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Business of Machining - Episode 82
179 Plays7 years ago
The Grimsmo Grapple: Touchy Subjects The guys do their best to be open and honest but some topics are hard to discuss!
Compartmentalizing family vs. business life is easier said than done. At GK, business IS family, so it's near impossible!
Process Reliability--NOT JUST FOR PARTS OR BUSINESS OPERATIONS Grimsmo shows tremendous strength in his ability to self-evaluate.
Instead of hiding behind a smile, he admits his own truth. On his quest to become more assertive, unlearning habitual ways of handling conflict and replacing them with more effective strategies is a lengthy process--a process needing constant practice. The old "build-up and blow-out way" isn't the Grimsmo way!
GET THE CHIPS OUTTA THERE
Throw a couple of broken through-coolant drill bits onto the pile and you've got the making of a "wild week."
"Could a line of code turn the coolant on to STRAFE the hole instead of going into it?" - Saunders (To understand this plausible solution, play DOOM or search the urban dictionary).
Centered Saunders Being an entrepreneur means you're a defacto leader. As the leader, you inadvertently pass on your ways of handling chaos to your team. If you freak out, they'll freak out. If you approach with a cool head, they'll follow suit.
SUB SANDWICHES AND SUCCESS Useful tips can be found everywhere...even at Jimmy John's! While on a lunch break at Jimmy John's, Saunders notices a list on the wall.
Warren Buffett's 10 Rules for Success
INVESTOR MINDSET Grimsmo shifts his perspective to that of an investor looking from the outside in. Saunders poses 2-sided hypotheticals about what outside investors AND business owners want.
***GET INSPIRED***
Manufacturing Entrepreneurship Summit 2018 - Chicago, IL! The Manufacturing Entrepreneurship Summit will be held at mHub Sunday, September 9th, 2018 (ONE DAY BEFORE IMTS!) and---it's FREE!
Workshop Topics:
- Product Development
- Bootstrap Entrepreneurship
- Growing & Operating a Job Shop
- Optimizing Surface Finishes with CAM & Tooling
- Fixturing Tips & Tricks
- Lean Shop Operations
Guest speakers: John Grimsmo, Jay Pierson, Tim Paul, Bill Fienup, John Saunders, and Zach Kaplan!
PLUS, AN AFTER-PARTY!
Recommended
Transcript
Hosts Introduce Episode: Chaos vs Calm
00:00:00
Speaker
Good morning and welcome to the Business of Machining, episode number 82. My name is Jon Grimsmough. Jon Saunders. Morning, buddy. How are you? I'm, if I'm honest, I'm all over the place. It's been a very wild week of a lot of stuff. How are you doing? Actually,
00:00:20
Speaker
Maybe sort of the, I don't know, we got to hear more about you, but maybe sort of the opposite. All right. And everything ebbs and flows. We don't have to
Managing Chaos as a Leader
00:00:28
Speaker
be on the same page, of course. Go ahead. Well, no, but so let's keep, I'll explain my thing, but it sounds like there's been more about you, but.
00:00:37
Speaker
Monday, I don't remember the days. I think I probably was bouncing around the typical list of too much stuff going on. And then we had our air conditioner break at home. It's been quite hot again here. So then it's like, OK, so now I've got to meet the service tech and then ultimately had to decide, there's a coil leak. You replace the coil. It's an older system. So there's some problems with new refrigerants. And so those
00:01:03
Speaker
It goes back to this thing of there's only so many decisions you can make and then it's kind of like, this is money I'd rather spend on the business. But one of the things I kind of took away from was
00:01:15
Speaker
And this is hard. I think this is legit
Entrepreneurial Leadership in Chaos
00:01:18
Speaker
hard. It's easy to talk about. It's harder to do, which is that, you know, a leader, which I think an entrepreneur is a de facto leader or has to be said anyway. It's your value to not succumb to that craziness of and necessarily the hectic or or disorganized nature or inability to control what's going on. But it rather your ability to process that.
00:01:43
Speaker
And I don't mean that patronizing because darn it, it kills me some days, but I do think it's important to remember the best example I could think of said humbly is like a military leader. Like you can freak out in a moment of chaos or you can keep your cool processing information. You know what I mean? Like it's hard. In that situation, literally people dying all around you, you know, hypothetically and you have to keep your cool. So you're right. I think the best leader, the best entrepreneur can handle all of it.
00:02:11
Speaker
and deal, make decisions still and not just freeze up. And I struggle with that for sure. Right. So what's going on with you? So much stuff. Honest version.
Growth Through Difficult Conversations
00:02:21
Speaker
Honest version. I'll give you the, you know, most of the truth. Obviously there's some things I just don't want to share like super publicly.
00:02:33
Speaker
you know, personal details and things like that. That's fine. Um, but it was great. Like we talked last week about when I went on my trip and then came back and had a lot of like, a lot of time to think and myself and, um, you know, how,
00:02:48
Speaker
It's I'm such a people pleaser person that I just don't want to I avoid conflict at any cost Yet it builds up and it builds up and you know, I realize there's things I don't say that I need to say to my dad to Eric to you know Ted almost everybody that just just never get to say and it really it really builds up and It feels like in those situations, you know, I'm making myself suffer
00:03:17
Speaker
And I don't want to like unload on them and ruin their day or anything like that, but, um, it just gets tough and it all kinds of builds up. And I've been picking away at, at having more of these conversations, um, with people that I know need to be had. And it's been great. Like it's been great, but difficult, but good and liberating and growing and all this stuff. It's just been weird and tough like that past week. That's a lot, dude. Yeah. Yeah.
00:03:45
Speaker
I, my humble advice is definitely don't let it build up, but then also remember, you know, it's the org chart, you know, which, which is that even you, um, work for Grimsman knives. And I would, I would suspect most of the time when you're talking about all that stuff, that's so easy to ignore HR and culture and behavior and work ethic and attitude. I mean, all that stuff, and maybe that's not what even you're referring to, but I'm sure you've my hype.
00:04:14
Speaker
And not just in the business, but in personal life too. Yeah, right. Everything. It's all the same. Yeah. Well, that's tough. That is a little different than this example. But my point is, usually, it's better to remember that it's not you personally, but rather, you're representing the company. I know that sounds like a subtle nuance, but it's kind of like, hey, we're all in this together. This is what we're working at.
00:04:39
Speaker
And a somewhat similar example is, and again, same thing where I don't, it's not appropriate to share for a bunch of reasons, too much detail, but I, in having a sit down lunch with one of my mentors asked about this idea of,
00:04:55
Speaker
How much do you share with somebody who has been here in a temporary role, perhaps say like an internship?
Feedback Strategies for Interns
00:05:03
Speaker
Do you sort of say, pat them on the back, good job, and so forth? Or do you sort of say,
00:05:11
Speaker
in the sense that they need some feedback, you give them that feedback at the risk of ruining their day or at the risk of... And I think his advice was really good. And it ties into my belief that if you're here for an internship, you need to win and we need to win. So that's one reason why we do the paid internships. I don't believe in this idea of just bringing anybody warm bodies in for free and
00:05:35
Speaker
I want you to get something out of it, but I also then hold you to higher expectations. But I think the best thing that you can give is that chance for them to learn some lessons. And they may be tough lessons, but the earlier in life you learn those, the better off you are. And there was an example where what I did was I sort of sat down and I thought,
00:05:55
Speaker
why do I feel this way about in this instance? And the reality was I felt that way. And I had to dig deep. I felt that way because I think in this case, the person has more potential than their caring to show. And they may not realize it, but it's kind of like, well, look, let's just move to a fake example that makes it easier. If they just want to be a button pusher, you're good to go. But if you don't want to be a button pusher, if you want to be somebody that's involved in leadership or
00:06:24
Speaker
tool and die or taking this to the next level, making decisions, having responsibilities. You got to up your game. You got to do XYZ3 things. And by framing in that way, I think I explained it's not that you're a bad person. It's not that you're a crummy worker. It's not any of this. It's that you're going to need to up the game period if you want to achieve more. So it changes it from a goal thing to it versus just a, you know, your
00:06:52
Speaker
Yeah, whatever, that kind of thing.
Emotional Management in Family Business
00:06:55
Speaker
Yeah, and it makes sense. Playing off of that example, imagine a button pusher that literally just stands in front of the mill all days and pushes buttons and loads material and shows no growth or desire or anything like that, but he's so busy pushing buttons, but he wants to be the manager or whatever, but he doesn't show it.
00:07:16
Speaker
looks at him thinking, oh, he's just a button pusher. He's happy. He's busy. And then he's thinking, man, why doesn't anybody take me seriously? Because it's this weird. Nobody shares anything. You know what I mean? If that person wanted to step out of their role and be like, actually, I'd love to learn this. I'd love to learn this. I did this. Look, I made this. It would show an internal drive, not just everybody's mad and nobody's talking about it kind of thing.
00:07:41
Speaker
Yeah. And look, similar sort of thing, everyone has bad days. So if you're sick or you had something really just absolutely terrible happen at home, could be a fight with a wife, could be something legit. You can't do this every day or every week, but you can take a day off or you can man up and ignore it, which is not always easy to do. I'm in that bucket.
00:08:03
Speaker
But man up, ignore it, put in a good days of work and keep that good attitude. Or if you just really can't get over it, do your best and then consider saying something casually. Actually, I'll give a legit example. I was frankly a rude person to one of our sales reps last week, but he had been annoying me because I'm kind of like,
00:08:24
Speaker
He wants me to push out this new thing. And I'm just like, it's not a priority for me. And he kept nagging me. And he was at my door. I'm like, go away. I got something going on right now. And I did. But the truth is, I was just in a bad mood about it. And so when he came in yesterday, I was like, hey, I'm sorry. I was probably
00:08:40
Speaker
brew to you last week. I had, and he didn't care, but it's kind of made me feel good. Like, okay, you get, you get, you get a hall pass on that every once in a while, but it doesn't mean you shouldn't make amends on it later. Yep. That was good. Cause you were probably feeling a little bit guilty about it, you know, at the time. Cause yeah, it's not how I want to treat people. No, exactly. Right.
00:09:00
Speaker
Yeah. Um, but yeah, I find this what say again, you know, you've got some tougher stuff on your plate because you got a, uh, the family dynamic that, that I, I have a, I have a huge family run business here. Um, which is funny, but Eric and I joke about this all the time because you know, we're both like softy emotional people, but we don't really talk about our emotions to each other. And, um, and we go through periods, you know, where we'll chat, but we'll not really,
00:09:28
Speaker
you know, keep each other in the loop about a lot of things for like weeks or months on end. And then finally, you know, we start to like present each other and we start to like be snickery to each other and stuff like that. And then finally we'll have like a three hour conversation and then all feel great about it afterwards, you know, and, and say the things we've been kind of repeating in our heads for a while. And that's, that's brother brotherhood dynamic of, of the two of our personalities working together every day.
00:09:53
Speaker
So we've sort of learned to work with that. But we still fall into that trap of a few months of not full communication and then a few hours of full communication. And then we both feel better about it for a couple of weeks or months. And then it's this weird cycle.
00:10:10
Speaker
Is it as silly as once a month you guys have a one hour private session where you get to air your dirty laundry, but then it's kind of like think about what you put on that list because sometimes in hindsight, the stuff you were mad about is really not that big a deal. Yeah, totally. But you also need to bring up, it's not, you know,
00:10:27
Speaker
My dad has always told me, you know, you got to speak up because it's not fair to anybody for you to bring something up that really upset you six months later. Like that's not, you don't have that right to sit on it and then throw it in someone's, you know what I mean? Yeah. Yeah. I agree with that. Um, unless that thing keeps coming up, you know, every second day, not just six months later. Yeah. No, you got to bring it up. Yeah. Don't you mean?
00:10:54
Speaker
But yeah, so dealing with a lot of that and a lot more, and broke two through coolant drill bits yesterday in a row, which felt really stupid. And those were my last two. On the lathe? Yeah, the first time. OK, so I drill a hole on the lathe, and then I drill it again faster to clear the chips, because it used to have chips in the hole, except faster and to the bottom of the hole, I think made it kind of buzz the bottom of the hole a little bit.
00:11:23
Speaker
on the retract and it, so I think that's why it broke the first time. So I'm like, okay, let me increase the, you know, the clearance distance. Um, except I must've deleted a line of code because it didn't go out of the hole before moving the turret to home. So I watched that happen. I was like, are you idiot? Oh my God. What part is this for? Uh,
Learning from Programming Errors
00:11:42
Speaker
the pivot, the Norseman pivot. Okay. Um, yeah, which you think would be totally dialed right now, but I'm making all kinds of changes because that's just how I do things.
00:11:51
Speaker
Our old sandic rep had at one point gave me one of those, don't you dare looks on redrilling holes with really good drills. I don't, it doesn't matter whether they're not just because I guess it could really put a lot of, is it the term flank where or like outside diameter where I hear you on getting chips out, but just something to potentially note.
00:12:17
Speaker
Yeah, I'll keep that in mind for sure. Because a threading tool, like a fairly delicate threading tool, goes in there next, and I didn't want chips in there. And actually, every single pivot used to come out with the spiral of chips in the bottom. So we'd have to sit there with tweezers and pull out every... I don't know if it's from the threading or the drilling. I can't remember. I wonder if you could actually just program a line of code infusion that turns the coolant out of the drill and strafes the front of the hole but doesn't go into it.
00:12:44
Speaker
strafe. That's an interesting word, but like passes in front of it. Didn't you play like Doom back in 1997? Not really. No, my friends did, but I wasn't cool enough. If you can say that. I don't believe there's anything about the Venn diagram of coolness and playing computer games in your room. It overlaps.
00:13:01
Speaker
Yeah. So I should think of a better word than strafe that tangentially circumvents the whole along the X, which should be a Y axis of the, I don't know. Yeah. X. Yep. But that, that should be coming out in a, in a consistent pointed stream, right? Although it won't be in line with the axis of the tool.
00:13:23
Speaker
Sure. And I don't think it'll be enough to clear out the chip. It's nice to have a through coolant drill that go all the way to the bottom, clear the hole and also flush it. Well, or if anything, put it, you can easily put a dwell in, have it dwell at the bottom of the hole longer. During drilling? Oh yeah. Facts Fusion has a line for most of the drilling cycles to dwell at bottom. That's a good question where I think the chips
00:13:50
Speaker
are probably coming from the threading, which is the next operation. So I'd still want to drill it again. I'm sorry. I didn't realize. I thought that bit chips might make sense. Yeah, I thought so too. So why am I redrilling it in the drilling off? I don't know. I'll have to figure that out.
00:14:06
Speaker
I'm pretty sure you're not supposed to peck drill a through coolant drill bit, right? Correct. I was doing that yesterday because the code was set up for non-through coolant. We put a through coolant in there and I'm like, why is it pecking? There's some significant numbers that I'm not going to even attempt to make up, but the wear of a drill
00:14:26
Speaker
is like, okay, I'll make up the numbers. It's like 40% of the wear is on the creation of the chip on the initial contact and 40% of the wear is on the end of the drilling rotation and 20% is actually during the drilling. Basically drills are happy to drill. They don't like leading into the material and exiting out because of the fact that you're going from a
00:14:47
Speaker
thin to thick or thick to thin or whatever. So peck drilling massively, I don't think there's actually anything wrong. I don't think it's going to all of a sudden snap a drill, but they tend to be expensive and they don't need it. I think they're designed to work without the peck
00:15:05
Speaker
Interesting, I never heard those made up numbers in that way and I like it, I guess it makes sense. Yeah, it's like starting a cut takes a lot of work, but then going through it takes less. Okay. Before we get too deep into the podcast, in case we have people who can't circle parking lots forever, last call on anyone who's either coming to IMTS or is in the Midwest and wants to make their way over to Chicago. Yes.
Invitation to Manufacturing Entrepreneurship Summit
00:15:31
Speaker
Sunday, September,
00:15:36
Speaker
It's the day before IMTS. We're doing a free event. It's called the Manufacturing Entrepreneurship Summit. I am going to be there. John Grimsmo is going to be there. Jay Pearson is going to be there. The folks at Autodesk are going to be there. We just got Zach
00:15:51
Speaker
Kaplan, I believe is the correct name and pronunciation. He is the founder of Inventables and is doing a talk about taking your business kind of from a garage shop to the real deal. He's an incredibly successful and I believe charismatic fellow, so we're awesome that he's on board. It's at M Hub, which is an amazing facility and yeah, it's going to be awesome. I can't wait. Do I have to register or am I already registered?
00:16:16
Speaker
I know I'm speaking. They're not going to reject you, but you probably should go register. OK. They're not going to turn me away. I don't think they're going to turn you away. Yeah, yeah. I've got you down at the first slot, so from 3 to 3.45. I know you've done this sort of thing a bunch before. What do you want to? Is yours on knife making? Is it on entrepreneurship? Is it on fixturing? Is it on operation? What do you want yours to kind of be on? Or have you worked on it?
00:16:45
Speaker
I need to work on it more. I won't deny that. I think entrepreneurship and tying it to a product that you love, in my case, knives. So talk about the knives. But I don't think it'll be super technical like this is how we sharpen the edge of the knife kind of thing. I want it to tie together with
00:17:02
Speaker
what you're all about and what I'm all about and what I can share to your customers and to your fans. I'm going to call yours knife making and product entrepreneurship. Pearson, this is on lean manufacturing. The HSM team is going to do a thing on fixturing and cam stuff. And then Zach Kaplan is also talking about product entrepreneurship. But I'm sure it'll be, I look forward to seeing both of yours. I'm not worried about any sort of overlap of information.
00:17:27
Speaker
Yeah, I can't wait to sit in on the other guys too. Cool. Yes. Okay, so what else? IMTS.
Excitement and Strategies for IMTS
00:17:34
Speaker
Dude, it's here. It's like a week, a week and a half away. Yeah. My debate. You want to hear my debate? Yeah. Don't bring your checkbook.
00:17:45
Speaker
Well, that's yeah. I don't really. I love a deal. I will always be an element of me will always be a bootstrapper. And I recognize sometimes you've got to play by their book. So, you know, sales guys want to give discounts and yes, they want to show their bosses the wins of booking POs or sales at IMTS. So I understand that on the flip side. I like being a little counterculture. I like being a little bit. No, no, we're not doing this on your terms. We're doing this online.
00:18:15
Speaker
not to be rude, but just like, I will buy the machine when I'm ready. We'll figure out the deal that works for both of them. You know what I mean? Yep. Yep. And I think at least with our local Elliott Metzer open house, I think a lot of the vendors will like, there's a show deal, but then it'll last for like 60 days or something like that. I don't know if that's the case at IMTS is probably different with everybody, but
00:18:35
Speaker
It's interesting because Haas has, I don't know if you get Haas marketing emails, but they've been pretty darn vocal about saying you can get a 7.5% discount until this Friday. After this Friday, including at IMTS, it's 5%. Don't ask, don't complain.
00:18:54
Speaker
So I don't know what they're, if they're trying to stop the expectations of IMTS. I don't know. It's interesting. It's a, it's a debate that I've had before, which is a vertical with a fourth, which is kind of what we quote unquote need a fourth axis versus skipping that and going to a five axis that would let me do what the vertical plus a fourth will do as well as have a five axis, which we no longer have. The trending is gone.
00:19:24
Speaker
Right, and you miss it, don't you? No. Well, it had to come off anyways. Sure. But I don't like the idea of being 12 months down the road and not having that for sure. So yeah, go to learn. A huge cost difference. I mean, another vertical, like, well, you'd be thinking of VF4, I guess, just for practicality. So you have two, three, four.
00:19:47
Speaker
Ha ha ha, that's funny. Yes, there is this romantic idea. I'm not going to, so here's my thing. I freaking love our Haas machines. Good. Absolutely love them.
00:20:00
Speaker
However, you wonder what else is out there slash my goal is not to retire when I have, I don't know when I'm going to retire, maybe 75, 80, having only bought Haas machines. Like that's not my goal per se. I think there's something to be said for seeing what else is out there.
00:20:21
Speaker
I won't apologize for the fact that Haas makes a phenomenal line, but it's a value line. And I think there's something interesting about, hey, I would not turn my nose up if I could ever justify or afford a Makino PS 105 or a high-end DMG vertical or just like that kind of stuff. So I get to go learn. That's my goal. That's the point of IMTS. And yeah, I've been craving it since I went last year.
00:20:51
Speaker
Yeah, I'm in a weird position right now with IMTS rolling around, and there's all this stuff I want to buy, but we're not ready to buy it. But I need to learn as much information as I can, and I need to figure out what direction we're going to take this business if we're going to buy more equipment. And tons of stuff rolling around my head in the next year, let's say.
00:21:16
Speaker
And then I've been thinking a lot about your theory is imagine an investor came in and gave you a million dollars and said, what would you do? Or like, obviously, you need to do this. You need to hire this person, this person. You need to buy this. You need to buy computers everywhere. You've got to move shop. You've got to buy these machines. Duh. It's different for every business and every scenario. But in our case, I've been thinking a lot more about that and talking about it with our local people. And it's such an interesting hypothetical.
00:21:46
Speaker
If your business is at the point of sustaining such a thought, you know what I mean? But yeah, it's time man. I could buy, I could buy a five axis and a Swiss tomorrow, but I don't have time to run both machines. I'd need to hire some people. I think you should get yourself out of the business.
00:22:12
Speaker
Yeah, I'm working on it, but I'm bad at it too. And that's something else I wanted to mention to you was in a lot of the things that we make, I've created a non-scalable system because I hand tweak and hand massage everything that I make. And I'm the only one that knows how to do the complicated macros and codes and things like that. And the goal is to set it up so it's kind of just works, but it's so complicated. Right. You create such a complicated system that
00:22:38
Speaker
Right? Well, so there's, what I don't want to do is, is let you get away with the, well, I'll work on it. Like that, this has to change. So the way to slap me, right? The way to effectuate that change is to just pick a single part. Like right now, say I am never, ever, ever going to make a Norseman pivot again.
00:22:57
Speaker
So, what do I need to do to get Sky or Angelo, you know, what's the code changes, the setup sheets, the tooling, and then all of a sudden it's not so hard. And look, the reality is you're going to be knee deep in this business forever, just like I am. But I kind of told myself, I don't want to make the fixture plates anymore. I'm still super involved in them, but it's reactionary to other people that have now taken over the leadership role of that process. That's what you need. Fantastic. Yeah, you're right. You're right.
00:23:27
Speaker
You're absolutely right. And it's part by part, just like you said, start with one part, list out every
00:23:34
Speaker
every variable, every change, every instruction, make an instruction manual, basically. And that's what I'm doing in ProShop. It's just, I need the time to like, I'd rather make the part and like do all the tweaks myself, then sit down and write down and wait. And I've been doing half and half.
Communication with Business Partners
00:23:49
Speaker
Like I realized a lot of my parts are in ProShop with lots of details and everything, but the Norseman pivot is not in ProShop at all. And I'm like, man, am I really going to sit, spend, you know, 45 minutes,
00:24:00
Speaker
laying it all out, or should I just make pivots because we're all out? You know the answer to that. I know the answer to that. I'm going to do both anyway. And I need to get Angelo involved and we'll do it together. And we do pieces together, but I need to get a more
00:24:17
Speaker
more responsibility, more knowledge, more involved, things like that. And you have great people. We really do. Don't underestimate them. It's so easy. It's not meant to be condescending, but you forget that these people are very capable.
00:24:33
Speaker
Yep. Like we were just saying about, you know, a button pusher that just pushes buttons. That's all you think he's good for if, if you look at it objectively, but you realize that's a person that's like smart, intelligent, compassionate person that has thoughts and feelings. And of course you can't just look at it simply. Yep. So of course. Yeah.
00:24:52
Speaker
while also finding where people are best suited. Some people are thinkers. Some people are doers. Some people are creative. Some people are not. And you kind of tease that out. No, absolutely. Yeah. But this is a very personal decision and certainly long-term consequences. But if I were you, and frankly, for me, I'm not necessarily against outside investment. Yeah.
00:25:16
Speaker
There's consequences and it may not be perfect, but you potentially find the right fit. You can come up with some creative long-term ways of making sure it doesn't go badly for you. I don't want to get convertible notes and warrants and upside kickers. I've never even heard those terms, but I can imagine their weight.
00:25:43
Speaker
Let's play this out for a second, hypothetically. For us to take $100,000 in outside investment is not going to do anything. Nor do people necessarily want to put in usually small amounts because they want more out of it.
00:25:58
Speaker
But I don't. OK, so here if I I know people that would do that, I don't know anybody or really have experience with people that would put in five million dollars or something like ridiculous. Well, we'll forget about that because maybe you've got more familiar with. I don't know if.
00:26:15
Speaker
If I figuratively were going to say, hey, look, you need $700,000 to buy a couple of these machines, get into a new shop, and get rolling, here's what I think I would want. It would be some sort of a, I would probably know, I'm going to negotiate kind of from both sides here, because I'm going to say, man, John Grinzer does not want to, quote unquote, give up equity. Your company, from a pure valuation standpoint, I don't know what your numbers are, but your company isn't worth enough
00:26:43
Speaker
relative to a $700,000 investment to not give up control. This is super problematic to say as a general rule of thumb. But you could say a company could be worth about one times revenue. That depends massively on margins. It depends on growth rates. But it's somewhere to start. Now, that would be potentially considered
00:27:11
Speaker
it's gross worth. So you'd have to back out its obligations, its debts, et cetera. But nevertheless, it's a lot. $700,000 is going to be more than 50% most likely. Let's just hear me out rather than worry about whether the math is accurate. So what I would probably say is, well,
00:27:27
Speaker
I would want to have a sort of use, like in the US, it's like a UCC. I would want kind of a rights to claims to some of the hard assets that you've got, the equity in the machine, some of the inventory, et cetera, just to make sure that's my worst case downside protection.
00:27:45
Speaker
And you would have to give that up. That's not a big deal. I would want some sort of a non-compete out of use that if it goes belly up, you don't just turn around and create chromosome knives 2.0. I would probably want to be assigned the rights to the IP of the existing products, maybe even with the right for me to go make those on my own. That'd be pretty heavy. With you as my employee.
00:28:11
Speaker
Oh, well, I'm just saying, I'm just thinking out loud. Okay, fair enough. But what I would do is be willing to phase those down or out as I get a return on my investment. So is this an investment or a loan? Meaning does it stay in the business or is it paid back? So it can be both.
00:28:28
Speaker
And this is actually really outside of my world from a true sophisticated investor standpoint, but you can have things like convertible notes or equity that has preferred equity. So basically I wanted to get a guaranteed payment from you every month. So that's going to be a return on my investment, not of my investment. So if I invest a million dollars and I want a 5% preferred return, which is too low, but you got to look at the whole picture here.
00:28:57
Speaker
then you're going to have to pay $50,000 a year, $4,000 some dollars a month, just as a cost of borrowing money from me. And then over time, the whole idea is you'd be making this investment to take this business from
00:29:14
Speaker
1x to 3x. Good grief to really jump in. So the whole point is I should double my money. If I invest a million dollars, I may be looking to get a million and a half or $2 million back from you, which is where it gets expensive.
00:29:30
Speaker
And so, but you may, you may cap my upside. You may, so there could be like, it's called a waterfall or something where, Hey, I get 5% along the way. And then as soon as you hit a certain number of revenue or whatever, I get a bigger payout or take some chips off the table. And, um, and then, but you may cap my upside. So I can't make more than X. And then all of a sudden the things, the note or obligations and all that stuff can be kind of phased out.
00:29:55
Speaker
Right, and then ideally at that point we're making enough money that not only can we easily afford to pay this 5% back and even pay off the loan portion of it and then phase them out and say thank you and you just doubled your money and we're making 10 times. Long term I'm not, and maybe I have some residual, maybe I get to keep 5% in the company forever and that's, you know what I mean, but long term I'm not a major player. That's kind of my thought of what you would
00:30:25
Speaker
There's a lot of heavy in there, like a lot of, you know, not giving up controls the wrong way. If you think that's heavy, no. Sorry, just to manage expectations. I mean, this would be investors, I mean, there's a lot of execution risk.
00:30:44
Speaker
Period. That versus funding your own growth through your own profits, which is totally possible. But I wonder if you can massively scale with incremental growth. Takes longer. And I don't like to keep talking about it because it's not fun. But I don't agree or encourage hugely massive amounts of debt just because the consequences are very, very short and swift.
00:31:15
Speaker
Yeah. That's where an outside investor could play a role. Well, it's still debt and risk. Yeah, but the difference is
00:31:26
Speaker
you structure it. If you stop making machine payments, they're not going to have a kumbaya conversation about how this... The investor has an interest in participating in the upside in the sustainability of the company and making this work. The machine financing or debt, they just want their payment. If they don't pay them, they come to machines. Interesting. Okay. What investors aside, how do you feel about
00:31:52
Speaker
massive growth
Considering Outside Investment
00:31:53
Speaker
transformation, hypothetically, if I did this. If I'm like, yeah, we've got the customer base, we've got the product lines, I could come up with a few more products. We could triple this business in the next whatever timeframe.
00:32:04
Speaker
How does that make you feel from an execution standpoint? Like good idea, bad idea? The only idea. I mean, it's what I told you when I saw that extra room there. I was like, look, it's always awkward because I don't mean this personally. We're incredibly good friends. I don't mean this personally, but I would not have done what you did in that space. And I don't know all the facts. That's the big problem. So for me to make these comments is absolutely
00:32:30
Speaker
lacking full knowledge of the facts at hand, which you know, and you have done a very good job of making decisions to this date. That's your key as an entrepreneur. You find people that you look up to, that you are smart, that have good opinions, you listen to them, and then you make your own decisions. I would have fit one or two more machines in that space. I think getting a robot... Well, that involves buying more machines, which we're not ready for yet. I hear you.
00:33:00
Speaker
I think it seems like a Swiss and a small mill, the Swiss probably needs to be new. The mill could easily be used for 30 grand. That seems to really unlock some earnings potential for knife production volume, complications of setups across the NOC, and potentially for pens.
00:33:26
Speaker
I freaking love, I love our setup right now. I love that we have whatever, how many Tormach machines. Yeah, we use them for little widgets and parts and classes and all that, but we use them because our hostas are often making real parts. I want to go play and I want to go make a fixture, test something out. I freaking love having them.
00:33:47
Speaker
I have one spindle right now, like one mil spindle and it hurts because it's busy and we have cycles that are like three and a half hours. Then if you want to get three of those cycles in any day, you have almost no time to make a clamp. When your tooling is all set up and locked in and you risk offsets and crashes as you start changing stuff.
00:34:08
Speaker
Yeah. Because you can't move shops right now. It's just too much money and work and uncertainty. And you can't get a big multi-palette five axis, too much money in space. So luckily, the Swiss will fit maybe at the bar feeder for the NOC, although I'd probably try to get a second spindle before I worried about that. Yeah. The bar feeder for the NOC doesn't really help.
00:34:32
Speaker
setups, dialing, changing tweaks, all that stuff that's kind of preventing us from keeping it running right now. It just lets you make way more price, which would be beneficial. And I mean, for the 10 or 15,000 that it costs, it's kind of a no brainer within the next few months. We need it, especially with pen production and things like that coming up. And then you buy a Swiss with a bar feeder like that would be a stupid no brainer.
00:34:57
Speaker
We were at Jimmy John's with our training class last week for lunch, and they had 10 business advice tips from Warren Buffett. And I am like 97% sure it probably didn't come from Warren Buffett, but it's still pretty good. And so I found it online, and we threw it up on the NYC CNC website. So I'll send you the link, or we'll put it in the description. But one of the things is watch the small expenses. And that's another form of lifestyle creep.
00:35:26
Speaker
Uh, just, and I'm guilty of it too, where it's like, Hey, you know, it's all of a sudden, it's not a really big deal. We want to try out a hundred and $160 thing, whatever that thing is. And it's like, like, okay, you have earned that, right? But don't use that. Don't, that doesn't mean you should always use it. Yep. Yep. Yep. Um,
00:35:45
Speaker
And it's funny because I am not historically a consumer of things. I'm in a market of consumers where I sell to knife collectors that have all this other cool fancy stuff. But I don't personally spend or collect things like that. I have one nice flashlight. And there's a short body conversion for it to use the smaller size battery to make it smaller. And I'm like, that'd be kind of cool. But it's $55. But I don't know if I need to spend that $55 right now because I like it as it is.
00:36:15
Speaker
It's only 55 bucks. I could do that no problem, but I'm actually conscious of the fact that like, yeah, I don't really need it. I'm good. One of the guys who's on my kind of mentor list, he doesn't even know that he's on that list. You know what I mean? It's like that kind of a relationship. Really, really good guy. And he and I were talking. And he's very successful. Very successful. And you wouldn't know it. And that's a common thing that you hear about from
00:36:43
Speaker
from some people that are successful but don't necessarily need to drive. I don't know what he drives, but I wouldn't be surprised if it's a pickup truck or a Honda, whatever. He talked about, it took him about 10 years to get rid of all his stuff.
00:37:01
Speaker
After, and I don't know the exact timing, but I think what happened was he had a liquidity event in a company he was involved in. And probably for the next five years, he kind of went on a buying spree. And it's things like the flashlights and the cars and all this stuff. And he hit a point where you kind of hear that figurative
00:37:20
Speaker
your stuff owns you, you don't own your stuff. And look, you know, like I'm still a gun guy. Like I've got a couple of guns that I really love. And there's a couple of things I'd love to add onto them. But what I'm realizing is, you know, having a few that I really are my go tos is great. And I don't need quantity or a bunch of stuff or pound your chest. And like the flashlight is a good example. I'd love to have a couple of good flashlights. I have a good sure fire, but like I don't need every accessory and switch ability. Like does it really make you happy? Right.
00:37:50
Speaker
Yeah, and realizing what what about it does and what what else will and yeah, things like that. And it's funny how short the happiness lives. Like I see that my kids I want that toy. I want that toy and you get the toy and like five hours later, it's old news. It's the same in adults. We just don't realize it. Yeah. And there's something to be said for once you can buy it.
00:38:11
Speaker
then it changes the need to buy it, right? Yeah. Yeah, for sure. Yeah. Yeah. Especially something you might have desired for years. I mean, you and I, for the past 10 years, we've wanted to build a big shop and buy fancy machines. Put your head up and look around. I still want more. Now it's like, what's the next level? Not just the next machine, but how do you double, triple your revenue? What's that going to take?
00:38:37
Speaker
And I know it's possible and I know we have the skill and passion to pull it off. It just gets a lot more complicated. Honestly, I feel like not having perfect information, but I feel like as much as getting a Swiss lathe and a used Robo or something is probably
00:38:56
Speaker
it's probably to me, that's probably the number two thing on my list for you. The number one thing
Reflecting on Business Growth Journey
00:39:00
Speaker
is you got to stop working in the business. Like, like, and that's going to be a bigger hurdle for you than I think I realized, but, um, you got the people now. I agree. Um, and it's nice. Like now that we have, I mean, including myself, there's six people here, but whereas a year ago,
00:39:17
Speaker
there were only three people here. I've now separated myself into Aaron, Angelo, a little bit Skye, all the things that I used to do they're now doing. It's still not enough, which is interesting and great, but we're doing a lot more. The past six months or so, I've been able to spend a lot of time on the business as well as in the business, which is
00:39:39
Speaker
invigorating and enlightening. It's awesome. I just need to do more. I need to tip those scales even more. Don't forget where you make money to. And that's not a capitalist, a greedy thing. It's simply the way you get to buy machines and grow is by making money. And you make money through, I'm guessing, well, we know you make money. You make money by selling product, period. So how do you make sh- Knives out the door.
00:40:06
Speaker
I got to run in a minute because I got to meet the air conditioning guy. But I feel like this is a really good conversation. I enjoy the fact that we can talk about these things honestly and candidly, but not keep it fluffy BS. But I also wanted to tell you how proud of you, dude. You brought this business to this point. I think you probably are at an inflection point, but I'm incredibly proud of you. You should be proud of yourself. And let's keep going. I really appreciate that. Thank you. Boom. Yeah.
00:40:33
Speaker
One more week and then we're going to have to figure out what we're doing for my MTS. Yeah. I figure, I don't know, part of me just wants to get in a room with all of our buddies and just group podcasts, but I don't know how that would work logistically. I think my favorite, like kind of bringing in other people to your, my social media world. My favorite thing was when Lockwood visited your shop and somebody in the comments was like, you got to be SHI.
00:40:59
Speaker
They thought Lockwood was some 63-year-old gray-haired tool and die maker from Pratt & Whitney back in the day. Eric's also too. Hilarious. OK, sorry. I got to run. I'll talk to you next Wednesday. Sounds great. Have an awesome day. Bye.