or buy a facility or build out a facility to do what we’re doing. It’s hard to find a property right now. We haven’t moved. It’s not because we haven’t looked. We’re a real specific size. Our building was built for countertops, so we have very high ceilings compared to most warehouses, so it’s hard to find something existing that would fit.
It’s hard to find something geographically that we like, so it’s just a path we haven’t crossed yet, but we’ve made a lot of mistakes along the way. Luckily, a lot of them are driven from the growth and everything, but there’s no shortage of reasons of why we’ve had to circle back and redo things. Like I said, we don’t claim to be perfect. Now when issues come up, we really try to look down the future and say, “Aside from before when we thought what we’re doing now isn’t possible, in the wildest dreams, what is possible, and how do we plan for that?”
Hopefully, we’re getting better every time problems present ourselves, and hopefully, we don’t have to double back on a lot of the work we’re doing now, but you also don’t know what you don’t know. The problems of 2016 are not the problems of 2020. The challenges of the company that’s cutting 1,000 slabs a year are not the challenge of a company that’s cutting 4,000 slabs a year, or even there’s breakeven points on stuff. If something takes you 10 seconds to do, but you have to do it 100 times a year, it’s a different story than something that takes you 10 seconds a year to do 1,000 times a year.
You’re also running into situations where four or five years ago, not that the problem didn’t exist, but the solution wasn’t worth implementing, because the problem wasn’t painful enough at the time. I don’t know a world where problems don’t keep coming up. I’m welcome to it. I’m open to it. I would love it, but it’s a catch 22. If we ever slow down from having problems caused by growth, it’s because we slowed down. If we have any say in it, we certainly prefer not to.
Certainly. Moving into closing questions, what class would you teach in college? If you could teach, anything you want to…
Man, if you ask the college, I’m not sure teaching the class would be an option. But if they let me back, and they said I could teach a course, I think I would teach a course on developing an action plan for a business or for purchasing a business. I think a lot of people you talk to, you just hear like, “Oh, I’d love to buy business, or I’d love to have a business,” or 90% of the time you hear this idea of something that they’d want to do. Not a lot of the time do you hear what they’ve actually done. I’ve made a lot of decisions based on things I wasn’t knowledgeable about, or I didn’t have all the information on.
I stand beside the fact of the best thing to do is going to be the right thing. The second best thing to do is the wrong thing, but the worst thing to do is nothing. I think there’s a lot of people out there that kind of like me when I was young, and buying a business. It’s overwhelming, or it’s daunting, or how do you lend a kid in his 20s seven figures of money? I think a lot of people just need some guidance. I mean, really, they just need the confidence to get started. It’s like you said, “How does something like showing up on time and doing what you say you’re going to do sounds so easy, but a lot of people don’t do it?”
That’s basically what we do, and it’s led to what I would consider a very successful countertop company. I think what a lot of people don’t have or don’t realize is just the drive or the push or the confidence just to start something, because I would even say if you start small, the person that starts small and fails has more experience than the person that didn’t start. Maybe it’s their second try that’s successful, or the third try, but you’re on there for a long time. If you never start, you’re never going to get anything done. Maybe the first go things aren’t perfect. But if you don’t start, you’re not going to do anything.
I think that’s one of the things that it’s daunting or challenging or intimidating, or there’s 100 different adjectives to why things could go wrong, but man, just get started. It’s the hardest part about doing it. I think a lot of people can realize their dreams or be happier in their jobs, or even if it’s not job related. If they just had the plan together to get the ball rolling, I think a lot of people would do it, and they’ll be successful, but they just need a little push to get the ball rolling. I think that’s something I don’t have all the answers or a lot of the answers, but if I can help younger people or inexperienced people get started, I think I would look back and say that that was a good use of my time in teaching the class, and that was a good use of their time in taking it.
That’d be a good class. I’d certainly be interested. What’s a belief you used to strongly that you’ve changed your mind on?
This was tough, because I said in the countertop world, we’ve changed our mind in almost everything because everything changes, and we’re constantly facing new battles. But I think one of the big things that changed, and I think maybe a lot of your listeners can relate, when I was young, I always knew I wanted to do my own thing. On my phone today, I still have a list of ideas, and the list of ideas or things I wanted to do or businesses that I think would work. When I was young, a lot of those ideas were inventions. It’s just like, “What is the next widget,” or there’s some great inventions out of the scrub daddy.
You see them all on Shark Tank. There’s a ton of great inventions that make people ton of money. In my younger years, I always looked at that path of like, “Oh, that’s a great path to success.” I think the irony there is in its simplest form, and how I like to explain my job to people, is I will take a large rectangle of rock and cut it into smaller rectangles of a rock for you. There’s no magic. I mean, literally playing with rocks, but if you do it right, and you keep the customers happy, it’s a successful business. I think a lot of people are… I know I certainly did, when I was young, looked to reinvent the wheel or invent a new wheel or come up with some grand idea of how I can have a business survey successful.
The reality is a lot of homeowners now, certainly in the service industry, is they just want someone to stick to the word and be reliable. You don’t have to have some crazy idea. When Amazon started, he was selling books online. It’s like a small boutique bookstore. Look where they are now, and it has nothing to do with the products they offer. They offer the same products that everyone else has. You buy it because it’s more convenient on Amazon, or you buy it because it’s faster on Amazon. You rarely buy it. I mean, now they have all their house brands, but you rarely buy it because it’s a different product.
The only thing they’re changing is the service. I think that’s one of the things I’ve really changed my mind on. When I was a young kid, I just thought, “Hey, you gotta invent something to be wildly successful, or have your own business, or do anything.” But you look back now, and certainly, you talked to all the other guests, and it’s like, “No, just find something that you can do, and just do it well.” A lot of times, that’ll create its own business, and you do it well. It’ll be a good one.
That’s a really profound insight. I like that one a lot. What’s the best business you’ve ever seen?
I don’t have a great answer. I’ve seen some incredible countertop businesses that we’ve toured. We have a good friend that does a cabinet business. I think a lot of these businesses and a lot of people that talk about the best business they’ve seen is the outside looking in. I think a lot of times, you might not realize that it’s chaos from the inside looking out. But I think one of my favorite businesses that I’ve seen is… I don’t know if you’ve ever been in the Atlanta area, but there’s a small pizza shop that started across the street from where I lived when I was in college, and they will sit you on wooden benches.
They’ll serve you on a baking sheet. You can basically tear off a paper towel to be your plate. It’s just by far the best pizza that Atlanta has. A lot of times, they get voted best in Georgia or best in Atlanta or best in the southeast. But from the business side, they use the wood burning ovens, so your pizza is done in a matter of minutes, so they can turn over a ton of customers. They probably have eight different pizzas, but in total, maybe 12 different ingredients. I mean, their skew count is almost nothing. Aside from the dough, they have 13 different toppings.
It’s BYOB, so they don’t have to keep a lot of light drinks in stock. I mean, it’s just a super simple business, but the pizza is incredible. It’s wildly expensive. They turn over a ton of customers. I mean, there’s lines outside every day. It’s just like they run such a successful operation with such a simple offering. A lot of places you go to, they all have menus for days. These guys are the exact opposite. Their menu could fit on a business card, because they offer so few options, but they run an incredible business. I think it’s like you said, it goes back to the simplicity. You don’t have to do everything for everyone.
I mean, that guy just makes really good pizzas quickly, and that’s it. He doesn’t care if you bring in on drinks. You’re not going to get some fine dining, table costs and everything, but even without all that, you’re still going to go pay 30 bucks for a pizza, and you’re going to eat it on a park bench inside the restaurant on your napkin, that’s a paper towel, and you’re going to love it because the food’s really good. That’s a business that I really enjoy, because it’s really simple, but they do a fantastic job.
That’s pretty neat. I’ll have to check it out if I’m ever in the Atlanta area. Thank you so much for sharing your time, Jason. This is awesome. Thanks for telling us about your business and some improvements you’ve made and all the constant process of improvement too. That’s been really fun to hear about.
I really love the show, and I appreciate you having me on. Like I said before, if I had a class, I would tell people just get out there and get started. I’m sure there’s a lot of people listening. Either they already have businesses or thinking about getting into businesses, you just gotta start somewhere because you can have a great life if you do. If you get started, do a good job with it.
Very true. Absolutely. Thanks, Jason.
Thanks for having me.
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