In the Eye of the Beholder… Transforming an Underperforming Business Jason P. Premo ADEX Machining Technologies. Discussion Topics. Introduction Finding & Acquiring the Right Business Transitioning with the Owner The Critical First 90 Days Quickly Capitalizing on Hidden Wastes
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In the Eye of the Beholder…Transforming an Underperforming BusinessJason P. PremoADEX Machining Technologies
Discussion Topics • Introduction • Finding & Acquiring the Right Business • Transitioning with the Owner • The Critical First 90 Days • Quickly Capitalizing on Hidden Wastes • Lessons Shared
Introduction • Jason Premo • Engineer to CEO, Serial Entrepreneur • ADEX Machining Technologies • Formerly M.C. Tool, Inc., Greer SC • Roots as a “Tool & Die” Machine Shop • Founded 1987 – Acquired Oct 2007 • Previously 19 people, $3million sales • Results in 12 Months • Precision Manufacturing: Prototypes to Production for Aero, Energy, Defense • Now 56 People, 24x7, $10million sales • Growing Strong in Down Economy
The Search • Business Plan First • Write a business plan as if you already had the company and were running it. Insert name later. • Create a Search Criteria Matrix • What are the Must Have’s and Would like to Have’s • Industry? Processes? Niche? Size? Geography? • Jealously qualify prospects against this criteria • Due Diligence Examples • Looked at over 34 businesses in 5 states • Typical: Last 3 years sales declining, health event, no exit strategy, owner is a micro-manager, no customer relationships, no niche, no value-add
The Seller • Seller as an obstacle • Most business owners not prepared and will be obstacles to completing the transaction • Building a relationship with the seller is crucial • What the Seller is Thinking • Before the transaction: Shall I sell my business? What is it worth? How can I find a buyer? • During the transaction: How much shall I tell this guy about my business? Will he raise his offer? What terms shall I insist on? Will they fire my employees? • After the transaction: Should I really have sold? I wonder if I could have got more money. I wonder how the business is getting along.
The Choice • Why We Picked This Business • Strong fit against our Search Criteria • “Hit it off” with seller – built trust quickly • Weaknesses were really opportunities • Strengths • Good customer relationships and track record • Beginning experience in niche processes • Talented employees and skills sets • Opportunities • Underutilized capacity (and employee talent) • Zero marketing. Huge upselling opportunities with existing customer base and expand niche capability.
Owner Transitioning • Keeping Skin in the Game • You aren’t as smart as you think • Will take you years to turn over every rock • Structuring a seller’s note not only helps with financing the deal, but ensures a smooth transition • Defining Owner Role is Important • Don’t expect the owner to assume a coaching role • Clearly define expectations for Owner • 1 year plan to introduce all sales relationships • Involvement in RFQ analysis and quoting • Be careful not to make owner look bad as you make process improvements and changes – Be humble!
First 90 Days • Build Employee Relationships • Employees first reaction is fear about their job • Seller introduce new owners, conveys confidence • One-on-one time (90% personal / 10% business) • Avoid “Savior Syndrome” • Don’t make big promises...Clearly communicate the vision and specific (simple) goals for the business • Operational Opportunities • Teach everyone about the “8 Wastes” (Lean Mfg) • Sales Opportunities • Spend time with customers & learn how to add value • Quickly FIRE CUSTOMERS that are not a fit!
Pareto Your Customers You will find that many of your customers are draining your resources and time away from taking care of your most important customers! Pareto’s Law: 20% of customers account for 80% of your business
Opportunity Summary • Made Execution Our Specialty • Making small promises and keeping them builds a huge amount of trust (employees & customers) • Opportunities Implemented in 1 Year • Shotgun approach to laser target market (Re-Brand) • Quotation response from 2 weeks to 3 days • Order Processing from 1 week to same day • Reduced lead time to customers by 60% • Leveraging employee ideas and empowering them reduced turnover from over 40% to less than 2% • Firing no-fit customers made room for new customers that tripled sales on existing assets
Lessons Shared • Stand on the Shoulders of Giants • Form a board of advisors who will challenge you • Maximize Line of Credit Early • Hyper-growth can quickly strain working capital • Don’t Plan on the Owner Hanging Around • Tough to give up control. Seller lasted 4 of 12 months • Consistency is Key with Employees • Eliminate favoritism. Hold everyone to same standard • Quickly deal with employees that are not on board • Create a Leadership Team • Enlist and empower employees, give them goals and boundaries and let them make decisions without fear
Thank You! ADEX Machining Technologies 54 Concourse Way Greer, SC 29650 Email: email@example.com Web: www.adexmt.com Mobile: 864-915-8658