My guest on this episode is Josh Schultz, current president CaneKast and previously co-founder of the Chess Group. Josh has partnered with Reg Zeller, a former podcast guest from Episode 81 and CaneKast founder, to acquire and streamline foundries across the country. But as Josh and I talked about in the episode, that is far from their only ambition.
Josh and I talk about what has changed the most in the year since joining CaneKast, how he approaches scaling, organizations, and teams, documenting processes, change management, and finding a complementary partner to work with.
Josh is also a great friend and a person I deeply admire. He’s incredibly intelligent, process driven, and creative, and I always love talking with him. Please enjoy our conversation.
Live Oak Bank — Live Oak Bank is a seasoned SMB lender providing SBA and conventional financing for search funds, independent sponsors, private equity firms, and individuals looking to acquire lower middle-market 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.
Oakbourne Advisors– Oakbourne is an independent retirement plan consulting firm that helps small companies design and implement great retirement plans for their teams. Whether you already have a 401(k) in place or are looking to start one for your team, please reach out to learn more about how Oakbourne can set your people up for success in retirement at oakbourne.com/think.
(2:58) – What would you say are the biggest changes you’ve seen in your business in the past 10 months?
(4:45) – Do you feel like there’s an order of operations for changing or tracking different things?
(7:00) – How did you go about understanding pricing and mold counts?
(10:47) – Do you believe you’re creating a competitive advantage beyond pricing that contributes to growing sales?
(12:40) – What’s the most challenging piece to improving service?
(14:45) – How much do you think making internal data more transparent has impacted your efforts?
(19:46) – How do you get someone with deep domain expertise to share and document knowledge?
(20:51) – What is the goal for building multiple solo companies within CaneKast?
(23:42) – What are some business models that are inspiring this move?
(25:05) – The importance of building a competitive advantage
(27:15) – Do you feel your competitive advantage will allow you to acquire other foundries?
(29:02) – Do you think there’s correct pacing to change?
(30:45) – How do you approach setting a vision for the company?
(34:49) – How do you view what types of aspects of the business will change next?
(36:51) – Where do you think you’ll feel the strain as you start acquiring companies?
(38:34) – How do you go about learning a new topic?
(42:10) – How have you used media and podcasting to build relationships?
(43:47) – What advice do you have for finding a good partner?
(46:00) – How did you think about your role at CaneKast?
(48:18) – Have you always had this Entrepreneurial Impatience?
(50:43) – Where do you feel like you need to be patient?
(54:56) – Evolving the CEO role to pure people & executive team management
(59:26) – What’s a strongly held belief you’ve changed your mind on?
(1:00:09) – What’s the best business you’ve ever seen?
(1:03:24) – What’s next for you in manufacturing after foundries?
Alex Bridgeman: So you mentioned kind of off microphone that a lot of stuff has changed in CaneKast this year. What are kind of the top two or three things that you feel have changed the most in the last 10 months of this year?
Josh Schultz: I would say that, off the bat, knowing what we’re doing and the impact that it’s having is huge. When I got there, to be frank, there were not really financials. We didn’t know production numbers, we didn’t know- we had an idea who the top customers were, but we didn’t know exactly how big or small or how they were changing. There was just a massive amount of gut feel off the cuff kind of work, which is par for the course for a founder, to be honest. That is one of the potential upsides is that you can run it with a little more of an objective approach. But so yeah, we had to start tracking what the plants were producing every day, what machine was doing it, who was doing it, understanding what customer it was for, starting to understand how long it took to do things. We were pricing product that had no idea how long it took to make it, which meant that our sales were highly variable, and we lost money some months, we made money some months. We thought we were making money every month, and I just didn’t feel right about basically guessing. And when we started implementing some of these tracking, these key really basic tracking things, we started realizing we weren’t making money every month. And so I think the first big thing was what are we doing day to day, what are we doing week to week? What do the numbers across the board look like? And then start to create kind of a cadence of those getting released, collected, analyzed, released for everybody to make better decisions on. And so, what we did, we tracked. Why? We wanted better higher quality decisions from every single employee across the board. And so that was getting them feedback.
Alex Bridgeman: Do you think there’s an order of operations to making changes or starting to track certain things before tracking the next thing?
Josh Schultz: As far as sequential like thing to thing, I think there is an order of operations but it’s not a technical one. It’s simply what’s going to have the biggest impact. That’s the question, especially in the beginning, we asked a lot – what’s the one thing we’re going to do that’s going to have the largest impact on the organization? To this day, I do that weekly. I write down every week all the sections of the organization, and I write, what’s the one biggest thing that I can do that’s going to have an impact on RDS, on CaneKast, on Ermac specifically, on our finance function. So when we were doing tracking numbers, what was the biggest thing that was going to have an impact? Mold counts. That was going to give us an insight into sales. It was going to help us with productivity and efficiency. We were going to be able to know a lot of information across the board just by knowing how many molds we were making every single day. And so I think that was the biggest one that we probably spent the most time on. And then from there, it goes out. How are we pricing these molds? And how are we using labor to produce these molds? And which machines are better at producing molds? But it all stemmed from, for us, that mold count. And I think if you look at every organization, there’s one or two key drivers. So I have a- the team knocks me out, but I always say, I hate sales, don’t tell me sales. And so every month, I get a report that says I know Josh doesn’t care, but here’s the sales numbers for each division. But I don’t care about sales because it’s really a component of other things that matter far more. And in our case, it is pricing, and it is mold count. If we can focus on those things that we can actually touch, sales will take care of itself. Sales might hide lower mold counts because such things are being priced higher or inflation, and vice versa, we might have crazy mold counts be pricing wrong, but it’s being hidden because of the crazy mold counts. So, it’s good to figure out what are the five to six key fundamental drivers of your entire business. And we have one lead gen method, we’ve got the actual mold count, we’ve got the pricing, we’ve got the cost of labor, and the cost of aluminum. And beyond that, all the rest of it can be pulled all into one thing at the end. But those are the key drivers for our business. So our focus for tracking, for understanding, for making decisions started around labor, metal production, which is basically mold counts, and then pricing.
Alex Bridgeman: So kind of walking you through those two, pricing and then mold counts, how did you go about understanding both? Because there’s- of course, with pricing, you understand what the market is, how are these typically charged, what can you charge, and then mold counts, there’s a thousand ways to understand that process. So how did you go through kind of step by step understanding each component?
Josh Schultz: Mold counts, we just created a quick tracker at the end. I didn’t know much about it at the time. And so we use Airtable for that, to be honest. We have a form that every molder fills out, what did you make today, who was a for. Most of the guys know this, they’ve been making these parts for 10, 20 30, years. That gets assembled an Airtable, and then all this processing happens and dashboarding and all that. But it’s basically just their numbers and what machine they made it on. Once we got an understanding of that, we got a baseline, and then we could tell if they’re going up or down. And we knew roughly what we should be doing. We knew which plants were doing more or less than other plants, all these other decisions. And you then take- we took a guy from Ermac and brought him down to Superior and said, okay, at Ermac, they do twice as much as you on the same machine. We’re going to bring him down and show you how because he definitely doesn’t work harder. He doesn’t leave more tired than you. He’s just working smarter. So we’re going to bring him down. We started to cross pollinate those ideas, which was huge. We basically had free ideas in our plant that we weren’t using. And so again, the tracking is what clued us into that. The quoting was a little different. The quoting is based on how long it takes you to make the part and then the inputs into the part. But with a foundry, it gets a little more complex because there’s multiple systems all with their own inputs and outputs that are working together in kind of a nonlinear method. So you’ve got a sand system, a metal system, a labor system all going on at the same time. So you have a metal system where metal is being poured in, it’s being charged or basically melted, it’s being cleaned, it sits being available to pour. Meanwhile, you’ve got a sand system, which is allowing us to build all these molds. Then you got a labor system, which is kind of combining the outputs of those two into castings. And each system has queues and buffers. And so looking at the whole thing, it was kind of complex. And so, we had to come up with a way, and we created a number of rules of thumb, so that somebody, not a foundry expert who could look at it and kind of intuit all this stuff, could quote this. And that goes back to building something that was scalable. We did not want to have to have foundry experts to do all of our quoting as we grow to 100 million because that means we’re going to need 15, 20 foundry experts, and that’s going to be very hard to find in the US. And so we worked with a guy and myself and some of the old quoting stuff, Reg, Reg brought his engineering hat in, and we came up with a method where basically there’s a number of inputs, but we have somebody in Mexico who has no foundry experience was able to quote 95% of our parts accurately first try. And so we built that tool for them. So they use that tool. And between the quoting and the mold counts, we were then able to lock in on basically sales. And the key was mold, like you said, it was market pricing and all that. We honestly did not pay attention to it. Our thought was, if we don’t make money, there’s no point making it. We don’t need all the business. We only need the business that will allow us to make money. Because without that, we can’t invest in the people and in the plant, and we end up going into a death spiral. So we have lost a lot of business, not that we already had, but we just lost like new business coming in that we didn’t get because we were overpriced. I’d say half of that has ended up coming back around and they go with us because whoever they went with had issues, problems, something was unanticipated. We try to do it right the first time and think about all the contingencies, all the extra costs that might come in, make sure it’s baked in so there’s no surprises. So a little costlier, but I believe the process is a little higher quality and a little less volatile for the customers that are willing to go with us the first try.
Alex Bridgeman: Do you believe there’s a third factor that’s influencing sales, kind of what you just alluded to, that your processes and efficiency and quality is creating this competitive advantage that also contributes to sales beyond just pricing and part count?
Josh Schultz: I would love to say yes, but I don’t think at this time that’s the case. I’m looking here. I wrote this to my leadership team. So we can talk about this later, but we’re really big on developing some leadership thinking right now. We have three keys that we’re trying to do. This is kind of our vision internally. We want to rebuild manufacturing in the US, we want high paying jobs for high performers, and we want a company worth working for. And so this got into, how do we get high paying jobs? We have to charge more. And how do you charge more? And this gets to what you said. This is what I think allows us to be able to charge more, but I don’t think we’re here. If you’re faster than everybody else, you can do things with less time, you’re cheaper, but you also get more business because your lead times aren’t as long, so you can charge more. If you control your costs, you end up with higher margins. That allows you to be able to do things like price it lower, but still get higher margins. So technically you cost more. If you have better service than anybody else, you get back to people right away, I think that people enjoy that. And you can charge more. And if you make a quality part that doesn’t keep getting returned, you can charge more. We currently have quality issues at two of our plants. Our service is a hell of a lot better than it was a year ago, but we still have so much to improve. So I think that while what you said is possible in our industry and is what we’re striving for, I don’t think we have service so good or quality so good that people are coming to us. But we are definitely building for that competitive advantage to be able to be the lowest lead time, best serviced, able to make it at a competitive price, but also a higher margin for us to invest back into automation and making it even better and better.
Alex Bridgeman: I think the service one’s kind of interesting. Like what’s the most challenging piece for improving service that you’ve encountered so far?
Josh Schultz: Yeah, it’s getting back to customers in their emails. And so the culture that I came from, that we built at a previous company Chess Group, was, you know when you email somebody or you call somebody, and you don’t know if they got the message or not, and you get a little bit of anxiety? It’s like did they get it? Did they read it? And then after two days later, should you remind them, or maybe they saw it. You don’t know, right? Well, every time your customer emails you, they’re going through that. They have a problem though. They’re saying, I don’t know when the ships, I don’t know if this is correct. And every minute you don’t answer them, the anxiety builds. But production people and engineers love to say, “Well, I’ve been working on it the whole time.” Okay, you know that, they don’t know that. So they can’t put themselves in those shoes and imagine the anxiety. So I’m very big on let’s just get back to them with something. Just say, I got this, I’m working on it, give me three days. That diffuses the anxiety. People feel better about doing business with you. Even though the answer is still going to come in three days, you defused that. And so what we did is we pulled on a team member to basically do nothing but respond to emails. And they were doing that and it helped right away. People were like, “Oh, you’re finally getting back to us.” But the answers were still taking a long time because we needed experts. And so what we’ve been doing is writing a guide to answering customer emails that is two parts. It is part technique. So we got things like anchoring and all this stuff. I just shared some anchoring in my last newsletter that’s almost directly from our customer service playbook. And then we’ve got things like when a customer has a question about molding or cords, how do you answer those? We have an engineer who actually has been listing those. And so we have this playbook that we’re growing to help us properly respond to people because what we learned was getting back to them right away was step one, but step two is getting them the answer faster. And because of the structure of CaneKast, we don’t have a ton of people that are just sitting around at computers all day just looking to answer technical questions. Almost every technical person is involved in production at this point.
Alex Bridgeman: It seems like a big theme for a lot of the subjects we’ve talked about just broadly over the years are around making previously private information more public and transparent and available to as much of the company as possible. How much do you think that impacts every one of these processes that you’ve had so far? I imagine a ton, like even just the concept of being able to take somebody who has no casting experience, and they can quote everything 95% accurately on the first try. Like, that seems to me like a communication and just internal data piece that you’ve improved. How does that internal data like just becoming more public influence the rest of your company?
Josh Schultz: I don’t know. I’m biased because I think it’s incredibly important, so I’m going to preach it like it’s huge. But in reality, I don’t think everybody would see it that way. We deal with an industry – Reg says it all the time – we deal with an industry that has just been beat to hell for the last few decades. And so you’ve got people that have been losing their business, losing their customers, losing their talent for literally decades. And so they’re protecting every last bit they can. At the same time, what we’re actually seeing is a shift in reshoring. We’re seeing a shift in resourcing back in North America. We’re seeing supply chain and manufacturing tech start to become very much invested in from a PE side, a VC side, and then just a private side. And so, we feel like we’re at the beginning of a new trend that we’re going to ride and we’re excited about it. But the guys in their 60s that have been doing this their whole life and have been just beaten up don’t feel that way. And so you’ve got this dichotomy where we are like, we’re going to make all this information available, we’re going to grow the heck out of this. And they’re like, I’m not sharing anything I don’t have to share. So it depends on who you ask how well and helpful it is. But my view is that nobody should be needed to run the business. And I can honestly say, today, if I was not there, nothing would change. Everything would continue to go. They’ve got my strategic plan. They’ve got all the tools I want to build. They’ve got even the tech that I plan to use to do it. They’ve got the structures, the ideas. It’s all listed publicly to continue executing on. All the cadences that I have and the things that I do are listed publicly. Same thing with my director of ops, our month on close process is posted. So technically, most of the people in our organization could leave and other people could very easily come fill in. There’s a couple that can’t. And so we just had this talk where, hey, listen, you think you have job security because we need you to do this process. The way I view it is, you’re a huge piece of risk in the company. And so I’d rather get rid of you before you become even riskier and deal with the fallout and fill in. And so there’s three people that are in that position where it’s like I know you think that we need you. But because of that, I actually see you as one of the riskiest parts of the org. Again, I’d rather get rid of you, deal with no production on that machine for the next two months, deal with the fallout, but then never have it again, versus you getting more and more entrenched in that position. And so that is something that we have shared in leadership and in management, and by the end of the year, will be shared across the entire organization, is this is the way- so we created like a list, here’s how to get promoted. We’re trying to do a lot of things more objectively because we have a very varied labor force that this isn’t fair and that isn’t fair. And so we’re getting really objective. And so we wrote a list: here’s how to get promoted. And one of the things is, you should be able to be sick for three to five days, and nothing really changes. People can fill in, they have access to everything you need to know. And that’s very obvious. If you leave and all of a sudden, it’s like, well, how do we order sand? Where do we go for this? And who’s the guy that brings this in on Thursdays, and no, I don’t even know his number, oh, they usually just text him privately. And it’s like, okay, horrible, horrible system. So, you just showed me that you’re a really risky individual, and we’re going to lower your responsibility, you’re not going to get promoted. And if you don’t fix it soon, you’re not going to be part of the team.
Alex Bridgeman: There’s a CEO I was listening to who talked about for those folks who are ambitious and managers and want to get promoted and move up in that company, one thing he said was they need to have their replacement ready, like their job needs to be replaceable. Like they need to be able to leave. Because they want to get promoted, somebody else has to step in and replace them. And the more they can make their job replaceable, make themselves replaceable, the easier it was to promote them, which feels kind of counterintuitive to some degree.
Josh Schultz: No, it’s funny you say that. I was doing it informally. Reg gave me a structure, a framework that they use at GE that I like, and we’ve been implementing that. So basically, we look at any position, every position and say, okay, who’s the next two best replacements? What is their knowledge gap between what they know now and what they need to know? And then what is the 6 month plan to get them halfway there and the 12 month plan to get them all the way there? And so now you’ve got your training program for that person, and you have training programs for everybody. And so we’ve been doing that starting with the riskiest and working out. Our roto, who’s the best person to do roto if this guy isn’t there? What don’t they know? Here’s the 6 month, here’s the 12 month. Now we keep checking back to make sure that that’s progressing.
Alex Bridgeman: How do you get somebody who has all of that deep domain expertise to willingly share? You mentioned an occasional personality you’ll run into is someone who doesn’t want to share anything if they don’t have to. How do you get somebody like that to share and document some of their knowledge?
Josh Schultz: I don’t have a 100% answer on that. I’ve got a partial answer. What’s been working so far for the majority of people is sharing the larger vision – here’s what we’re trying to build. When they just see their piece, they don’t want to lose their piece. But when they see a much bigger piece that they aren’t exactly a part of yet, then they want to be part of that and they know they have to leave what they’re doing behind. And so we’ve been sharing what CaneKast is becoming. And there’s a lot that we haven’t talked publicly about. We’ve got three companies we have started inside of the CaneKast family. And there will be a total of 10 over the next three years that are not foundries. And so these are manufacturing support companies that we are building for ourselves. And then we will release out into the public, which will be really exciting. But we’re building them specifically to be able to service manufacturing companies.
Alex Bridgeman: Can you dive into those a little bit? Like what’s the broader vision there, multiple companies that aren’t foundries?
Josh Schultz: Yep, so our goal is to rebuild manufacturing. The foundries are just the start; it’s the foray into it. That means that not only casting but at some level machining, could be plastic injection molding, we’re not sure. We haven’t gotten that far into what the next vertical will be. We still have plenty of fair game in the foundry space. At the same time, each of these are going to need focus on manufacturing specific types of companies. So for example, bookkeeping. Bookkeeping is bookkeeping; you can hire a bunch of bookkeepers. But there’s also a layer of things that are specific to manufacturing that is very different from HVAC- or sorry, that’s very different from home services, that is very different from CPG. So we are building that specialized bookkeeping service for us, to help us with really understanding labor as it ties to production, really understanding working capital absorption, understanding capex and repair and how that goes into your fixed assets, those kinds of special key pieces. As we build that muscle- So we’ve already got it to where we have our set dashboards, we can drill in on things, we can see history by just mousing over certain numbers, we have certain alerts that pop up for the plant managers. We also have it so that we can get that data from Xero, QuickBooks, AccuMatica, and Sage. We’ve got four different platforms already built with systems codified to get the data from that into our kind of cool system. The goal would be to be able to do it from any system that any manufacturer is using, give them the same reports we’re using, but obviously somewhat a little tailored to them. And then we do their bookkeeping plus give them all the interesting stuff that we’re building from this tech side. We’re doing media. We’re doing customer service. We’re building our customer service arm. So this playbook I told you about, there’s two parts. Foundry part is really specific to us; we can help other foundries with that. But we have this other part of how to answer customers, how to build relationships even with bad news. And every time we talk about something, it goes into that playbook that is now eight, nine pages long, to where we have call scripts in there for all different types of scenarios, everything from shipping dates that are delayed to pricing that was off to bad parts. We’ll be able to do call centering for specifically for manufacturers that get the same types of calls. And so our goal is to help the mom and pop shops and manufacturers that are stagnant that are possibly declining, that need some help to beef up things like service and quality and bookkeeping and to understand their books. And so we’re going to- we want to basically API our services out to those small mid volume manufacturing services. So we’re building those muscles now. Internally, they’re all under separate LLCs already. Some of them have beta clients, and most of them don’t. I think only two of them have beta clients. And so yeah, we’re building kind of this entire support network that will be not only for us, but for many manufacturers and distributors across the US.
Alex Bridgeman: So this is new. We haven’t talked about this before. What are some business models or companies out there that have inspired this idea of making your different functions their own solo companies?
Josh Schultz: I would say Amazon probably. So Amazon has the AWS model. I know you’re really into data, so you know this probably better than I do. But they basically built something to scratch their own itch, realized it was pretty good, and then released it out. And that helps fund a very capex heavy business, which is logistics. You got trucks, you got warehouses. And so we run a CapEx heavy business, and we want to be able to build these muscles that help us, but then also be able to API them out to others. And in a low capex, basically highly variable margin, that we can just funnel that back over to our CapEx. That’ll allow us to do things as we gain momentum that nobody else will do. And I think we’re already starting to see that compound where we’ve got funds flowing in from these cash businesses that feed automation investments. And we’re looking at two machines right now up in Pennsylvania that are just incredible. We’re going to be able to do that at a faster rate than I think anybody else. And because we’re building them now, it’ll be hard to- I think it’ll be hard to catch up in the foundry space. And so we’ll just keep knocking over bigger and bigger dominoes as we kind of compound this side cash machine that funnels our CapEx production machine.
Alex Bridgeman: Yeah, we talked about competitive advantage earlier. This feels like a way to increase that even further if you have all the best functions of a foundry in house that are under your control, and you’re not- if you had a good vendor that wasn’t your company, it was some other third party, and you lose that vendor, that’s going to hamper your own performance. But now that you can control and keep it in house, you can grow it but also with less risk because now you don’t need to worry about losing that relationship or getting priced out or some other thing happening.
Josh Schultz: Absolutely. And I think there’s two things to that that make it important for our industry. One is the specificity needed, not needed, but that’s nice to have for manufacturing because it’s just a different beast than other types of businesses. And so just putting a general solution at it isn’t always the best or as helpful as it could be. The second thing is, and I would have disagreed with you on this 12 months ago, but the foundry space is on life support in the US. There’s a number of vendors that barely- like one or two people are there, their heyday was in the 80s. And it’s hard to get product out. And these products are essential for foundries. So there’s a large vendor risk out there. And so we are constantly, even today, I was working on one section of this, trying to pull in house our own experts, so that we can do, if needed, everything in house, and then spin it up, spin up our own kind of foundry supply. Because yeah, it’s- I would’ve say outsource everything that’s not key to production. But the foundry space is an interesting space in the US where it’s just on life support. And there’s a lot of risk where in another business, as long as you can buy a screwdriver, you’re good, or as long as you can get some PVC piping, you’re good. Not so in the foundry space. There are things that nobody else uses that we use. And there’s only a couple of companies left that make them, and those companies, they’re customers are all going out of business. That’s why we’re buying them. And so it’s really a shrinking life support space. We want to make sure we are constantly building up our own internal capabilities, knowledge, so that we can be not only able to pull those resources, but also be the best at it in the country.
Alex Bridgeman: You’ve mentioned before that foundries are really hard to expand because there’s a ton of CapEx that goes to building a new building, adding machinery and whatnot. So it feels like you’re acquiring partly as you just need more capacity. And you need to acquire businesses to fill that capacity. And it’s an efficient way versus building a new building for example. Do you feel like the competitive advantage you’re building with expertise so far, but also, if you have these other companies that have foundry vendors or customers, I imagine that’s an easy way to kind of start those conversations other foundries to go acquire them too.
Josh Schultz: I think we have kind of this cool exponential thing starting to happen. So when I first came on, we had one well run foundry. And we had two recent acquisitions that had basically just been acquired and were as they were when they were acquired. We now have three, soon to be four, pretty well running foundries, and we’re about to buy a fifth. And so, what happens now is when we learn one new thing, we can apply it in four different areas, and it helps level everybody up. Where before we’d learn something, and it would just help one plant, and so you get a 5% boost. But now we’re getting that boost across all the foundries. So every one new fact that we learn gets spread out. And so it becomes again, kind of like you said, a compounding snowball, where every new foundry, part of our thing before we change anything, or even tell them how we do things, we did this in February, we’re going to be doing it again later this year, is we do a best practice extraction. We go in, how are you doing things? Why are you doing them this way? We’ll compare to ours and then we’ll cross pollinate that idea to all the other ones if it gives us a hard return on capital invested.
Alex Bridgeman: Do you think there’s a correct pacing to change? You mentioned like taking notes and having some new top of mind thing that you want to improve to have the highest return that week. Do you think there’s a pace of change that a company can handle that is quick enough that it’s aggressive and kind of keeps you on your heels without kind of breaking things too fast?
Josh Schultz: I think there is. I don’t know what it is, though. We are definitely past ours. I know- We’re dealing with people that have run the same type of thing for literally 20 years. So 20 years, the same rough sales level, just the same thing day in and day out. And all of a sudden, we’re doing 4x, which means things have to change. And their first thing to say is, well, we’ve always done it this way. Right, I understand that, but we are no longer doing 2 mil a year. This plant’s now doing 10 a year as of January, so we need to do things a little differently or everything will break down or you’ll be here till 4am every day. So yeah, there’s definitely a level of change that is too much. We knew this was going to be too much. So we wrote a memo, I wrote out to everybody in January that said, okay, 2022 is just the operational year. We’re going to rebuild the whole ops. And rather than extend this for three to five years, and all of us be tortured with just constant change and all this stuff, we’re going to just front load it all, we’re going to get out of the way. And then we’re going to be able to slowly just build our machine, being the acquisitions, from 2023 on. And so we’ve gotten pretty close to changing everything and anything over the last nine months so far. And by the end of this year, CaneKast will be a completely different company, no matter which section you look at.
Alex Bridgeman: When you talked about getting folks to share their industry expertise and knowledge, you talked about kind of setting a vision. I imagine setting a vision helps folks on your team know that, okay, this is going to be painful as we change all these different processes, but there’s not only an end in sight, but there’s a broader vision that we have. How helpful is that? And then what are some other tactics to help folks manage their own internal change, both in their own role, but also like broadly as a company?
Josh Schultz: Yeah, it’s funny, when we first- when I first went around in December and talked to everybody, here’s what we’re going to build, then it was all just on paper. And a lot- nobody interacted, nobody engaged, nobody cared. Literally every plant, nobody cared. And so, okay, so I started building it myself, just I started writing documentation, I started building the LLCs, started creating the tech we needed, I started calling partners. That was one of our visions, was to have these partners across the board that handle stuff for us. Those partners started coming to the plants, the plant started seeing new things pop up in their plants, new ways of communication. They started getting new information that they never had before that was never shared. We implemented an incentive program for every single worker in the entire company. We implemented a 401k program. So then I went back around, hey, we’re still build this vision. All of a sudden, people are like, oh, we’re really building this vision. Like, that’s going to be a real thing, I want to be part of it. So I think there was sharing the vision. But I also think that there was the initial execution that took it from okay, yeah, whatever, thank you, corporate guy, for showing me your piece of paper to, oh, we’re taking off like a rocket and now I want to be part of it. And so we went from, again, nobody talking to us to we had a plant manager position that we had open up. We put the job applications out there. We had employees that found it and applied. And so now they’re like, we want to be part of it as much as possible. And so, to manage that, I come from a background where I always wanted more. I was in finance. And I would have done anything. I would have wrought any amount of hours. And nobody would give me the chance. I didn’t have the right pedigree or whatever. And nobody would give me a chance. And I just wish they would have told me like what you have to do. So, thinking back to that, I said, okay, and I talked to this guy; I said, okay, you can’t be plant manager. You do not have the skills. However, I will teach you the skills over the next 12 months. And I guarantee you more leadership positions will be available because we are growing like a rocket. And so, by the time it comes around, you will be ready, I promise you. I will work with you. And so that was the start of the Leadership Development Program, which is what are all the things we want people to do? How are the ways we want them to think? What are the frameworks we want them to use when encountering problems and culture issues and making decisions and buying equipment? We’re going to package all that into a program. We’re going to all run through it together so that we’re all thinking along the same path. And then we can have true plant autonomy. So I think managing that change, sharing the vision, yeah, executing on it so that they know it’s real, and then giving them a path to be part of it. And people want different levels of part of it. Some of them want to be plant managers. Some of them just want to be left alone and want the incentive program. And some people want to be right up there grabbing cash flow with you as part of like a massive like leadership incentive program. I’m okay with any and all of them. You tell me what level you want, I’ll find a way to get you engaged or up to speed so that you can get engaged. And so I think that the fact that nobody has been held back, everybody says that there’s more now has made the extreme pace of change bearable. But again, it’s only for a time. I think if we kept going at this pace, we probably would break down about summer of next year. I can see the fatigue on some faces. They’re still excited. But there’s fatigue on faces. There’s like, alright, I need a break. I’m getting burnout. And so I think we’ve got a massive HR payroll onboarding training platform we’re implementing that will be done 1/1. The ERP should be done around the same time. What else have we been doing? The acquisition will be done two days before that. Like all the stuff will finally hit finish at 1/1, literally, almost on 1/1/2023. And then from there, it’ll be acquisition templates, playbooks, scale that way.
Alex Bridgeman: Yeah, I imagine the pace of change is probably not going to slow down. It probably just changes where the changes happen. Like right now, it seems like it’s process change, but then eventually it’s going to be just organizational change. As new organizations are coming in, you have to adjust them. So, how do you view like, not the rate of change changing – I’m saying change a lot – how do you view what types of things will be changing through the rest of this year and then going into next year? Like, where does that get reallocated?
Josh Schultz: Yeah, the only- I don’t know until I go through it. The only thing I can think is the changes happening now are to make it easier to run the businesses for everybody. It’s easier for the molders to run their departments, easier for the managers to run their divisions, easier for Eric, the operations guy, to run all the businesses. We keep saying we’re taking it from running multiple businesses multiple ways to running one business multiple times. And so that’s kind of what we’re doing is we’re systematizing and operationalizing all the foundries so that they all run the same way, with the same platform, with the same cadence, with the same information share. And it makes it much easier. It takes- we’re allocating, let’s just say, 10 to 15 hours per plant a week. We’re going to get that down to two to three hours per week, per plant. So you’ll be able to do more plants with less effort. So that’s what’s changing now, like you said, process. What’s going to change is, like I think you put it, organizational change, acquisition, integrations. That is different because you can’t really speed that up or- I mean, you can make it a little more efficient. Like we said, we have playbooks. What used to take three months to figure out, we now know day one that we need to order these 30 things and get them because they’re part of our system. So we’ve sped it up a little bit. But that kind of change, I think, can only go so fast, depending on how many people you have to do integrations, which at this point, we don’t have many. We’re mostly a production shop. So I think that one is a much more realizable cap than the process change that we’re doing now.
Alex Bridgeman: Where do you feel like in the organizational change, once you start adding companies, where do you think the strain is going to be felt?
Josh Schultz: At the top with me. I think eventually, that’s what’ll break first. We’ll need to get- depending on how fast we do acquisitions, we’ll need to actually start to build an acquisition team. Right now, I do them, Eric does them. We do them together. We have it split a certain way. But with running the businesses and doing integrations, like we’re basically an M&A integration team on top of a- and a change management culture team on top of the actual leadership team for the current foundries. Right now it’s working well because we’re creating that playbook. And there’s probably nobody more excited about this business than me and Eric and Reg. So Eric and I will sit every night and just talk until 1 or 2am. Reg and I will talk often till 2am, just hashing out all these details and creating this playbook. Once we have it, I think it’ll be easier to pull somebody in to say, okay, here’s the playbook, here’s the vendors, here’s the processes you need to check, here’s the speeds they should be done at, find all the gaps. And that’s your to-do list for the next three months. But it’s nice being kind of the more strategic thinker in the middle of it able to play with that process, keep it as puddy right now, and be able to tweak it a lot and develop that playbook. Because a different mind is needed to develop it than to execute it. And so for now, I think the strain will just have to be there. And it’s just- I like to be in the middle of messy processes and figure them out. That’s the fun part for me. So I don’t mind being in the middle of it and a little stressed out. But yeah, eventually we’ll have a really dialed in playbook that we can just pass off.
Alex Bridgeman: Yeah, I know you’re working incredibly hard. How do you go about learning a new topic? Do you have– obviously, you take notes and have a journal or organize things on Airtable or some other note taking format. How do you go about learning new things? And then how do you systematize that learning?
Josh Schultz: We’ll talk about the foundry specifically because that’s a unique process to my personal learning. With the foundries, so I came in, I don’t know anything. I know what a casting is. I sold castings, like I told you, I had visited foundries in China and in Mexico and in the US, but I had never actually been part of the production process. And there’s a lot of science there. So there’s some chemistry, there’s some physics, there’s just a lot of technical information that tweaks these things in crazy ways. You add too much water, and it changes how gas can get out, so it changes the porosity and holes in the metal, which changes how solid they are. And you can tweak sand by adding chemicals or removing chemicals. And so for me, a lot of it was writing down everything I heard that had a cause and effect. So cause and effect was the big thing that I honed in on. If we have sand with grains that are too big and they’re overcoated with clay, we’re going to have low permeability, we’re going to have an issue. What does that mean? I would just write too much clay, low permeability. And so I’d go back and I’d have all these causes and effects, and I would just start looking into them. There’s a lot of technical research out there that you can get into that gets over this. I then realized that it was taking me too long to get to realizations, so then I started reaching out to what I called experts. I started developing these relationships, mostly starting with Reg – “Reg, who knows a lot about sand? Who knows a lot about the sand mixture?” And he’d say, “You got to get ahold of this guy.” And so I started developing relationships, having calls. When I would visit the plants, I would find them, go have lunch with them. And so I’ve got kind of this board of experts now that I can go to all the time. I’ve had a lot of them into the plants to meet the workers. They help out. We pay them a consulting fee. And so that’s how I’ve learned a lot is them explaining it. I’ve got a sheet here actually, from a while ago, talking about all that sand stuff, this was the sheet that I had developed kind of and all my notes on it, what do all these things mean? How do they go? So once I have the general idea, I’m a top down kind of person. I can’t understand something if I don’t get the big picture. So Christian gives me the big picture. And then I go look up every single technical word, and I fill in all the gaps. And then my final process for this, and it’s kind of like the Fineman technique, but I basically write it in an easily understandable way, where if I forget it later, I can reread it, or somebody in our foundry can use it and read it. And so we’ve got what we call an industry knowledge base, which is stuff that is not specific to our foundries, it is just general, here’s how sand works, here’s how you should de-gas metal, here’s what’s happening when you de-gas, here’s why it’s important, whatever. And so as I learned, I’ve been almost writing a book on the foundry process, one paragraph at a time. And so I’ve got a bunch of stuff on my desktop here that over the weekend, I’ll go through and read and process. I’ll update notes and fill in. I’ll add a chart or two. But that’s been my process, basically get the big picture from an expert, look up the details on my own, and then turn that into kind of a how to or an explanation guide for others to use.
Alex Bridgeman: Is that just a giant Word doc that somebody can go Ctrl F on any topic and go find it?
Josh Schultz: It’s a space in our Confluence. So in Confluence, we’ve got our operational space, our leadership space. We have a knowledge base, which is problems people hit and then how they were fixed. And then there’s a, like I just said, industry knowledge space, which is how all this stuff works.
Alex Bridgeman: Gotcha, gotcha. We talked before recording about your SMB op show and the podcast and how I’ve personally used Think Like an Owner to go reach out to other people and build relationships with them. It sounds like that’s something that you’ll have the potential to do as well. You mentioned media kind of being one of those companies that might be part of the CaneKast universe of companies. Do you view media partially as a kind of building that board of experts function for you?
Josh Schultz: We see media with two main purposes. One is, like you said, sharing out who we are so that we can build relationships with experts. So since even the small amount that we’ve done, between Reg and I, stuff we’re on, stuff we’ve hosted, we’ve done some live stuff down here, we have met people that do automated sand creation, 3d printing sands basically, like just so many neat vendors that could give us capabilities that can help us get new customers that we didn’t know about. And so it kind of creates this awareness of what we’re doing. And people say, oh, that’s cool, I bet you they would like what I’m doing, or that’s the kind of organization I want to connect with. And we build kind of a symbiotic relationship. And then the second thing is sharing that vision out there and having people go, that’s the company I want to be part of; I wanted to get into manufacturing, and that’s what I want to do. And we’ve had people actually come apply and become part of our team from hearing us talk about what we’re trying to build. We’ve got about three of them in the organization right now. We’ve got one probably that will be coming on in the next year. And it’s just exciting to- we think it’s just starting to put that message out there more and more to create just this inbound interest of really strategic, interesting people that want to build something really cool.
Alex Bridgeman: Yeah, it seems like you’ve found a really good partner with Reg and a universe that’s big enough for you to try a whole bunch of different things and build the processes that you enjoy doing. What advice do you have for finding a good partner? Like for someone like you looking to find a CaneKast type role, what made this intriguing to you? And how did you think through finding a good partner for you?
Josh Schultz: Yeah, that’s a hard question. Yeah, I had been asked this question inside of a private community, and I actually put a lot of thought into it and listed out all the sections, and I can’t remember most of them now. But I think the key is finding somebody you like working with. So from my experience in the past, building a business with my father, I know what I’m really good at, and I know where I need someone to kick down the door. And so I wanted, I needed to find somebody that would do that, fulfill the same role that my dad did, which I call the bull in a China shop role. If they’re there every day, they’re going to probably tank the business, but if they’re there once in a while, they’re going to be the bull in the China shop. They’re going to break everything so you have to rebuild it, in a good way. They’ll just rethink and just break down all the kind of weird stuff that you’ve built up in the meantime. And so that’s Reg. If Reg was there every day, it probably wouldn’t go as well as it goes when he comes in and he questions seven things that we’re doing. And he said, why are you doing this and this? And it’s like, I actually don’t know. He zooms out further than I would, he’s comes back further, he goes forward further. And so I saw that right away in Reg. He’s very aggressive. He’s very in your face when it comes to the business stuff. He’s the nicest guy. But I saw right away when I hung out with him, this is the personality that I- this is like my dad, basically. This is the piece that I need to be more successful. And I think vice versa, because he’s volatile, he needed somebody who was a little more consistent. And I think we both fit the missing piece pretty well. And we get along. We have a great time. But at the same time, we each fulfill a role that I don’t want to be and he doesn’t want to do mine, and we just have a good time doing it. And for whatever reason, there’s a lot of trust, which is huge.
Alex Bridgeman: How do you think through the organization that you’d be a part of? There’s one thing to analyze who you’re going to be working with, but also understanding the role and organization and potential of that. How do you think through what you could do within CaneKast?
Josh Schultz: I think that I can do a lot more now than I thought I could do when I joined. I thought we were just going to be building a couple of foundries when I joined. So being inside of it, my mind is just constantly cranking on stuff. But what’s been good is Reg hasn’t been “No.” He’s been just excited as me, which I think is cool. So there’s a lot of people you partner with and oh, slow down, or that will come in due time, or, yeah, we can maybe do that in a few years. Other than extremes, it’s pretty much just been, yeah, that’s really good idea, we can do this, we’ve got this, we could share this resource, and we can outsource it here, and yeah, we can probably get that going in three weeks. And we do. There’s no one to put the brakes on for no reason. We do red team ideas. We’ve shut down a number of ideas that we just talked it out for five days in a row. And at the end, we weren’t as excited about it. That’s kind of our test. If we talk about it over and over, and we get less excited, we trash it. And so we were going to move into this one space the fall of last year, I’m sorry, winter of this year. And we just got less excited the more we talked about it. And then we just said, well, we’re going to table this. It’s happened a few times. But if we end up more excited after hashing out all the details of what it might look like and realistically who we could pull in, and then yeah, it’s a go. We just go, we execute. And I think the continual execution is really what’s exciting. So the more you execute, the bigger you realize you can go. Like I said, we did, like I don’t even know, 6, 7 million the year before I got there. We’ll probably close this year at 16 to 19 million, somewhere in there. And we’re projected next year based on acquisitions and growth to do, I don’t know, 30 to 40. And we’ve got- that’s not even counting the service businesses that we’re building that are all small. But it’s just exciting. When you iterate every week on ideas instead of every month or every year, you can grow. It’s just incredible how fast you can grow and how much fun it is to.
Alex Bridgeman: Yeah, there seems to be kind of an entrepreneurial impatience that you work really well with or need to have in your role, whatever you’re doing.
Josh Schultz: That’s a really good way to put it. I never thought about it that way.
Alex Bridgeman: Like you just can’t stand to not be moving somewhere or have some tool or process that you’re working on or improving. Do you feel like you’ve always been like that, or do you think that’s a kind of mentality you’ve developed over time?
Josh Schultz: No, I’ve always- I’ve always been told that I’m moving too fast. I was 15 and working at a front desk of a gym. And I told the gym owner he wasn’t selling the right supplements, and I wanted to get in there and sell different supplements. And he could charge me rent. And basically, I would use all of his display cabinets. And I would run the whole thing myself. That was my first business actually called Infinity Bodybuilding. And I’ve just- he was always telling me, you’re going too fast to, do this, why don’t you just get used to training first? And I just, I don’t know, I just wanted to go to the next thing. And it seems like a lot of people are intent on telling you to slow down, but they don’t actually have a good reason. To them, it just feels too fast. There are reasons you need to slow down. But it’s not because it feels too fast. It’s because there’s a reason, there’s a risk, there’s a possible breaking point. And I think people are uncomfortable with speed. Once you get comfortable with it, and you realize it’s just a different feel, it’s not a bad feel, just a different feel, you can do a lot more. And so it’s cool as to what we’re building. The speed isn’t affecting all the same person, except for me and him. But when we’re iterating on our bookkeeping, it’s not affecting the foundries. And when we’re iterating the foundries, it’s not affecting the media company. So like we’re iterating fast at all of them. And they only feel their portion of it. So it feels fast to us. To them, they’re all getting incremental pieces of it. But yeah, I think I’ve always been that way. I think the first time I was able to unleash it was with my father. He basically, after about a two year kind of getting used to the business, pretty much took the reins off and said, alright, do whatever you want. And he started traveling about six months a year. From there, I mean, we went from about 3 million to, we got up to 10 domestically, another 1 down in Mexico, sold that off, and sold those. And so that was fun. That was kind of where I- that was the last thing I did. So now with Reg, we’re going to take it and go to the next level. And we always say, I mean, constantly when we do our quarterly reviews, it’s people will probably wonder, I wonder what the secret is, how are they doing it, it’s literally the same stuff we always say – build something, optimize it, hire somebody to run it, go build the next thing, optimize it, hire somebody to run it. We’re just doing it every two weeks instead of every year.
Alex Bridgeman: Where do you- you mentioned there’s areas where impatience is a bad thing. Where do you feel like you need to be patient?
Josh Schultz: Family, stuff outside of work, personal relationships, and realizing that everybody’s mind is moving like mine. And again, my mind has a lot of bad parts. But speed is somewhere that it does well. Memory is somewhere it does horrible. I always say I have a processing mind not a memory mind. I think the people side is probably where I’ve had to grow the most at CaneKast. I went from working with six people that were all very similar to me, we just basically crushed it at Chess Group and had a great time, to being with 65 people spread across four different divisions that no one probably thinks like me. And some people wanted to, some hate the way I think, some people have their own approaches, they have 30 years of experience. And now all of a sudden, it’s like how do I get this whole train moving in the same direction? And I think that’s been my big thing is okay, that’s where you slow down. That’s where you have more meaningful conversations. They’re not fact based. Not everything’s objective. Tap into what they’re doing, what they want to build, what’s their vision for their role and their plant. And not just listening and walking away saying I got buy in, but listening and saying, okay, how do I use this now to help their role, their plant, and what we’re trying to build. And so this whole thing about people development, leadership development, getting feedback, giving feedback, spending more time with one on ones, something that does not come naturally to me. I don’t ever need a one on one. Like I’m fine, I’m just going to keep going. But there are people that really, really need and want those one on ones. They want that time to unload their mind. They want that time to connect, to feel important, to feel seen, all that stuff. And so for me, and REG has been saying it too for the last year, that that is the biggest area that I need growth. And so that’s where my challenge has been to slow down, spend time with people at all the plants and just see what I can learn from them that maybe isn’t operations, but I can learn other things from them.
Alex Bridgeman: Any particular moment where you realized that’s really the thing you need to work on? Like did any one on one or meeting go particularly maybe not as well as you hoped it would go?
Josh Schultz: There’s a guy up in New Hampshire that I had a hard time connecting with. And I wouldn’t say this is the answer to your question. But that guy’s on my mind of trying to figure out how to get him to understand that I’m literally trying to help him grow his plant, make more money, not have to work as hard with those machines because they’re in poor shape. I can think of somebody in headquarters that I avoided for quite a while. And then I can think of a couple of times where I got a text from one of them that said, “I have seen a lot of people own this foundry over the last 15 years. I’ve been hesitant to get involved. But I see what you and Eric are doing. And I want you to know that I started really kind of getting bought in about three weeks ago. And as of today, I am 100% bought in, and I’m full board with you guys.” That’s an awesome thing to hear from a guy that wouldn’t even return your calls, wouldn’t give you the time of day, couldn’t figure him out, to all of a sudden him say like, I didn’t trust anybody, but I trust you guys. And I’m in, and let’s do this. We’ve had meetings where you can kind of see the glow in everybody’s eyes and they get it, they get what you’re building. And you’re like, okay, finally, these guys get it. They might not know all the steps and know what know what to do, but I can tell they just got a little more excited about their jobs because they see that they’re part of something bigger. So I think those are the wins, and not having those wins is where I know I’m doing something wrong. If people aren’t as excited as me, then I’m not conveying it right because what we’re building is amazing. If you’re in manufacturing and you dig it, and these guys do, they’ve been doing molding, a lot of them are foundry their whole life, they should love we’re building. We’re literally going to be building one of the, I think, best companies to work for in the rough materials manufacturing space. And so yeah, that’s what tells me that I’m not doing my job right. And I’m not because there’s still people that don’t, aren’t excited. There’s still people that don’t get it. There’s people that don’t want to develop. They’ll always be some but there’s still too many, I think, and that means that I’m not spending enough time sharing what we’re building, sharing the updates, showing them the opportunities and the promotions that are happening in other plants.
Alex Bridgeman: Yeah, that seems to be the super high leverage tool and skill to learn over time because it seems like the end state of most CEO roles is just managing your executive team and people management. You remove yourself from the day to day processes, the operational improvements, even M&A to a great extent, and eventually, the end state, at least from what I’ve seen, is managing executive teams. Do you feel like that’s the end state for you? Or do you feel like you have a different kind of end goal in mind or end role and set of responsibilities?
Josh Schultz: I don’t know if it’s end state, it will always be a large part of my job. It has become a large part and will remain a large part. I know it’s probably the biggest, like I said, it’s the biggest spot I’ve changed. It’s probably if you asked me a year ago and now my view of all these different areas of business, this is the one that’s changed the most. I realized- once you realize that it’s hard to hire- because, okay, let me put it this way, in tech, there’s a lot of people you can hire that are interested in the space that have the tech skills. Software engineers galore. And a lot of them, because they’re software engineers, think correctly. They know when they write code that you don’t want to write the same method 27 times. You abstract it into one general method, and then you pull that method and you do it right. So there’s all these principles like abstraction that these engineers know. So you don’t have a hard time with key simple things constantly when you’re building a software company, for example. In the foundry space, this isn’t true. Most of these guys need to be able to make decisions on the floor, they should be empowered. And they need to be able to problem solve when a casting isn’t right, before we make 400 of them, they should know within four or five that they’re wrong. And they either have been disempowered to make that call, they’ve been belittled, and so they opted out, or they never been given the framework or tools for simple problem solving and decision making. And so what was happening was I was getting called into every single problem. I mean, multiple ones a day. This customer returned a shipment, what do we do? These parts are bad, what should we do? Like, you guys have been in this for 30 years, if you don’t know what to do, and you’re calling me who’s been here for four months, we have a problem. And we did. So I started to realize the power of internally developing people. And this is- I don’t know another way to say this, but that think kind of how we want them to think, which is using statistics, probability, probabilistic thinking, reason, logic, rational thought, linear process, excluding bad things, focusing on good things, lowering risk, long term, return on capital, not just total cash, like all these things, where there’s an upside and a downside. And so what we thought was I got all this thinking from somewhere. I wasn’t natural here. I’ve read business books. I’ve taken math courses. What if we find the best of the best, pull them out, read them with them. And now because we’re all reading the same thing and discussing it, we start to all get ahas together. And now instead of me getting drawn into everything, we slowly over time create an organization that all thinks the same thing, has a shared language, has a shared problem solving methodology. So when somebody says, oh, make sure that you do X, Y and Z, everybody knows what they mean by that because we’ve all gone through the same kind of thinking, we’ve all read the same book, so to speak, we’re all talking the same language. And so I thought personal development, leadership development was kind of bogus before, but now that we have 60 people, it’s like, man, what if everybody could kind of think, at least in these key areas – like not everywhere, we want diversity, want diversity of thought and approach. But there are some key areas where it’d be nice if we all just approach it the same way. And so that’s what the Leadership Development Program is. It’s helping with key decision making, problem making, understanding financials, like that’s a key thing everybody should know. Yeah, a few other things that I posted out there. But so yeah, I think people development is huge because I want to hire and promote from inside our org. That’s always going to be better than pulling somebody outside that has no experience with how we’re doing things. So we just need to get everybody there so that they are promotable, documenting the process, giving them the tools that they need, helping them get ready to level up, like all that stuff. And so I think for me, I went from not believing in people development to being like this is huge, because if we do this, we don’t have to hire outside people. We can build an organization that can compound knowledge faster. We’re all doing the same thing without having to remind each other. We don’t waste time. It just becomes an unstoppable snowball, I think.
Alex Bridgeman: Yeah, speaking of change and learning how to get on the same page with everybody, what’s a strongly held belief you’ve changed your mind on?
Josh Schultz: I just told you, man. People development is the thing. Like that has gone from I don’t have time for that to that is the most important thing I need to figure out. Even to outsource teams – how do we make them feel more part of the team because they are part of the team? How do they not feel like outsource teams but members of our team? How do we develop them? How do we help them up their skill so that we can do more with them and they can do more with us? Just across the board, if I can develop people, they can develop the technicals and the tacticals and all the stuff needed to get the businesses going. It’s like the ultimate meta system is developing great people that can then go do great things.
Alex Bridgeman: Would you say then that Amazon is the best business you’ve ever seen just because of the all the different ways that you’ve learned from them, perhaps?
Josh Schultz: Yeah, I think I like a lot about them. I know, I’m like negatively reacting to best business I’ve seen. I don’t love a lot of things that they do. But I think that they do have a pretty core ethos that I probably agree with.
Alex Bridgeman: Any others that- maybe not like best business, but like what practices or models or customer service-? Yeah, who do you admire?
Josh Schultz: I like Danaher, the Rails Brothers, that’s a really good one. I like Amazon. And Rebuild is interesting actually. Rebuild is an ex-Amazon exec who went out and is now kind of using some of the Amazon approaches to rebuild manufacturing as well. So those are the key ones that I really like their model.
Alex Bridgeman: Yeah, I remember asking you about Hadrian and you brought up Rebuild. What’s kind of the key difference between those two in your mind?
Josh Schultz: Well, Hadrian is specifically building machine shops at this point, hyper optimized factories is what they call them. And I love a lot of the stuff they’re doing. They’re going after a massive market. They’re going after specifically aerospace. They’re going after scale. And so my beef with it is the way that they talk about it, they’re the end all, fix all to all manufacturing. But there is a large number of small mid manufacturing that will always be needed across the US. There are industrial air conditioning units, there are parts of airplanes, there are parts of almost everything you see in your daily life that are not made in the millions or even hundreds of thousands. They’re made in the hundreds, they’re made in the ten thousands. Think about special parts of hospital HVAC, you’re not making 10,000 hospital HVACs a year. And so there’s always going to be this need for small to mid level volume, which means you have to figure out a way to be profitable without scale. And that is something- that is the number one problem we struggle with at CaneKast and that we talk about all the time. If we need scale to make something work, we don’t use that method. We got to figure out another way. Because our goal was to be profitable without scale, not a prototype shop, but not have to be- a lot of foundries, what they do, almost all of them that have been successful so far, have bought them all, moved them into one building, cut the fixed overhead, and basically whatever. We’re building a network of foundries, and we’re very specific with that word. We’re building a network of foundries where we can shift risk, we can shift capacity, we can shift knowledge, we can basically use all the upsides of the network setup and structure. And so yeah, I think that that’s where we differ from Hadrian. But Hadrian’s hitting another part of the market that is definitely needed. And that is scale volume machine parts, precision parts specifically that there’s a huge issue for. I was in that space for 10 years. And yes, lead times for those parts can go 26 weeks, they can go up to a year. And so that was actually the role I filled. I sold it differently, a cheaper way. I would order the parts ahead of time and store them in my warehouse so that the aerospace companies could have access to them within a day. But there’s a lot of holding costs and risk there. And so, they’re solving it in a much grander way.
Alex Bridgeman: You mentioned that it won’t be foundries forever. What do you think is that next area of manufacturing that is a good fit for what you’re trying to do next?
Josh Schultz: I don’t know. We haven’t- we’ve joked around a little bit about it. I honestly don’t know. I know every foundry is going to need a captive machine shop. That would be the easiest one. Machine shops also have horrible economics, so it’s not the most desirable one. We’ll probably have to do a lot more market research into what the next vertical is.
Alex Bridgeman: Gotcha. I always love chatting and wish these could be three hours, but we can’t, unfortunately. So I’ll let you go here. But thanks for doing this. I realize you hadn’t been on the podcast before even though I’ve visited you and your family and you made an awesome egg sandwich and a whole bunch of other things.
Josh Schultz: So yeah, no worries, man. You’re welcome back anytime.
Alex Bridgeman: Yeah, I definitely want to go back soon. So until then, we’ll chat soon.
Josh Schultz: Sounds good. Thanks, Alex. Appreciate you having me on.
Alex Bridgeman: Thank you for listening. I hope you enjoyed today’s episode. If you enjoyed the show, please consider leaving us a review and telling a friend to help more folks find Think Like an Owner. I also want to thank our show’s sponsors Live Oak Bank, Hood & Strong, Oberle Risk Strategies, More Staffing in Oakbourne Advisors for their support. For full episode transcripts and more information, please visit our website at alexbridgeman.com/podcast.