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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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    1. In the Eye of the Beholder…Transforming an Underperforming BusinessJason P. PremoADEX Machining Technologies

    2. Discussion Topics • Introduction • Finding & Acquiring the Right Business • Transitioning with the Owner • The Critical First 90 Days • Quickly Capitalizing on Hidden Wastes • Lessons Shared

    3. 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

    4. 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

    5. The Search

    6. 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.

    7. 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.

    8. 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!

    9. 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!

    10. The 8 Wastes

    11. Order Processing!

    12. 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

    13. 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

    14. 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

    15. Questions?

    16. Thank You! ADEX Machining Technologies 54 Concourse Way Greer, SC 29650 Email: Web: Mobile: 864-915-8658