Manufacturers Make Strides
Manufacturers Make Strides is a podcast about people in manufacturing and the paths they’ve taken. Martin speaks with guests from across the manufacturing world about their careers, the challenges along the way, and the strides that keep the industry moving forward. New episodes every other Tuesday
Manufacturers Make Strides
Why profitable manufacturers think differently with Jay David
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Most manufacturers think profitability starts with margins. Jay David believes it starts somewhere completely different.
In this episode, Martin sits down with Jay David, who has spent more than 30 years helping manufacturers improve performance. Starting his career in cost accounting before moving into operations leadership, Jay realised many of the assumptions he'd been taught didn't match what he was seeing on the shop floor. That journey changed the way he thinks about pricing, capacity and what really makes manufacturers profitable.
In this episode:
- Capacity utilisation
- The death spiral
- Smarter pricing
- Shop floor leadership
- Better decisions
- Automation
- Mentoring teams
Connect with Jay David
Website: https://dobusinessbetter.com/
LinkedIn: https://www.linkedin.com/in/jayadavid/
Turnaround Revelations: https://www.amazon.com/TURNAROUND-REVELATIONS-Alternative-Approaches-Transforming-ebook/dp/B0GHQN4YWQ
Capacity Utilisation And Fixed Costs
SPEAKER_00A lot of the assumptions made in traditional cost accounting are not designed for making business decisions. They're designed for creating financial statements at the end of the month.
Martin GriffithsMost manufacturers talk about profitability as if it's this mysterious thing. Margin pressure, market conditions, maybe bad luck. But Jay David has spent the last 30 years proving that that's backwards. Profitability isn't luck, it's about understanding one thing: the relationship between capacity utilization and your fixed costs. Get that right, and everything follows. Jake has worked as a fractional COO, he's helped turnaround large manufacturing operations, and he's now written three books challenging how founders think about finance and operations. He started as a cost accountant in a candy manufacturing business, but instead of just staying at his desk and crunching numbers, he spent his time out on the shop floor learning about what actually drives profitability. And that's where this conversation gets really interesting. We dig into why so many manufacturers make the wrong decision when it comes to pricing and capacity. We talk about what he learned early on and that most leaders miss, and we get practical. What should a manufacturer do this week to improve their profitability? This is a conversation for anyone running or leading a manufacturing business. No theory, just 30 years of real experience and some hard truths about how to run a profitable business. I'm Martin, this is Manufacturers Make Strides. Let's get into my conversation with Jay David. Hello, Jay. How are you doing today? Very good, very good, thank you. Brilliant. Really good to have you on the podcast today. Looking forward to getting into all things manufacturing, finance, and operations. But just tell us first off where you're joining from today.
SPEAKER_00I'm in El Paso, Texas. Uh at the far, far, far west side of Texas, more New Mexico than actually Texas. What's the weather like there at the moment? Is a bit hot? Uh we're hitting 100 just about every day. That's Fahrenheit. I know you have that other uh scale, but perfect.
Martin GriffithsYeah, I'll do some maths and figure out figure out what I convert to. We'll get to your background. I like to jump in with a with a question just to really kind of uh set a tone for your the what how you think. So what would you say profitable manufacturers understand that sets them apart from other businesses?
SPEAKER_00The biggest thing is when you build a huge factory and invest tens of millions of dollars in building it, it's understanding that uh you can't run that operation on a one-shift and cover all of those fixed costs. So there's the challenge there of understanding the relationship between capacity utilization and then that drives the price you can go to market with. Good manufacturers understand that, that utilizing that fixed cost capacity
From Restaurants To Candy Plants
SPEAKER_00is is the most important thing to profitability.
Martin GriffithsAll right. Well, there's a lot to dig into within that, but let's hold fire on that. I think that just sets a scene. And just tell me what first brought you into manufacturing. You know, what was your background? What was your first experience of manufacturing?
SPEAKER_00My career started in a uh uh different way. I went to college only to play baseball, and my batting average was more important than my grade point average. And I went to college only one year, played, and then left, and then I got in the restaurant business and managed and opened up new locations. When I got married and had a kid, I realized that lifestyle was not going to be very good going forward. So one day after work, I drove to a local community college that I had attended for baseball, signed up for one class, and realized that that was my path. So I worked my way toward a bachelor's degree in accounting, the last two years of which I was bartending at a Riverboat casino, working evenings, and while I was bartending in the back of the house, more of a service bar, I was doing my homework for accounting. So I chose accounting because I had a strong numbers background, but I also knew that I could uh get a job. When I graduated, the first job that uh I took just out of a newspaper ad was a cost accountant at a candy manufacturing business in Chicago. They had four plants in Chicago, a large distribution center, and then uh another one in Oklahoma. So I learned manufacturing there from the from the bottom up. As a cost accountant, you're primarily focused on valuing inventory at the end of the month to get to the cost of goods sold number, but we also worked on productivity and some other things. So I spent as little time as possible at my desk working on the accounting side. I did what I needed to do there, but I spent all my time on the manufacturing floor working with plant managers on cost savings, productivity, and just really learning the nuts and bolts out there.
Martin GriffithsWhat would you say some of those early experiences on the shop floor taught you then?
SPEAKER_00I took my what I learned from cost accounting and the traditional methods and the way the costs are calculated, and really learned from the beginning of how all the allocations work, how the accumulation of labor cost gets into a unit cost of a case of product or something like
When Standard Costing Breaks Reality
SPEAKER_00that. So I did all of my work based on those assumptions. And we did a couple of big projects, multi-million dollar projects on automation line upgrades and things like that. But what I found is a lot of the assumptions that we built into the CapEx to get it justified never came true. And over time I migrated more into the operation side. And I realized once I got on the other side, that a lot of the assumptions made in traditional cost accounting, gap, generally accepted accounting principle rules, are not designed for making business decisions. They're designed for creating financial statements at the end of the month from a compliance perspective. That was the biggest kind of shock to me when I when I jumped on the other side of the fence.
Martin GriffithsOkay, go you. So just go back to that. You mentioned earlier that in some of those automation projects or capital expenditure projects, a lot of the assumptions uh that were made didn't really kind of pan out. Is that related to what you've just mentioned though, that you think that way of accounting is more to do with monthly reporting than how to plan out, you know, to kind of forecast or plan out, or is that something else?
SPEAKER_00Well, when you come at it from a gap perspective, what we did there is we allocated overhead based on labor usage. So every dollar of labor carried $2.35 of overhead with it. So in a simplistic way, if you take a production line and you reduced labor in it, in a simplistic way, every dollar of labor you reduce, you also are reducing $2.35 of overhead. And that's how the accounting rolls up. That's not the case at all. The assumption in all of that is that overhead expenses are variable and that they're easy to adjust. Even labor is not variable and easy to adjust in a manufacturing environment. So that was kind of that light bulb moment where I said, you know what, things aren't working out the way that I thought here.
Martin GriffithsOkay, go I yeah, I understand that that makes sense. So can you remember a moment in your career then, or maybe, yeah, just one specific moment, or maybe a few specific moments were the really kind of triggered that light bulb moment or that turning point in your career of what you thought, you know, this isn't working?
SPEAKER_00I'll give you a short little uh process of kind of where I went. So I jumped out of accounting and started working in operations in a uh a company that had bought us. We became part of an $800 million company, and I was the cost accounting controller for that business. We had 10 factories, five different ERP systems. So that was kind of a moment of chaos that I had to kind of clean up, get some people in to do the job. Then I jumped to manufacturing. My first job over there was to consolidate a lot of the information from all those ERP systems, but also I was thrown into a project to close two factories and to transfer production and outsource some product. So it was then that it really smacked me that as we really looked at the full economics of the building and said, okay, when we close this, here's all the fixed savings that we're gonna get. Well, a lot of that transfers over to other to other businesses. So there I had a foot in operations, but still the finance mind. Later I moved into full operations leadership to where I had full responsibility for the PL, and that's where things started to leak. And especially from the labor perspective, you ask any accountant in the world and ask them if direct labor is variable. Meaning if it takes five people to make 10 cases of product a minute, you can go to 10 people and you're gonna get 20 cases per minute. Or backwards, if you cut, you're gonna get the equal the same thing. Sounds good theoretically, but you can't treat people that way and say, we don't have production today, go home. So things started to unravel as I dug deeper into all of those costs. And the problem with the entire process is when you're building your budget, you you build it out, rent, insurance, medical insurance costs, office supplies, travel, everything. You come up with a big budget there, and then the sales team puts their budget in and you get units of sales, which drive the production budget, and then you do all the division to come up with what those costs are on a per case basis. So you've taken rent cost or depreciation, which are fixed costs, the minute you've done that division, you've made them variable. So the assumption all along is that it acts in a variable nature. And that doesn't sound terrible until you figure out that you're using that same information to price your product. So when a new business opportunity comes in and you say it's an incremental 10 million pounds of production, every million pounds or every pound carries this much labor, this much overhead, and then you start to price your product, and then you don't get the business. And it's not because you weren't competitive in itself, it's because you built in all of your inefficiencies into that budget, all of your unused capacity into that budget to cover it, and then now that you're pricing, you can't price. So I
The Death Spiral In Pricing
SPEAKER_00call that process the death spiral. So if you can't compete, you can't bring in more product, therefore you can't cover your fixed costs, and then you struggle for volume and you don't you're not profitable. And then the worst thing you can do is then do an analysis customer by customer to say who's profitable, who's not. When you do that analysis, you've got four customers that aren't profitable, maybe 50 items, and then you decide to fire them and move on because you think that getting rid of them is going to improve the PL, but it actually doesn't. So that was probably a seven to ten year process of really understanding that. And and that helped me understand why businesses fail and why they struggle years before they finally fail.
Martin GriffithsOkay.
SPEAKER_00Well, okay.
Martin GriffithsYeah. Well, that must have been quite a kind of an insightful time over that time. What would you say kept drawing you more into the operational side of businesses then? And and slightly less of a focus on just the accounting and the finance?
SPEAKER_00The biggest thing that I realized in it, and I actually got a little bit of this from my restaurant days. Manufacturing, the belief is that it's equipment and it's conversion, but manufacturing is also people. The company that I was chief operating officer for, we had 3,500 employees. And as the chief operating officer, yes, I was responsible for pushing product out the door that was safe and of high quality to deliver on time, but I also had responsibility to 3,500 people, 3,500 families, multitudes of kids in those families. So my the my ability to run the business efficiently was important because those folks needed the work. They needed the the paycheck. So I enjoyed operations from that perspective. It was about the people. I enjoyed promoting people from within, finding a machine operator and giving them a responsibility for multiple machines on a shift, and then two years later giving them full shift responsibility over the department. That's what is the best part about uh manufacturing and operations is the people. The equipment takes care of itself with the engineers, but it's the people.
Martin GriffithsOkay. Yeah, that that's interesting. Yeah, and it as you say, it's a big responsibility when you have, you know, count three and
Automation With People In Mind
Martin Griffithsa half thousand families. I'd be interested, like the question that comes up from time to time, I'd be interested in your viewpoint on it. You know, what do you think about the pros and cons of automation then, uh, if it's potentially, you know, putting people out of jobs versus, you know, the long-term competitiveness, you know, of a company or of a plant? How how do you look at look at that?
SPEAKER_00Automation has its place in in the business that we were in, we did a lot of private label work. So as long as you have repetitive production that you can automate and add in auto case erectors, auto pick and place, putting product in the boxes, moving to uh automatic taping to automatic palletizing, and then sending a pallet to the back door. All of that works when your product mix is not diverse and it's it's stable over a period of time. So where we found opportunities to automate and add something, it was because we knew it was going to be stable and the justification was there. What I see in a lot of companies when I do go out is they introduce a product and they automate it right away, and they spend an extra few million dollars to make sure that there's absolutely the least amount of labor in it. And then six months later, their customer says, you know what, instead of a 12-count case, we need a four-count open top tray because we like that better on the retail shelf. Can you do that? And then they've automated away from that. So that's one of the challenges. But again, it gets back into the stewardship of 3,500 employees. So if you have to do a project that's gonna uh remove a hundred people from the factory and it's justified for the business to be healthy, it's the right thing to do. And usually those projects take a period of time. And those hundred people aren't released, you just through normal attrition can uh uh absorb them and and and reduce your hiring otherwise. So it has its place for sure.
Martin GriffithsOkay.
COVID Turnaround And Ending Overtime
Martin GriffithsSo so after this period of working working in these businesses, learning a lot, what led you to start your own business?
SPEAKER_00I left that business. That was a about a $350 million plus per year candy company. I left during COVID. All of our factories, uh, the candy factories were across the border in Mexico, where I had gone every day. So we obviously had challenges during that time. But we also had a change in the CEO role, and there was kind of a different business philosophy that uh instead of us being 100% aligned all the time, we were kind of at odds. And I had been there a long time, and I realized for the business to be successful ongoing, this guy needs somebody that he's fully aligned with. So we parted ways. And from that time, I looked at utilizing what I learned in all of those experiences to help other businesses. So I went to a tea company in uh Georgia. They make private label tea bags for hot tea use, but also iced tea for Chick-fil-A and other businesses like that. I entered that business in the middle of COVID where all of the plastic shields were up at the time and six feet, and they had no plant manager, no maintenance manager, a HR manager hanging by a thread, uh, but yet they were considered important, obviously, to the uh food chain at that time. So I flew in, gave them some advice on some things that I would help them with, and I was planning to do it as a consultant, but they wanted me to relocate and to take the business over. So we stabilized, and the first thing that I did, which was very controversial, is I stopped overtime. They were working mandatory overtime every week, burning their people out, having immense turnover in a time that was hard to hire. So we stopped that immediately. We stabilized, we cut some orders, but uh we stabilized the workforce. We started listening to the workforce as to what they wanted and what they needed to be successful. And then I started building a team, got a good plant manager, hired a couple of excellent engineers to help with continuous improvement and um reliability engineering, and really built a strong team there. And then I realized that skill set is transferable. So from that point forward, I stayed independent and helped businesses that I came across and kind of to do the same thing.
Martin GriffithsThat's brilliant. I have a quick follow-up question on that then. So that decision where you decided to cut over time, just talk me through that a little bit more. What led to, you know, what things were it that you saw, you know, either on the walk around the business or with the conversations with people that led you to think that was the right decision?
SPEAKER_00Aaron Powell Anytime I enter a business, I obviously hear the perspective of the owner, the president, the vice presidents in their areas, and what their perspective is of the challenges the business faces, but that's usually about 30% of the story. So I spend time on the production floor speaking with shift management, department managers, and then I walk and talk with the employees themselves too. And usually you find that that exercise has not been done by the owner or the president in months and maybe ever. So then I'm able to bring the voice of the floor up to the main office and talk and say, okay, um, here's what you thought the issues were, and here's why you think that we're having turnover, and why you think our that we're having quality problems is lack of motivation or poor training or the floor leadership is bad. What I'm being told is that you've worked these people six days a week for five months and not taking a single Saturday off. They miss their families. It's a time of COVID and everybody's worried about everything anyway, and your only focus is saving your business and your employees are are uh taking the brunt of it. And so by doing that, then we started to say, okay, how do we how do we react to this? So I had pushback from finance and sales right away that says, well, we we still have to get the product out the door. We we have to do this to save our business. And I said, Well, you're about two months away from losing your business because 40% of your employees out there right now are looking for jobs. So we compromised and and I said, okay, no more overtime for the next three weeks, Monday through Friday, standard shifts, and we're going to Prioritize the customers, the big ones that we can't afford to use, we're going to ship to them. Some of the other ones, we're going to inform them that, hey, we're in a pandemic and we're going to be a little bit late, but you're going to get your product eventually. And then one out of every four weeks will kick in and work one shift on a Saturday to help push more product out. It just it lowered the the pressure uh within the whole built business and it turned pretty quickly after that.
Martin GriffithsYeah. And that's interesting. Do you think at that level of the, you know, the CEO, the owner, to sometimes out what do you think leads to getting to that situation, do you know, of the not of walking around and having those conversations and finding out what's what's going on at the shop floor level?
SPEAKER_00It's blinders, and you see it really, you know, that was an extreme case, but you see it in a lot of cases where the production floor, that's where the dirty, the dirty work happens. It's um a lot of times the leadership don't really understand what's going on out there, the chain of events, the interdependencies of the production lines and uh the supply of materials coming in, that's the hard work. Um you've got to get in and dig. They would uh in many cases prefer to look at the financial statements. They would uh will look at um sales trends, they want to look at that stuff. And rather than going out and asking the reasons sometimes, the message kind of comes through finance to ownership, and it's it's deemed to be uh 100% valid. And and it's always really around the financial statements.
Martin GriffithsOkay. Got yeah. All right. So you've kind of touched on some of the some of the issues with more traditional
Pricing By Incremental Economics
Martin Griffithscost accounting and some of the problems or the miss things missings from that. What would you say in terms of what you think is a is a better way then, what would you say successful manufacturers in that instance are doing to bind to balance financial reporting, planning, and operations?
SPEAKER_00This is where the controversy comes in, and I never propose a second set of books. You have to close the books, you have to be compliant, you have to fully value your inventory, so you're therefore you have to go through the process I mentioned of accumulating a budget, allocating cost to units, and that's how you get to cost of goods sold, because the government wants their their taxes. They want to understand net income in a in a clear and uh equitable way, company to company. But that information, when you turn and use it for operational information, uh decision making, and especially your pricing model, is so inaccurate that it drives very bad decisions. So what I propose and what I've done in multiple places is to say, okay, let's look at the opportunity in front of us. If we take I'll give us a very specific example. In the candy company, one of the heads of sales came to me and says, Jay, I've got an opportunity for a million pounds of gummy bears. When I go to finance and they cost it out, they're telling me I have to sell no l at no less than a dollar a pound. And these are very simplistic numbers. And I can't get the business that way. And I really, I said, Well, where do you really need to be? He said, I probably need to be in the low 90s, but there's no profit in it at that. So I said, give me, give me a day, let me get back to you. So when I went and asked the plant manager, the scheduler, the supply chain folks in the factory, and said, okay, today we're sitting at, you know, actual utilization of our assets, you know, we're probably fully utilizing about two and a half shifts of work every week on but running a three-shift operation. So we've built those inefficiencies into our cost. So I said to them, what is the cost, the true cost of saying yes to this million dollar opportunity? If we say yes, we're gonna spend obviously material cost, packaging cost, boxes, we're gonna have freight, we're gonna have a few other things by saying yes. And I looked at the plant manager and the HR manager there. I said, How many people are you gonna have to hire to get this million pounds done? And to give you perspective, this is on a production line that produces about a half a million pounds a week. So this equates to about two weeks production. I was told there's no labor added. We don't have to add one person, mechanics, quality people, anything else. No, we're not gonna have to add anything. How about utilities? Do we have to add utilities? Not really, Jay. And in fact, the scheduler came up and said, you know, production schedules do this. So this million pounds helps us fill some of those gaps in there because it's gonna come in weekly buckets. So I went back and we did the math, and the cost of saying yes was not the normal standard cost that we use. The cost of saying yes was about 35 cents a pound. So when I went to back to the head of sales, I said, if you know, if you can get 95 cents instead of the dollar that that they want, we're what we're gonna make plenty of money on it. And I didn't give him all the details, but I said, you know, from an operations perspective, we we support going after that. Had a conversation with finance, they agreed, he went out and got it. And that's kind of how we ran the business for a while. And you take those opportunities when you can, and as you get to a higher utilization of capacity, when you ask the question, what's the cost of saying yes? Most of the times then that says, okay, we have to add another shift, or we have to add machine capacity, we have to do that. It's a different question with a different answer then. Okay.
Martin GriffithsThat's interesting. I have a couple of follow-up questions for that then. Because you mentioned earlier you don't suggest or you don't recommend like running a separate set of accounts outside of the so how do you so uh how would you do that? Would you just do this as and when kind of needed, and do you you know, just do a project-by-project cost analysis?
SPEAKER_00Yeah, I mean the typical way that it happens in our company and in the companies I was in in the past and every place I've seen it, they've got a cost accountant or they've got an analyst in the finance group that has more focus on the operations. In the past, when a proposed PL would be done for prospective business, that finance person would go to the general ledger and pull the costs, and the standard cost of a gummy bear is 87 cents a pound, which includes labor and all the other labor and overhead and all that. And that's what they would do, which is very easily, easy, painless, and then they say, What's your price? Here's the margin. Our target margin is 35%, doesn't mat meet the criteria, go do it. So what we did is said, let's look at the cost of saying yes, let's look at only what comes in there. And we're not proposing that if your target margin was 30%, that you only make 30% over those incremental costs. But what you're trying to do is can we say yes or should we say no and walk away? And that's it. So then there's a belief that on the back end, well, we have to track what we assumed during that business. So we have to take that individual customer in that line of business and run a PL on that to see if we if it matched. That's unnecessary because the perspective that I have is what you're trying to do is to make the most profitable portfolio of business from the manufacturing, from the sales side that can best consumes the full capacity of your manufacturing side. And as you fill up and you get a new opportunity that comes in, rather than necessarily saying, okay, we're gonna have to add a shift, we're gonna have to do this, one of the alternatives is says, let's look at our portfolio, and then let's look at some of the customers who are troublesome, some of the customers who have a lower margin. And then you can say, okay, we've got another opportunity to replace them, so we can do one of two things. Let's issue a price increase to them, and if they accept it, we've improved our portfolio. If they don't and they move on, that creates room for more profitable business to come into that portfolio. So it's it's more of a conversation. You don't need to adjust your accounting, you just adjust your assumptions. Okay, got you.
Martin GriffithsAll right, thank you for that. Uh the second follow-up question was I notice on your books there, ones that stuck out to me is Profit First by Mike Michelowitz. I'm a fan of that book as well. I have it uh up up there as well. I use it for our consulting business, our software business. I was just wondering, does that work for my you know, for manufacturing businesses, or is there a point where it because I I my feeling is it's more targeted at, you know, kind of smaller businesses. Does do the principles in that book well maybe if you just explain the gist of it, you know, the 30-second overview of it first, and do the principles in that work in manufacturing businesses?
SPEAKER_00Yeah, I mean the principles of profit first is as you're setting up your business, you decide the profit on the products up front and you make sure that that's always paid. When money comes in, there's an automatic bank account that ships money to a specific account that is profit. So you figure out what your profit is first, and then all the other things come in behind it. So, yes, it's it's good for those types of businesses that are more uh labor and there's not a lot of product cost and a lot of capacity issues and things, but the principles hold because when you let's say you and I are starting a uh manufacturing business from scratch, we have to make decisions on what we're gonna sell, what the product features are, what the inputs are to that. So we make all of those calculations, and then we figure out okay, how big big of a building do we need? How many, how much equipment do we need? So we make this fixed cost decision that's out there. And then before we spend a dollar, we look at that cost structure. And then the most important analysis you can do is a break-even analysis that says, okay, with what we've just decided, the decision on fixed costs, how many units do we have to sell to break even? And if you can't get there, if it if that's a million units and you have an untested item, you're gonna fail that test right off the bat. So the principles hold is build your capacity, build your fixed cost structure relative to the profit that you need to make. So some of the great stuff in that book is if I build my profit in first and I want a big fancy office, I'm working out of my garage and I want to go rent some space, there's no room for that because you've taken your profit first and then you decide I can't afford that because it's right there in front of you. So what it does is it helps you capsulize those decisions and do it. And that's what manufacturing needs a lot. It's sexy to buy highly automated equipment. It's sexy to have a fancy building with a beautiful office in the front. It just raises the amount of units you have to make before you hit break-even.
Martin GriffithsYeah, got you. Okay, thank you. That was a great breakdown. Tell me a little bit then about what your work looks like today. What's what are you working on at the moment and what you're enjoying at the moment about working with manufacturing businesses?
SPEAKER_00So I work as a fractional chief operating officer. So smaller businesses that can't afford that position yet, they may be resting with an owner and uh and a plant manager, or maybe they've got a vice president of operations who was a plant manager three
Profit First And Break-Even Discipline
SPEAKER_00years ago. They don't have the strategic person coming in, somebody that can look over the whole thing. So I fill that role fractionally so they can get the expertise that I bring, not at a full salary of a chief operating officer, but we make a decision up front as far as a time commitment and such, and they can get my services for the price of a plant manager, but it might be 25% of the time. So I do that. I also work with a restructuring firm when when banks have clients that are in trouble. I go in and help them try to restructure operations, but also finance to figure out how we get the line of credit down to a manageable perspective. And that's using really, you know, everything that I've done. But my focus right now outside of clients is is writing books. So this book here is mine. It's Turnaround Revelations. It's a terrible cover, and I and I'm working on regenerating that cover cover, but it it really is my 30 years of experience. And every single chapter in there challenges a paradigm that on how people lead and how people look at the numbers and how people negotiate and so on. But it's really the blueprint of a turnaround. The book that I just finished this week and I'm in editing, the goal is one of the most famous, popular manufacturing books ever made. It was written in the 1980s, and it's a narrative, it's a novel. So it tells the story of a guy who finds out that his plant is going to close because it's not profitable. He establishes a mentor relationship with somebody who asks him leading questions and he figures out, and then by the end of the book, he has fixed fixed it. But it's a true story, so it's easy to read, it's compelling. He talks about his Boy Scout troop that he leads and other things in there and how that leads him to some principles. So I've written one called The Gap, and it's similar, it's written in the same format, but it it amplifies the conversation that we've just had today.
Martin GriffithsYeah, I really enjoyed the goal. It was one of the first books I was recommended uh after in my first job. And yeah, the the scout troop wanting to get to the next um destination and people taking the back carrying the bags off the off the kid at the back of the line. That was yeah, that was a really nice uh kind of parable way of explaining that, wasn't it?
SPEAKER_00Well, there's factories all over the world that refer to their bottlenecks as Herbie because of the goal. Yeah. Who did you write Turnaround Revelations for? For founders. So a lot of times founders they begin with a business idea, they become an expert in what they they know. Might be a machine shop, it might be, you know, agricultural uh-based work, whatever. So they're experts in what they do know, but they need help in the things that they do not know. They've been raised on their own ways, their styles of how they lead, and they've learned that the financial the income statement is the Bible. It's how I run my business. I need the income statement. So I've written it for founders really because I'm really costing myself some money. Everything that you need to fix your business and to turn it around is in that book. Um, and I the last few chapters are here's the exact mechanics that you need to do to fix your cash flow issue or excess inventory issue. It's written for them, but again, I I address everything. When you're building your management team, most people want to find people that are just like them, that think just like them, and they interview for that. And I propose just the opposite: find people that are absolutely opposite of you, people who are gonna say no, people who are gonna challenge you. So in the beginning of the book, I say you're you might read a chapter of this book and say, this guy is absolutely out of his mind. That's fine. Move on, because seven or eight chapters in this book are gonna clearly resonate with where you're at and the challenges that you have. If you need help, you can reach out to me. But otherwise, the book is designed to challenge people. And at least when they set the book down on their nightstand, they say, wow, there's a different way to look at some of this stuff.
Martin GriffithsSo is that published and is that available now?
SPEAKER_00Yeah, it's on Amazon in ebook, uh soft cover, hardcover, and audio. The gap will be out. Uh I've got cover design working right now. I self-published, so that will probably be out early August. And then I've got a third book that's about 80% done, and it's called The Numbers Don't Lie, but I've crossed out the don't in there, and it's all about how numbers can mislead. And uh I get into some sports analogies, but budgeting, zero-based budgeting, uh, and a lot of other things there. So the series of books that I'm writing are called The Practical MBA. And it's really hearing from a non-academic about the realities of business and different ways to look at things.
Martin GriffithsSounds brilliant, Joe. Really helpful for people. And um, yeah, it sounds like you're kind of really hitting your productive stride with all of this and enjoyed yourself. It sounds good. Thank you for spending the time today to come on the podcast. Really enjoyed this chat. Just before uh you go, I would just like to leave one takeaway. So, what do you think is one thing a manufacturer could do this week to go about improving the profitability?
SPEAKER_00It's funny that I actually have a chapter in the book that says here's five things you can do right now. Get off your off your butt and walk out onto the plant floor and do that. So it's being receptive to challenging your pricing paradigms and going out and saying to your salespeople, bring me every opportunity, and we're gonna pick the best one of them, and we're gonna aggressively go after it, because filling capacity is the most important thing. The CFO or your controller, somebody, they might squeal
Weekly Actions And Finding Jay
SPEAKER_00a little bit, but look at the cost of saying yes as opposed to your margin and how you think it might impact on your income statement. But from a leader perspective, the note that I took and it and it's in my book is replace yourself. Go out, look at your management team, find one or two people that you can begin mentoring, find your eventual replacement. Because as a founder, you got to leave someday and you want the business to run. Go find somebody, begin a mentoring relationship with them, and then also encourage them to do the same. They can't move up unless they they do it. So mentoring can be as simple as 30 minutes a week in my office, let's just talk about family, let's talk about challenges, but let's talk about something you encountered at work last week and how did you react to it? What was the outcome? How could it have been done better? Many leaders don't take that time, they don't see it as value added. And then when when they're out, when they want to leave the business, or maybe they're out for a medical reason, they're irreplaceable, and that's the the weakest position you can be in as a business.
Martin GriffithsWhat can people go to find out more about you then?
SPEAKER_00My website is dobusinessbetter.com. And on there I've got a lot of different resources as far as the services that I offer, the links to my books, and uh a lot of great information, especially for founders. And I work really in simple simple ways. Call me, we talk, and if we strike a uh a common point, you know, I'll say here's how we can work together. And it's not always a fractional relationship. It could be task-related that says, please come out to my plant and leave me a business plan and and that's it, and and go. So I do any number of things, but the most important thing and how I choose the work is have I met somebody in this relationship that I really root for and I want to help them in the business? If I if I get the idea that, you know, they just want to hear something but not really act on it, then usually I say, well, you know, here's a little bit of advice, good luck, but I want to find somebody that I can truly root for and and get in and help them. And the satisfaction comes from that more than any consulting wages or anything.
Martin GriffithsYeah, I've seen something grow in the success that comes out of out of that. Yeah, brilliant. Thank you for that conversation today. I really enjoyed it. Hope you have a great day. Thank you, Martin.