We Don’t Have a Brand

[Music] hello everyone welcome to the 21 hats podcast I'm your host Lauren Feldman this week Paul Downs talks about why furniture makers traditionally have not stamped their names prominently on their work and why he's rethinking that now that change of heart is the direct result of Paul's unlikely experience connecting two very different businesses one a medanite company manned by Master Craftsman and the other a startup manned by tattooed hipsters with a Mastery of kick starter not only has the resulting culture Clash changed the way Paul thinks about his own business it's also the subject of a book he's now writing in this conversation Paul explains what he's up to and also talks about how close his business came to failing how he plans to double his Revenue why he thinks about trying Tik Tock and how he feels about his son's success in the alternative reality of venture back startups even in Good Times owning or running a business can be a lonely Pursuit our hope is that these weekly conversations will let owners know they are not alone in facing challenges same thing with our daily newsletter the 21 hats Morning Report which highlights the most important news of the day for business owners and which you can subscribe to at 21h hats.com where you can also find transcripts of our podcast episodes and lots of other articles and interviews joining me this week on the podcast is Paul DS who is CEO of Paul DS cabinet makers which is based outside of Philadelphia where it makes custom conference tables the episode is titled we don't have a [Music] brand welcome Paul I want to start by reading a paragraph from the excellent book you wrote called Boss Life surviving my own small business I think it's just an interesting reminder for our listeners of where you've been with your business I barely survived the terrible year 2009 customers purchase our product custom conference tables when a business moves or expands as 2008 ended we still got a few orders from projects initiated before the crash but sales volume soon took a huge drop I took any job I could find but I had to lay off five of my 11 remaining employees I cut all my workers pay by 15% and set my own salary at just $36,000 a year I rarely had more than a week's worth of cash on hand the stress of wondering whether I would have to close the doors was relentless I experienced shooting chest pains and sleepless nights but I never quite failed by juggling incoming and outgoing payments I managed to pay off my vendors and survive to see another year the year 2010 started with no relief in January I came within a day of running out of money but in February buyers started calling by March 2010 with orders appearing at a sustainable rate I was able to restore everyone's pay to previous levels and re hire some laid-off workers by Year's End I had 10 employees and a bank balance of $16,779.23 said that I had 11 employees and went to five but 2 months before that I had had 23 employees so we had to lay off half the company in the fall of 2008 and then the rest slowly bit by bit over the next year so it was a sudden drop and then gradually got worse and then got better and you're right we did meet at that point because you reached out to me cuz I was editing the um you're the boss blog at the times and you thought it might be interesting to have a business owner write about the process of shutting down a business that was in the process of failing which you were convinced at that point was what was going to happen do you know what you were going to do if it had in fact failed no I didn't know what I was going to do other than fail but what precisely that looked like was very mysterious because I in the at the end of 2009 I was looking for information about how you actually close an ordinary business and what happens to you when you fail and and really found absolutely nothing that the only mention of of failure I found and I was on the looking around on the internet at that point was this kind of story that seemed to be associated with Silicon Valley startups where you tried to get your startup going and then it failed and then you you tucked your tail between your legs for a couple weeks then you went out and raised more money and then you ended up a billionaire that seemed to be the only account of failure that I I came across and clearly that's not typical so I was really terrified of failure I had been doing my own business for a very long time and one of the things that I was worsted at was building a network of people who might possibly employ me if I failed I just really didn't have a network of other business owners or of clients uh I didn't have a network at all and that was uh my own fault I think that a lot of it is just because of my nature I'm a very solitary person and I also like to just figure out how to do things myself so I started my business when I was 22 with no real guidance never had worked for anybody and by 2008 which was was it 18 years later I had no network so failure was going to be be pretty ugly and I'm glad it didn't happen is there an aspect of running the business and maybe it has to do with the network that you're referring to but is there an aspect of running the business that you feel especially uh proud of and that you think is responsible for the turnaround um am I proud of it I think that there's an enormous amount of luck in my story and that varies from personto person but we got put into the business we're in now of making custom conference tables for anybody who wants one through a sheer moment of luck in which Google chose a page on my old website back in 2003 and decided that that was going to be the top search result for boardroom table and so people started calling and they've just never stopped and that's the real Foundation of of any success I've had is that through sheer luck I was given the opportunity to make a product that not that many people know how to do that's not that easy for foreign competition to to take our Market away but that happened five six years before the 2009 collapse and the period where you thought your business was going to fail and it was only after that that you turned the business around so it wasn't all about Google no um it's a really complicated story and even in the book I had to leave a lot of it out because the years before the crash I had a partner and my partner now and I did a poor job of of growing the business and lost a bucket of money so we were a wounded duck by the time the recession arrived and then after the recession my partner and I sort of stopped agreeing with each other about how the business was going to proceed and that's a big part of the recovery was just me getting out of that partnership and sort of undoing a lot of mistakes that we had made beforehand so is that a triumphant story of business success I don't know it was a lot of cleanup and just undoing stupidity that that I'd walked into with open eyes before then well it's certainly a long way from what we talked about the most recent time you were on the podcast where you talked about your hopes that you may be able to double your Revenue in the next five years and better position the company for to to so at least you'd have the option to sell it if you if you chose to pursue that option you mentioned in talking about that that to do that you would need to think very differently about marketing can you tell us what you had in mind we need to stop just being reactive so in the Google Business somebody out in somewhere of land uh is looking for the a giant conference table and has no idea where to buy it because who does have any idea where to buy this thing and they get on Google and they find us and in my mind we don't really need a brand presence or anything we just need to be the guys at the top of the organic search results so that people patronize us but don't necessarily form a long-term uh relationship we need to build a brand and start reaching out and identifying people who might patronize us on an ongoing basis and I'm thinking architectural firms because we have a couple that we've picked up over the years that come back to us again and again but not very many and that's what I'm trying to accomplish and I think I just need a different marketing effort and in order in order to do that uh there's all these new platforms now there's new ways to reach audiences there's new ways to fly your flag what kind of platforms are you referring to Instagram Tik Tok you know like if you want to if you want people to understand that you exist there's just a lot of different ways to do it you can imagine posting videos on Tik Tok to sell conference tables well I can imagine posting videos on Tik Tok to show people that Paul DS makes cool things that you didn't suspect existed now am I going to be dancing no that's where the people are and that's particularly where the next generation of buyers is going to be and we just need to get our name out there and we have not been able to manage that effort successfully with the internal team so I'm looking to hire someone whose claims are good at it and uh see how that goes that's a big step and a lot of people have struggled with that I mean you neither you nor I is a digital native and you know the the the step to T to Tik Tock and success there is a a big leap have you how far along are you uh not very far at all okay um but but I'll tell you who who I've decided to go with which is in my vistage group there's another uh business owner who runs a company that does nothing but make video content and he has concentrated on sort of medium to large siiz businesses for years and had a lot of success with it and assembled a very effective team and he wants to roll out a new product which is aimed at smaller businesses that so there's a whole kind of series of steps that he takes your company through produces content and then here's what's really interesting to me is his team will figure out how to deliver the content into the channels and Target at the audiences that we identify so that we can make the connection between having stuff and delivering it to the people who need to see it and that's very analogous to the problem that I ran into when I was just trying to figure out how to how to actually make our product which is that we could receive inquiries from Google and we've got a kick-ass shop so we can make tables all day but the big trick is to get them to where they need to be and I see this as a version of the same problem which is that we've got incredible stories going on on our shop floor every day and there's all kinds of people who are interested in Woodworking and we're doing a version of woodworking that is most people can't do so I'm not I'm not really worried that we can't come up with interesting video content or just interesting content because the projects we do really are amazing the question is how do you get it in front of the people who need to see it which is a fairly limited set of people like okay if I had a video that went viral and 50 million people saw it and it was the next gangdom style or whatever that's fine uh I don't expect that to happen but how can I get my little uh story in front of the 3,000 architecture firms that I want actually want to talk to and the people I've engaged claim to be able to do that and we'll see uh it won't be cheap we're looking at a budget of about a hundred grand over the next year but I've spent that much and more before on marketing when we were buying AdWords we spent 150,000 a year for for years uh to get the paid search results that we we wanted so it's a gamble but it's not crazy gamble we'll be interested in hearing more about that as time goes on and uh you make progress with it I'm pretty sure that the video is going to going to be good because we've made some some decent videos on with our own efforts and my in house staff and we don't know anything about making videos I'm sure the video will be good whether that translates into success on Tik Tok is another question in my mind but uh we'll be eager to see okay don't get too caught up on Tik Tok that just came out of my mouth that's not like oh it's got to be Tik Tok all right all right we're actually I think that the the main targeting is going to be through Linkedin and then Instagram that makes sense yeah all right let me ask you this have you thought a lot about how your own role would have to transform over the next 5 years as you pursue this goal do you think you have to become a different kind of manager of the business I hope not but uh I I'll tell you what I'm just about to be 60 and I've been doing this business since I was 22 it's been a long long road and I've gotten to a point where the company is of a size and a sort of a challenge that's pretty pretty manageable for me so I don't have to work super super hard and I'm not one of these people who likes to you know grind out 80 hour weeks I really just do not care for that so what I'm hoping is that we can we can get to a point where I don't have to work a ton harder I just have to make sure that the things that need to be done are being done if you do in fact double in size presumably you have to double your number of employees would you have to add another layer of management to do that I hope so I mean that would be the way that I I get to where I want without just drowning in it myself because I really have no desire to do that all right I want to take a step back and ask you about your father who was a well-known Economist and your son who's had a lot of success in the Venture back startup world but first let's take a quick break to hear from our sponsor I'm here with Rob Levan co-founder of work better now which provides businesses with highly talented virtual assistance Rob I've noticed that owners tend to have certain questions about virtual assistants for example what exactly can they do yeah Lauren we get this question all the time uh because people really know deep down that they need an assistant but they're not exactly sure how it works and what they can do for them I would say that our clients use our assistance in one of two ways they will either use them much like I've been using my assistant for the past 8 years as an executive assistant handling my calendar which takes up so much time email management database file management personal tasks creating documents for me and then a lot of our clients basically operationalize our assistance so we have assistance with titles like project manager marketing associate operations manager and customer service representative I think some owners worry they'll spend more time managing their assistant than it would have taken them just to do the test themselves how do you respond to that right right right this is a deadly trap not only with assistance but really with any employees which is is oh I can do it faster myself and the reality is you might be able to do it faster yourself of course it's impossible to grow your business if you're doing everything yourself I was very much uh of a similar mindset and what I did with my assistant is I basically told him what needs to be done and had them document it I hate documenting tasks but I know the processes are so important now we have a manual full of my uh tasks I only had to tell him once that he can follow time and time again and if he's out somebody else can follow and also think about it this way if you're a business owner making something like let's say $200,000 a year which is about $100 an hour you're basically paying somebody to do administrative work at $100 an hour if you're doing these tasks yourself that makes a lot of sense what does it cost the cost is $1,900 a month and as you know Lauren we are offering 21 hats readers and listeners $150 off per month for three months just by mentioning the word Lauren there are no contracts also very important for people to know can you promise a return on that investment if you're not getting a return something's not going right all of our clients are not only getting a return with the first assistant they've hired but many of our clients are now on their second third and fourth assistant where can we learn more work better now.com and again when you sign up for a 15-minute consult just mention the word Lauren we'll make sure to give that $150 off for each of the first three months thanks Rob and we're back Paul your father uh was named Anthony DS I believe he died last fall yes he did he died in October a prominent Economist who studied things that weren't necessarily what you expect an economist to study uh including why people vote and why expanding uh highways can actually lead to more traffic he also served on the kerer commission uh in the 60s which studied civil unrest sounds like a a really interesting guy I'm I'm curious was he interested in entrepreneurship and your uh efforts to build a business not at all he he he paid almost no attention to anything that was happening to me other than to be extremely supportive of the general idea of being me being in business and I should say that he was a man of of wide intellectual interests and he was a very very smart guy uh he had a lot of success in the political science field with his doctoral thesis from Stanford and then went into spent most of his adult life dealing with real estate and uh Urban Development economics and that was his his specialty and the whole political science thing got him shortlisted for a Nobel Prize but he it ended up going to somebody who had taken his theory and developed it much more but when it came to actual business he did not know a thing about it and did not care and which is sort of surprising because his father was a a real entrepreneur and my father worked for his own father for many many years but my grandfather very early decided that my father was not suited to be any kind of manager or to be involved with the with sort of the day-to-day running of the business and that what he was good at was being in front of the clients and sort of thinking great thoughts and it was a consultant firm so that worked out fine what kind of Consulting uh they consulted for anybody who wanted to but mainly with uh Union Pension funds in the 50s 60s 7s and 80s uh about what to do with Pension funds in real estate investments in other words Pension funds collect a lot of money they need to do something with it and the unions were interested in investing in real estate this is in Chicago right this is in Chicago yeah this is pretty rough and tumble politically but my grandfather was very very well connected in Chicago politics and he started a firm that was aimed at this Market of of giving advice to people who needed to invest in real estate and his claim to fame was that he dealt with a lot of crooks but that he was personally an honest guy and he made no bones about it made sure everybody understood that he would never lie he wouldn't cheat he wasn't open to bribes he couldn't couldn't send a girl to his hotel room like forget all that but he would give people honest advice and and it worked out very well for him he was the entrepreneur my father not at all and my father never once gave me any advice about how to run my business and wasn't really interested in understanding what you had to do to build it no he couldn't have cared less but he was there when I needed him and there were a couple of occasions when I had to ask him for help and fortunately he was able to help me out there was one time I think it was 2006 when my partner and I realized we weren't going to make payroll and uh I had to call my father and asked for a pretty significant amount of money and he said that's a lot what do you need it for and uh I said I got to make payroll he's like okay when do you need it and I said tomorrow and he still wrote me the check it was for 100,000 bucks and uh and I eventually paid him back but being saying yes to your to your own kth and kin in those circumstances that shows to me the value of family connections which I think is an underexplored Topic in in business finance I mean how many people start with a pool of money that they've gathered from their family are you suggesting that a lot do or a few do I think quite a few do right it's a huge Advantage for those who have it and difficult for those who don't well let me ask you about your son uh Peter you you sometimes laugh at me me for including articles uh about Silicon Valley and Venture back startups in the morning report in fact you referred to those stories as pornography um because they're not really intended for the audience that we imagine reading uh the 21 hats morning report but that's kind of the world that your son inhabits am I right yeah yeah he's poster child for that do you guys talk about the relative merits of the ways you both do business yeah actually we have a very different relationship than I had with my father in that my son is very interested in how I run the business and we have a great ongoing relationship he is now 28 and he's managing a team for the first time and he asked me for advice all the time and I think it's it's wonderful it's really brought us together now the world he lives in is just insane by myl lights that the money just drops down like a blizzard of dollars on on these companies and and they can't even figure out how to spend it so the money you're referring to being investment dollars Venture Capital Venture Capital like if you can be in that world God bless you you're there and go for it but there's there's some things that are very strange about it too so there's not much loyalty uh it's pretty assumed that everybody's always open to the next offer and that if someone stays at a company for three years that's remarkable the rewards for the effort invested are just outlandish my son you know on paper is worth 20 times what I am and he put himself through MIT um he didn't make a ton of money before going there but he made some money he put himself through college at at full sticker price because nobody would give us any financial aid and now that he's been out for I guess five six years he's really had a lot of work experience and is doing a great job for a for a company that's on fire as far as I can tell and his future is very very bright is there any chance that future would include running all Downs cabinet makers I hope not it would be it would be a disaster for whom everybody probably the reflexes he has I think are not well suited to my business just as if I tried to step into his shoes I'm sure that my my lack of experience with that mindset uh would would be bad like I just wouldn't be able to get my head around the the need to just put your foot to the floor and go and spend the money and grab the people and do the stuff the pace of it and the challenge of getting from zero to billions is is real and I I'm not suited to that I'm just way too fuddy duddy and quiet what would he struggle with with if he were trying to adapt to your world I think he would have a lot of difficulty dealing with uh just the the can can we swear on this just the there's in his world too there is but the the the of the physical world and Manufacturing products is there's stuff that happens that you're just like oh my God how did that happen like for instance yesterday uh we were trying to deliver a job to a client and the client was already kind of touchy and Troublesome and we were delivering a a bunch of stuff and one of the one of the things was just a big piece of stone that was going to be used for a desktop and we're on tentor hooks about this delivery and when we get to the site and we pull the stone out of the out of the back of the truck it's just cracked in half H for like it was packed the way it should impact and a $6,000 piece of of marble is just split in half and we're standing there in front of the client who's nervous as anything because he spent a lot of money on our our product and we got to say to him oh sorry the Stone Broken half you know we we'll take it back and we'll start all over and I got to eat 6,000 bucks on that and you know try to try to calm this person down and who needs that but then that's that's the world I live in so don't you think there's a version of that in most businesses yeah I do but in his world six grand is like the coffee bill for the morning in my world it's 6,000 bucks it comes out of my pocket and then all the labor involved to redo this thing and and the client is now double nervous so when we come back the next time it's going to be even harder to make sure everything is perfect so that's one the other thing would be think it would be a surprise to him how ordinary people actually are that he's been working in this in this world of it's kind of let's call it the upper 5% maybe even the upper 1% in terms of cognitive ability and education and resources and he just hasn't been exposed to the entire range of how people are uh now in his family life he's got a high a severely autistic twin brother and that's taken him into an entirely different world than his peers inhabit and so I think that I'm confident that he's got his head on his shoulders and that he's an empathetic person but that's not the professional world he lives in now one thing that is strange something that he remarks to me is that almost everybody he deals with in terms of being an engineer for a Silicon Valley startup is somewhere close to being on the Asperger spectrum and that that has a huge effect on how he can manage his team because a lot of the people just are like wired differently from your average cat and I think that that again is a is a story that's underreported in business which is how different people get attracted to different types of businesses and that managing them can be completely different depending on who you've got and what kind of person you attract that makes me think that I mean I'm not saying this should happen that makes me think it's more likely that Peter might be able to slide in if he wanted to and run your business at some point fairly well possibly I think that that he would given his resources at the moment what if for some reason he ended up needing to do that he would be more likely to hire someone to do it than to try to do it himself and I think that that would be a wiser move honestly I I wasn't thinking of it so much as of him needing to do it because it seems unlikely that that would be the case well I I'll disagree with you in my vistage group there's several several second generation businesses where uh the person who's running the business now was put in the position of running the their their parents' business at a moment's notice one guy's dad died in a motor motorcycle crash and another one just dropped out of a heart attack and all of a sudden these guys are like oh you're running the business and they were were doing different things and had different plans for their life but their families uh you know the whole family was invested in these businesses and somebody had to do it so I've seen how that plays out and it can be an extreme Challenge uh and I'm sure that there's lots of instances where that happens and everybody just fails and you never hear about it but he wouldn't necessarily have to run the business in an ongoing way I mean obviously we're hoping this won't be necessary yeah may we should stop talking about this right now but you know um he could wind the business down and go back to his life if if that's what he chose to do he could I I think that it might be a difficult business to wind down we'll see let's talk about something more fun okay one of the things that I've found uh so enjoyable working with you through the years Paul is that I hope you take this as a compliment you you you really have kind of the Mind of a journalist you love talking to other business owners uh you love doing research and you love really getting an understanding of how other businesses work you talked about um just in the the last time you were on I think the guy who built a um a staircase business and sold it for a lot of money and you said something about he had a really interesting marketing scheme is that worth sharing yeah absolutely he was one who was whose business was probably closest to mine in that he had a not very sexy product which is custom spiral staircases generally made out of welded metal uh sometimes they had wood stair treads sometimes they had metal stair treads and he bought this business in 2009 I think and it was a small business and he decided that he wanted to Pump It Up and that the way to do it was to really get good at marketing over the internet to uh use Google searches and paid search to get people to call and then develop a sales effort where you could get predictable yields out of a given number of people calling by having a very tightly controlled sales staff doing the things that he wanted to to do he put his mind to this in a way that I think is extremely impressive which is that he would hire people to do something and it could be I'm going to hire a digital marketer to double my leads every 18 months or I'm going to hire someone to sell the stairs and I'm going to give him the script and I'm going to give him the support but I expect you to sell this much he would hire people he would set an expectation and then he would say tell me everything you need to succeed and then he would give it to them and so that they have been given a goal and they had been given the resources that they thought they needed and he gave them support as they as they attempted to hit the goal and if they didn't hit the goal he'd be like sorry you're gone and then he would find somebody else and do the same thing and he was he had to be tough to do that because when people are not quite hitting their their their targets it's always very tempting to make excuses for them you know this is something I do all the time which is I'm just not tough with people with my people I I tend to have sympathy for why they might not be doing what I want them to do and I don't like to get rid of people and he got his head around that and it really made a huge difference in growth rates we started off that his business and my business at about the same sales volume when we both joined vistage and when he sold he was about six times the size of mine I had taken my business from 2 and a half million to 4 million he took his from 2 and a half million to 20 some million and so I think that he he was extremely impressive and one thing to emphasize that he he wasn't a jerk he wasn't mean he didn't enjoy firing people he just had a very clear idea of where he wanted to go and he was willing to do the hard things to get there and he worked really really hard himself so it's just it's something that I couldn't do because I'm not that person but I think it's it's a model of taking something a business which isn't all that sexy and making a real success of it because he figured out what it was that needed to happen in order for it to grow so if I understand you correctly it wasn't that so much that he understood something about marketing or figured out something about the mechanics of marketing as that he figured out a way to manage marketing people that got results right his his his success in all directions was based on the idea of try to do as good a job as you can with hiring and then try to give people the resources that they think they need to do the job and then hold them accountable as three steps that nobody could argue with really but they're hard to execute and it takes takes a lot of energy and the ability to deal with frustration to actually pull that one off all right let me ask you about another one in another podcast you referred to a company that started doing what I think you called open hiring where they didn't interview people just whoever responded to an ad could show up and start working yeah do I have that right this is a small company well it's not small now that's something that that I'm still trying to get to the bottom of exactly how well that worked because I'm I'm writing my next book about this company oh I didn't real I knew about the book I didn't realize this you when you told us about this that it was referring to one of the companies in the book yeah yeah so it's a company that that makes uh wooden accessories for the Gaming Community people play Dungeons and Dragons and I guess I can mention them the company's called wormwood W RM w o d and they've been very very successful very fast growth again in sort of non-sexy manufacturing and they had a whole series of decisions they made and also a bunch of Lucky bounces that helped them to succeed but the founder a guy named Doug Castello has some very particular ideas about company culture and when his company was very small and he was trying to keep up with uh 50% or 100% year-on-year growth he he just desperately needed Warm Bodies so he put the call out to anybody he he encountered and anybody's employees knew like if you know somebody recommend him there was actually a very short interview process just to make sure that they weren't complete bozos but you you could basically get a job there just walk in my understanding based on on couple of years now of talking to these people is that it worked for a while and then it didn't work because what happened was the a culture of not super productivity kind of settled in to the company and a lot of the people were allowed to set their own out hours and sort of design their own job and that was attractive uh but they ended up having a somewhat dysfunctional Factory floor because people just didn't work that hard and they eventually decided to acquire another company that was a very very different uh culture a company that was owned and run by menites and Amish a menite family owned it but there were a lot of menites and Amish working there and in that company they had a much more productive culture and there's been kind of an ongoing Schism after the acquisition between these two cultures and and it's playing out now in a in an interesting way and that's one of the reasons why I wanted to write a book about them how did you get connected with these companies well there's a lot of luck in that I was giving a a lecture at a at a woodworking Machinery show and the guy Doug and and his brother Ian who owned the gaming company came up to me afterwards and said hey they like my talk which was about how to introduce technology onto a wood shop floor and what happens when you do it and what do you need besides just the machine in order to make it work and they were in a at a point where they needed to do that they needed to get more high-tech equipment into their shop and they didn't really know anything about it and so we met then and they were rolling out a big dining table SL gaming table a table that was specialized for holding a board game but could also be used for dining and I said to them oh that's that looks pretty good and uh have you sold any and they'd already sold something like they had orders for 50 of them at 10,000 bucks a pop which is just astonishing they didn't really know how to produce it and they also didn't have any any chairs to go along with it and I knew because I had been in the dining table business for many years before I started making conference tables that if you sell dining tables you can sell chairs people just want to buy them both at the same time and I had designed all these different chair designs back when I was doing that and sort of stopped making them when we started doing conference tables but I had all the designs so I suggested that hey you're going to need some chairs to go along with your table and I've got chairs why don't we make a deal and so they hired me to provide some chair designs and then I had to go find a manufacturer for it you didn't want to manufacture it yourself no because making chairs is just different from making conference tables it's like it's like different Medical Specialties the guy who does brain surgery and the guy who does you know ear nose and throat they're just different and so that happens in in woodworking too so I thought I would go find a chair manufacturer and just by sheer luck uh the guy who was running the spiral stair company had just met the menonite company owner and he suggested oh I you I you know I should go talk to this to to this guy James Martin running the menite company and they were doing nothing but high-end chairs and residential Furniture so I thought well this is a pretty good pretty good fit so I went out to look at the menonite factory and it was very well equipped and very well run and so I connected the two companies I designed a chair and showed it to the gamers said here's the chair what do you think they liked it and then I said you should have the menites make this and they they agreed and so these two started doing business with each other where are the companies based the gamers are up in Taunton Massachusetts which is just south of Boston about 30 miles and the menites are out in myown Pennsylvania which is not far from Lebanon it's it's the northern edge of the Amish belt out there so very very different extremely different because the gamers were were was a very young Workforce a very Northeastern hip Li kind of Workforce lots of tattoos lots of hair colors blah blah blah blah blah and menites are menites and and Amish are even more than menites and so you're you're looking at basically the entire span of American culture tell us what that means I mean do they use electricity menites use electricity so one of the things is that both the menonite and the Amish are ways to describe a groupings of congregations small churches and congregations which have their own rules about exactly how they deal with technology and there's a range from old order Amish who don't use electricity and ride around in buggies up to every little gradual step of more technology and more connection the menites kind of take up where the Amish leave off and become more and more technologically Adept so that James Martin and his F his company which is called Keystone they were on kind of the the most technologically Adept end of the menonite spectrum and so that on their shop floor you would see electricity and you would see computers and you would see robots and things but it was more how the people behaved in the inner interior company culture so there was no swearing allowed uh nobody was allowed to listen to music while they worked nobody could wear shorts ever um you were encouraged to wear just black gray or white uh no word words on the cloth you couldn't have any tattoos visible and Company meetings began and end with prayers and the uh company culture statement was very explicitly Christian and you know that's fine there's a zillion businesses like that actually there's a lot of companies in America that are run on on these Christian principles and they may they may allow tattoos and red shirts or something but Christianity is is a huge part of American Business business that that again goes under reported so these guys are doing that and then here come the gamers and uh they have an extremely different culture but the the reason that they ended up getting together is is because the menites were stuck in a business model that had been working in the 80s and 90s but was really not working in the in the 2000s why is that well they had they had built a business model on selling High quality hand americanmade handcrafted solidwood Furniture through small local furniture stores and this was how business was done in the furniture business say up to about 2,000 that's just how how it happened and then you have the China entering the World Trade Organization and you have Ikea and then eventually you get to Wayfair and then all of a sudden the the way people think about buying furniture and the speed on which it's delivered and the price points all of that gets totally disrupted and Furniture goes from being a kind of a once- in a-lifetime purchase where you save up and buy the dining set and you're going to have it and pass it onto your kids all of a sudden it's just a disposable thing that's really cheap and people just buy based on how it looks rather than any other the looks and the price as opposed to any other virtues it might have and it was really hard for the menites to figure out how to get out of their business model and become successful in just a completely different way of thinking about production and distribution I'm guessing they weren't on Tik Tock nope no Tik Tock and uh and they were they were actually struggling they were heading for failure Co would certainly have killed them because it shut down uh people going to to small stores to shop and they were already in financial trouble at that point and the gamers swooped in and bought them and uh because they had their business model was was basically coming up with cool products selling them through kickstarters and over the internet and they rolled out a new version of their gaming table that had just an unbelievably successful launch in the summer of of 2020 and on a Kickstarter this was the number I think the fourth most successful Kickstarter ever they sold a million dollars worth of these tables in 7 minutes wow and at the end of the first day of running the kickstarter they had over 8 million in orders and the way kickstarters work is that people place an order and make a commitment in order to sort of hold their place in line and then the the actual size of the order gets determined later and so the kickstarter happened in a in late August of 2020 and by the December when they' sort of the Dust had settled on this they had collected $20 million in orders for this one table and they needed someone to build it and they had no idea you know like how to do it themselves because they're they had not built tables before so they just bought the menites for cash so oh they didn't buy them just to make the chairs they bought them to to do the whole thing to do the whole table they Kickstarter delivers the money from the pledges in one lump sum at the conclusion of the kickstarter so they had an $8 million War chest in their hands and they were fairly comfortable with the performance of the menites because they've been sending them chairs and they just decided to go for it James the metanite owner called me and he said hey these guys offered to buy me and I said well how much and he told me and I was like take it cuz you're never going to get an offer like that again his company was really had no worth there they had been losing money for years had no Book value I should say that they had incredible value as a collection of skilled craftsmen who knew how to make furniture and so the gamers bought them because they were going to be able to upgrade their own manufacturing prowess in a way they could never get to by trying to bootstrap it themselves so they were going to buy the menite company and have the menite workers build gaming tables right they were going to have the metanite workers be upgrade the skills of the whole organization the combined organization the manufacturing in Taunton was pretty primitive because nobody who worked there had ever been in manufacturing and the guys in in myown knew manufacturing and so the acquisition was to get a hold of that Workforce and that kind of institutional knowledge of how to do the business and and then redeploy it in a whole new business model with a huge number of orders in hand like a mountain of work to do and then just try to get this work done when you saw the results of that Kickstarter did it give you a moment's pause did you think maybe a combination conference table and gaming table could work oh no it scared me when we sell a million dollars wor the tables it takes us months it takes us a lot of effort to do it and we have a very clear idea of how we're going to deliver that and the idea that these guys could sell a million bucks of tables that they hadn't actually ever produced in any quantity in 7 minutes and then make a commitment you know a few months later they were committed to delivering thousands of these things uh and they had the money but they just they had never built them but you know you could have figured out how to build them I probably could have but maybe not it's not trivial these days most people are so disconnected from the actual production of physical Goods they don't realize how hard it can be even to make something I mean this these are not iPhones they're just wooden gaming tables but even that uh is a complicated thing to make in any quantity and so so there's a lot of challenges to executing on that but these guys had the all the money sitting there in their hands it's an interesting comparison with my son Peter's task to to to scale up the engineering capacity of the company he's working for and he has all the money he wants and he's out there hiring people what company is that uh his company is called pipe and it's a it's a company which provides financing to people who have ongoing revenue streams so if you've got a business that is kicking out some kind of monthly subscription revenue or let's say you're a gym or any anytime you've got an ongoing Revenue stream and you wanted to convert that into a lump sum so that you could you could grow faster and you didn't want to give up Equity by going to venture capitalists you go to pipe and they they take your situation analyze it and and then offer it to people who want to invest their money and buy that Revenue stream and they make the market between those two types of uh entities and which is a great idea and it's it's going gang busters and it's a lot of smart people and he's doing great at it and then you've got this a version of this same need to scale up capacity very very fast being executed by people who are just from a different place in terms of resource education culture and they're trying to make it Go by combining liberal hipsters with menites and see if we can come up with the game game-winning team and there's there's plenty to write about in all this I will say that at what point did you decide you wanted to write a book about this as soon as I heard it happening like this is going to either succeed or fail but it's going to be a hell of a ride on the way and it was just the kind of story that I think is really interesting which is a story about real people in ordinary business Main Street business and there's there's not a single person who went to Harvard Business School or ever talked to venture capitalist or it's just like something that's more accessible and I think it's just interesting to see a business like that really growing and succeeding seeing how the leaders are responding to an unexpected level of success seeing how these workforces who were like the menites were sort of a version of every American steel mill that was about to shut down these are people who had been doing a business successfully and then it wasn't successful and they were about to get they were about to hit the bricks and then something came along and and they had to change the way they think in order to succeed and will they be able to do it and the thing that came along was a company made up of people who who had no idea what they were doing okay but they had a pile of money and so like you know it's like what could possibly go wrong well can you give us a a hint of where this is going how far along are they and is the collaboration working if you had asked me all the things I thought were going to happen and all the trouble they were going to have I would have predicted that there were there were a number of things one The Gamers bought a factory that was doing a certain kind of production and that was more varied on a day-to-day basis so the the menites would be making a set of chairs one day they'd be making a dining table the next day they were doing it more or less on a on a custom basis very short runs one-offs and the employee basis there was there's a lot of variety in the work that come across the shop floor and the people in order to do that and have any hope of staying in business they had to be very very skilled and flexible so a lot of the production in that business prior to the acquisition is really based on the skill set of the people you could never write a manual that that told you everything they knew how to do it's all residing in the minds and the hands of the workforce and that's very similar to my business like I there's no there's no manual for how to make conference tables and when you need to in the next year produce $20 million of basically one thing you are looking for a different Workforce honestly you're looking for more technology less skilled labor the skilled part of it needs to be turned into more someone who can do mass production techniques and that's a different worker and so that was one thing I I felt like the the gaming guys probably bought the wrong company because the the menites weren't actually doing the business that was arriving now the other thing is the gaming guys needed to ramp up their own uh Workforce very very quickly they went from 40 employees to something like 125 up in M Massachusetts in the course of a year and so that the culture that they had developed of this kind of Loosey Goosey uh I mean there's details about how they how they describe themselves and how they manage their internal culture which are kind of mind-blowing but let's just say it was a very relaxed atmosphere very individual respecting and there wasn't much emphasis on hey we just got to get this done and I don't really care about your feelings while we do it and so you inject triple the number of people at the end of the year than at the start of the year without the management structures to accommodate it and there's going to be trouble uh that happened you know like extremely predictably that the management that worked with 40 lacad isical workers did not work with 120 new people who were even wondering what was going on they didn't have an HR department at all and they didn't have anybody who was tasked with dealing with HR issues when they started this and they trouble arrived then there's another thing which is they had to go out and buy a bunch of machinery and to accommodate the production Pace they needed so now these guys are going out and buying machines from people whose main job is to sell machines not necessarily to make sure they work and everybody involved is dealing with covid and a huge International Supply Chain crisis at the same time so the price of machinery and the ability of the Machinery manufacturers to deliver their products was really impacted by what was going on in the last year so machines would get ordered and then they would either show up and not be working because they'd been rushed through production or they just wouldn't show up for months and months because they couldn't get the chip or they couldn't get the the gasket or whatever the little bit that was required to make it work and that caused huge problems because there were all these people who' put down money to get a table and no tables were being produced so those are the the highlights of what was going on that was highly predictable but uh there's even more how have you managed to track this I mean initially your role was to introduce the companies and to you know provide designs for chairs did you tell them you wanted to write a book and somehow maintain access I'm probably uniquely qualified to tell this story because I not only know all the parties involved but I actually understand the business so that if you put Michael Lewis or some other pype on this they would probably be able to get the rough outline of it but they wouldn't understand the business they wouldn't understand how these guys succeeded and failed in the decisions they made and they wouldn't understand the product in the same way I do and so I'm only interested in stories that I feel like I can bring something unique to and I think that putting me in the middle of this from the get-go has allowed me to maintain the relationships required to tell the story and it's been really I mean I got to say that if you ever have a chance to write a book about two crazy companies that Collide like like tectonic forces do it because you you'll learn so much about your own business and just the decisions that you've made well do you feel that's happened do you feel you've learned things that uh that will have an impact on your own business absolutely I think that the main thing was that the gaming guys succeeded because they decided to go all in on branding their product and like like physically putting their name all over it which is not unusual for a lot of products you know like Nike on sneakers or cars or clothes but in the furniture world is absolutely unheard of it's it was a huge no no to ever put your name anywhere where anybody could see it and they decided to break that rule and it paid off huge for them because as it turns out people aren't nearly as bothered by it as you you might think and that's really influenced my own thinking about trying to transition beyond the Google Business which is basically we don't have a brand we just do the thing and then move on and trying to build a brand and I'm being much less shy about putting my name all over stuff and and really trying to establish that brand than I would have otherwise can you tell us did did it have a happy ending for James Martin selling his business a much happier ending than he would have had because he was going to go broke and and basically he and his father had loaned tons of money into the business his father was the one who actually started it so one of the interesting things about that business was that the father started it just to give the kids something to do when they were young and James had started working in the business when he was 14 and menites don't have any education past 8th grade so James had been started at work age 14 and had been in the business his whole life and had managed to guide it into using computers and all kinds of Technology but he's a guy who does not he's not what you would call educated never been to college and and then there's other other things that menites don't do like James has never seen a movie um he's never he'd never listen to the radio he just doesn't that's that's just they don't do that so having him interact with the wormwood team who are very media Savvy was pretty interesting and one of the things that that happened to him is that after the acquisition his personal financial situation was was really vastly improved but he he had to kind of give up on just his whole life in that business and this is something that again I think I'm uniquely suited to sympathize with because I put my whole life into my business and if someone came in and said you know what you're just not profitable enough and here's what we got to do we got to you know get rid of all the employees you got now and get different employees and do this and do that maybe that would put money in my pocket and maybe I would enjoy the money but at the end of the day there would be this huge sense of loss of having oh I struggled for years to get the business to go a certain way and it didn't work and now I'm you know all that effort just kind of vanished and he went through that in in a very in a very pointy way and and and it it's It's just tough it's it's a it's a form of mourning for everything you tried to do that didn't work out and again I think that that's a a an experience that a lot of business owners have but that nobody ever ever wants to talk about and I think that I came close I was heading that way when I first started when I first met you and then we avoided it by the skin of our teeth but that's where I was going and so I'm very happy to tell his story because he didn't end up bankrupt and he's got he's started another business a trucking business that I think is going to be very successful and he was able to clear all his debts and and all kinds of good things happened to him but he also had to watch most of his Workforce depart because they didn't want to be part of a company that had the same uh culture as the gaming game guys and he had to kind of walk away from all of his all the skills and all the stuff that he all the effort he put in it would have failed and he knows that and so it's just a tough situation are you still reporting the story or has it run its course no it hasn't run its course long story short they've only delivered about 10% of the orders that they received in in August of uh of 2020 so far although they're ramping up fast now but it's been a it's been a real long journey there's so many zigs and Zags in the whole course of it that I have a lot more work to do and a lot more people to talk to about what actually happened and which I'm really enjoyed and I've been able to just contact all the company owners and then a lot of the workforce and be like who are you where did you come from how did you end up working on the shop floor of a menite company and what was that like and just here stories about ordinary people uh quietly doing something which is actually pretty extraordinary which is going to work every day building something with your hands that's intended to last forever and watching it go out the door to its life with its new owners and knowing that you didn't just do garbage all day that you really did something good that's again is a story which I don't think gets told most products that are made are so disposable or they're just experiences or you're just doing some kind of weird corporate project people don't have the opportunity to build a thing that's intended to be great and both of these companies are trying to do that and they're coming at it from very different places but that at the end of the day is what all the people in these companies are trying to do just make beautiful products that last forever all right Paul DS thank you so much for taking this time this was great I really enjoyed it wait wait don't leave yet if you have a question or a comment that you'd like the 21 hats owners to address send it to me by replying to your Morning Report or by email at Lauren 21h hats.com that's l r n at21 hats.com do it now before you forget and don't be afraid to tell Jay what you really think you can take it and if you got something out of this conversation help us reach more business owners tell a friend subscribe and review us wherever you get your podcasts follow us on Twitter subscribe to the morning report at 21h hats.com this episode was produced by Jess Theron founder of blank word Productions okay now you can leave thanks for listening everyone [Music]