A.J. Gordon, Gordon Aluminum
Thanks for joining, AJ, I’ve been looking forward to having you on, especially since the business you’re running has been in your family for a few generations now. And as a strong manufacturing focus, of course. So I’m looking forward to hearing about that. And then just your time as an operator in this business. It sounds like it’s been quite the journey, so I’d love for you to give us a quick overview of the journey so far and what you’re working on today.
We’ve been around since 1958. And as we spoke about before, my grandfather and my dad started the business then. And it was just the aluminum extrusion press and analyzing line that sat in Hudson, Michigan, and operated there mostly serving the automotive industry around the Detroit area, and also the architectural window industry, the aluminum window industry. And that really grew fairly quickly in Central Wisconsin, and eventually got to the point where that was 70 percent-ish of our business and made more sense to move the plant here and ship metal back to Michigan, shipped 30% back to Michigan as opposed to shipping 70% to Wisconsin.
So through a set of circumstances where a customer in Central Wisconsin went out of business owing my grandfather a fair bit of money. We ended up taking that building over which is where we sit now. And it had its own anodizing line, so we only had to move the press. And so started operations here in 1970 with I want to say probably about 30 or 40 employees at the time.
And then through the ’70s and ’80s ran as a single extrusion press operation with the anodizing line, continued to grow, but our growth was limited by our capacity and my grandfather was a product of the Great Depression, wouldn’t spend a dime he didn’t already have in his pocket. So the prospect of borrowing money to install a new extrusion press was completely foreign to him and just frankly not acceptable, and unfortunately, the amount of money you needed to buy an extrusion press and install it at the time was about five million. And that was more than he was willing to just write a check for. So that didn’t happen while he was on this earth. Then in November of 1988, my grandfather passed and my dad bought a press.
So we bought our, at the time it was a 10 inch extrusion press and added that to our lineup. The original press was a seven inch press. So expanded our offering larger shapes. And in the architectural world that went from just kind of residential and commercial window sections to larger curtain wall type extrusions, larger mullions, things like that, that you couldn’t do on a seven inch press. Unfortunately, that was installed 1989, really got running early 1990, and of course, the building industry crashed. And so we were sitting on a brand new extrusion press, first time the company had ever been in that, and really no place to sell metal.
So my dad was kind of forced to innovate a little bit. And we focused on a lot more of the things that larger extruders that we were competing with didn’t want to do. At the time, larger extruders were really interested in high volume, run it, pack it, ship it and don’t mess around with it too much in between. Being already in the service side of it with the anodizing and having done some fabrication, we looked in that direction and started going after more fabrication accounts. When the company was in Hudson, and we were selling a lot in Wisconsin, my dad had his pilot’s license, he would fly back and forth. And so as we were looking at how we were going to get out and sell in a broader range, we bought an airplane again, my dad started flying again. And we went every place within about a 500 mile radius and sold every fabrication account we get our hands on.
And through that forced innovation, it really opened up another sector of our business that now is probably, I don’t want to say it’s our most profitable, but it certainly is a very important part of our business, our fabrication side. And also in that timeframe, because the architectural side of the business had been kind of decimated by the crash of the building industry, and we had focused on fabrication of other things, we’ve thought, well, now we’re fabricating metal, if you’re extruding it, anodizing it and fabricating it, well, really all you have to do is add glass and you got a window. So my dad opened up Alumitech, which was our window manufacturing facility, which about 20 miles north of where we sit in Lhasa. And we started making windows.
Along with that as we got into the fabrication side of the world, there was also a greater demand for powder coating. In the U.S, most architectural finishing was either anodized or liquid Kynar paint, liquid paints being solvent borne, have some environmental issues, as does anodizing to be fair, but in Europe, they went to all powder coating sometime in the early to mid ’80s. They weren’t doing Kynar liquid paints in Europe for architectural purposes for a long time. My dad felt that that was the direction the U.S. eventually had to go. And so we installed the powder coating line also.
So this is over the course of the ’90s, there was the window company, there was the expansion of fabrication, and then there was also the addition of the powder coating line. As we got further into fabrication, we realize that the powder coating line is really for us used more for fabricating parts than it was for window parts. And politically speaking in the U.S., the U.S. window industry didn’t go into powder coat as much. Residential windows did, commercial windows did not. And there’s some reasoning behind that, the Architectural Association, AAMA, that sets the metal specs and paint specs for architectural buildings.
One of the biggest players in AAMA was PPG. PPG makes Kynar, and it was kind of tough to get them to change that standard such that only powder coating would be acceptable or that even powder coating would be acceptable. They kept changing the standard so that only Kynar could meet it. So from a commercial construction standpoint, powder paint never took off. So the line that we have installed was really designed around linear material, long length stuff that was used to then fabricate window parts.
And the way we ended up using it was really as a parts line which would have been designed dramatically differently. So this was happening over the course of the ’90s while I was in school, in the late ’90s and I came back to the business in December of 1998, so early 1999 and had worked in the business my whole life, obviously, as anybody who grew up in a family business knows, everybody works in the family business, there is no escaping it. But came back to formally work here in 1989 with my degree in economics and finance, and then my law degree. I say that under my breath, because my dad said, “Don’t ever tell anybody you are a lawyer.”
So we keep that on the side. But one of my focuses when I was in school was in the cost accounting side of the world, because, frankly, that interested me having been in the business my whole life, and knowing we were really weak there as the business expanded, we went from that kind of 40 employees stage and when we moved here in 1970, to about 400 employees, by the late ’90s. But we hadn’t seen the corresponding increase in profit. We made about the same amount, but we did a heck of a lot more business. And that never made sense to me if you’re growing.
The percentages may change a little bit, maybe they get bigger, maybe they get smaller, but overall, you’re doing more business. So if you maintain your profit margin, you should be making more money overall. And that wasn’t happening. So when I came back, well, the first things I really wanted to do is dig into the financial aspects of the business and understand why that was. And what I found out was that, while the manufacturing side of the business had evolved dramatically from what it had been in the ’70s, we’re still accounting the same way. And that was problematic because we’re kind of putting everything into the ragu, and then seeing how it tasted, we didn’t know how much garlic was in there, there’s no way to measure any of that stuff, because it was just in the ragu.
And so it’s one of the first things I want to do is really start to separate that, understand the components, understand which things tasted good and which things tasted bad and in doing that, first, I mean, there’s a lot of resistance put that way, because I was peeling back some band aids that people didn’t want peel back. But at the end of the day, you push hard enough long enough, you kind of get to the bottom of it. And what we realized was that our windows division was not profitable. In fact, we were losing a significant amount of money on a monthly basis, our powder paint line, the same, losing a significant amount. But the extrusion and the fabrication sides were buoying that to the point where we were still showing profit. So as long as the bottom line was black, everything seemed hunky dory, but it wasn’t.
And what was happening was that we were funneling our capital toward those newer ventures toward the new machines and fabrication, the new paint line, the window facility. And what’s happening is we were starving the core. The extrusion presses were aging, they hadn’t been updated, they weren’t being properly maintained, the anodizing line had fallen into serious disrepair, and was going to need to be essentially entirely replaced. So by the early 2000s, 2001, 2002, I started having these discussions with my dad, and let’s just say he wasn’t warm to those conversations, because those were his babies. Those were the things that Jack built. And rightly so.
I mean, he had poured a lot of blood, sweat and tears into that, and wanted to see it succeed. Unfortunately, again, what he was missing in that was that breakdown to understand what was succeeding and what wasn’t and what needed to be done in the meantime. Problem was we had gone too long with those things drawing off of the core. So had we been looking at that in 1996, there might have been time to correct course and say, “Okay, well, if that’s losing money at the summer, here’s what we need to do to fix that without pouring a bunch more money in.” But we need to do that.
So that money was gone. I mean, once it leaves, it’s kind of like the Vegas scenario, you win a hand a poker, and you’ve got all the chips sitting in front of you. And now you’re playing with “house money.” So you bet a little riskier on the next few hands. And well, you know what? If you walk away from the table with what you started with, you think I’m even, but you’re not because when they push those chips across the table to you after that first hand that you won, those were your checks. Those weren’t the house’s chips anymore.
And that’s kind of what happened, we had won the hand, we were doing really well with the fabrication, the extrusion so we could expand into those other areas. And we’re kind of playing with house money. And unfortunately, unlike the poker table scenario where you can get up and walk away when you’ve lost the house money and you’re sitting even, you don’t get to do that in the family biz. You have to somehow figure out how you’re going to rebuild your path, and you can’t keep taking the risky bets to try to win that big hand. Now you got to start to make smaller, smarter bets and you’ve got to find some way to rebuild that.
And so those conversations were popular with my dad when I started talking about shutting down the window company or offloading the powder coat, or in those things, those were uncomfortable conversations. If we wanted to talk about expanding fabrication, that was great conversation, but not killing his other babies. And by 2004, it had started, I mean, really 2002, 2003 that come to a head, those things were actually losing more than the other portions of the business could make up for it.
And so we had to make some moves, one of which was to look at bringing in some outside work into the window company to just get that to a critical mass where it had that kind of shipped and a half worth of regular work that you could then layer on more and get it to profitability that flew to Italy, met with an Italian company to possibly manufacture their window line and market it in the U.S. It seemed like a viable prospect. I came back and I laid it out. And I told my dad that look, we either need to do this to add some critical mass to the bottom line of the window facility, which also, by the way, that kind of the two went together, because that system was completely powder coated, it would have also added that critical mass to the powder coating line. So it would have buoyed both the window side and the powder coating line. Wouldn’t have anything for anodizing, anodizing is still going to need to be rebuilt.
Anodizing was profitable, though, even though it was in disrepair, it was profitable, so I wasn’t worried about that, I needed to get the other two generating cash so that then we could put money back into the anodizing line and the extrusion lines. But as we looked at the risk profile of bringing in a product from overseas and marketing it here, it gaining acceptance, that was a big bet. And it takes money to make money to a certain extent, so we would have invested a fair bit in that relationship and it was very speculative on the other side. So my dad may have the conversation instead.
We either have to push the chips in and bet on this or we have to pull the chips out and we have to kill the window line and we have to kill the powder line. I wasn’t sure about anodizing at that point in time. But those two things had to be excised, we had to do something. And then after a few years of arguing about it, he finally looked at me and said, “Kid, you do what you got to do, I’m going up north.” And at that point, he kind of just said, “That’s your decision and you’re going to be here longer than I am.” And he semi-retired at that point, not driven by that decision necessarily, but things were being handed over in the process. But that was really kind of that tipping point where he didn’t want to see those things die. And so he chose to look away, understandably so.
So in 2004, I approached several different companies about buying the window division, other companies about buying powder division, turned out that we had a local competitor in anodizing company that was also a painter, but they did liquid paper powder. And they were interested in the powder line, but only if we would also sell the anodizing business. Their sister company is a window manufacturer. And we were kind of an annoyance to the window company as well with our window division. So we were able to package the whole thing up, the only sticking point was the anodizing and really didn’t want to give up anodizing. But as I thought about it, I kind of took the rabbit approach, “Oh, please don’t throw me in that Briar Patch. I really don’t want to give that up.” So we use that as a little bit of leverage and ended up selling the whole finishing division analyzing in powder paint, and the window company all to Apogee Enterprises, which is Wausau Window and Wall and Linetec respectively for Windows and paint.
So, through that sale, we were also able to get some cross contracts. We brought some business in from Wausau Window and Wall who we hadn’t done business with for a lot of years because of a ancient disagreement between their founder and my dad. That blood had since washed away. So we’re able to work with them. And then Linetec, we formed a very strong partnership with them on the finishing side because we couldn’t give up the ability to finish for our customers, we would lost them, several of them anyway. So it was important to us that we still be able to provide finishing for our customers as a pass through transparently. In other words, they order the product from us, finish, we turn around and do the finishing with Linetec and then send it to our customer. Not that we were hiding that we were doing with Linetec, we just wanted them to still be able to do with one invoice, one payment.
That transaction actually went fairly smoothly. In the process, one of the gentlemen that worked for Apogee Enterprises that I worked with a lot in that process, his name is Mike Clower. And Mike and I became friends through that process. And when he was in town, we would go out and have dinner and chat about business and such. And when that transaction was complete, it coincided with Mike stepping back from Apogee and not retiring permanently, but just getting out of it for a while, taking a break. And I said, “Hey, we’re going through a pretty dramatic downsizing here going from 400 employees down to I don’t know how many, because I don’t know how many we really should have as just extruder and fabrication, I could use a second set of eyes that has been through this process in the past,” and Mike had. And I said, “So would you think about coming on with me just as a consulting relationship?”
And he said, “I would, but I need to make sure that if I’m going to come help, that we’re not going to run roadblocks.” So we sat down, Mike and I and my dad, and Mike looked at my dad and said, “Jack, is there anything that’s going to pop up here that I’m going to get blocked on or that if AJ and I are working on something, we’re going to end up in a situation where you’re going to tell us no?” Then my dad said, “Nope, I’ve handed it over and as long as he’s got sage advice coming from someone else, I’m willing to go along with it.” So Mike worked with me and we went through the process of downsizing the company, and really changing the management of the company from, as I said, we had gone from the ’70s, and kind of that old school management style to a leaner, more, I guess, more focused management. And really kind of looking at where people’s strengths were that we had, where the weaknesses were, who we needed to keep on board, then who really, unfortunately had to go away with those other portions of the business.
So that process happened between 2006, really and 2008. And we had done some good work, the company had returned to nice profitability, our debt load had been cut significantly through that. So we’re in a very good position, and really building steam. And we’re starting to reinvest in the extrusion side of the business, refurbishing the presses, and adding to our fabrication line. And then in that process, streamlining our relationship with Linetec to really make that kind of a hand in glove fit so that we could provide that pass through finishing service, and also co-market with them. And that paid dividends. We were going strong, right up until August 23 of 2008, when lightning struck our building, hit a gas line in lit the place on fire. So that was a little bit of a hitch, just to say the least.
So we had the fire and I came in on the, well, we’re still the morning of August 23, the lightning struck at 2:30 ish in the morning and we really weren’t notified of it until about six in the morning when word finally got back from place fire, blah, blah, blah, blah, big set of circumstances there that caused some delays. But anyway, rolled into the parking lot with fire trucks spraying water and the building’s smoking, we had no idea what was ahead of us and me, and I’ll tell you, that’s at heart sink moment. And I stood in front of the building. And I started laughing. And one of our guys Bruce Pregont is our head of customer relations. He said, “What are you laughing at?” I said, “Bruce, I’m going to laugh or I’m going to cry and right now I’d rather laugh.” And so that was that. From that point forward, it was all right, we got to figure out what we have in front of us. How long are we down, we had no idea what was going on.
And so that was a little shock to the system. And it was right at that point where we’re really kind of hitting the tipping point or really hitting our stride and then that. So long story short, the fire took out about 15,000 square feet of building that was actually destroyed by the fire. And then there was another plus or minus 25, 30,000 square feet that was affected. In other words, the part that was destroyed was attached to that. And that was the oldest part of the building, that was the original 1964 building. So to rebuild the portion that we would have had to rebuild that was destroyed, we had to actually update the rest of the building to meet code, and it was the core of our planet, it was the center, so everything flowed through that.
Thankfully, it wasn’t in the area where the extrusion presses or the majority of the fab equipment was so we lost two pieces of equipment in the fire. The rest was smoke and water damage. But we were dead stop. I mean, there was nothing we could do. And I didn’t know this about fires but I quickly found out that the portion of burn was our offices. In the offices there’s a lot of paper but there’s also a lot plastic computers and things. And when plastic burns, this is what was explained to me, that it releases the chlorine atoms, the chlorine atoms mix with the water vapor from the fire being put out, then as that center of heat starts to build, builds pressure there, and that finds its way out through the building to any place where that pressure can be released.
So even though that fire was contained, really to a very small area, I mean 15,000 square feet out of a 200,000 square foot building, doesn’t sound like a lot, except all of that smoke and that accurate gas went into every nook and cranny, every square inch of our facility, ceiling, roof, walls, purlins, everything, every piece of equipment, every piece of metal had to be cleaned. So you think about cleaning a 200,000 square foot facility, almost literally with a toothbrush. I mean, we had to give the whole thing a sponge bath. It’s a gargantuan undertaking, and to top it off, about 20 feet from where the fire started was our computer lab, our IT center. We had been configuring our system to run kind of a tandem unit where one unit would be set in a remote location, so that they would run concurrently. And if one of them for whatever reason failed, you would have zero data loss and just fire up on the other system.
Those were being configured in the same room. In the meantime, the IT guy had decided that since we were so close to getting that up and running, we could just go ahead and skip the tape backups. So we had no IT and we had no backup. So not only did we have the facility down, we had zero information. And even the paper files that we did have were so smoke and water damage that there was not a lot that we could get out of those. So we were in a scenario where we had no IT system, we had no production planning system, nothing. So we had to essentially reconstruct that from the ground up using spreadsheets.
And firstly, we took freezer paper with the waxy side out and we extended it around a conference room in a building that we owned across the railroad tracks from us. And we mapped out our process from order entry all the way through shipping and invoicing and collection, then this was a no between midnight and 7AM that Sunday night when we realized we didn’t have backups. Fire was on a Saturday morning, so by Sunday night, we realized we didn’t have backups, we knew we were going to have to start answering questions on Monday morning. We figured we should have a way to do that, so the whole team was there.
We moved the command center from my living room where it was Saturday night to the conference room in the building across the tracks on Sunday night, and mapped our process and realized that we could run the business basically using Excel spreadsheets and Quicken. It wasn’t smooth, it wasn’t fun, but it could do it. So we went from full ERP, then all that went with it to running off of spreadsheets in our just Quicken for counting software. And what we realized in the process, we were doing rebuilding, but while we were doing the rebuilding, essentially all the metal in the facility that had been run was damaged so we couldn’t ship it. We were coming literally from nothing on the ground to needing to supply customers the next week and that was a daunting task. We couldn’t run our presses for the first week because they had to be cleaned, we had to figure out a way to get material from the presses to our shipping backs without the center of the building. So we literally run the metal and take it off the back of the press building, put it on a truck, drive it around to the shipping area, unload it there, package it, put it back on the truck, and then send it to our customer. But it worked.
Then through the whole process, the total recovery took August, and we moved into our new building in the production portion of it in May. So six months ish, eight months, and it was a daily battle. But what we figured out was that with the spreadsheets without the restrictions of the ERP system, and having to juggle not only customer orders, but each line on every order, because when a customer is looking at it, they might not need all of those parts at the same time. And we were trying to just keep lines running. So we might have to ship five pieces of this, 10 pieces of that, whatever it was just to keep our customers lines running. And through that whole timeframe, we only had to line on situations that our customers and neither lasted more than 24 hours. So it was really looking back at it. I don’t know how we did it.
I mean, I know how we did it, but it amazes me that we could and really that was just massive effort, I mean, the amount of time and effort that our employees stepped up, we’re spending 16 hour days, more than that, in some cases, and juggling schedules, we had a meeting three times a day, morning meeting set up what you’re going to do for the first four hours, then you’d have the noon meeting set up what you’re going to do for the next four, and then the afternoon meeting set up what you’re gonna do overnight. And it would change from time to time with customer call, they needed something, we jumped through hoops to make it happen.
But what we realized through that whole process was that we could be extremely flexible when we needed to be. And we wanted to make sure we captured that because it was something that I felt that would be marketable. If you can be that flexible, that’s something that is rare, especially in a commoditized industry like extrusion. So we put together what we call our at that point, we put together our customer first philosophy and really a lot of words in it. But really what it comes down to is that we changed our measures of success. Our measures of success, in the past, like many businesses were profitability, and productivity and all of those things.
And really, what we figured out was that, at the end of the day, it’s really not those things that measure your success. It’s the success of your customers that measure your success. Because if we’re helping our customers succeed, they see value in us, they are willing to pay for that value and they are loyal to us. And so by making sure that you’re making your customer successful, the rest of the things follow profitability, efficiency, those things are necessary to achieve that result. So if you’re achieving that result, it doesn’t mean you don’t measure productivity, doesn’t mean you don’t measure profitability, it just means that that’s not the ultimate measure, the ultimate measure is the success of the customer. And it really changed our philosophy and I should say, it changed how we went to market, it changed how we acted inside. And we really came out of the fire with a focus on customer satisfaction, not that we hadn’t looked at that in the past, but it was a different type of focus.
And it also kind of forced us to look at our longevity in the state of repair of our machines and how we were approaching, not just the next year, but the next 20 years. And during the fire, I think we discussed this in one of our initial conversations, I would never want to go through it again, but it was probably one of the professionally anyway, not professional, day to day, it was probably one of the easiest times of my professional life because tomorrow was a rumor, I mean, it may or may not happen. There was no five years from now, it was only what do we have to do today to make sure that we are here tomorrow? And it’s kind of liberating, because you don’t have to think about strategy, you don’t have to think about what markets we want to get into or any of that, it’s just set them up, knock them down and this is what has to be done today if we want to see tomorrow.
So from I guess a mental standpoint, pretty easy to deal with. Difficult to deal with, from an emotional standpoint, because, yes, you’re hanging by a thread, but easy to deal with from a decision making standpoint, because it was quite simple. So January 2011, my dad passed away and that was obviously another transition point for the business. But really, he hadn’t been involved in the day to day for several years, so less of a management change, more of just another personal challenge. But like my father before me when my dad died, I bought a press. It’s how our family grieves, we buy expensive manufacturing equipment.
Obviously, you spent a lot of time in the business as a kid and growing up and before you ever in charge of the business. What teachings did your grandfather and father give you as they taught you about the business and showed you how it all worked?
I think the most important thing that I got out of those relationships with my dad and I didn’t know my grandfather very well. When he died. I was only 14 years old. And they lived in Detroit. So I didn’t get to spend a lot of time with my grandfather. He was a Golden Glove boxer and he had won the Detroit Golden Gloves, I believe in 1935-ish, somewhere in that neck of the woods. And so grandpa was a fighter. He wasn’t a big guy. I think he was 135 pounds. But he was a fighter. And in his world, you never walked into a fight that you couldn’t take it, and be able to take the punch. If you’re going to go into the fight, you got to be able to take the punch, you got to be able to swing back.
And I guess some of that philosophy was ingrained in my dad. He always looked at the fight and understand if you can’t afford to take the punch, don’t go in the fight. Then my dad had a little different philosophy in that he was more focused on growth. My grandfather was more focused on stability, I guess and kind of that, well, the Great Depression type of mentality, protect what you have, make sure that you can continue to generate income and wealth and don’t borrow money you don’t have kind of thing. And my dad looked at things a little differently, he looked at it as if you want to expand, if you want to grow, if you want to make this a bigger, better company, then you have to go out, you have to take risk.
So he was a little less risk averse, but he also was more of one that the way he approached the business was if you need to expand in a different area, buy a new piece of equipment, and then you run that piece of equipment until it just won’t run anymore, but you keep expanding buying other equipment. And I saw some failures in that. So if I look at the lessons I learned, it was really more an observation, it was looking at what worked and what didn’t. And looking at what my grandfather did. It was a great setup, it built a great foundation. But it was always going to be what it was. So you couldn’t be protectionist, you had to take risk. I saw my dad do that, he took risk. He was successful with it. But his philosophy of growth and not really paying as much attention to the health of the capital structure inside was detrimental long term, so I learned from that too, not only do you have to look at the growth of the company, also to look at the health of what you have. Adding limbs to the tree doesn’t do very much if the trunk is rotten.
And so some of those things that I saw my grandfather do, that I saw my dad do, some of them were learning experiences that we put in the press in 1989, and had to go out and diversify and do that. That was the right play and watching my dad do that was very instructional, and seeing the fruits of that really made an impression. But also seeing that there were things that he did that didn’t work out as well. And that’s easy to say in hindsight, I mean, it’s easy to judge those decisions, with the benefit of being able to look at them in the rearview. But one of my favorite quotes, and I don’t know who it’s attributed to, but was that smart men learn from their mistakes, wise men learn from the mistakes of others.
So my goal is always to learn from the mistakes of others. Have made my own for sure, then without doubt, but learning from the mistakes of others is much less painful. There’s that one thing, it’s that you look at some of their experiences and some things worked and some things didn’t. And having had the ability to see those decisions from the inside, understand the thought processes behind them is something that you can’t read it in the book. It’s experiential. Seeing the stress my dad went through when he put in the new press, and then the building market took a dive, seeing how he had to deal with that, you’ll read that, man. And that’s something that you live. And that’s I guess, one of the biggest benefits of being in a family business is that you get to see that at a young age, whereas many people enter their professional lives never having experienced that. So they have to learn it in their job and from what they’re experiencing in their 20s and 30s. Whereas I was living that when I was in my teens.
So you kind of start with a little bit of a head start in understanding how those decisions affect people and affect ownership. So long way around saying there’s not really one thing. It’s just really learning from all of their experiences and trying to draw as much as you can from it to make your own decisions.
How important is keeping the business within the family to you going forward into the next generations? Assume obviously it’s a family heirloom of sorts with it being around for so long. But what do you have in mind for the next steps?
There are two mindsets on that. And I talked to my dad toward the end of his life about should we look at maybe marketing the business, we’re doing really well. The M&A market was pretty hot, in multiples, were looking good. And I thought maybe we don’t have to be this business long term. Maybe it’s more about wealth preservation and putting that into maybe a different business or diversifying, maybe taking some chips off the table and getting into some other things as well. And my dad said, “Look, grandpa started out with an asphalt paving business.” It wasn’t extrusion, man, it was asphalt paving. It wasn’t about necessarily the business as much as it was about the passing on of something to grow. Not money, necessarily, but a business. So whether it’s this business or a different business, if you divest and you get into other things, and then you have that to pass on and he wasn’t married to it. It wasn’t something that he looked at and said, “No, this has to be passed on from generation to generation it was whatever you do, you need to look at it generationally, whether it’s this business or a different one.”
I took some of that, and I’ve flirted with the idea over the years, especially when the proverbial poops hitting the fan and thinking about, man, I don’t really need this, I don’t need this headache. But on the other hand, there is without doubt, an emotional attachment to it, you can’t separate that. So I guess I had that thought a couple times over the years and I’ve largely put it aside. That being said, if somebody walked in with a large enough suitcase of money, I mean, at a certain point, money talks, but it would have to be a princely sum, and it would have to be more than it’s worth. In other words, somebody would have to buy the emotional part of it. And that’s sounds cold, but it’s honest. I would love to continue to grow the business, more to the point, continue to stabilize and improve the business not necessarily grow, but stabilize and improve the business, then I have two kids, got a seven year old daughter and a four year old son and I’d love to someday see them in my chair, that would be amazing.
But on the other hand, I know what I’ve gone through. And it’s tough road, man. There’s no sugarcoating that. Regardless of how successful your business is, when you sit in the top chair, there’s a lot of stress, a lot of anxiety, it’s not easy. So on one hand, I would love to see them take an interest and be part of the business and pass it on to the fourth generation and I hope I can. On the other hand, if they decide that they want a different path, and they want to do something different, I will absolutely respect that too because there’s a little piece of me that doesn’t want them to have to go through what I’ve gone through. I don’t know. So I guess that’s where I set I would love to see it be a fifth generation company. But it’s not necessarily the be all and end all for me.
What are you teaching your kids from your experience and the experience of your family running this company?
It’s interesting, because kids view the world very simply. And I guess we’ve all been kids, but you forget how you viewed the world. And they see the world from the lens of kids that have grown up with a dad that runs a business. And I try to keep as much of the stressful parts of it away from home as possible. So they don’t see that side of it, they don’t see the worry, they don’t see the weight of decisions, at least I hope they don’t see it as plainly as I feel it. But as they get older, and as my dad did with me, I want them to see that, I want them to understand that there’s no free lunch here. Yes, we have nice things, we are able to do fun stuff, but that doesn’t come from nowhere. And that comes from a lot of work that comes from a lot of time spent worrying about the future. And so what I want to teach them is that there is nothing that comes without a great deal of responsibility, especially with family business, because everybody in this business, from the floor to the front office, it’s part of family, then when you make decisions, you’re affecting all of them. And the decisions I make today or that I’ve made throughout my career, have effects on those people.
And when you think about telling somebody that they don’t have a job or that we don’t need you, that way is you have to kind of emotionally detach yourself from those things just like we talked about the decision to shut down certain divisions of the business. You have to at some point, do a kind of a cold calculus and say yes, but what is the greatest good for the greatest number? What is the greatest good for the business for the long term? And impressing upon them, I guess the weight of that and I don’t know how to describe it. It’s I think in so many things, especially in the media and some of the younger generation, you see this natural tilt against corporations and business, then it’s the CEOs that are ruining the country and taking all the money off the top. And I can tell you from this chair that that’s a load of shit, excuse my french for the podcast, but there’s a lot of responsibility to it. And those of us in businesses that I’m not speaking about fortune 500 companies, I’m talking about privately held businesses, family businesses.
We do care, we do very deeply care about our communities, about our employees, and about the impact that we have. And so it’s something that I want to pass on to my kids that, look, don’t believe that. Are there companies out there that are bad actors, absolutely. No doubt. But there are also a heck of a lot of really good companies run by really good people who really do care. And if you enter this business, if you decide that that’s your path, you need to enter it with that philosophy. And I guess I can go on about that.
What class would you teach in college, if it could be about any subject you wanted?
I think it would be critical thinking, because unfortunately, I see such a lack of it. I see in some of the younger folks that we hire, in some of the people that we interview, and even people that we work here, I guess you can teach all the reading and arithmetic and history and those things that you want to teach. But one thing I think that’s sorely lacking is just the ability to really break down problems, look at them in their parts, and figure out solutions to them, as opposed to substituting facts with emotions, facts don’t have feelings, you can break things down into specific facts sets, you can determine what the best outcome is, and how to get there from this point. And I think that, if that was taught more, I think a lot of our social and governance issues could be discussed more productively. Too often these days, as I said, we substitute emotion for fact, and that leads to bad decision making. And so critical thinking would be where I’d want to be.
Like it. What’s that belief used to hold strongly that you’ve changed your mind on over the years?
We touched on this, but I always heard and I always kind of was not indoctrinated with. But we saw that bigger is better, and that if you’re not growing, you’re dying, and all those things, it was all about growth and growth and growth and growth and growth. I don’t believe that anymore. I believe that what’s more important than growth is improvement, and innovation. I don’t think businesses have to be bigger, I think they have to be better. And by that I mean that growth is good for some businesses. And that’s the path that leads them to greater profitability, it gives their employees greater security, all those wonderful things, but growth for the sake of growth. And this is kind of we talked about observing the mistakes. A lot of my dad’s push for growth was understandable, but it wasn’t healthy growth. We focused more on yes, we want to continue to grow the business, but what’s more important is that we make the core of the business healthy, and that we do smart growth, we focus on innovation and improvement. And if growth comes with that, great, and if it just makes us stronger at what we do, and helps us serve our customer base and makes our customer base more loyal, but we never gained another dollar of sales, fine, as long as I continue to make each dollar of sales more profitable. And not even necessarily more profitable, but more secure, better.
It sounds weird to say, a dollar is a dollar and one dollar is better than different dollar, but there is in that when you have strong relationships with customers, and you’re helping them be successful in their businesses, their businesses are growing, that’s where growth should come from. And as you do that, if you’ve produced something in that process that others see and want to buy from you, well, then that’s where growth comes from. It comes from first improvement, innovation. So I guess the change in thought is that growth is good. That’s what I used to believe. Now I don’t believe that necessarily growth is good. I think improvement is good. And if growth happens as a result, great. So just I guess a different way of looking at it more than I haven’t gone from growth is good, to growth is bad. I’ve gone from growth is good to, not all growth is good. It’s more about improvement and constantly looking for better ways to do things.
What’s the best business you’ve ever seen?
We talked a little bit about this one too, Gastaldello Sistemi, Italian window company that we looked at building their products here in the U.S. And I have no idea what their P&L looked like. I have no idea what their balance sheet look like. But when I walked into their facility, it was absolutely amazing. It was the cleanest extrusion plant. They had their own extrusion press in Italy. And it was a five or six year old extrusion press at the time, and you could eat your lunch off of the press pit, the floor underneath where most presses, you’d have oil and whatever else, you could literally have a picnic down there, it was absolutely gorgeous. You can tell that every employee in that place took absolute pride in their job. They were proud to work there. They showed that pride by keeping everything perfectly organized and clean, and their approach to innovation. And the way not only that they produce the extrusion, but how they put the window systems together, their warehousing system, everything was just top notch.
I mean, it was well done from the floor up. And it left an impression of, in fact, that was a Danieli press. An 8 inch Danieli and it was a 2700 ton press. So when we bought our … From that point in 2004 when I saw that press, I fell in love with Danieli presses. It probably had more to do with Gastaldello than it did with Danieli. So I bought a Danieli press because I was so impressed with the Gastaldello, the sistemi machine. But in any case, that place left an impression. Ever since I have been there, I have tried to replicate it, and I guess that, to me is the measure of a good business.
You walk into it, and you look at it and you say, “I want to be like those guys. I don’t care.” And like I said, I don’t know what their P&L look like, or their balance sheet or anything else. I just know I wanted to be like them. And that to me was the measure. So trying to live up to that and trying to make it so that when people come through our business, they can say, “I want to be like those guys.” I don’t know for that, we’ll find out.
That’s fantastic. That’s pretty cool. That’s part of the fun of the question with the podcast is asking people what the best business is because everyone has a different definition of that. It’s really great to hear yours. And I want to thank you for sharing your time with us and telling your story in such detail and how you’re thinking about this family owned business that’s been in your family for a while and you have all these different decisions. You’re constantly juggling. And so thank you for sharing a little bit about your insight in running that business. I’m really excited to have had you here.
My pleasure, and thanks for having me. It’s a fun story to tell.