Manufacturers Make Strides

What a financially healthy factory actually looks like with Stewart Ervin

• Martin Griffiths • Season 2 • Episode 17

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Many manufacturing businesses look busy, yet still feel financially exposed underneath. 

Stewart Ervin has seen this pattern repeatedly inside factories where activity masks a lack of control, and where a financially healthy manufacturing business feels harder to define than it should. The conversation centres on what actually creates stability when demand, cash and operations start pulling in different directions.

Stewart draws on experience built inside the value stream, from early shop floor roles to working with businesses under real pressure. Rather than chasing growth or volume, he reflects on how discipline, intent and forward visibility shape day-to-day decision-making when leaders want more certainty about where the business is heading.

Stewart's LinkedIn: https://www.linkedin.com/in/stewartervin/

Bracket Mgmt Website: https://www.bracketmgmt.com/

Available on to watch on YouTube or to listen on your preferred podcast platform.

Stewart Ervin:

The best RAN factories that I see are the ones that are very disciplined with every move they make, and every move they make is with intent. And so they just don't do things. They're very much understanding of okay, if we make this move, this is the result we anticipate happening, and therefore they move forward with that.

Martin Griffiths:

Hey it's Marshall, welcome to the Manufacturers Make Strides Podcast. Another episode today, and I'm talking to Stuart Irving. And we have a really in-depth conversation about manufacturing operations, finance, how to run a healthy business, and how to turn around a business that's in trouble. He started off working at his his father's manufacturing company, moved into property, and had some learnsome harsh lessons about cash flow management in the business through that, then went back into manufacturing. He was a turnaround guy, so he's learnt all sorts of lessons from identifying bottlenecks to linking up sales and operations to how to have your ELP system matching the reality of what's going on in the business. And one of the key things he said is that businesses need to be able to start forward forecasting, to stop getting out of that reactive firefighting mode and into a more proactive way of running their business. Being stuck in that reactive mode can lead to that kind of feast or famine and can lead to all sorts of business issues if not dealt with correctly. So there's a lot of information in here. Let's jump straight into it now. Here's my conversation with Stuart Irvin. Hey Stuart, welcome to the podcast. How's it going today? Great, sir. Thank you for having me. Perfect. Yeah, good to have you. Nice to see you. Where are you joining us from today? North Carolina in the United States. Okay. So is that somewhere you've always lived or have you moved there at some point?

Stewart Ervin:

No. Born and raised, we've kind of bounced around North Carolina just a little bit, but for the most part, I've been here the majority of my life.

Martin Griffiths:

Perfect. Okay. Well, it'll be good to get into your journey and your background. I'd like to jump in and start, though, with a question that really focuses on what you're doing at the moment. So if you pictured a factory that's financially healthy and in control, what does that look like? What's happening inside it?

Stewart Ervin:

Yeah, so uh a healthy company is one who has a great alignment on their strategy. They know where they're at any given month. They have a very solid close process. It's typically closed within five to seven days. They have a good plan for their people where their people know what success looks like. They know what their job is and how they're measured. There's a great alignment within their sales and operations. And all in all, everything's just kind of clicking and moving forward. They're always looking forward, and everything they do is with very a very disciplined approach and like with intent, not just kind of how the wind blows per se.

Martin Griffiths:

So yeah, over the course of this conversation, I'd kind of love to dig into so there's lots of steps there, how what your playbooks are, what your strategies are forgetting. But first off, what drew you into manufacturing right back in the beginning?

Stewart Ervin:

Yeah, so I kind of fell into it and my dad started a company when I was young, about 13, 14 years old. And that's where I really got my start. I started at the very bottom, very entry-level position, and kind of worked my way to the top. And it really just happened to be that it's just what I have always been in. I did for a period of time step out and do a little bit of remodeling and construction as I was doing some real estate investing. But for the most part, I was just always qualified and just seen like the opportunities always existed in the manufacturing arena. And so therefore I've pretty much established myself in that in that world.

Martin Griffiths:

Yeah, well, that must have been quite a quite an interesting, maybe exciting time when you were 13, 14, and your dad started that business. What pushed him to do that at that point?

Stewart Ervin:

Yeah, so he had worked as a route salesman for a long time, selling snacks like a local, they were called Lance, a snack company. And he had done that for as long as I can remember and had left and was trying some other options. And the reality is he was working as a sales rep for it, it was a vinyl fence company. So like plastic PVC fencing that had just kind of come out on the market. And an individual approached him and said, I will back you if you will help me start a fence company. And again, my dad had made a couple of moves trying to figure out what his next steps were. So he's like, hey, why not? I kind of know this industry now that I've been a sales rep in it, so let's try it. And one thing led to the next, and in 1999 is when they officially started that business. And he, I think his partner exited li after 24 months or something, and then again, my dad just kind of ran that. So it was just an opportunity presented itself and he took advantage of it.

Martin Griffiths:

Perfect. So what would you say, what moments within that early stage of your life, your career, really helped you understand about how a business or about how a manufacturing business works?

Stewart Ervin:

Yeah, so it's something I didn't recognize until like 15 years later. Having started at the bottom in kind of holding every position, it really allowed me to understand the inputs and outputs of a company, right? If you think through a value stream, at the end of the day, this demand which comes from your sales, this materials that come from purchasing, operation execution back end office. And so when you've rent held every position within that, you start to kind of learn what inputs and outputs affect the value stream as a whole, which later led to me kind of putting together a playbook of sorts that helps businesses turn around and grow. And so again, it's at the time I was frustrated, like, ah, I wish I could do more, I could grow and be do different things, but the reality with the reality is it really teed me up pretty well for what I'm doing today. Got you.

Martin Griffiths:

So what would you say? What kind of challenges did you come across that have now shaped your thinking for today?

Stewart Ervin:

Throughout my entire career, I think probably one of the biggest challenges I had to face was in my late 20s, is when I was really heavily invested in real estate and was doing a whole lot on the flipping houses side of the world, and I did not control my cash. And so cash became an issue and I started to run out of liquid money. I mean, I had plenty of houses and we had plenty of opportunities going, but I had not done a good job of managing my cash. Additionally, I had all my eggs in that basket. And so when the dynamics of the world changed, which originally was good for if you were flipping houses, right? 2007-8 were great. There were a lot of opportunities, a lot of inventory, but nine and ten, those opportunities dried up. And so not only was I having cash flow issues, I had not done a good job of diversifying my interest, and when I had all my eggs in one basket, and when that kind of dried up, I was in trouble. And so those were the two big that I really it's all in the same, but those two issues looking back, if I had done a better job of managing cash and diversifying my interest, I would have saved myself a lot of heartache. But again, it propped me up for what I do now and I learned it the hard way.

Martin Griffiths:

So Yeah, what a lesson worth that's kind of led on. So so now then, bearing that in mind, when you walk into a factory or a business that's struggling at the moment, what would you say the things that stand out to you first?

Stewart Ervin:

Yeah, typically the biggest disconnect really lies in the sales and operations unity. A lot of times you'll see that the sales is overdriving operations, and that leads to the operations getting frustrated and then falling backwards and you get in this gas break situation. That's typically one of the biggest issues. The second probably biggest driver of frustration is only looking at the results and just going with the wind and how the market's driving versus saying I'm going to look forward and drive my business strategically. If you're just living kind of looking backwards at the results, you're not driving your business forward. And so you'll end up like I did in my late 20s and go, oh crap, I'm in trouble. So the the alignment of sales and operations and then starting to drive your business forward versus just looking at results are the two key areas.

Martin Griffiths:

Right. Okay. So you're saying too too many businesses are be reactive, basically, and working from more of a forward plan. Okay. Yes. So you walk into a factory, situation like that, what's your first step then? What do you do next?

Stewart Ervin:

Yeah, so the first thing I really attempt to do is I try to understand the flow. So I talked about it just a second ago, trying to understand the inputs and outputs of the value stream. And so I'm going to I have a Link 6 Sigma black belt. So the very first thing I'm going to do is I'm going to walk through a swim lane process. And I want to identify the players. What are your top, your top key objectives throughout each value stream? How do you drive demand? What is how's that information flowed? Who does what? We typically can do that in a couple of hours. And I'm going to spend some time really validating that. The second thing I'm going to look at is how do your processes align with your ERP management? Is your ERP a total mess? Are you using it only a fraction of what you actually could be using it for? Are you overusing it in incorrect areas? And what I'm looking at there is I'm looking at the alignment of the processes and then the systems that you have. And typically from that, if you again understand the inputs and outputs of that value stream, traditionally those two exercises will allow you to quickly find the one thing that's kind of throwing the whole thing off. And so if you can identify that one process is somewhat broken, typically you can prop the business up pretty quickly to get out of triage mode if you're in trouble. And you fix that and you kind of again you use some antiquated old school tactics to really try to drive and okay, let's get you back on track, and then you start working through the process in a methodical manner.

Martin Griffiths:

Okay. All right. Couple of follow-up questions there, then. So you said you you rely on some antiqu antiquated old, so tell me more about those. Do you say? So yeah, tell me more about that.

Stewart Ervin:

So it's brute force, right? So I normally try not to do things manually. I try to drive everything in the system and have a very smooth process, but depending on how in trouble your business is, it's spreadsheets, war room boards, whiteboards, tear-off papers, and it's really a fight, right? You're grinding to and you're kind of circumventing some stuff. And again, your whole goal is to at least try to get the company from wobbling, at least get them to stand up so you can have some basis to build off of. And so again, that's not a lot of explaining. And all this is really centered on how in trouble is the business. If you're not in that much trouble, then we can really work towards just kind of moving forward and building your stuff out. But unfortunately, in many cases where I've been caught in, the company is severely past due. Their on-time delivery is less than 50%, they're having issues with profitability, and typically we're like months away before we're having some major financial impacts. And so again, we go in and just take the business over and just grind our way through to prop it up, then to turn around and say, okay, now let's do it right.

Martin Griffiths:

Okay. So like so fix the backlog first, so stop the water kind of leaking out of the bucket.

Stewart Ervin:

Yep.

Martin Griffiths:

That gives you a bit of breathing space, then you can go and do some of the more longer term kind of improved fundamental stuff too.

Stewart Ervin:

Yeah.

Martin Griffiths:

Okay. All right, perfect. You also mentioned about so I think that kind of example you gave though kind of focuses on the situation where there's maybe an operations problem, maybe there's a bottleneck somewhere that's causing those delays. You mentioned before that sometimes it's the problem is a disconnect between sales and operations.

Stewart Ervin:

100%.

Martin Griffiths:

So yeah, can we dig into that a bit more? What does that often like show up as? And what are your ideas of how to get to the bottom of that, of issues like that?

Stewart Ervin:

Yeah, so a lot of times how it shows up is all of a sudden you have a massive surge of new business or new orders that just pile in with no real regard to what your capacity or ability is to execute on that. Because traditionally, you say that the business is lacking some revenue or they're all of a sudden seeing a slip in profitability. And the number one thing is you got to go get more sales, right? And so you'll see the sales team go out in a frenzy and they'll gain some new business or they'll gain a big chunk of work, and all of a sudden you're you're putting a strain on the operational processes. And so then the operations team freaks out, they say, stop getting all this work, we can't get it done. You have no clue what's going on, and so what happens? There's a slamming of the brakes on the sales side, and then they get frustrated and say, Man, I'm out here trying to do all these sales, the ops team just can't make it happen. What's going on? And that is a rinse and repeat year over year. And at the end of the day, it really boils down to there's not a the processes in the business are not robust enough to handle that. And so one of the plays that we have is we call it play four, which is the monthly business review, and it's the alignment of this uh traditional sales inventory operations planning, and it's where the groups get together and they understand the ops team understands what the sales team's selling, the sales team understands the capacity and some buy and some open opportunities, and there's more of an agreement and alignment into as to what the go-to-market strategy is to make sure that your sales team and ops team are walking hand in hand together.

Martin Griffiths:

Okay, got you. All right, that sounds great. In that situation, then, in in either of those situations where a business is stuck in that firefighter mode, what's the best way? What's the best way to get out of that and back into yeah, like you kind of mentioned it before, I suppose it's just doing the hard work. But yeah, what would can you give us an example of what that might look like of getting out of that firefighter mode?

Stewart Ervin:

Yeah, 100%. So I kind of referenced earlier the ERP. The ERP to me is everything in regards to taking the human side out of it. And again, these things are built, you know, it's at industry best practices, and if you can drive all your processes to the ERP, that's huge. So one of the biggest things that we do right out of the box is we try to understand what your actual backlog is. What's real, what's real from a quantity standpoint, what's real from a date standpoint, and from there you can start formulating a capacity model, and you can start understanding what your revenues are going to be. We don't really focus a lot yet on the costing side because, again, your goal at this point is just to understand how much work is in front of me, do I have any gaps? Do I anticipate any valleys coming? And when you can look at that, you can identify just that. You can identify the peaks and the valleys, and it allows you to either renegotiate some dates with the customer to kind of level out your capacity, and it allows you to maybe flex some capacity over, but you're starting to understand what your true forward-looking demand is, which allows you to level out your headcount. And now there's an alignment of, okay, this is what our future looks like. Hey, sales department, go sell this little subset of time, or we're lacking in this product line or this group. Can you go sell this? And it's very important to drive that and can keep that up to date. And so again, to traditionally, it's like, all right, let's make sure that our dates are right in the system. If there's some issues with the ERP, we may pull it out and manage it in a spreadsheet. But at the end of the day, you've got to make sure that you have a good understanding of where you're headed and you can plan accordingly. You do that, you'll start to see over a month or two, you should start to see your demand and sales side kind of level out, which allows you to start executing and pull your own time delivery up and then align some strategic sales going forward.

Martin Griffiths:

Okay, got you. So what is that an area like the use of the ERP system? Is that an area that you think is kind of misused or underused or not used correctly?

Stewart Ervin:

I don't think I've ever walked into a company who had it all together on the ERP side. And it's traditionally one way or the other. It's one that they either have the functionality inside the ERP, they just choose not to use it. They've put an ERP system in because they thought it would really take them to the next level, but the reality is they still kind of manage everything outside, and they really just use the ERP for an accounting side of things. Or I have seen where these companies have an ERP and they are using it to the max, but it's so full of bad information and bad data, they just continue putting bad data after good, right? And I mean it just ends up becoming a nightmare, and they just say, well, we use it, but it's not worth anything. And so we have to do our capacity planning over here, and we have to do our this over there, and it just they just end up again in the end not using it. And so our goal is to try to come in and find that sweet spot of what makes sense, and that's why you have to kind of understand their processes and say, okay, you're doing this over here, but your ERP would do it there. So let's start aligning those two scenarios. But yeah, I very rarely have ever seen a company when I walk in the door using ERP appropriately.

Martin Griffiths:

Okay, got you. But what you're saying is depending on the situation, how bad the situation is, you may need some time to just manually put the work in and fix it to get through the backlog, or you may have the capacity to like focus on aligning one part of the process with the ERP system so that it gets better going forward. Uh, do that kind of piece by piece, got you. The best run factories that you've seen, maybe the best run factories as you leave them, what would you say they do differently?

Stewart Ervin:

So I can again I go back to and kind of how I tell my clients today, the best ran factories that I see are the ones that are very disciplined with every move they make, and every move they make is with intent. And so they just don't do things. They're very much understanding of, okay, if we make this move, this is the result we anticipate happening, and therefore they move forward with that. And in order to get to that space, you really have to understand the very minute details of your business, right? You have to understand and know where your costs are, your capacity, know the abilities of your people, your sales team, your operational execution. You're operating at a 98 to 99% on-time delivery, so you know that the cadence and consistency of what you're doing works. You have regular communication in regards to a daily gimbal walk or a team huddle, where you're always knowing, did we win yesterday? Are we on track to win the week, the month, the quarter, the year? When you have that, you can truly operate and say, I have a very high certainty if we make this move, this is the outcome we're gonna have. And you're tracking as you make those moves and say, Oh, we may have to slightly pivot because we're not seeing said result, this, that, and the other. But it's again, it's it's driving your business forward with discipline and intent with every move you make. Got yeah.

Martin Griffiths:

So does it need the big team on the operations management side to do that?

Stewart Ervin:

No, not necessarily. I mean, really, it starts at the top, right? There's it has to be an alignment at the top, but the reality is you can flow your communication down. So if you're familiar with the lean six sigma terminology of a gimbal walk, right, that's where the site leaders go to where the action happens. And if you have a solid process where you know what's going on, traditionally you have in many cases the entry-level employees are reporting up to that. And so it's really getting buy-in from the top to the bottom and making sure that your management team is really there to serve your operations team. You can eliminate a lot of that middle management because, again, there's just like a solid alignment of expectations. The floor knows what winning looks like, you have good standards in place, you have good execution of efficiency and utilization, and you're reporting that daily. If you're consistently getting great reports, then you know you're on track again to hit your day, month, week, quarter, year.

Martin Griffiths:

So if you're enjoying this episode, please give us a follow on Apple Podcasts or Spotify. That would help us to keep bringing authentic manufacturing conversations with the people who are shaping our industry. Thank you. I want to shift. Is slightly so you intimated to this kind of earlier in your story of one of the issues that you came across that like the management of cash flow was a big issue. What would or lesson that you learned, what would you say one of the biggest m misconceptions is about finance in manufacturing businesses?

Stewart Ervin:

That it is hard. I mean it is hard, don't get me wrong, but it people tend to make it out to be more difficult than it is. At the end of the day, some uh again, it really varies across industries, but I'm a huge proponent of standard costing. And when you have solid standard costing, it allows you to kind of set the baseline to understand what where all your costs are going to align with your revenues, and then you can really just manage your variances. And so it's not in it's not incredibly difficult. Again, you have to kind of have an ERP system and you have to be disciplined with how you set all that information up. And so again, I kind of keep preaching the ERP, but that is kind of one of the number one drivers that I really work towards is having a solid, robust system. But if you if you really operate and get in in solid forecasting and you set an annual plan where you're driving forward, and then you do those monthly reviews where you're always kind of checking to where you're aligned, your results, actual results are to your plan, and just make small adjustments, you'll start to realize that finance is not the big bad woof, right? It's actually a very powerful tool that if the processes are set up appropriately can really help drive your business forward.

Martin Griffiths:

Okay, perfect. Got two questions based on that then. One by ERP and the other about standard costings. So who do you think you should be responsible? Whose responsibility should it be for getting the standard cost ins right in terms of the because you've got the labor, the overheads, the component parts, uh the materials costs?

Stewart Ervin:

Yeah, so traditionally the finance department controls it, but it's with input of purchasing operations as a joint whole, right? And so obviously the purchasing side manages all your cost of your byproducts. You have your operations side, which tradition is your manufacturing engineering who helps with the labor standards. And then your overhead cost tradition comes out of your finance group. And so it's really a joint effort, but at the end of the day, the finance team, they live and die by the numbers, and so they have to put their stamp of approval and say, yes, this is how we're going to manage the costs going forward. But it's really a kind of a triple team effect there.

Martin Griffiths:

Yeah. How'd you and how do you make that happen? Because I've seen lots of businesses where the standard costs in the RP don't reflect or a best guess, like maybe putting as best guesses at the start of a new project product coming in, not really get being forgetting to get updated when reality hits. And because it's responsible to multiple different people responsible for multiple parts, it's never really brought together. Yeah, what would you do in that situation?

Stewart Ervin:

Yeah, so again, you kind of do a little bit of work outside of the ERP for that. But traditionally you can set most ERPs up where the standard cost hits a particular GL and the variance difference hits a different GL. And obviously, you can traditionally see the details on the purchasing side and ask the question. There are some ERPs that allow you to have a variance report, a PPV, right? Purchase price variance report where you can drop your purchase order price against your standard cost and see before it ever hits what your costs are going to be, and you can start working with your purchasing group and saying what's going on here, right? So in the in the your best of ERP, you're always aligning your open purchase order price against your standard cost price to anticipate your variances. On the labor side, it gets a little more difficult and it's not as cut and dried. You know, traditionally, if you're launching a new program, you're making your best guess as to what it is. But we go back to the Gimba discussion in regards to your planning group is going to say, okay, you have the capacity to do 100 hours. I'm going to schedule 70 hours with efficiency and we're going to see how that plays out. And when you do your Gimba walk, traditionally it's, I had a plan of 70, it took us 125. Well, automatically that's going to be a red flag to let's see what's going on with that. And you just kind of set it in a new parking lot and you kind of start moving forward. And if you're consistently seeing there's issues with that, once the again the new program's kind of up and running, then you just run your traditional time studies and make those adjustments. Really, in most cases, I try to roll the standards only on an annual basis. And so you spend the entire year working through the nuances of that. Because again, you really have some of the markets up and down that's driving chaos. You want to have if you're going to change labor efficiency and labor standards, you're going to want to have multiple iterations of that time study done so you can lay that in. And again, it's more or less you spend your year explaining and understanding your variants, you roll your standards at the beginning of the year, and you start again. But again, it's just being very diligent and trying to understand why do we have said variance.

Martin Griffiths:

Yeah. Okay, great. Sounds good. The other question was you keep coming back to the ERP system. I was just wondering, could you kind of give me your thoughts on what a day in the looks like of a company who isn't utilizing the ERP and it's done by imagine spreadsheets, by walk around to check where orders are up to versus move somewhere where the ERP is looking smoothly, and yeah, how what does the day into life look like in the two situations?

Stewart Ervin:

So I just was at a client yesterday and I watched him have multiple spreadsheets, a hand calculator, pad, paper, and he literally spent eight hours looking, writing all this stuff down, just page after page worth of data research, trying to figure out what he wants to do and how he wants to move forward with this particular issue we're dealing with. And I was in the processes on the side, putting the data in where we can just press a button and a report tells us what it is. And that's the biggest thing is if you have your ERP solid and working, the vast majority of your information should basically be able to come out in a report. Again, you may have to dump it and compare two different Excel files, but you're not looking at 50 spreadsheets, six or seven different reports inside of ERP where, oh, I got to print this report, but strike out all this information because you know that's incorrect, and then therefore you're starting to write stuff on paper. That's really the biggest difference. The also on the positive side, uh a solid ERP is traditionally paperless, right? So you're not printing a bunch of stuff out. You can do the majority of the work in with reporting out of your ERP or through some spreadsheet work, and you're not printing out a bunch of stuff walking around trying to figure out what's going on. And so probably the biggest difference is the speed to information is tenfold if you have a solid ERP versus not.

Martin Griffiths:

That's great so far. I won't shift gears. Again, we do a section called Myths and Truths. So I give you a statement, let me know if you think it's a myth or a truth. Cash flow problems mainly happen because customers are late paying.

Stewart Ervin:

And the reason why I say that is cash flow traditionally is misaligned because you don't understand your demand of cash going forward. So the payable side is only a small portion of where your cash actually goes. The reality is if your demand and material requirements overdrive your cash surplus, therefore you say you're growing too fast, you run out of cash versus s someone paying late. And if you're managing your payables, again, no one company should be the majority of your cash inflow, right? So you should be diversified well enough that you're consistently getting your payables in if you manage it properly.

Martin Griffiths:

Yeah. Okay. Got you. Finance and operations can run well, even if they're disconnected from each other and run separately.

Stewart Ervin:

I go back to meth on that too. Again, I drive for that forecasting is a major component of success inside of a business. And when you're always comparing your forecast to plan, and in order for it to be an accurate forecast, you must have input from your operations team and sales team, right, to understand what's going on to properly drive your forecasted revenues, material requirements. Therefore, you can execute a solid cash flow plan to make sure your business is operating healthy in the future. If there's a disconnect there, then that ability to manage that cash flow side becomes problematic.

Martin Griffiths:

Yeah. Okay. If a factory looks busy all day, it's pretty much always performing well financially.

Stewart Ervin:

Um yeah, 100%. So most places I walk into, they'll tell you they're an absolute, oh my God, we can't take on any more work. We're dying, but we're not making profit. They all think they're working, they're doing the best they can do, and there's nothing more they can do. And we quickly start to align as showing how inefficient these guys are running. I mean, traditionally they're bloated, they got bloated head counts from overhead all the way down to the operations level. And so, yeah, looking busy does not necessarily mean that you're profitable.

Martin Griffiths:

Okay. You've taken off another one that I was going to come to there, but let's end on this one. We're not doing so well on the trees so far. Let's see. When margins fall, the issue usually is that prices need to go up.

Stewart Ervin:

When margins fall, the prices need to go up. Again, so margins driven off of labor and material, right? And so obviously I'm always a proponent of value-based pricing. You take your pricing as high as you can through value-based pricing. But in order to do value-based pricing, you must have like impeccable quality and solid on-time delivery and really provide a service that's outstanding. And in order for that to happen, you must be like tight on your execution. And so if you're tight on the execution, that pretty much means that you're managing your labor and your cost. And so, yeah, I would say ask that question one more time. I kind of rattled off. If margins are falling, it's usually a sign the prices need to go up. Yeah, not necessarily. Again, it's you it could be that, so I'm gonna say myth on that. Your purchasing team is not managing their costing that we kind of talked about earlier, and they're just kind of allowing the supply base to kind of run amok with their pricing. It could be that your labor, your operations team is operating incredibly inefficient and they're not utilizing the labor appropriately, which all then driving cost up. And in many cases, people try to again get price and increase versus looking internally and fixing what's going on inside their own house.

Martin Griffiths:

Yeah, okay. I won't I want to dig in. So thank you for doing myths and truths. We're done with that. I want to dig into something that you mentioned kind of in by in bypassing. You said you like to push clients towards value-based processing as opposed to cost plus. Yeah. Yeah, can we just dig into that a little bit more?

Stewart Ervin:

Yeah, a lot of times your cost plus can sometimes inadvertently drive you to the bottom, right? It's a race to the bottom where if you really can understand what your core competencies are and you can sell that side of you being the expert or being the best in your industry and you can back that up with amazing execution, you can traditionally drive a premium on your price. That doesn't mean that you serve everybody, right? Not all clients are great clients, not every dollar is a good dollar for revenue. But if you again traditionally can prop yourself up as the expert and you have some type of IP or something, then you can really sell that value-based pricing, which means you can get a premium price, which inherently drives your margin, right? So many people just kind of look at the revenue side of the house, but reality is margins where it's at, right? And so being a charge of premium for for your offerings of any sort allows you to every dollar you make in price drives direct goes directly to the bottom line. And so value-based pricing is where it's at.

Martin Griffiths:

Okay. So and I guess that might down be down to the product, the quality of the product. I suppose it might be down to the services that you offer afterwards, the your on-time delivery, things like that.

Stewart Ervin:

All the above, yeah. So I normally tell people on-time delivery and on quality is now an expectation. Right to brag and say, hey, we're 99% on time and we have zero defects. Okay, thank you. That's what I would expect. And so traditionally, it's going to come through some other avenue. But just understand if you're not 100% on time and not 100% on quality, give or take, you're never better new, you're never able to drive value-based pricing. So those are a must. And then you really try to find your core competency and sell that aspect to help drive that value. Okay.

Martin Griffiths:

So let's dig into that a little bit more. Have you got any examples or stories of where clients have found, what that core competency may be, and it's helped them to really drive some value-based pricing.

Stewart Ervin:

Yeah, so I'm working in the telecommunications industry now where traditionally it's somewhat fragmented, like one company will do the civil site preparation. There'll be another company that does the drilling and preparation for the towers, and then another company comes in and does the towers. They recognized early on that their goal was to try to make everything easy and be a kind of a one-stop shop. And so they strategically vertically integrated, and their core competency is we're your one-stop shop. So you can call us and we can handle everything from design build all the way to final installation and site cleanup and prep. And they recognize that and they have developed a whole process around that. I work with another company who recognized that their core competency was making small run capacitors. And so this, if you're familiar with the capacitor industry, majority of these capacitors run hundreds of thousands of parts, sometimes millions of pieces, and they recognize, hey, we're very good at running three. And so they built an entire business, $25 million worth of business a year, focused on small run, quick turn capacitors. And all these worldwide, all these companies were coming in saying, hey, we just need a few to try something before we go into large-scale production. And so they recognized, hey, we're very good at that, and when they sold that and we've did very well. So those are two great examples of where they identify their core competency, recognized it, and then strategized and built off of it.

Martin Griffiths:

Okay, got you. Thank you. That was that was really interesting. I'd just like to shift to what you're up to today and what's coming up in the future for you. So what does your work look like today?

Stewart Ervin:

Yeah, so we're really focused on fine-tuning our offerings in regards to starting to offer some more of the fractional CFO side of the business. So for the last 15 years, it's been really kind of focused on the turnaround side. We're really starting to break off into some of the fractional CFO work where the turnaround work, again, it traditionally was we come in and kind of get you going, get you turnaround in 18 to 24 months, and then we're off to the next one. We're really changing things up in regards to offering a few opportunities to do some quick turnaround stuff. But the difference is we'll embed with your team for the long run and through the financial side of the business. Retained relationship as a member of your management team for the long haul to make sure that you kind of don't get back in the same spot that you were in. But the biggest driver is we're a strategic partner with you, right? So we're on the we're in the weekly meetings with you, we're driving your quarterly and annual strategy plans and always making sure you're consistently moving forward through pricing strategies, cost reductions, and a new business growth.

Martin Griffiths:

Got ya. That sounds really good. So of the work that you're doing then, what's the part of it that feels the most meaningful or impactful to you?

Stewart Ervin:

Yeah, so the turnaround stuff is what I I that's been my game, right? And so there's there's no greater joy I have than working alongside a business owner who was like freaking out because their sales have stalled or their margins are starting to erode. And for the working with them, for them to have those aha moments to go, oh, now I see it, right? That's so rewarding to me. And so I really enjoy the turnaround side of it. And it to me is I kind of learned the playbook, right? And so I can just kind of methodically work my way through it alongside the owner, and then we can turn that over to one of our fractional CFOs to make it happen and kind of carry on that legacy and make sure that they stay consistent and don't get off into the weeds again.

Martin Griffiths:

Got yeah. What would you love to see more manufacturing businesses doing over the next few years?

Stewart Ervin:

Yeah, that's a good one. Again, it's what we're finding a lot that's going on kind of in the world that we're seeing. There's you're getting a lot of second generation owners now, right? Where these the there's a lot of there was a big boom of these founders who had started the companies and now they're getting ready to retire and pass off the businesses to a second or third generation. And so what I would love to see is a better transition of handoff from the first generation to the second generation because it's it's surprisingly how rough it is of a handoff for these guys, right? And so I've had I got three clients today who are going through that. And so I'm more or less working with the second generation group, and I see the struggles that they're having, taking the business over from the founders, and it's really difficult. So what I'd love to see in the future as we kind of move forward is come up with some better succession planning of how to exit and hand off your business as we have an aging world where that's definitely going to be needed.

Martin Griffiths:

So why is that because the original owner has a lot of the processes up in their head and maybe not implemented as systems?

Stewart Ervin:

Yeah, that's part of it too, and part of it as well isn't it's their baby and no one can run as good as I can. And part of it is I my identity is my business, and I don't know how to let it go. I don't know how to truly retire and let it go. And so those are really key areas of of some struggle today.

Martin Griffiths:

Okay. What so in that either in the turnaround or in the maintaining things going forward, what shift do you think would make the biggest difference for manufacturing businesses going forward?

Stewart Ervin:

Yeah, the biggest shift that we really try to do is have the business start looking forward. Right. Too often what happens is the books close, they may close at the 15th day. And so a lot of times you're looking at data that's 45 days old, right? And so if we can have the business make a shift to drive in forward, what that does, and again, it does a variety of things. Again, it aligns the sales and operations. It allows you to start driving cash flow and understanding where your money is going. But the biggest thing is you're looking forward and you're driving. And now you start making decisions based off of where you're headed versus where we're being pushed. So that that's the biggest shift, man. Start forecasting that allows you to do cash flow analysis and really start to drive your business forward.

Martin Griffiths:

Okay. And what's the best way to get started though? Do you just do you have to put a date in the calendar and go out there and do it?

Stewart Ervin:

You do. You do. You just you again you start with, like we spoke earlier, understand your backlog. When you can understand your backlog, you can start at least understanding your cash, like your revenues. And then that allows you to start understanding some of your gaps to give you time to start building your understanding of cost. Get a spreadsheet. It can be super herky jerky. Just start with something, just to start again start moving forward. Gotcha.

Martin Griffiths:

Okay. That's really great advice. Thank you, Shuart. Been super interesting. You've covered lots of things today. Where can people go to find out more about you?

Stewart Ervin:

Yep, so I'm most active on LinkedIn, Stuart Urban, you can find me there, or you can check out my website at bracketmgt.com.

Martin Griffiths:

Amazing. Thank you. Yeah, and I've checked that out. Your website, you've got loads of playbooks and templates and things like that on there. If you go in to your website, what would where would you go to? What would be a good thing to get started with?

Stewart Ervin:

Yeah, so we offer a free business assessment. It's about 35 questions, and it focuses on strategy, operations, and finance. It's roughly six or seven questions in each one. And it we do a customized personal assessment of where you're at as a business, and it covers a variety of things. And it just kind of gives you some insight. We give you some highs and lows and some key areas to focus on. Um, so that would be where I would normally try to drive everyone, is just do a quick assessment of where you're at, and then we kind of follow up with some some ideas of improvement as you can move forward and do some of the implementation on your own.

Martin Griffiths:

Brilliant. That sounds great. Yeah, we'll drop links in the descriptions for that. Thanks a lot for today, Stuart. It's been great speaking to you. Hope you have a great day.

Stewart Ervin:

You as well. Thank you so much.