Gat kaeron welcome to acquiring minds great to be here well gat you are 20 plus years into your journey of having acquired a business now the vast majority of my guests have more recently or relatively more recently bought a business so we typically are hearing what their search for the business was like what the deal terms negotiation was like what the transition has been like and then of course how it is as new owner of a business that they've acquired but given that you are so much further along and that really your acquisition has become your career we're going to get a bit of a different perspective today and I think listeners are going to find it to be a real treat let's start back in the 90s Gat who were you then and what was the path back then that led you to wnab buy a business yeah quickly I grew up in Charleston West Virginia the outskirts of West Virginia I used to play in the woods when I had free time uh went to high school believe it or not in New England and then uh went down to North Carolina to go to college I played football down there and then ended up with a job in Chicago working for a guy named Sam zel who's happens to be just really one of the great business guys of all time it was a dream job work for about three years and I I looking around I I realized that all the guys that had NB got paid a lot better than I did and I said geez I may got to go get one of those things uh went to to Y Chicago at night while I was working for Sam and started working through an NBA and about uh I was probably halfway through the process and I was thinking gez I got to go back to Sam one day and tell them you need to pay me more because I now I have an MBA instead of a ba and uh that looked like a pretty daunting uh negotiation he's not an easy guy to negotiate with and uh you know walking around I said you know what I really ought to do is I had to buy my own business that's the way you really graduate from working for a guy like samel uh and going through school so I started on my free time and you know I wonder One Nam free time I was working full-time going to school at night but here and there just kind of calling around people I know to to look for a business I'd been doing a lot of work let me stop you right there Gat let me stop you right there because I have a bunch of follow-ups about this first of all Sam zel legendary business guy as you said um in the 90s was he already a legend or was he Le he must have been far less known then or not uh you know he was more of a he was a legend in the real estate world he was primarily doing real estate and he had a nickname the gravedancer he turned around a lot of real estate properties and had you know gone from zero to you know a couple hundred million dollars you know he he concluded about uh uh you know5 billion dollar so uh it was relatively on but he was welln and did you work to work did you work directly for him did you know him have a relationship with him yeah I worked I was on the seventh floor he was on the sixth floor and I didn't work directly for him but I was you know one person away and so I get to have a nice relationship with them I you know I wouldn't uh I I wasn't an insid Insider but I get to work a lot with him and any any uh interesting things you can say about him that weren't already part of his public Persona he passed he passed away in 2020 yeah no 2023 or 24 it's been it's been less than a year oh oh oh didn't realize that okay go ahead um no he he was a goat he was one of the greatest of all time he was very smart he was a fantastic person to walk to work for uh you know one of the kind of takeaways is that he really loved uh you know running into smart and young and interesting people and uh work with people and throw them in the deep end and see if they could swim you know he love you know putting people in over their heads see how they reacted how they're comfortable with it so is what a cool guy to work for so you know I got thrown a deep end many times in my life so that really didn't bother me I was always trying to figured out how to swim you know when the water was over my head uh so yeah it was a treat he was he was as as smart uh and uh you know his reputation is Weller yeah yeah well how you just put uh being thrown into the deep end and learning to swim while the water's over your head I feel like that perfectly captures buying a business actually as well I think it was very your story but so go ahead yeah yeah it was very relevant it was exactly the same feeling and I guess one of the things that gave me the confidence to go out and say you know I need to do one of these deals myself well great so that you've checked the confidence box that you've already been in many situations by this point in life that where you you've you've demonstrated to yourself that you can figure things out when when you're when you kind of start over your head at least I demonstrated I was willing to jump in okay you I don't know if I demonstrate I could be successful but I was willing to try okay that you you had the fearlessness maybe not the competence but the but the fearlessness which is maybe more important um the the insight to buy a business though or the idea to buy a business there are many paths to become self-employed to generate wealth um even today as we talked about in the pre-call and I was telling you about this podcast and how there's this whole um trend of people buying businesses um but it and so it's it's more popular now than ever and yet it is still very much very much an alternative path um it's it's not that many folks out there doing it in the 90s uh you know the phrase ETA search funds none of these things existed so so give me more on how it occurred to you to do this path which was even more alternative then than it is today sure I I was really honestly working for Sam we I was in a group called uh Eagle Industries that they he' put together years ago with a a holy company that had a large tax carry forward and he bought successful manufacturing companies to go under that shell and I'd done a lot of work in there been in out a lot of manufacturing companies and uh you know I thought and this again in the 90s before you know manufacturer got goofed up by China uh there was a lot of manufacturing around and uh I was really comfortable with it and you know it was an easy thing to find passion in um and uh and I you know I guess I went looking for a business before I really knew how I'd Finance it to be honest with you uh you know so much of uh I just I calling around you know and know what you knew and eventually find I figur when I found the right business I'd figure out how to how to finance the acquisition well what that kind of feels like a little bit to me is I'll have a lot of guests who come from private Equity they maybe they worked at a private Equity shop as an analyst and basically and kind of said said to themselves I can do what we do here at a smaller scale for myself and it feels like maybe you know kind of what Sam was doing at Eagle Industries I I know there was a particular Financial play was doing there but basically the you know you were in a private Equity shop of sorts and you guys were buying manufacturing businesses and you kind of said to yourself I can do this at a smaller scale for myself is that a fair analogy I'm drawing right exactly right totally agree with okay okay okay great um all right so he set out to buy a business uh not knowing how you're going to finance it um and but decided that it'll be manufacturing because again this is where your skill set is yeah that was that was my parameters I thought manufacturing was very cool small Manufacturing Company would be very exciting again China wasn't an issue in these days it was before they were in the WTO and there was a lot of small manufacturing companies around those days I think you know I had a much a much deeper well than there would be today if you'd say ah I want to find a Manufacturing Company it wasn't quite as nichy as it would be today yeah yeah and so um what year is this exactly and and how old are you 90 94 or 95 and I was 26 or 27 years old okay tell us a little bit about how you then found uh what is today Gat Creek yeah yeah so there wasn't any of that infrastructure in that that I'm now learning about which is kind of cool uh I literally just called up people uh that I knew that uh you know I'd met through my father I'd met through work I'd done so a lot of those phone calls were people in West Virginia because I had grown up there but it went exclusively West Virginia and uh you know it would you call and lead from one to the other um I eventually found a uh a a a little water water bottling business in southern West Virginia and I was like ha that could be a good business you could you know you get water for free and then sell it for a buck you can make that work and uh I went that looked at it and uh I did the business plan and I and I found out why you know exactly why it doesn't work because even though water is free it cost a fortune to put in a bottle to put in a bottle um and uh you know it was a high Capital low thing business I said no I never made an offer on the business uh but it was a nice little you know start I was looking around and uh uh I actually think my dad one day said I remember years ago I was up in Berkeley Springs West Virginia There was an old guy up there building Furniture he's the only guy that's actually doing value added manufacturing all we seem to do in West is cut down trees send them to North Carolina buy the furniture back he's building something uh you know maybe he'll take your call and I literally cold called Tom Seely um I think the person got confused and let me through to him and he was like well why did you call me and I said well it doesn't matter well we're on the phone I introduced myself and uh ultimately uh you know we had a nice conversation I said I'd love to see your business one day and he said fine and so I took a day off of work and uh in those days you could you know jump on a plane in Chicago fly to DC drove out spent three hours with uh Mr cely and you know finished at the end said you know this is the type of business I've always looked I've always wanted to buy would you be interested in selling it he said I saide he Saidi would I I don't want to sell the corporation I don't want to do this I don't want to do that but you see them okay if you want to make an offer you will I said I will and then and I said I said uh I'll make an offer and and uh you know that offer is you know I'm going to come to this community and and run the business the way you'd be proud of and uh part of that offer is going to be you financing me and providing some of that financing you said well that's fine we we'll see we see what you come up with so I got the financials went away and uh you know what a month later you know made an offer to made an offer to buy the business and it's it's striking G how similar the that pattern is to the or that story is to the pattern that that still often plays out um some things have changed um but some are are exactly the same including kind of your uh forgive me for sounding so academic but your value proposition to to Tom cely which was carrying forward the Legacy uh doing right by your people doing right by your business doing right by your community sounds like that was really really resonated with him and you made a point to say it am I right yeah it did and as you go through this whole transaction you know it was critically important on two sides uh on the financing side the part of the pitch was obviously you know I needed to financing a seller note but it was also to me as like you know you need to be in this as well you know how am I going to trust I'm not buying something with a time bomb in it if you're not willing to participate in the financing of it uh and that those two things pretty good Sals and then the other kind of helped to close and he hard to close these deals the guy you know built the business for you know big part of his career and he was an old school guy you know he lived out of the business if if if his wife wanted to floor swept she'd call the factory someone would go buy a broom sweep the floor leave the broom there and then come back down so I had to kind of off to the side you know take a literally do kind of A Five-Year Plan uh and say Hey you know I'm going to take care I want to have someone take your trash out for the next five years and you know the plan is over five years we got to wean yourself off of doing having the business do everything for you and work your way down to zero and I used a trash thing because that was one of the few things that lasted five full years it was literally like the last day I had to send the guy up to take the trash out for him man Gat that is that is classic I uh after having talked to well over 250 people for their stories the theme that you know a seller's personal life is all intertwined with the business particularly financially you know the the boat the car the cell phone all of the stuff that's being gone through the business but I've never heard this level where basically all his home services somebody at the factory one of his employees has to shlep up to his house to do for him and that one of your one of the sweeteners of your offer to him was to do his trash or to get his trash taken out they trash out once a week you know uh and you know the guy who did every did every day was the guy did it to the very end and he was the guy that came up and said get this should be the last pick up and I said you know you're exactly right I I'm gonna call Tom and tell him to give you a tip uh because it's the last time he's going to see you in his house interesting thank you just going back to your um cold Outreach as we would call it to Tom cely because this is a big part today something that the the kind of tactics here we talk talk about a lot because finding a good business to buy is so difficult and therefore getting sellers on the phone getting their ear and then meeting them and then seeing the business and so on is is kind of a big part of the search process you flew out to see him without you without saying did he kind of smell on you that you might be this this young guy interested in buying his business or or like what was the pretext of the visit yeah I think that's I think that's true I told him I was very interested I told him I was in his business didn't say I was interested in buying the business but very interested business I was from West Virginia you know we grew up in West Virginia always interested in stuff like that and uh you know woodworking's cool so uh you know so I think he was fine to you might as well show the kit uh this stuff and uh you know I think he probably thought 10 20% chance the back of his head that I I was interested in working they doing something like that that acquisition and here we are in 2024 and uh and and you're the owner 25 years the owner or Tom Liv Tom lived to be 96 years old he was 75 when I bought the business I think 76 in the 70s and uh you know we developed and kind of triy to treat each other like family he was I he was kind of a grandfather I treat him like a grandfather figure he would treat me like a grandson and would give me those types of advices and stuff like that it'd be a Friday and I was you know I bought this business before I finished I finished my degree so I had to I spent six months going back to Chicago every weekend so I could finish my degree um and uh and I every so I'd have to rush out every Friday to catch the catch the plane and then get the trade and go to class six o'clock a Friday night and he'd always like oh now watch out for them Smokies as I was driving out so he you know he gave me kind of grandson type advice uh throughout the rest of his life and I I I we try to teach other teach other that way I mean we weren't family we weren't super close but we we try to respect each other those kind of ways which made made a transaction nice for both of us yeah yeah that's really that's really that's great uh and just one thing on one more um a little more detail on the the value added manufacturing piece your father had said to you contrast value added manufacturing versus whatever the alternative is and and how this one so and how your this business was value added yeah you know Wester just has a great tradition of being an extraction State you know mine coal ship coal out cut trees ship trees out uh to do a value added manufactured me you know it would be the next level where you you take instead of making Lumber you take the lumber and build a piece of furniture okay and so that was exciting and it's uh uh and it was unusual particularly in the furniture World we're of course we're going to hear about China here in a little bit but at the time this was still where when North Carolina was kind of really dominant what what was the the the lay of the land the industry lay of the land for wood Manu Furniture Manufacturing in the it's a great it's a great question so in those days um uh there had been a big wave of consolidations and you know the big kind of the conglomerates of the day had moved into the furniture industry thinking that it was an easy place to make money and there had been a couple folks that had done relatively aggressive rollups and they were actually pretty smart folks some of them were smart um and they all failed the there was a bunch of business that been Consolidated rolled together that were failing so uh there was a kind of a feeling in the industry that Outsiders can't run this business and that Outsiders were going to fail and uh people were uninterested in folks kind of buying in thinking that they're smarter than the rest of the folks from the outside looking in you were like I'm getting into this business because I'm GNA compete against these guys because they didn't look very smart when you were uh know looking from the outside uh you know the the long lead times relatively inefficient manufacturing it looked like something that you could uh you know it didn't look like a smart industry it looked like something you could in and that was part of the of the of the business plan there's I made I made two real mistakes in my analysis uh coming into this business and and one was that was like you know it's not a very well run industry I could compete against those guys it's a it's an open field and you know in hindsight which I learned over time was that uh you know you're actually better off with smart good competitors than you are with bad or dumb competitors uh you know an industry you know an industry that's really working hard and doing great stuff is a much better industry that that creates more value than working with the industry that's you know slow and backwards and you know uh you're you're honly better good competitor than you are with with a backup pedor that that's so counterintuitive C can you just elaborate on why why if everybody else is in your industry is not doing the smarts thing and you are why don't you just out out compete everybody why is do work that way there's plenty of businesses there's plenty Industries out there where it's a whole bunch of highend you look look at the the you know the chip business you know those guys were all rock stars competing with each other and they built a beautiful uh industry in a business and a world changing business um you know when you have people going to market with the customer focus in a very smart way um I think it makes it a you know better industry you attract more consumers in the industry because you're doing cool and productive things yeah um and you know often when people you know get their themselves in a corner by not doing the right stuff you know they react by cutting price you know cutting service and doing stuff that you know ultimately hurts the overall Marketplace as opposed to build the marketplace yeah yeah counter I was dead wrong with my analysis and later later I got really involved in the furniture industry I was like you know you know this furniture needs to be strong I'll be more successful in a strong industry than a weak industry yeah yeah it's such a uh great Insight but let you know and again I'll probably do this throughout our conversation here G but um The Echoes of what you your analysis and what we hear today for people doing this today which is you know the sellers are uh pen and paper they've been resting on their Laurels they're you know in their 70s they're not Tech forward they're they're not up to speed on you know how jenz buys HVAC services or whatever so so they're basically unsophisticated that's the that's the word that we hear so often in including from my own lips um and it's both but but it it does prove to be both true and false in some sure they might not be on Tik Tock advertising their HVAC Services um but but typically we Outsiders do underestimate the genius that that they bring to their own businesses um and so it's not as easy as as getting into what appears to be a Dusty old industry and cleaning up it's it it it turns out to almost never be that easy um anyway want to react to that yeah I think uh yeah founders of businesses are are often good at a couple things and uh you're making great mistake saying that they're just all oldfashioned they doing everything wrong also at the same time there's blind spots there there's real opportunities and on this acquisition I was really more focused the blind spots I was focused on is was the manufacturing itself I really didn't know how to sell Furniture I didn't know uh it was not done an effective way but you know he was selling $10 million of furniture a year uh you know I walked through the furniture looked like nice furniture and looked really good uh but the plant was a disaster I mean they were uh you know nice product came out the door but the process was crazy and even as you know even as someone that that got a be in Workshop in wood shop I could walk around and say this is not the way to do it and so as you're doing the business analysis is say like God we got $10 million of Revenue we can get an I can move to that Community move into the factory and figure out how to make that furniture for you know not $10.1 million but make it for $9.5 million um and uh that I could improve the manufacturing side of it and then ultimately grow it but the the first move and the first financing was that in essence you know it was an lbo leverage buyout I it was 70% debt seller paper when I bought the business really 90% debt overall um and the play was you know kind I thought I could fix the manufacturing and specifically you know Implement lean manufacturing and we did that and it went well and then the first year we cut the lead times from like 16 weeks to eight weeks when you cut your lead time in half you cut your inventory in half and you know it freeze up a whole bunch of cash so we you know made the lean made a good manufacturer you know inventory that you know an inventory went in half we generated a good million and a half dollars worth of cash in the first year and a half kind of getting that under control and that allowed me to get to really a normal balance sheet by year two by the end of year two phenomenal and I want to spend a little bit more time on what you did and how quickly you basically turned it around um but before that let's hear just what the business was when you before you made all those improvements I just heard you say $10.1 million costs to $10 million in Revenue so was the business actually unprofitable the business was it it showed a profit on paper so it it had an ebit of maybe a a half million dollars uh but uh if you looked at the uh if you looked at the balance sheet the balance sheet was going up a couple hundred, do a year mostly in terms of the inventory so they're capitalizing a lot of cost so it was uh it was just slightly better than break even when you really when you dove into it and can you tell us what you bought it for how for a business that's basically at break even but is a substantial old business which has a lot of uh opportunity in it how do you how did you come to evaluation of that yeah so you know so I had done a lot of that so luckily that was able for me to kind of justify and I went at it at two angles and and to to cut to the end it was essentially a book value deal um you know there was just so many assets on there and it became a book value deal and in terms of multiple on what what they showed is an ebit D multiple it was five and a half kind of an ebit multiple which was basic for an Enterprise Value and uh you know total assets in the B business was uh was about four million so it was it was a it was end up being a book value deal and it checked off if you looked at kind of a multiple cash flow oh when it was it was probably at then when you do the accounting right it was a high multiple of cash flow but not unreasonable not not crazy highh okay and when we say Book value book value or asset deal here G one of the things that actually probably has changed quite a bit since the 90s is that many of the businesses that are acquired by people listening to this are airballs they don't have much in the way of hard assets um and so you're you know you're buying Goodwill uh and so so we actually don't often we the deals like yours are actually rare these days so when you say Book value basically added up all the hard assets of the business and which was probably primarily that inventory that was sitting around and then whatever Machining equipment was there that right whatever that added up to okay you and a building so building machinery and and equipment and then you know you know cash and receivables okay and and and so you got and you got Tom Tom financ the vast majority of it you said 70% actually more like 90 so you brought you brought a few hundred,000 to the table yeah yeah so I had I I ended up you know put everything I had together I had 5% um I uh I got Tom Tom financed 70% of it so I get a seller note with him where I paid him I did interest only for two years and then I had balloon payments year three four and five um so it was kind of an installment sale uh I went to the local bank and and literally a local bank and they uh they said ah I I we can get you 20% so I got 70 from the seller 20 from local bank I had five and I went to family for the other five so you know the rest of my family you know Dad primarily owned the other on on the other half um so yeah it was kind of it was it was cool and then you know went to work did your dad own so he if he brought half the equity even though it only was 5% of the deal did he end up being 50% owners with you he did he did oh so you and your dad were 50/50 oh I didn't get that from the preall that's that's that's cool yeah he he wasn't active in the business but but he was a 50% owner and a great owner he my dad had when I was growing up my dad uh sold insurance he had Insurance Brokerage a family insurance brokerage so that was kind of my bias towards having a family business and then uh later in life my uh long story my dad was uh when I was in college my Dad decided that he wanted to uh become the governor of West Virginia and did so so my dad was the governor West for eight years I didn't get that part either the recall yeah oh okay I'm talking to West Virginia royalty here it's you're you're well well overstated bet um but uh yeah so yes he was a 50% partner he was a silent partner because it was a relatively small investment uh and uh you know um and he had bunch of other stuff he was interested he wasn't a manufacturing guy he didn't okay okay so was really nice it was it was great D he was he was a great partner yeah yeah that that's really that's a a great detail thank you for that uh and then the Governor detail you're actually G you're actually the second governor's son I've had on the podcast but the first time around I didn't know that who I was talking to was the governor's son Tennessee governor um I won't say his name but anyway I found out after the fact that I had been interviewing the son of the governor anyway that's right no just on that side is that you know your parents especially you know the kid and the dad son and the dad there they bias you easily but interesting my dad was you know I was growing up my dad was in business uh he later became a politician so I didn't grow up a governor's son and I didn't really grow up with a bias towards politics I was always kind of interested in business because that's what my dad did yeah well and and I heard you say this bias towards small business in particular so rewinding back to your time in Chicago um and we we heard why you got off that track and come by business way you characterized it was you know how do I basically become how do I build wealth how do I get out from under samel but it sounds like you might have ended up doing this path anyway not necessarily that you were trying to leave the samel situation or that job as good as it was but that you you were you may have ended up as a small business owner um you know inevitably I think so I I I love working for Sam and I I've been happy word for him you know if I was working for him today uh it was fantastic so there was no trying to get away from anything but uh I definitely uh had a bias growing up with the dad had an insurance brokerage that was essentially you know family business and I thought that was you know that was always in the back of my head something cool to do okay so and you may have already just you may have just answered this but when your V your vision so we know why why you wanted to buy a business you wanted to and you wanted to do it in your home your home state of West Virginia was your vision that it would be this acquisition would be your career or what what was your what did you have a long-term Vision or were you just kind of taking it year by year uh yeah well I I I I think I had a long-term Vision but of course you never really know the long term um no my I I bought it in a way that I thought uh that uh I was well well open in my mind that it could be a fiveyear 10year deal where I ran a business sold it and uh then did something else uh I had in the back of my mind that you know maybe you buy this business and you you buy uh you know an upholstery factory and you become a bigger Furniture business um I was really open to to all three pass um as uh you know as you own a business um you know I guess I got a 20y year run of owning this business and uh you know there's times yeah this business was we you know we almost died a couple times uh we've had success anded coup times yeah and uh so you know when things are when things are running pretty good uh you know you're not really don't have a appetite to selling it you know when things are crummy you can't sell it so uh uh you know next thing you know you put 28 years together um so there was times where I you know the value in my head what this business was uh was greater than what a what a buyer would buy and then there was times where there just wasn't any value here was we w a valuable business things were tough yeah so so it never I'm not so proud that would have shown up with a check I would have taken a check and find the second career uh but uh you know as a job it proved to be a great job I I loved it for a lot of I've loved it for a lot of reasons and you said 28 years so 1996 96 96 great okay uary of 96 and how old are you now Gat 57 now so returning to your turnaround you you've already you given it to us in brief um you B basically place the production line the manufacturing line the process was a mess inefficient no order you come in Implement lean menu and and anybody could see that even your you know be and Shop class said could see that uh um you come in you you implement lean manufacturing you get all this inventory that's sitting around off the books that frees up a lot of cash and then with that cash you strengthen you really strengthen the the balance sheet deleverage it and get cash on it um right correct sound sound right okay great lean manufacturing this is something that um we've all heard those two words together um but if we don't if you don't have any manufacturing experience you don't know exactly what that is we assume it to mean more efficient manufacturing um but may maybe give give the audience a two-minute tutorial on exactly what lean manufacturing is um you know there's a fantastic book called the goal which is a r read by most and many people uh and it's a story about turning around a small Factory uh with lean manufacturing uh gold Rat is the author it's a classic and it tells the story better than anything but simply just from my stories lean manufacturing is about eliminating waste and focusing an organization on doing what customers pay for so you you know you're looking at having a a clean facility a well organized facility one with that uh extra inventory um so it's a whole combination of basically eliminating waste and and generating efficiencies that's a customer focused efficiencies okay okay and are there kind of Frameworks in playbooks or is it just a vague sense of like you know dialing in your operations so that they're tighter yeah the be the best Playbook is the Toyota production system Toyota's you know pioneered this and and they're the best and there's a couple great books about the Toyota production system that are also helpful to read okay now but going back to the shop class B and Shop class thing but in fact at at Eagle Industries with Sam you guys were buying manufacturing so you had been exposed to a lot of manufacturing turnarounds correct so in fact you had some industry experience doing exactly this or no I was on the second half of this of the eagle indust Eagle Industries deal so I was actually at the latter half for the second half of the you know it was essentially a 10-year kind of run where they bought the businesses and used up such so I actually had more experience selling uh the businesses uh as we were kind of downsizing and downsizing the the investment then buying but uh I had spent a lot of time in a lot of different manufacturing companies we had a period uh in the early 90s where you our cash flow for us was tight and I spent a lot of time working with the factory presidents in and out of places where I could be value added help help us generate cash flow so I had good experience you had okay so so you you kind of yeah you really could go in there with a with a Playbook and and kind of to done i' been in and out so I've been around it worked it and helped people do it you know I never run a factory line or this or that but you know I uh I had enough experience that I felt I could do it all right well and and do it you did H and so two years in business is looking pretty good right and you're feeling like a genius yeah I felt pretty good it was nice you know that's that's great ego work when that stuff go comes together and you know as as it see like you talk about a lot you know there's a there's a big there's a lot of anxiety when you when you buy a business and you know everything's new you're discovering stuff and you know the first two years you discover crazy stuff no matter how good you are due diligence you miss stuff and uh this was an old factory that had all kinds of problems uh you know uh you know you know they they literally you know paid women 70 cents on a dollar what they paid men you know stuff you just don't see until you walk into place so we had to correct all kinds of crazy stuff um I had one point in time I had guy two months in it was March and uh had guy walked Factory said yeah looks like a good day for a burnoff and uh Ronnie was his name said Ronnie I don't know what a burnoff is goes oh you know we burn things off at this tight days like this a Smokey and stuff like that no one will see a smoke I said I still don't know what you're talking about and so he way he go shows man essentially they took a had 1950s dump trucks all the short wooden wood they couldn't use they took out in one of Tom's Old Fields that was kind of over the hill across the road you couldn't see it very dumped stuff out there and then it was you know back a couple times a year when it was Smoky and foggy uh they'd light it all on fire and burn it off and uh so so he explains that all to me and I said uh Ronnie I don't think that's legal he goes oh we've been doing it for years I said I don't think that makes it legal either he said well okay smart guy what do you want to do and I looked around and I said all right burn it off but never clean it up and never bring another piece of wood out here we've got to do something different than this so uh the first two years were kind of discoveries of crazy things like that you know you're fixing stuff it was it was a ton of fun a ton of fun the business one I bought it had uh and not it was had crazy manufacturing they didn't have a catalog believe or not they would take a picture of a piece of furniture and get like 20 copies made at the photom mat and then uh put them in like a an album that you put a family album that's what they were handing out to people buy furniture and sketches so we actually had to create a catalog we create all that stuff and the business grew it got you know we generated cash it grew and it got to about 14 20 it got to $14 million which were 10 to4 million at $14 million we are at capacity we found uh our capacity I was about four or five years in six years in yeah six years in we got it to 14 million found capacity I went to the bank I had a good run it was an easy time to go to the bank to refinance and uh added added space and rebuilt spit $25 million rebuilt everything added space essentially doubled our capacity we said we're going to go from you know whatever from 14 or 15 to 30 million and we put those assets in we did it on time on budget we had do crazy things like Fire Control and the day we the day we got all that work done our sales just went through the floor just everything went back at uh you know had key customers go out of business or some more product line it just hit the you know hit the end of uh hit the end of success you know they they they died and uh you know then the economy got bad um so we we we loaded up again with thatb and got clobbered our sales went back down below $10 million and I 911 time frame g what precipitated this this decline um yeah so the product line the probably got old we had a lot of customers that went out of business and uh China uh China you know came in and and and changed the the manufacturing of furniture to when I bought the business 90% of the wood furniture that was bought in the United States was made in the United States 15 years later it went from 90 to 10% it flipped W flipped upside down so it went to yeah it went from 90 to 10 so 80% of the market went to China um and deflation came in you know distribution channels changed and we got clobbered and we spent literally three years uh hand to mouth it took me a 100 days to pay any of my vendors I paid the bank on time I paid the government on time paid employees on time but everybody else had to wait you know three months to get a paycheck to get to get paid for for services and you know my suppliers kept us in business you know I I still buy wood from the same people because they they stuck in with this and this would have been early 2000s ear 2004 2005 and then you know the economy got terrible in 2008 you know had we had the you know Great Recession in 2008 so you know everything was hard and it took us to about 2010 until we got you know back on our feet where we could you know pay people again and the business model is for a manufacturer like you is that you don't sell direct to Consumer this is well before direct to Consumer DTC even existed as a model so I guess all manufacturers like you sell through retail channels that was the model yeah that was the model of the day for sure we independent sales reps and you would sell wholesale to Independent retail stores and uh you know then they would they would sell the retail portion so okay it was a crazy distribution it was an easy it was a distribution channel that was easy disrupt from from China um and why what was so easy for China just because they go to those same retailers and say we'll give it to you for a tenth of price or half the price or whatever yeah yeah and that's that's easy disrupted and uh you know in those days China was uh you know illegally dumping product they were literally you know paying woodworking operations in China 20% to export to the United States so it was uh it was impossible competition wow and and it sounds like it happened quite quickly so China comes into WTO and then and I mean you feel it within a couple of years and then it's unrelenting sort of thing yeah 2001 is when they got to WTO they had World dead uh they had uh most favored nations in the 90s people were like huh you know and then ultimately WTO and then they uh when they got in there got they got especially aggressive and you know in a lot of cases illegally trading with the United States um and uh yeah it was hard everywhere we we're lucky we were high in we could find a little bit of a niche but there was wild def deflationary pressures in the industry and um yeah it was it was crazy time it was tough yeah by the way how how many employees were at the business when you bought it in throughout this first 10 years yeah well I bought it at had aund it was $10 million business had 130 employees uh today we're a $30 million business and have 160 employees so uh goes to show the value of that lean manufacturing little bit more of anic operation today these days we get to we buy these gigantic CNC machines that are you know magical you know or world changing type technology that uh are wildly productive that make a big big difference but uh well well I want to I want to hear about what manufacturing looks like today and into the future so we'll hit on these CNC machines okay how did you ultimately I guess you explain how you survive these Hard Times by basically paying your suppliers in 100 days and just you know Robin whatever Paul to pay Mary or whatever it is but it it was it was real cash management and you know we we would we would speak to our suppliers you know every week you know we would pay them what we could we would make sure we did exactly what we said we would do so that they could continue to trust us um and they were they you know they were in a position that they were willing to kind of ride us out they we were an important enough customer to them that they would you know they they essentially financed the business for three plus years and then how did you because in in some situations where there's a downturn in an industry it's a cyclical industry and so it goes down and you're holding your breath till it comes back up real estate would be a classic example but in in this case it feels like it was a secular change where China's this is a permanent disruption to manufacturing it's not just going to recorrect so so what were you holding your breath to have happen and ultimately what did happen that you could get Shore up the business and carry on um a twofold uh one is which is uh you know we we aggressively went around trying to find other channels and ways to sell furniture and and people to sell furniture too you know there's furniture that you can you obviously today you can sell direct to the consumer you could sell it through uh lifestyle big big retailer stores uh and we basically uh you know all of the above was the answer we look for any kind of customer that could allow us to bring volume through the business and uh we would aggressively go out there and pursue that business uh especially a lot of the OEM business so we started doing a lot of work with uh uh you know ultimately our biggest C would be room and board which a wonderful business sure sure you know found some different channels that we eventually got Traction in and had growth in and you know found protection in um so yeah we went every you know we we knocked on every door we could tried everything we could to sell furniture and eventually found enough you know other customers that we didn't have before to start growing the business simultaneously we joined a group that uh uh sued the Chinese for a legally dumping wood bedroom furniture and uh back in tell that story gat you told us send me on the preall you it's great and I had gotten I had gotten a call from John Basset who and Basset sounds like a Furniture name and I I didn't know anyone in Industry because I was still kind of an outsider he called me up and he said gat you know these Chinese are stealing our business blah blah blah and I said yes sir and and uh he said we're going to sue him I want you to be on my team and I said John I got a couple problems three actually goes oh what the heck could your problems be first off you know I went to fancy schools and they talk about about free trade and how important free trade is he's like yeah this isn't free trade it's blah blah blah I said I said well I got a fancy degree but I know you vote with your wallet not your degree and I think you're right I don't worry about that he good Kat I thought you had good sense and I said I hope so too he what goes uh what's your next problem I said I'm getting letters and this is true you know letters from all these big Manu retailers they said if I work with you and I sue the Chinese I'll never work with me again they'll never work with me again and so Mr Basset says Ah cat you're not getting bullied around you're not someone to get bullied around like no I'm not and those guys sent me a form letter and you called me I want to be on your side and he said that's right you do and I said and he said what's your ass problem and I said John I'm broke I can only biggest problem of all yeah I can only guess how much money it cost and see with the lawyers it takes to do a case like this and I don't have a penny he says get I was afraid of that but I got a solution for you I said oh what's that he goes I'm gonna pay your share and when we win you pay me back how about that I said Mr Basset that is wildly generous but before I answer or say yes I got to tell you if we don't win I'm not paying you back not cuz I don't want to because I I don't have anything to pay you back with get we're going to win Come Aboard I said Mr Basset I'm bored and that was the beginning of uh and he was a great salesman I love I love him to the day he gets done with that he said I said okay what what I do next he says get I'll call you when I need you hangs up the phone get the deal done and hang up the phone and I work with him and he's got two Great sons that are great for they become best friends with me over time and it was a 10year Odyssey there's a there's a book called The Factory man it's a wonderful book it's all about John man Factory man is an odyssey so we ultimately went to the ITC Commerce testified in front of all these folks uh you know had a room with half Chinese half Americans everyone looking across each other I was testifying and we ultimately won we won it and those days they had what was called the bird Amendment which was named after our long time and great Senator Senator Robert bird when they decided to put these anti-trade laws in place he said hey the government shouldn't get that trade money the people that are get beat up by Foreign competition should get the money so when they put tariffs in they actually distributed to folks like us that had had had had brought the lawsuit and uh so uh that was part of the turn around so I got a couple big checks from the government uh that helped get me out of debt uh it help me pay John back my first check I you know pay to the order of John Basset uh but eventually second one I got the cash and uh uh that helped you know that helped lot and then they put tariffs in and and the illegal trade stopped um so that was it so how big was that check how big were some of these checks um for me I was the smallest guy in the operation I uh I was uh and over a 10year period or collecting it got close it got close to a million dollars I got the first big one after like eight years and it was a half a million dollar check and my person who does it came in and showed it to me I never seen a check like that before I'm like this is incredible had all the colors and everything that the government checks have yeah yeah and she says uh get what do you want to do with this I said you know what we should do we should pay everyone said what I said we owe at least a half a million dollars we could actually get current with everyone we that were behind said you know I think you're right I think that's about what we can do is let's do it we sat there for the next three hours and wrote half a million dollars checks out to all our suppliers you kind of tired at the end of the day so I didn't think twice about it we mailed all that stuff out and like three days later couple my lumber suppliers calling back I said c is everything all right is everything all right I'm like yeah yeah things are fine goes well something's wrong I said what's that goes you paid me I got I got a check from you are you going out of business I said no sir I I finally came in some money and I you know I owed it to you so I sent it to you and you're not going out of business no sir we're going I think we're going to make it well that's great and I had like three or four calls like that was wonderful that's great and and this so This lawsuit is this something that furniture industry insiders will have heard about I mean was this a big industry event oh it was a giant industry event it was a it was a third rail in the industry you know people were mad at each other you know I'll never work with you again yelling and the whole thing it was a crazy crazy time and there's you know there's a half dozen to maybe two dozen uh Industries have gone through the same thing um you know they've done the same the same process it's it's a tricky difficult uh process uh but you know we proved a point and we saved a good chunk of businesses by doing so and and and in fact going back to what we were saying before about what would there ever be a staunching of the bleeding of this China effect in fact there was so so you pushed out through legal means some of this a lot of this competition that was killing you so so obviously good for business um so things started and you felt that within a little bit of time I imagine next year or two well I felt the check I got that was for sure those check it took a longer time and you know China is still uh you know is still 90 90 8888 89% of the of the wood uh business but at least it it stopped the pendulum there and so what you what they were doing that was unfair uh was that it was being subsidized by the government because they're if they're still competing it's not like what what Chang I mean it was crazy obviously you had inexpensive labor that was that was just a part portion of it you had illegal timbering uh okay you know so they're cutting down trees for free in places that you know didn't have controls and uh and then they were uh when they would export obviously the the Chinese government gave a lot of their factories money to start up buy things and then when they would export they would get up to you up to 20% export like a reverse tariff uh to export United States yeah so that so the cost you know for you know the cost of probably coming here from China in those days was was maybe you know 20 was a quarter you know a quarter what it would have cost to do here so it was well below the price of the inputs wow gotcha and so the uh the outcome of this of this case is that the prices of furniture coming out of China wood furniture coming out of China have gone back up to where they're kind of more in line with what the costs are uh yeah this international trade is never that simple but what it what it did is it really kind of stopped the the the most egregious folks from from uh Contin to do their stuff there were still a lot of factories that that were exporting here and those factories were doing things legally and uh they continued to have access to the to the market so it really didn't stop a flow the the ones that it it stopped either they they either got acquired by folks that were doing illegally or they would you know trans ship stuff through Vietnam so it never got uh it never you know it helped you never you never stop it it's it's a little bit of a whack-a-mole game okay but in the in the meantime the way that you've survived is you basically sold more sold different channels found new customers and found kind of tow holds in various uh retailers R and board is a high-end retailer so you're in the high-end Niche room and board is also American everything's americanmade right so you're you're you're maybe really starting to cater to position yourself as American maid w w and and sell at a premium based on that which was a new strategy new marketing strategy for you yeah so the americ made was was was part of it R board a wonderful customer they had the same kind of DNA we did they believed in you know beautiful wood made in America and so that was really a natural growth for us uh for but our business there's two things we would talk a lot about main America and we spent spent a lot of time talking about sustainability I helped found the sustainable Furnishing Council 17 years ago they know no one knew what sustainability meant 17 years ago and we began that conversation within the industry and obviously that's G that's become you know pretty common place today but it wasn't those years so main America and uh sustainability were were the points of try to differentiate to hold a niche and uh you know interesting just kind of long Arc stories that in those days people would make fun of you for making things United States the answer was like oh when are you g to start importing huh when are you gonna go out of business uh it was kind of impossible and people treated as such and uh you know you you when you told someone you're an American manufacturer they kind of looked at you like you are a fool um and uh there really wasn't a premium for being made in America in those days uh too often made America was presented especially in the 70s when I was growing up it was like Hey buy an American car be a good American uh that uh you know that doesn't that doesn't sell much product um and it wasn't important to people uh today that's changed a lot people you know more people care about uh where things come from and how they do it and uh you know low price is and justification for you know for anything uh today it's kind of fun to be an American manufacturer like wow what a novel neat idea uh that's great uh you must be really smart and you know I'm a Survivor uh so we're one of the last dogs in the kennel and people you know kind of being nice to us now it's much it's a much better situation yeah yeah well not to pump your tires SC but you must feel pretty damn good about holding on and and emerging from this on the other side because you it was Bloody uh and here you are yeah yeah yeah and you know uh you walk into a factory and you have people here that had those days had worked 25 years here they they we're fully committed to it you know the last thing I wanted to do was to be a Furniture marketer and forget about you know the people who built this business so it was fundamentally important to me you know a community having a manufacturing Factory in a community is a real thing I mean the the people that work here you know are the firefighters they they they run Sunday schools um and it's the fabric of what we do you know I just uh it was terrifying to to have that being ripped out not just myself but uh a whole lot of people here that had put a long time into it so yeah there was great pride and I really I look at myself not a necessary Victor but a Survivor um but uh yes absolutely well what what you just said is is such an encapsulation of um the economic trauma that we all know hear so much about uh if if we don't live in these communities we hear about it through the news and of course it it's more than made it into our politics and um just the the devastation wrought by the Outsource and Manufacturing I mean this is I don't need everybody knows this it's an old Story by now but to hear it firsthand from you and to have been kind of on the precipice of having a manufacturing business collapse in a small community where so many people depend on the factory um it it really hits at home um yeah tell us about the community where are you based how big a town is it give give us a painted picture happy dude Berkeley Springs West Virginia was one of the early Spa towns uh of this country it was surveyed by George Washington himself when he was in his teens working for Lord Fairfax uh so we have a warm spring in town that's the name Berkeley Springs it used to be called the town of bath named after bath you know a copy of bath England and they had a polio Hospital in the in the in the 20s and 30s in here have we have a castle for someone in the 1890s the in the Roaring 90s built a castle so his girlfriend would marry him and move out into the SP Town um so it's a it's a it's a wonderful Castle still there Castle's still here absolutely um and uh um yeah two hours an hour and a half outside DC what give us two hours it's an honest two hours outside of DC basically Due West of DC 100 miles Due West of DC um so it's nice in the fact that it has some access to larger cities uh it's not totally remote but you know small towns are small towns there's been difficult didn't you know our country has you know often forgot about small towns since uh since Lyon Johnson was in no one's really paid a whole lot attention to to smaller towns and they're they're they're tough but they're also wonderful in in their own way too so it's SW out our whole County's 14,000 people um wow the whole County so and and and are you the county seat is Berkeley Springs the county seat we are the county seat yes indeed right yes sir all right and so what's the population of Berkeley Springs proper so the town is 16 is 600 it's one of the little old school towns you know it's Lord Fairfax and and Mr George Washington only survey so much space it's a tiny little footprint uh but it's it's a it's a nice Town it does great weekend business so there's a lot of folks that that come out here to escape DC Pittsburgh Baltimore on the weekends and uh um yeah it's basically the start of the mountains as you work from the East Coast as you work from the east coast to get heading west okay all right it's 4 hours from where I grew up so it's uh it's and I learned I won from here so I've got to learn what it was it was it was a true adventure moving from Chicago to Berkeley Springs West Virginia and uh for those that have have ever moved from the big city to a small city you'll never feel wealthier than that day you move into a small city um so that was great and then you know but uh small City yeah but you were from West Virginia so you were you were prepared for I mean you knew what you were getting into so to speak I mean you knew the culture of a small town right but I guess you you said you were born in the suburbs of Charleston so by comparison Charleston's a big city yeah uh so yeah you know there's a West Virginia there there's a there's a sense of place here people uh love being from West Virginia and I'm one of those and be able to come to your home state and have a career uh me means a lot to me it means more than just yeah there's there's a there's a lot of Pride into that for sure yeah that's so that's so cool people are going to just really resonate with that I think get um okay well we still got uh some topics to hit I want to talk about the future of manufacturing I want to talk about what you would say to people who are trying to buy a business now that you are potentially going to maybe be a seller not imminently so before we get to those closing themes get let me just let's get up to speed on the business okay so you did that big loan I guess in the early 2000s to to to expand capacity to gun toward 30 million and then all hell broke loose where's Revenue today 20 20 years later yeah I'll walk it forward the uh from kind of 10 to from 2010 2012 business got relatively good we were able to start growing the business at uh you know kind of a 10% clip which is really great for manufacturing it's hard to grow a whole lot faster than 10% where you have to buy machines and train people and actually produce the stuff so we were really happy we were growing at a 10% clip um and then covid hit uh which everything obviously everything stopped for six weeks and U and then uh you know for two years everybody was locked up at home um with nothing to do but to buy furniture and other crazy things uh so the business went from uh you know growing in a nice way to being totally overload our demand doubled um and we went from an operation that would deliver furniture that could deliver furniture in four weeks to uh our low point was 23 weeks I shouldn't say a low Point our slow Point uh was 23 weeks and uh you know what a crazy crazy time uh you know counter to what was kind of fun was the the longer our lead time got the more people bought you know God bless the American Consumer because you know if you tell them they can't have something you know they want it even more and you know we you know and and you know you give the American Consumer a dollar they'll spend a150 um and uh so it was one it's kind of one time in life that we were in the right place at the right time yeah I had I had someone call me lead time 22 weeks I was like I'd like to buy a nightstand from you and I was like oh that's great I'll give it to you in 22 weeks like what and I explained the whole thing to him he goes well heck I better get two of them then you know so um it was all that craziness been I was that guy in a couple of conversations I I I understand that psychology well I probably did a little of that myself yeah um so uh we were we were nearing our capacity Point uh before Co before the all that hit uh and I I you know made the decision it was time to to actually expand this facility expand our capacity and uh to shorten the story basically I doubled down I uh we we went to the bank it was a great time to borrow money we had you know two years of Boom in sales and and good good revenue and uh and the rates were as low as they ever been in the world um so I went and borrowed $7.2 million and we built out another we went from $100,000 square feet to 140,000 square feet and put what needs to be put in place to double the size of this double the capacity of this business um so I you know I was at the point where you doubled down and obviously those decisions are are really interesting and and tough decisions to make especially because the last time I expanded I almost went broke um and uh You' also look like well now might be a good time to sell everything's Up Up and Up um and I ultimately decided that uh you know my best opportunity my really best opportunity was to go ahead and double down so you know went back into debt uh expanded upgraded the facility took two and a half years it took us a year to get the steel to to do the expansion during during all this stuff um and uh we literally finished that expansion in January of this year so we're now trying to you know fill up what we've what we built but you know I I literally doubled down and I guess it was a time when I said you I think there's more inherent value here than that someone would pay me for and I think uh the idea that you know $2 million business is a $25 million business or so is a nice business but uh the opportunity to grow it would really be kind of awesome too you know we're at a bit of inflection point where gets large enough where you can you know you can hire a couple people that you normally had do yourself so get a nice chance to hire really you know what do we think and believe great people and you can bring in more talent and it gives you a lot not just that but also gives a lot of people that worked here chance to you know become a supervisor become you know work your way through you create a lot of opportunities for people here and the people here were hungry for new and you know embraced the challenge of of doing more more and different things so yeah it seemed like the thing to to do I I don't don't ask what I'm going to do when I've run out of capacity again because I don't think I would do it a third time but at least I'm crazy enough to do it twice well get a bunch of follow-ups there first how did you get comfortable with the new demand the new yeah basically consumer demand for your goods that that would sustain itself after covid we're all now extremely aware of the covid bump um but people even dur even in the midst of it could see that this was probably a fleeting phenomenon so how did you get comfortable that to Double Down on that phenomena yeah so that you you you you know it only takes a little bit of common sense to know that it doesn't last like this forever and that we would have to return to some kind of normal not only return to normals that there would good chance there's be a bit of a hangover after we go through whole process P pulling forward of demand as we as we heard I it's a pretty fair Assumption of what pretty fair analysis of what happened the uh so you you really had to go back to to 18 and 19 and think through there uh you know can you grow and know you're going be back there so in manufacturing when you have a giant backlog you've oversold yourself you have to the only way you catch up is by overproducing which is great and it's fun to produce all out all the time until you actually catch up and then suddenly you have to produce at your rate of sales which is always less than what you you know your than what you've been prod that to catch up and uh so we've been totally focused on trying to create a soft trying to grow our Core Business fast enough that when we got done building our backlog we wouldn't have to go and do a whole have to do a riff and you know fire Bunch people and uh it came close it was not it was not a soft Landing but it really it was wasn't super hard but it was uh tricky so we went from producing $120,000 a day to a little 95 so 120 to 95 uh we were before covid we were doing $80,000 a day um so we're back on on that kind of 10% growth path and uh you know so we we did the we ran the numbers that we would you know take a step backwards and then restart growth so you're doubling down really maybe the maybe the Surge and demand during covid caused you to really think about it and kind of nudged you to make the decision but in fact you were Trend lining from 201819 so the decision with or with even without co uh you would have kind of eventually been forced to make the decision to double down or not because your 10% grow year forward and and part of to is like you know if you want to sell the business I don't know how you sell a business that's running a capacity I mean you you know no one's going to pay a multiple for a company that you know can't grow can't can't you know you can't grow if without put additional capital in right yeah exactly great and then the what about you said way back at the top talking about what Vision here could be your you know some of the paths you could see this going were other Acquisitions buying an upholstery company I think I heard you say um did you ever what I don't think you ever acquired another business why not uh no did and yeah that's that's the logic when you when you're in a declining Market the you know the the safest path is to you know is to to merge and consolidate um and the wisest path to do that um but this thing was declining too fast there really wasn't for a long time out there really was anything out there that you would uh in terms of woodworking that you'd want to buy um we looked a couple times at at literally just buying product lines which would be something you could do without uh whole much cash down and you could bring a product line into here but all those product lines were kind of old ultimately we're better off developing new product lines ourself than buy an old product line and and wind it down or move it as it winded down um yeah yeah so okay okay uh fair enough you know you know maybe one day we do it didn't but also the other thing in my mind was again crazy own one Factory Furniture Factory I didn't think I wanted to own a second one um not just because the risk factor and you got plenty of risk in the furniture industry but also lifestyle I mean there was thought that you know it's kind of nice to to live and work at the same place uh you have a second Factory that's in Hampshire and i' you know have all good things to say about New Hampshire but uh you know it's nice not have to get on an airplane and fly up there once a week okay uh size of business in terms of Revenue I think I heard you say 25 million around um just before covid hit was that right uh we were running uh I guess uh 20 when Co hit and we're we're we're about we're we hit we're I I always round off the round numbers we're like 20 27 28 so sometimes I say 30 sometimes I say 25 but it's a yeah 2530 million business where you are now after the kind of covid pullback a little bit and on the back to the trend line 201819 trend line I guess we're I tell you we'll tell you we'll be 25 this year uh you we have we get basically 250 days to build Furniture we're building almost 100 $100,000 a day $25 million business great and so to doubling Capac way we think it's that's that's the that's way I would look at things so yeah $25 million business this year the way you think meaning you look at you look at production per day times 365 yeah we get we get you know this month we've got 21 production days and we're going to build uh this month $95,000 a day yeah yeah right so you don't produce every day you produce 21 days month ah next month it's 100,000 a day yeah we're entering in table season we love table season it's uh you know no one buys Furniture over the summertime we have to get come of get near Thanksgiving so people start buying tables again ah okay so we are seasonal we're heading into the good season and there's a little bit of seasonality as business so we're moving up great great well I wish you a good strong season a good high season thank you um and but and then but going back to doubling capacity means therefore you're you're you're hoping for kind of a 60 million roughly $60 million business in the next how many years when that loan comes to um yeah I got uh um yeah I mean if you could do that then you know you'd love to think you do it in five years if you grow 10% a year I guess you double in seven or eight years at 10% I think it's about right so you know I would say uh you know seven to 10 years if we could I would hope we be on trajectory that we could fill up that capacity seven to 10 years great and one other thing Gat so I asked you in the preall what your margins were so of of in a $30 million business what of that Isa and you said what and and by the way that that's kind of how not kind of that's really how we think people out here buying businesses today we always are thinking about what the the margins are um but you were you said to me well I don't really think in terms of margin I think in terms of return on assets return on Capital uh and you're actually my second guest to say that I guess a couple months ago Dan tagliatella who um also comes from a finance background if if if you want to call your background back in your 20s and the 90s of kind of Finance background um and and he we kind of Rift on return on assets um and and he made the point you know I don't know why that's not that that's a very common metric among analysts looking at manufacturing companies or hard asset companies in the world of Finance but you never hear that metric talked about here in the world of business buyers and searchers um so he gave us a bit of a tutorial and I'm going to ask I'm going to kind of push you for the same type of type of next two or three minutes explain to Us return on assets in in your in your case and why it's it is the lens through which you you gauge the health or profitability of your company yeah sure um so I guess now we have about a $15 million balance sheet so we have $15 million of assets here um and uh yeah we really look at what your return on assets is that's really what the investment is if if you're going to have a million dollars worth of investment somewhere you're really wan to know what your what Your what you're getting on that Capital as opposed to what percent of sales you're getting to keep yourself um and so you know the cost of capital uh you know these days a little higher used to be you know debt uh debt cost 8 10% if you have secured debt you know you make up what you need for equity and you say you know I want to make 20% Equity so if you have an asset that's uh you know asset would uh this company if it generates uh uh you know 15% return on assets 20% return on assets um uh that's a pretty darn good business because you put a little leverage in there then you're getting a return on Equity uh in the 20s and 30 you know 30 30 and 40% depend how much leverage you put on it so um and and that number is appealing because when we compare when we compare 30 or 40% to investing in the stock market or something you you see it's typically you know single high single digits low double digits so so 30 to 40% compared to what why is that so strong uh yeah you know boy it's hard to to buy a public stock and and make 20% every year um so it's kind of nice to have uh obviously it's a different risk profile but it's really nice to uh be able to run that and uh you know it also just it tells you what kind of capital you could afford when you're getting a you know 10% 15% return on on assets uh it's pretty easy to leverage those assets and uh you know when Leverage is Affordable uh you can really you can G your Equity returns there's a great uh you know a lot of public companies run this way these days there was a great book you know years ago uh what it the outsiders and really talked about uh you know the real the CEOs that have really generated long-term value for their shareholders or the folks that are focused on their return on assets and you know they're buying back stock they're using they're using cash to uh you know to make the denominator smaller and uh thus making General a bigger return and that's that's and that follows a little bit of lean manufacturing you know we try to be really Capital efficient here we had to do it you know in the days of China taken over the business but you know Capital efficiency is very key so you know low inventory you know you collect your cash quickly we pay people in normal terms uh but that's that that all adds up to a real return and so that's the big picture you always do look at your but that's important to just look at your performance But ultimately you know running a business you know by I it just is the return on capital is this the real measure and just to be clear when you say you're using the phrases interchangeably return on Equity return on Capital return on assets those are basically all same thing oh yeah it's similar so obviously we I just look at the return on assets uh as the first number I look at because you can you can you can genin your return on Equity depending on how much debt you have so you you know you adjust your your debt levels uh your debt levels adjust you'll you have different return equities well one of the things that also this really communicates is that as the owner of a business at 25 million soon to be $60 million business you're really making Capital allocation decisions when when when you make business decisions um and so it's it's kind of like the best entrepreneurs the best business owners think like investors capital allocators and in fact I think I think that is that is kind of the thesis of The Outsiders is that those that those Executives who were so successful those five profiled Executives in The Outsiders who are profiled um are basically think like investors um Capital allocators as opposed to I don't know businessmen if you could yeah no I think it's I think it's a very that's that's a big part of it you know for for me you know what's the you know what's my job as this as running and owning this business it is it is you know capital alloc capital acquisition you know how to get as much Capital as you can because these businesses are hungry for Capital and then you know how you allocate it the most effectively uh you know you never you never have enough money so you know youve got to be effective on how you distribute it so uh you know two things of being an owner of a business it's it's Capital acquisition and it is you know alignment of Interest so that you have a business and management that everyone is aligned at what you're trying to achieve so you know alignment management and capital acquisition or just you gathering enough Capital allocate properly those are those are the core that's that's my core job okay let's start wrapping up let's look to the Future a little bit and talk about manufacturing um from here into the future so you how are you thinking about manufacturing we've already T looked at the the history of the last 25 and 30 years how rough it's been but as you said a few minutes ago um being an Manu American manufacturer is cool again uh and you're looking like a genius and um say say say more what do what do we think about this trend overall uh that we're hear so much about manufacturing coming back yeah so the future of manufacturing future of American manufacturing I'm wildly bullish on obviously I've doubled down in my own business as a manufacturer and there's a couple things behind that uh is uh is is the demographics we're we're in a really nice demographic growth area where you know the the Millennials and gen xers um you know there's not many Millennials you know many us around there's a lot more gen gen xers and they're all now moving into the age of having kids and buying homes and uh you know there's nothing better than American that forms a family they they got to buy all kinds of stuff like minivans and houses and furniture and dining tables for Thanksgiving good a good dining table absolutely the uh uh you know you know in 2008 it was just the opposite you know all the all the Baby Boomers are moving out of prime consuming time uh now we're we're at we're we got the wind in our back in terms of demographics today especially for Consumer durables um so the next five 10 years I think is going to be you know in terms of demand we're going to have a really uh attractive uh Forefront Force that's applicable to a lot of different businesses uh that is good in terms of manufacturing a couple things that are really great about it uh again the American Consumer today not all but more and more American consumers uh you know care about you know what something cost as well as How It Was Made where it was made you know they want product that is safe and uh that you know treats the environment with respect um I think it's uh that's that's key and important and that it always it's not always like that so so there's a reason for optimism I think uh you know back in the you know 15 years ago we used to say main America was a good tiebreaker uh today I think actually people would pay a little bit more for something made in America that they could fundamentally trust not a lot more but a little more and that's uh that goes a long way uh and then uh manufactur the manufacturing technology today with primarily the CNC computer Intermatic control Manu technology is really wonderful we've got big giant Gantry CNC machines that are magic they're equivalent to digital printers and and as some of you would know digital printing you design something in 3D print it layer by layer and you have a 3D shape uh that's what they call addtive manufacturing we do subtractive manufacturing with the same technology we essentially take a block of wood cut away what you don't need and you have a beautiful Park that comes off of one machine you know in the old days we'd have to take a piece of furniture take it to a table saw a joiner a table saw a drill press a this or that that to make a par uh today we literally put it on one giant machine and a part comes out it's fast flexible um and so so so how does that how does that um what does that mean for the your labor and and the people who are working in the factory are basically everybody keying things into the CNC machines as opposed to working with their hands sort of picture it's a great combination that's really probably the the secret to a lot of the manufacturing is it automation these days and it is uh it's actually very easy and very affordable and very effective if you have a uniform to input plate of glass sheet of Steel uh a nice piece of nice panel of wood drop it on a machine and it will work fast furiously and do everything you want it to do when you have variability as an input it becomes quite hard and quite often people deal with variability much better than computers and Technology does that's slowly changing but it you know that hadn't quite changed yet uh so in our operations very very conscious about what we're doing by hand what people are doing and what machines are doing so there variability especially when you're actually assembling a piece of furniture that is done by a person at a bench it's done in a nonlinear way where the person gets puts the whole piece together signs it dates it and moves it on uh where we have you know we have uniformity and that would be trying Machining a panel uh the uh CNC machine does it beautifully better than the machine does it's better person can do and so it's a combination of the two it's uh in no ways uh you know people going away for the next couple decades thank you for that uh G so I I want now to close us out I want to ask kind of a few questions here that basically prompt you to reflect on your career and um and kind of kind of apply your experience to where people are who are listening to this they are you in the 90s looking for businesses you know on the other side on the the beginning end of of the journey that you're so deep into already first would just be to I guess talk to them uh this this path has worked out well for you right despite the the gray hair despite the fetal position moments when which were years long it sounds like during those rough those rough patches in the late auts but um I guess nett it out for us how do you feel about having chose this path um yeah geez I could tell you I still think I'm a young guy doing this for the first time it's it's kind of funny to to be the old wise guy um is a little different than my mind's eye um uh it's been a wonderful journey I I would recommend it to anyone um I think what's been uh you know the things that that I've enjoyed the the most and what I enjoy often about working uh this entrepreneurial thing of owning a business and buying a business you know really works to a lot of it uh you know things that I that I truly enjoy and I find great is just the process and ability to be creative creative not just to simply try to design nice product but uh designing process EES designing how you work with people um and it gives you a great pet to be creative and solving all kinds of things when that's that's stuff that you wake up in the morning trying to figure out how to do this or that better is is all cool stuff um you know I I generally like working with people so it's you know I like the people I work with and you have a lot of control over that um uh and I think the one thing that's just you know I've been a I've triy to focus on lifestyle I mean it's it's uh you know I work hard but I have a level of freedom I wouldn't have had I been working for for someone else um you know and that freedom is wildly valuable to me so you know I'm able to take a vacation when I want to take a vacation I'm you know able to you know if I need to be gone I could be gone you know I typically show up on a Saturday make up for that lost time but uh I have freedom to take time when I want to and uh and that's real value you know it's really nice you know people like time off and people like flexibility and I you know there's I don't know of a situation where you could have better flexibility than you know owning and running a small business and Gat what about specifically buying a business versus starting one from scratch so this podcast is all about that buying an existing business rather than starting from scratch one of the sort of mantras of this space and of this podcast is the media has told us that an entrepreneur entrepreneur looks like Mark Zuckerberg and Elon Musk starting giant ideas from absolute scratch which is glorious and great but it it makes people feel like if they don't see themselves in Mark Zuckerberg or Elon Musk which Mo most of us do not then oh I guess I can't be an entrepreneur because that's what I'm told an entrepreneur looks like so what what about how what would you say about um that distinction between the fact that you bought your business as opposed to starting something from scratch yeah the uh you know uh the most obvious is uh is great and uh Mart zuger is a very obvious example but there are nuggets of value all throughout this country there used to be a lot in manufacturing there's a lot of different places in that that there's real value um so you don't have to look like the most obvious uh the most obvious player to to find success I uh you know I like to to say to you know when you go down do a kayak or go down White Water stuff like that always have Eddy so you know whenever there's big trends and big trends are great and big powerful Trends out there you know there's often an Eddy where the water circles back and goes upstream and uh those are kind of fun little niches to be in so uh you don't have you don't have to you don't have to be in a big current to have something that's exciting you know it's it love that metaphor great okay and now and now speak to people who might consider buying specifically a manufacturing business you've told us big picture what you think about manufacturing but but put yourself in the shoes of somebody who you know they don't even I don't think people even take shop class anymore by the way Gat so so a lot of listeners who might buy buy a manufacturing business have never set foot in a shop of any kind um and and and probably don't have the experience that you had uh at least talking to manufacturing Executives that you did while in your Chicago days what what would you say to somebody who really doesn't have manufacturing experience but for whatever reason is drawn to buying a manufacturing business I'm going to go off a quick tangent before I answer that question and tell you when I first ran into my shop teacher my high school shop teacher after I bought this business it's about two years after I bought the business I'm a wedding in Philadelphia I'm walking to the hotel and my shop teacher says hi to me he was at the same wedding obviously my buddy was a good shop guy I was not and I look over I say Mr Brown he goes oh yeah how you doing I said I didn't expect you to remember me I wasn't one of your good students and he he goes oh I know and uh my wife was with me we just gotten married and and she he goes I get a kid like you every couple years my wife goes what kind of kid is he goes well G you know you were uh doing a nice little project nice little table and the last three weeks the school came around and uh you never showed up I said Mr Brown I I I'm sure I was in the library or something he goes I don't know where you were but you weren't doing your stuff and I said well I guess I owe you an apology and let me let me do so right now and get and offer you a heartfelt apology for that he goes actually yeah you don't owe me apology I said what do you mean he goes well you know after you left school I took all the parts you had made fixed a few of them put them all together I have a piece of your furniture in my house today what I said well that's great I feel so much better I said I said is that why I got to be in your class he goes yeah yeah you were a c student but you did me a favor you didn't know you did me a favor I figured I'd owe you once so I gave you a B I said well thank you I didn't get many bees that year because I figured that as well and we all kind of had fun to start smiling and so we started walking off and he looks at me says well so what are you doing these days I said Mr Brown I'm manufacturing furniture and the guy turns white he goes what I said I'm manufacturing Furniture what kind of furn oh antique reproductions would this and that the more I told him about the business the worse he looked and he finally looks around and and he's like and you can tell he's like I gave this idiot a be and he thinks he's in a vocation he's going to be successful in I feel terrible and uh he goes uh he goes are you making the furniture I said no sir I just run the company goes oh well thank god you'll do just fine then and color came back to his face and we walked off together I bought the beer so I bought the first beer and he G you you'll turn out all right um so you know never never let a shop class deter what your ultimate vocation is nor let it be uh inspire you into doing something you can't do um so uh that's that's my uh that's my shop teach guy was a great guy he was a 50-year shop teacher I wrote him I wrote him a letter when he retired about a year ago what a cool guy uh the uh uh yeah I think uh you know one of one of the awesome things about um doing something new and acquiring a business is also the opportunity to learn you know you're problem solving you're learning it it is a great opportunity to jump in with both feet and uh and do some stuff I think you know each year you you learn you figure out it's uh you know no way to make yourself stronger uh as a as a as a business person you know as someone that kind of contributed Society then jump in and do stuff like that yeah so one of the things in in our world here uh of buying business businesses is that um we hear so many stories of people who've done it successfully and we and we and we believe that we can do it successfully which we can um and but then maybe we get a little bit uh overconfident and we interact with businesses in the world and if we come across a business that we like we say to ourselves huh maybe I'll buy this business right so there's a there is a hard there's a americanmade wood furniture retailer here in the DC area um whose stuff I admire though I haven't bought anything just because I have my stuff um but would like to at some point buy a piece from them they're called hardwood Artisans U manufacturing facilities in C pepper Virginia I'm from Virginia um and you know I've gone in that store and kind of you know stroked my chin and been like you know maybe buy this business or wouldn't it be or maybe I'll just reach out to the owner one of these days and just start opening conversation like you did with Tom cely what should I look for in a in a manufacturing business business what are what are some of the key thing signs of Health that I might that I'm looking for maybe the technical ones obviously the ones that apply to every business you know history and um brand and and some of that stuff is universal but maybe more specifically um especially this business which is probably a competitor of yours what should I look at sure uh no I know those guys they make they make beautiful Furniture they're good they're good folks uh and they have retail stores so they're they're fully integrated operations so they're they're make making stuff with coold pepper and they're selling it in DC which is what you want to do it's nice to make things in a relatively lowcost operation and sell it in a high cost operation yeah um so they've got that all right um uh to them to speak you know when I would look at something I would look at you know how good of manufacturer they are would be something I would look at uh specifically quality of product yeah the quality product and how good they are making it you know there's a lot of people that can make a nice quality product but do it in efficiently and you know in a backwards way like like what you found at Tom cely yeah yeah so that would be part of it I think the the the more important lesson what what I'm working towards and I think this is a general across the board the closer you are to your customer the safer you are and the better chance you have to get paid well I think this it's an analogy that people often use in corporate life you know and you work for a big Corporation the close you the customer the better chance you have survive a merger or downsizing um often you're the better you're often the the better paid person is the one that had that has the connection and relationship with the customer owning a manufacturing Factory has a lot of similarities to that analogy in that The Closer you are to your customer the more chance you're going to have success both in terms of you know being able to communicate tell your story to them and also just learn from your customer on what you know what they really need and want so you do that well uh this industry Furniture industry um has multiple layers of distribution um and uh you know my old distribution where I was 100% selling through independent retail stores is you know multiple steps away from the customer as I grow and grow our business the channels that get get us closer and closer to the customers are the ones that are most valuable and give us the best return um your your example with hardwood Artisans is a nice business in the sense that they have they're they're selling directly to the customer there's obviously challenges with that because there's a good bit of capital and other things you have to go in but you always want to look at you know how close to your customers and there's often a great play and didn't have to be manufacturing but anytime you can eliminate a step in distribution so you're not going through a job or you're not moving product through a warehouse you're not moving things that whenever you can take a layer distribution out in Industry you have got a business model that's going to give you a return and so I'm clear so that great understand how hardwood Artisans is is closer to its customers because it sells retail it's own retail stores but in your case how have you gotten close closer to your customers sure so we'll we'll work with uh uh you know obviously still a large part of our businesses uh is is working through independent retailers we work with a room and board and a room and board's a different type of relationship you know we develop product together they essentially own the product they lab they market and label the product but uh you know there's no there's there's no Sal Sal person in between you know there's there's we're much close to customer we're driving much better value to the consu we're driving good value to the consumer um we'll work more and more with specifiers so a designer so we could sell uh to specifiers both in terms of residential and Commercial um and then you know we'll occasionally where we don't have retailers we'll sell direct to the consumer at a at a at a retail price um and uh those are all valuable channels and you you kind of have to do all the above in business these days and the ones that are close to the customers will will ultimately give you the best return ultim often now with the hardwood Artisans you know one of the difficulties is those are that's two different businesses you know they've got you've got to run a retail store and you got to run a factory uh in the case of furniture that means you get to work 24 hours a day because all day you wake up early in the morning Monday through Friday in a factory and then you stay up late Friday night Saturday and Sunday selling furniture um it's uh it's it's It's a combination that's pretty tough it's a little bit like the uh end up you end up having a schedule much like owning a hotel which I think would terrify me because that'd be 247 but uh owning a retail operation and a manufacturing operation well creates a great value it's going to take a lot of hours of your life yeah great great insights thank you Gat last question for you so again to tie it to this you know who you're talking to and and and are the are the Gat cerons of uh of today uh the Gat capons of the 90s but today so how would H how you're you're not selling your business but you know at 57 and you you hit your 60 million Mark you know it's it's feasible that you might sell your business sometime in the next 10 years you know call it give or take I tyly I would sell before that I think it would be if you get halfway there would be the more Ideal Time okay great so so five years um if you got calls or and maybe you already do or emails from people who are you know starting out of their career more or more midcareer but you know in their 30s 40s and and and they kind of say hey Gad I I uh would like to learn about your business or maybe they're more direct and say I'm looking for a business to buy um how do you react to those calls now that you might be receiving them as opposed to making them to Tom cely as you did back in 94 or six um uh you know I always pick up the phone I you know I think you never know what's going on until you talk to somebody and I'm always happy to to to do that and you know I've had different people reach out me over time that you know uh that I've developed great relationships with that are fun that I've learned from uh I've never created I've never gotten a phone call that's turned into a scenario where we talked about potentially an acquisition offer um and uh and I'm not answering the phone in in with that in mind uh but uh I think it's you know when you run a business it's a little bit like living on an island uh you know you appreciate visitors and you appreciate phone calls um so I I tend to be quite open to you know people that don't live on my Island uh because it's nice to know what else is going in the world okay okay grit anything we didn't get to G I feel like we covered a lot of ground here this has been so much fun anything that we didn't touch on you want to share with the audience um oh what a treat I I've I've learned a lot by telling my old stories here I love the context I I I really uh it's so what a what a cool and interesting uh uh topic this is it is fun I I I the acquisition business I I think is very cool it's it's uh almost as cool as running a factory well as I as I told you on our preall you did what is now a big Trend to do and has vocabulary around it and podcasts like this one devoted to it and books written about it and uh influencers online and so on but you know you you but but the but the the formula and the pattern is the same as it was you know back back in 96 when you did it uh you were just uh decades ahead and doing it even more entrepreneurially than than we do it today because you really were kind of figuring things out uh without uh any kind of beacons ahead of you so um fun to fun fun to you know show you show you what a first mover you were someone asked me K so what are you really good at a business I say you know I'm good at borrowing money and surviving and uh so uh that's it's an ongoing theme and uh for me personally and and you know a lot a lot of it is survival you know stuff's not easy but uh you know when you when you have a couple wins it feels pretty good works yeah yeah if people do want to reach out uh how online where I should say online are you LinkedIn email somewhere else yeah yeah I do a LinkedIn I'm not very active on LinkedIn but I'm certainly reachable there and uh you know I got a beautiful website that's called gatc creek.com uh you'll have to look at a couple pieces of furniture to get in touch me through there but uh that is uh that is what I have out to the that what's that's what comes off the island okay hey and by the way Gat Creek uh what was the name of the business when you bought it and how did you choose to Rebrand it ah so it was originally Tom cely furniture and so I bought the business from Mr cely and I ran this Tom cely furniture for a number of years which was outstanding because every time we'd screw up and they said what the hell is that Tom cely guy thinking I could look at him and I say I don't know what the hell he was thinking um eventually it was the line the product line was antique reproductions and you know eventually came realized that uh you know antique reprod Productions worked the way to to go over the long term for this business I wanted to make furniture that was design more contemporary not necessarily modern more contemporary furniture and so I kind of decided need to brand things a little differently uh I grew up uh in Char outside Charleston West Virginia on a road that was actually called Gat Creek Road uh it was uh my when I was five years old I had a brother that was four years old at the time my parents and four of their buddies bought a piece of land put four Lots on it built a road in there was a creek at the end of the road we went cleared for our house when I was five when not had a picnic I saw the creek before my brother did I thus claimed it my Creek two five-year-old four-year-old boys we went fist to cuffs over whose Creek it was I was taller and bigger than my brother so I both saw the creek first and won the fight and my parents were just too damn tired to to to do anything the hell with it it's gats Creek we'll name something after you another day John and my brother's crying and I'm jumping up and down and they're driving out and then they're like we're just call this road Gat Creek Road so uh today there is if you look find the right place to chareston you'll see a gat Creek Road and there's a there's a creek there that you know didn't have a name that now says Gat Creek um and so you know quite of people was like wow that's great so you were named after Creek I'm like no I came first I was there named after me uh later on WE you named the furniture business Gat Creek just to rub your brother's nose in it even more yeah crazy my dad's like you got to call it cat Creek that's a special place people love that name like I don't know it is it's a great my brother my brother by the way eventually they they got a we got a dog an Irish Wolfhound and named it Sean galic for John and my brother was the happiest guy in the world walked around this dog forever and it was great until you know of course the dogs died and so when the dog passed away you know he pissed off at me again we have a great relationship now I one time I said I want to order I want to name a product after you built this designed a beautiful table I called the Amer table my brother's middle name I was so happy and we sold like a total of three of them I actually had to discontinue the product so he's he's John amler yeah um Gat speaking of names I I just made the connection Tom cely that's is he part of the cely postoptic family no relationship at all they're totally different oh okay all right all right G great interview thank you so much for doing this and congratulations on on quite a career uh running Gat Creek and and here's to here's to double in your Your Capacity over the next five seven years you're very kind I appreciate it uh it's exactly hope hope hope to do so it's been a it's been a treat thank you sir I hope you enjoyed that interview make sure you subscribe to the acquiring minds Channel below we are now publishing twice a week so tons of new interviews and stories to come stories that will help you along Ong your own path to acquiring a business