Jonathan Weiner 36 min

Exploring Aftermarket Business Value with Jonathan Weiner


In this episode of the Aftermarket Champions Podcast, host Vivek Joshi interviews Jonathan Weiner, former CEO of Hayward Gordon. John shares his background in corporate America and his time working in Asia, highlighting the importance of long-term relationships and customer satisfaction. He discusses the challenges of selling capital equipment and the opportunities in the aftermarket, explaining how Hayward Gordon implemented a separate sales organization for aftermarket sales and focused on building customer relationships. Throughout the conversation, Jonathan emphasizes the importance of change management and continuous investment in employee skills to thrive in the aftermarket industry. He further explains the pivotal role these elements play in sustaining growth and innovation. The episode concludes with a discussion on the role of private equity in the aftermarket industry. John discusses the importance of building relationships internally and externally, the value of aftermarket business, and the lessons he has learned throughout his career. Jonathan emphasizes the need for change management when implementing new strategies and the importance of listening and understanding the needs of others, highlighting the role of luck and opportunity in his success. Join us as we explore John Weiner's insights into the aftermarket industry, gaining valuable lessons and strategies for success in this dynamic field.



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[MUSIC]

0:07

Okay, good morning everybody and welcome to yet another edition of the After

0:11

market Champions

0:12

Podcast. This is Vivek Joshi, your host and the CEO and founder of Entitled, a

0:17

software

0:17

service company that serves original improvement manufacturers. My guest today

0:22

is John Wiener,

0:24

former CEO, Heyward Gordon, one of our customers, and now John is a personal

0:28

friend of mine.

0:29

He too lives here in Austin like me and I thought it would be great to have him

0:32

come and join us as a

0:33

guest to tell us a little bit about his story, about his experiences leading up

0:37

to Heyward Gordon,

0:38

but more importantly, the role of Aftermarket in the context of Heyward Gordon

0:41

and his career

0:42

because he's had quite an illustrious career to this day. So with that, welcome

0:46

John, welcome to

0:47

the show. Thanks for joining us today. Good morning Vivek, good to see you as

0:50

well.

0:50

So John, I always like to start this show with asking people to tell a little

0:55

bit about themselves,

0:56

a little bit about John. So maybe maybe your history all the way from Brooklyn

1:00

onwards,

1:01

or you know, you choose where you want to start, right? Well, just celebrated

1:04

my 60th birthday

1:05

last month, so they can get an idea. Welcome. Yeah, thank you very much. I went

1:10

to

1:10

University of Denver, graduated in the mid mid 80s. And then eventually went

1:16

final education at the

1:17

Harvard Business School Advanced Management Program, which was a great way to

1:22

kind of cap off my

1:24

education, spent 26 years in corporate America, a company called Paul

1:28

Corporation,

1:29

also world leader of filtration industrial filtration and life sciences. I was

1:35

on the industrial side.

1:36

And for 26 years, worked with some of the best and brightest people I've ever

1:40

met. I'm very

1:41

fortunate to have that career. And during that time, I spent a total of 12

1:45

years living and working in

1:46

Asia. First in the early 90s, then in the from 2004 through 2011, lived in

1:53

Singapore, lived in

1:54

Japan and was able to eventually I ran the industrial businesses throughout

1:58

Asia. That's 13 countries

2:00

and about $500 million of sales. After 26 years, I think was time for something

2:06

new,

2:06

and wound up working with their capital, Chicago, running one of their and

2:12

eventually two of their

2:13

portfolio companies, somebody called Keesan. And I have a member in filtration

2:19

and consumables in

2:20

that respect to capital equipment, which was a small part of Paul's business.

2:24

We definitely had

2:25

the approach we sold equipment to sell filters. And so it's definitely the idea

2:32

was to get as

2:32

many filters as you could sell. It's interesting when you get to Keesan, they

2:37

're a capital equipment,

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they really didn't focus on aftermarket at all, because it's rotary equipment

2:42

and it's just about

2:43

selling hundreds of thousands of dollars. Each piece of equipment being, you

2:47

know,

2:47

100 spends a year. I ran that for four years that was sold, moved to element

2:52

partners,

2:53

where I ran a group of companies called the Hayward Gordon group. That's

2:56

Hayward Gordon

2:57

pumps and mixers, shark mixer and Scott Turban. And there again, capital

3:02

equipment, but there's a

3:04

great portion of aftermarket that unfortunately was not being not being mined

3:10

correctly. And we

3:12

just sold that a year ago to Ebaro Corporation, the world's largest pump

3:15

company. Great exit.

3:17

Everyone was very happy and I've just entered retirement, but still keeping my

3:22

hand in the private

3:23

equity world. Yes. And I think that's been a fantastic story for you. Just

3:26

listening to this

3:27

26 years at Paul, but also those 12 years in the Asian market. I mean, 13

3:32

countries,

3:32

so lots of frequent fire miles. But I think the point is that in those 12 years

3:37

, you probably saw

3:38

lots of similarities and differences in the way those markets treat capital

3:43

equipment in the

3:44

post-seiz environment in your case filters versus maybe the US and the European

3:47

markets.

3:48

Is there something there that was unique in terms of Asia versus the US that

3:53

you took away?

3:53

Yeah. Well, you know, Paul Corporation is not really a capital equipment

3:56

company,

3:57

so it is a consumer business. So I grew up thinking, you know, it's about long,

4:01

you know,

4:01

relationships, but Americans and New Yorkers are very transactional and are

4:08

very kind of

4:08

go on to the next item. In Asia, when I got to Japan, I was 26 years old. You

4:14

know, I knew everything.

4:16

So I thought, and you know, the Japanese, it's a completely different world. It

4:20

's long-term

4:21

relationships. The customers came. You do everything you can do to make that

4:26

customer happy. And so

4:27

the Japanese really taught me about that stickiness with relationships, about

4:32

going the extra mile,

4:34

and then maybe even a little bit beyond that. You know, customer complaints

4:39

were taken with the

4:39

utmost seriousness of the customers down the, you know, their business stops,

4:44

our world stops.

4:45

I think that's true of a lot of Asia. So Japan certainly exemplifies it, but

4:50

through India and

4:53

Singapore, Korea and those countries, quality is key, making the customer happy

5:00

, and establishing

5:00

those really long-term decisions. The other thing was lucky is that Nepal was a

5:06

very big company,

5:07

12,000 employees. Asia had about 1800 with the factories, but there were 13

5:14

countries.

5:14

So when you looked at it outside of Japan, there were really small businesses.

5:17

You had to be quick,

5:19

you had to be nimble, you weren't dealing with matrix organizations like you

5:22

would at the mother

5:24

ship in New York. And so I was able to work in a big organization, but have the

5:28

feel of running

5:29

a small company. But there's something interesting to say in addition to the

5:32

small company bit at

5:33

the end, you talked about the relationships, the continuity, the stickiness,

5:37

and the ability to kind

5:38

of be making sure you're always taking the customer's outcome as a first thing.

5:44

Now,

5:45

when you translate that, you experience not just a case on the drill, if they

5:47

would go

5:48

in companies, how do that manifest itself and how you started making changes,

5:53

what kinds of

5:53

things you started doing? Because that to me is really a secret sauce. I think

5:57

a lot of companies

5:58

forget that the ability to try to get the long-term relationships.

6:02

Well, you know, capital equipment, if you're selling pumps, let's say, and you

6:06

get a million

6:06

dollars worth of pumps for municipality, when are they going to come back and

6:10

be your customer

6:11

again? 10 years? 20? The pumps last certainly that long. So unless there's an

6:15

expansion or

6:16

something tragic happens, they are not your customers. So your salespeople are

6:21

looking to

6:21

move on to the next big elephant to kill. But the aftermarket is the best

6:28

opportunity. So you need

6:28

to kind of start figuring out how do you stay with a customer. One is obviously

6:33

making sure your

6:33

quality is better than anyone else, because you don't want to spend your time

6:38

fixing problems that

6:39

you didn't have to create in the first place. But beside that, what we really

6:44

learned, I think,

6:45

at Hayward Gordon, is you can ask salespeople to be what they're not, which is

6:49

aftermarket salespeople.

6:50

Elephant hunters need to hunt elephants, and farmers need to farm. And so we

6:56

decided let's

6:56

create a separate sales organization outside of the capital guys and hand off

7:02

the business. In fact,

7:03

I'd say it even started before the sale. We looked at our quote system and said

7:07

, "Why aren't we

7:07

quoting the aftermarket parts?" A set of them with the initial right. And he

7:11

said, "Well, why do I

7:12

need it parts?" And we'd explain to the customer, "It's good to have them a key

7:15

. Something happens.

7:16

Maybe you break something." And we would give them a package deals. But we

7:20

wanted to get our part

7:21

number in their system. And someone in purchasing a year from now says, "A seal

7:27

for Hayward Gordon."

7:28

Boom, they got the part number. So it started there. Then once you got the

7:32

order,

7:32

the day of really installation, one of the checklist is an introduction to the

7:37

customer

7:38

to the aftermarket team, whoever's gotten that customer. So you had to make

7:42

that connection,

7:43

right? I'm leaving. Thank you for your sale. Here's Dave. He's going to take

7:47

care of the aftermarket.

7:48

And we would actually have scheduled 30-day, 90, six-month, and one-year follow

7:53

-ups. Fascinating.

7:55

Right. So this way, you got an email and a call just following up. How's

7:59

everything going?

7:59

Well, the customer will tell you. If not, you want to know that. And if it's

8:03

great, you want to know

8:03

that too. And there was an opportunity for, have you serviced it? You know

8:07

there's a certain amount

8:08

of lubrication that needs to go on and do you need a seal? How is it? We also

8:12

tried to sell monitoring. And that was some success. I think it's going to get

8:17

better now with

8:18

the Internet of Things. But the idea is, "Hey, why don't I monitor your

8:21

equipment? I'll tell you

8:22

when you need something." And that's the future. And the last part is looking

8:28

back at the,

8:29

Hayward Gordon was a 70-year-old company. Sharpen, Scott Turban were 50-year

8:34

companies.

8:35

The next question was, how did we go after that treasure trove, that mine of

8:40

gold, which is

8:41

an established base of customer. It's been about 20, 30 years. It does need

8:45

after market,

8:46

regular service. How do I get that? Because if I'm not selling it to you and I

8:49

sold you the

8:50

print five years ago, 10 years ago, 20 years. Somebody else is there. Somebody

8:53

's eating my lunch.

8:54

So we really kind of had to look at the whole process from new equipment and

8:59

creating that

9:00

opportunity that goes forward. How do we create new opportunities like with

9:04

monitoring and then,

9:05

truth be the biggest opportunity, is that mine of 30 to 40-year-old equipment.

9:11

And how do I get

9:11

that going forward? So it's a multifaceted approach. And one which I think that

9:16

the entitle really helped us unlock. I appreciate that last part. But I think we go

9:22

back to something

9:22

you said, which is interesting. So at the point of sale, once the sale and

9:26

installation is done,

9:28

your capital equipment sales person handle, your aftermarket manager or team

9:32

leader who

9:33

could be saying, "My job is done. You got to pump up and running." By the way,

9:37

here's John

9:38

Wiener who's now going to take care of you over the next few months, years,

9:40

whatever it might be.

9:42

That's an interesting handoff. I've not seen too many people put that into

9:46

practice

9:46

on that kind of handoff basis. Is that something you took from Paul or is that

9:51

something you

9:51

got developed in your home or was that an existing practice? Because that's

9:55

actually

9:56

really good practice in my mind. Yeah, I think I got in truthfully. Paul was

10:00

more always less

10:01

capital, so it was more. I think the idea originally, I probably wasn't even

10:05

from me. I have to tell

10:06

you, I've had some great people who worked for me and who I've worked for. So I

10:09

'll take credit for

10:10

this conversation, but likely I'm mine. But we talked about how car dealerships

10:14

do it. When you

10:15

sell a car, when you buy a car, and the salesman's with you the whole time, he

10:19

has a green up price,

10:20

and he walks you over for the paperwork, and then they're going to sell you, of

10:24

course,

10:24

the undercoating and all the horrible one argue. But he's walked away because

10:28

they want him back

10:29

in the front of the showroom for the next customer to walk in. And for the next

10:34

, actually, for the

10:35

life of your car, it'll be that service guy. And it's a very effective way

10:39

because you don't want

10:40

the guy who's selling you the car trying to sell you on a tire replacement. So

10:46

I did this great

10:47

practice. It was a really good practice. I've seen it done from some other

10:51

companies, and it really

10:53

is a best in class process. So not invented by me, but certainly stolen

10:58

shamelessly by me.

10:59

Yeah. There's something else you said in the Japan experience,

11:02

talking with relationships and continuity and stuff. So it's one thing to hand

11:05

off to John Doe,

11:06

who's now your aftermarket manager. The question is, how do you go about making

11:11

sure that

11:12

organizationally and institutionally is John Doe and Jane Smith and whoever

11:16

else follows

11:18

this customer or set of customers have a certain cadence or rhythm to go. You

11:23

talk about emails

11:24

and phone calls every 30, 60, 90 days, whatever it could be. But just going

11:27

beyond that,

11:28

embedding the mindset of the company is also important. How do you go about

11:32

doing that

11:33

in a company as old? And honestly, with age or tenure from this practice, is

11:38

that I embedded in

11:38

your brain, right? That changed heart. One of it is we really bifurcated the

11:43

two things

11:44

very clearly within the company. So you've had a sales manager for capital

11:47

equipment,

11:47

and we had a sales manager for aftermarket. And first of all, as I told you,

11:52

the aftermarket is

11:52

de-graviates the high margin. So capital equipment, 25% margins, might be

11:57

really good.

11:58

Aftermarket, $15.75 is really good. So every dollar I saw in aftermarket were

12:04

three times,

12:04

in some cases, with the capital. It needs to be elevated to the same status as

12:11

the capital equipment.

12:12

And in fact, you're trying to get to at least 25 or 30% of your total revenue

12:18

to be aftermarket.

12:19

When you get 30% of your revenue, that means it's almost equal in profit to

12:23

your capital.

12:24

So there really should be equally weighted. The sales team, of course, always

12:28

has sales commissions.

12:29

So does the aftermarket team. So incentivizing these people for those sales is

12:36

very important.

12:37

And yes, you can automate emails. You can automate. We did promotions. So that

12:42

first sale is the

12:42

most important. Getting the SKU number in their system is so important. So we

12:48

don't just do a

12:49

package of say, aftermarket parts. We had everything enumerated. So we get each

12:53

of those into the

12:54

system. And then people were incentivized, paid for quarterly for the after

12:59

market sales.

13:00

So a bit of a pros and cons.

13:01

So doing it, I think, is important to show the seriousness of the company.

13:05

Yeah. And I like this part number idea because that's also Trojan horse.

13:09

Right. The moment you're in the system, you're on AVL. It automatically just

13:12

becomes like,

13:13

just plays a PO. You have the partner, my system anyway.

13:15

Now, case on corporate, on that point, one of the biggest consumables in case

13:21

on is

13:21

vibratory screeners have screens. Big round screen, some 102 inch diameter

13:26

could cost,

13:27

you know, $20,000, but smaller ones are five, 600 bucks. They break, they have

13:31

to be replaced

13:32

and have to different sizes for different jobs. And they didn't have a

13:36

partnering system for

13:36

the screens because there's a lot of variables, the size, the mesh, the gasket,

13:42

does have a center

13:42

plate material, whatever. And the answer is, of course, you can create a

13:45

partner.

13:45

Right. Now, not that hard to do when we did. And the shame was customers could

13:52

never order a

13:52

part number. Right. Right. And so you made it difficult for the customer to

13:56

order.

13:57

And that's the last thing you want to be is the hindrance, not the help to the

14:01

customer.

14:01

Right. You know, what's this couple of things I want to pick up on, the one is

14:05

you talked about

14:05

this partner, my idea, which is great. But something that you just referred to

14:10

has been stuck in my

14:11

mind for a while, which is, as you make these things happen, there's a series

14:16

of changes that

14:17

happen, right? So you can, you had to convince the case on people who said,

14:19

look, let's create

14:20

partners wherever you want to these measures. Or you create this practice about

14:23

having everything

14:24

to have a leader correctly to kind of have the partners put them in system. But

14:28

that begs a

14:29

bigger question, John, about change management, right? Again, I don't know how

14:33

all case on was as an entity, but my guess is more than 40, 50 years old, they

14:37

would go in 70 years

14:38

old. How much change management did you have to undertake to kind of make this

14:43

thing work for

14:44

you? Right. Because it's not simple. And that's where I see the biggest failure

14:47

mode, if you

14:48

made most of these companies today. Sure. And depending on the size of the

14:51

company, the first

14:51

mistake I think people make, Paul Corporation, by the way, was a wonderful

14:55

place to practice

14:56

change management. It was highly innovative. It's owned now by Dan or her,

15:00

which is, you know,

15:02

Dan or her business systems. I mean, there's a process. I think Paul was very

15:06

similar in that,

15:07

you know, we had really kind of figured out how we do things and change is

15:12

necessary for every

15:13

business. The first thing though with small companies is you can come up with a

15:16

thousand

15:17

great ideas. But if there's only 10 people to do it, you're not doing a

15:20

thousand ideas.

15:22

You really have to pick your battles. So don't do more than you can do. In the

15:27

first few,

15:28

we used to do product champions. We used to do, we would make it very special.

15:32

If you were on a team,

15:33

we elevate that in the eyes of the employees. So you almost wanted to, hey, can

15:38

I get on an

15:39

initiative? There were different initiatives. We would name them. We had a team

15:44

at Heyward Gordon,

15:46

we had the Midas team, we had the Merigold team. And they had very specific

15:49

goals. You were chosen

15:52

to be part of it. We did special things, dinners and so on. There were weekly

15:56

and monthly report

15:57

outs. And so if you're a lower level person on this team, you felt kind of

16:00

special. We did,

16:03

when we finished projects, we gave prizes. We gave gifts. We everyone had pens

16:07

and t-shirts that had

16:08

team Merigold and this and that. So you really create an excitement around the

16:13

initiative.

16:14

But it has to be a very clear start and finish. You have to set the goals. You

16:18

have to manage it.

16:19

And you make these people feel as if they're really it matters that they're

16:23

changing.

16:24

It's a big deal to make people feel special. It's a big deal to get them

16:29

motivated through

16:29

these things right. And I think that's an important aspect. Now, one question

16:33

for you regarding that

16:34

and it goes back to what you said a little while ago, which is it's one thing

16:38

to have a

16:38

poll with 12,000 people in case someone with whatever the size was and coming

16:44

to Heyward

16:44

Gordon where maybe you don't have the size of employees that population if you

16:49

may. And therefore

16:49

finding even the 10 people to do it is always harder to these smaller companies

16:52

. Right.

16:53

Do you have to go back and maybe re-skill certain things or maybe bring in

16:58

people from the outside?

16:59

How do you kind of make some of these things stick there? Yeah, I mean,

17:02

cool if you don't have the skill set in house, you've got to go out and get it.

17:05

There are people though that are really interested in learning new skills and

17:10

getting upgraded. So

17:12

project management, for example, on one gentleman who was naturally good at it,

17:17

but he was totally

17:18

unskilled. And also we didn't have the right software. So there's sent them on

17:24

for a couple

17:24

of months. I think it was a four week course. Came back as energized as you

17:28

could find someone.

17:29

So investing in your people is a great step. A lot of the young people want to

17:34

learn new stuff.

17:35

But there are also, you'd be surprised, the guy, the 25 year veteran, the

17:40

company who's just on it

17:41

and you kind of look at him and he gets up, does the same thing. He might be

17:45

looking for a challenge

17:46

too. So I think you got to keep the door open for everybody. A couple of

17:50

questions. I want to

17:50

rewind that to your early day, not early days, but when he came to Howard

17:54

Gordon. A couple of

17:55

questions for you. What is, how did you wind up in the Howard Gordon job? Was

17:59

it because he did

18:00

have a relationship with element partners or were you selected to kind of

18:04

recruit from the

18:05

outside coming in? Yeah, it was recruiter. It was one of the large recruiters.

18:09

It was

18:10

hydrogen struggles and they came in. I always, I'll tell you, my fortunate has

18:16

been that I like

18:16

long term relationships. I make friends and Vivek. You obviously is one of

18:20

those.

18:20

Making sure you make an effort to keep friendships and business or personal

18:26

life, I think are an

18:27

important sign of happiness. And with hydrogen struggles, they had come to me

18:32

several times

18:32

with possible job opportunities. And I said, not interested, but I know

18:37

somebody who would be

18:37

great for it. And on two occasions, colleagues of mine were fortunate to have I

18:43

threw their name

18:43

into the ring and they got the job. They're certainly thankful. But you know,

18:48

who has also

18:48

the hydric struggles of the world are thanks for their job is trying to find

18:52

good candidates. And

18:52

if I can hand them one, so you start reading this back and forth until

18:55

something really juicy came

18:57

up. And for me, love private equity. It's the best. It's the after doing both

19:02

sides. Let me tell you,

19:03

thank you corporate America. I have nothing to do with you. Private equity to

19:07

me is the place to

19:08

be. And we can discuss the reasons why. And so I jump at those opportunities.

19:14

In fact,

19:14

I have a call later today on one of those opportunities. So, you know, it's

19:19

only because of old

19:20

contacts and friends. But it's actually interesting. Right. So, you know, and

19:25

this is, I'm going to go

19:26

one more different question. But what I keep picking up from you is actually

19:29

something that

19:30

is a underappreciated aspect of success, which is relationships and investing

19:35

them in an

19:36

invested network around you. To some degree, you know, I keep looking at you

19:39

and saying,

19:40

John's a bond sales guy because I know I've known you for many years and I

19:43

understand. But also,

19:44

if you go back to your experience in Japan, it's about creating and maintaining

19:48

the relationships

19:49

and cultivating them over time, not just transaction, like I said, you know, we

19:53

tend to be very

19:53

transactional versus building out a what's in it for you, what's in it for me

19:57

kind of process.

19:58

And I think people forget that. Now, I want to kind of segue a little bit back

20:02

to the private

20:03

equity and element partner's discussion. So, you know, my perspective on

20:08

private equity is

20:10

there as focused as an interest to your point is, and thank you for private

20:14

equity, they're very

20:15

focused. There were deal thesis. They kind of have a objective and plan in mind

20:18

. I'm going to execute

20:19

that. Was that one of the motivations why they brought you in because of the

20:23

experiences you had

20:24

on the one-out-of-a-reza-reza-blade capital plus aftermarket mindset? Was there

20:30

a specific deal

20:30

thesis that Element had as part of the Herr Gordon investment? The answer is

20:36

yes, but I think they

20:37

liked a couple of things. One is, you know, private equity, nice thing is that

20:41

you walk in day one

20:42

with exit on your mind. So, there's an end goal. And I like that. I like having

20:48

really concrete

20:49

deliverables. And you need to instill that throughout the organization. You can

20:53

't just be like,

20:54

everyone understood where we were going. It's not a secret. But I had run big

20:59

companies that are

21:00

very good at process. Very good right now. You know, we talked about Paul, we

21:04

're down. We're

21:05

talking about Paul. There is a way of doing things that big companies have

21:09

figured out.

21:10

Translating that to a small used to be a mom-and-pop type of company. A lot of

21:15

these smaller companies

21:16

are just that. It's tough to do, but you need somebody who has the skill set,

21:21

as we just talked

21:22

about, of getting the old way to do the new, the change minute. You know, when

21:28

I put 13 countries

21:29

in Asia, or 13 very different countries, the best compliment I ever got was in

21:36

Japan, one of my

21:38

colleagues I had known for 20 years said to me, "John, I think in your past

21:41

life, you were Japanese."

21:42

Now, my good friend in Korea, years later said to me, "John, I think you used

21:47

to be Korean,

21:49

because you think I could be Korean." Then my good friend who ran Paul in India

21:55

said, "John,

21:56

I think he used to be India." I tend to look at most of these cultures, and

22:01

that could be a

22:01

country-related company, and not say, "Why are they doing this wrong?" But what

22:05

can I learn from

22:06

how they do right? And really absorb the good things. And once you do that, and

22:12

they get the

22:12

genuine feeling that you are listening and appreciating them, you can then

22:16

offer a suggestion.

22:18

But the ugly American, which I'm sure I think you would love as well,

22:22

of let me tell you how, let me tell you, is the probably the worst way to start

22:27

any covers.

22:27

That's right. Let me tell you what he should do.

22:30

Everyone's eyes roll in the back of their head.

22:32

So when you think about this journey at Hayward Gordon, you would have like

22:37

four or five years,

22:37

I think roughly plus or minus. I know, I mean, we don't need to know the data

22:42

because you

22:43

have talked about this in the past. But what is the transformation in terms of

22:48

the mix of

22:49

aftermarket and aftermarket really parts and consumables when you arrive versus

22:54

when you left

22:54

as a percentage of the total? Because I think it is a dramatically improved

22:58

performance,

22:58

if I remember correctly, right? Again, no numbers dated, but-

23:01

I think we were about 15 to 18% of aftermarket, most of that from a very small

23:07

pool. So you've

23:07

got to measure two things. One is percentage, perhaps. The other is, is it, you

23:12

're getting all

23:12

this money, but it's from one or two customers. A lot of it was from the mining

23:15

industry.

23:16

And I think the reason for that obviously is they're hyper focused on keeping

23:21

things moving.

23:22

There are remote locations. They buy lots of parts because if something goes

23:26

down,

23:26

and also it's custom equipment. So you've got this to call up eight different

23:31

suppliers.

23:31

The tough part is expanding that base and on some of the more consumable things

23:37

that are really

23:38

passed through items that you can buy and resell and still make two or three

23:42

times.

23:43

Right. Right. Because that's the right seals and gaskets.

23:46

Yeah. It's everything. And so we went from about 15 to 18 and we certainly were

23:54

over 30.

23:54

And that's- That's a big number. I'm creating that stickiness with the new

23:59

stuff, but that's

24:00

a very slow process. And if I sell like people's a piece of a capital equipment

24:04

, my first

24:05

aftermarket might be a year or two down the road. That's right. That's right.

24:07

If I want to get at

24:08

it today, it's about mining the old customers. So we took a very- We took the

24:13

approach,

24:13

anything that's between five and 10 years old, that hasn't bought anything from

24:17

us.

24:17

So this is data mining to mine. And that's where companies like yours really

24:22

helped us.

24:23

Let's come up with a thesis. If you haven't bought anything in the five to 10

24:27

year window,

24:27

and we know the equipment's still there because that's a very long time. And we

24:32

know there's parts,

24:33

somebody else is getting our lunch. That was our expression. I don't like that

24:36

feeling.

24:37

How do I get that back? And that is, okay, what parts can I go after? Who do we

24:43

know at those

24:43

sites? And if a salesman's in the area, can they drop by? Can we create some

24:47

type of a way of

24:48

doing it? Can we get the aftermarket team really going through the internet and

24:54

trying to find

24:55

using LinkedIn, using all these sales force we used, actually used not Sales

24:59

force, but

25:00

Dynamics. Yeah, we've done that. And how do we integrate all that to work? So

25:05

that's, I think that's the approach we did. But it moved the needle. And

25:09

remember,

25:09

25% margin versus 75% margin. An extra 10% from 15 to 25 to 30. The bottom line

25:20

. And how much higher marks boost? Yeah, it's huge leverage.

25:22

Yeah. And so we saw a huge improvement on the company's overall revenue, profit

25:28

, and percentage

25:29

of profit compared to revenue. And that's due to that.

25:32

So interesting. You said when you entered, when you entered it with Gordon and

25:37

private

25:37

equity is clear, you have a focus on mind, which is an exit, you build a plan,

25:40

you build the

25:41

profile to the exit. So you also mentioned just now that you goose chop margins

25:47

, you goose chop

25:47

growth, you know, you obviously had a higher even down margin, if you may,

25:51

before and after.

25:52

How did that play into your final exit process, I guess?

25:58

Yeah. It's the multiples, you know, the multiples in industrial business can be

26:04

depends, you know, the hey days could be 10, 12, 15%. Yeah, it's not SaaS and

26:11

it's not

26:11

life sciences. There's no 25s and 30s. That's right. And in the worst side,

26:16

you have a very small customer concentration could really five or eight percent

26:19

, six percent.

26:20

And then when after, you know, COVID and as in, obviously, as interest rates

26:25

have gone up,

26:26

the ability for private equity leverage has gotten harder. So multiples have

26:30

come down. But

26:31

without talking specifically about, hey, we're Gordon, the multiples were

26:36

beyond where they had

26:37

hoped. And you know, most people want to have an IRR of 25%, they want to see a

26:43

two and a half to

26:44

three times exit. And we surpassed those numbers significantly. So that's a

26:49

healthy return for all

26:51

the investors and element partners couldn't have been better how they treated

26:55

the all the employees.

26:56

Yeah. And I'll shout out to Ibarra Corporation who had bought it. They have

27:01

been the best company

27:03

to sell to. And that's something we think about, you know, when you're selling

27:05

a company, yeah,

27:06

you want to get the highest number, but you don't want to sell your baby and we

27:09

think even the

27:10

private equity, the heartless private equity guys turns out they're like Grinch

27:14

. They have a heart

27:14

and they really want it was a great exit. So both from a personal, from an

27:21

economic standpoint,

27:22

but also from just the right people, the right people and the right people.

27:26

But you know, something interesting you said, so you you element to care the

27:31

employees,

27:32

but the business that you build a profile you changed from before and after

27:35

really helped

27:36

in terms of getting a better value for the company overall. Now, the question I

27:40

have and you and I

27:40

have talked about this is this a bit of a softball question is, even though it

27:45

's so obvious, John,

27:46

on the what the transformation does in terms of the value valuation and so on

27:50

and so forth,

27:51

why do more companies not follow that path of building up a strong aftermarket

27:59

post sales,

27:59

parts and service? What have you want to call it? Business versus just letting

28:04

things be, right?

28:05

It's a mystery to me and during this treatment. Well, of course, a lot of these

28:08

companies are

28:09

family owned. The capital equipment guys are typically the owners are

28:12

mechanical engineers.

28:14

They love their equipment. It's their babies, right? They help develop it. That

28:19

's what they want to

28:19

talk about. That's what they want to sell. And if they're making good money, is

28:23

growth really

28:24

that important? I want to invest my hard-earned winning in something that may

28:28

or may not pay off.

28:29

And so it's private equity eyes are really the what are the metrics we need to

28:36

go and we need

28:36

private equity companies or sharks. They need to keep swimming to live while we

28:41

need to keep growing.

28:42

So revenue needs to go up. Margins need to improve. Cost needs to improve as

28:46

well.

28:47

I've walked into family owned companies where we ask questions and they say, "

28:51

Oh, we don't track

28:52

that." Can you give us your revenue growth for the last few years? Yeah, most

28:56

people have that.

28:56

We see margins by product family. We don't have no idea what that means.

29:01

What would last to mean a price increase? Only when we have to, or are we?

29:05

Because pricing strategies are another thing. Do you realize you're selling

29:09

this for less money

29:10

than that, but that costs more? We never looked at that. We didn't look at our

29:13

croose.

29:13

I think it's a professionalism of a large, either large public company, which

29:18

are driven because

29:19

you have shareholders who are going to have a right now, or the private equity,

29:23

which says,

29:24

"We need to improve these things." So I think it's just not an they're not

29:28

educated in

29:29

those type of things. With that said, there's some privately owned family owned

29:32

businesses

29:33

are run wonderfully. So I don't want to paint with too broad a brush.

29:36

But I think that's an important opportunity for many companies to come in and

29:40

fundamentally

29:40

change the profile of the business to create more value both for the customers.

29:44

I think what's

29:45

forgotten in this process is, yes, the private equity investors made out well

29:50

as it employs.

29:51

But the aftermarket business, aftermarket processes and operation that you put

29:56

into place for the

29:56

continuity of touch points, relationships, the customer care really is actually

30:01

about

30:01

helping a customer operate better. So at some point, you had to realize that

30:05

this is about the

30:06

customer being better off as well in the bargain.

30:09

It really is that's a very true statement. I should have emphasized that more.

30:13

You know, not just doing it because you want to make more money. But if you

30:16

sell equipment and

30:17

you walk away, you're missing the opportunity to keep your customer happy. He

30:22

may be happy the

30:23

day he bought it. But what's the frustration if he doesn't know when to change

30:26

something out of

30:27

that fails five years later? Now, it's well passed a warranty. It's not your

30:33

fault because it didn't

30:33

maintain it correctly. But does he going to think about your pump or your mixer

30:37

? Again, when he says, "Ah, it was great for the first five years, but then it

30:42

fell apart."

30:42

So if you really want to make customers, you want to talk about solution

30:47

selling.

30:47

And part of that solution is providing them with all the knowledge to have the

30:52

most effective

30:52

piece of equipment operating today, tomorrow. We had equipment out for 30 years

30:56

. Those customers

30:58

thought the world of our product. That's right. That's right.

31:00

Part of the reason it was working for 30 years is it was maintained correctly.

31:03

Maintained well, yeah.

31:04

And so after markets more than just, "Hey, how can I put some money in my

31:07

pocket day?"

31:08

It's about improving the overall value proposition of the total company.

31:11

And it's actually interesting, right? So, when I kind of wrap this thing up,

31:15

we're almost at 30-minute mark right now. If I were to ask you to maybe kind of

31:20

step back

31:21

for your 30-plus years and in this business, what are your lessons learned that

31:27

maybe the next

31:28

generation of people around us can take as part of this learning that says, "

31:33

Use the three or

31:33

four things that took away from my 30-user experience."

31:35

Yeah. Well, I mean, the first one I think was the lesson learned from Asia, of

31:39

course,

31:40

which is build those relationships internally to the company and externally.

31:45

Don't look at

31:45

things of, "What do I get from this if I give this?" Think of it more of, "How

31:49

can I help you?

31:50

What do you need from me? How can I help you on your journey to the customer or

31:55

to your employees?"

31:56

That conversational dynamic will eventually lead to things like, "Okay, now I

32:00

understand."

32:00

What you think the problems are may not be, but you've had that conversation

32:04

all of a sudden,

32:05

your paradigm starts to shift. So, with my mother used to say, "You've got one

32:10

mouth and two years.

32:10

Listen twice as much as you talk. I don't know if I've always followed that,

32:14

but I will tell you

32:15

it's good advice nonetheless." The second one I think is, I think it follows

32:20

that is,

32:21

"Don't ask people to do things that aren't naturally to them. You're not going

32:25

to create

32:26

them." I don't think you can take a really effective capital equipment sales

32:29

group

32:29

and make them also be effective aftermarket sales. It's not the DNA.

32:34

So, learn that that's not going to happen and create a structure where that

32:40

separate organization

32:41

that can happen. Making people do what you want simply because you want it is,

32:46

maybe it worked in the 40s and the 50s. I had a boss once. If anyone from my

32:52

old company,

32:52

Paul Carvish, knows this, they'll know who I'm talking about. He ripped the

32:55

phone out and threw

32:56

it out of a window. He was mad. You can't get away with that. You can't do that

33:00

.

33:00

What I find today is that CEOs and leaders in an organization, sales, whatever,

33:07

are less about telling people what to do. But making sure that collectively we

33:13

know what

33:13

needs to get done and then facilitating how to help them do that job. I've

33:19

tried making people

33:21

do what I want to do. From my family to my children, it just doesn't work. It's

33:28

much more that

33:29

cooperative and that's consultative type of approach. I think is the way you

33:35

get people to

33:35

succeed. That's amazing. I think this has been a fantastic thing. I always like

33:40

to end these

33:41

interviews or these discussions, John, with my favorite question. I have a big

33:46

podcast

33:46

listening. I love Guy Raz and his how I build his stories. You always ask the

33:50

end. I like to

33:51

ask the same. If you think back to your career and where you are today, how

33:54

much of it is luck

33:55

versus how much of it is because of your own brilliance and charm and good

33:59

looks, right?

33:59

Well, the first little charm and good looks, I think your listeners will

34:02

obviously understand

34:03

that that's not it. I would say luck is probably 75%. I was very fortunate to

34:10

have some wonderful

34:11

bosses. People who really taught me what it means to be a boss. That means not

34:18

throwing

34:19

phones out windows. What it really was about listening to me and understanding,

34:23

when they

34:24

would ask a question, so where do you want to be in five years? They weren't

34:28

just asking

34:29

this for a pet answer. They were like, "Okay, how do I help you get there?" I

34:33

had great mentors

34:34

along the way. I had great opportunities, but I also had an advantage of the

34:37

opportunity.

34:38

So the luck is getting an opportunity. This smart is taking it.

34:42

So opportunities to move to Japan or to move to Singapore or to run different

34:47

divisions.

34:47

I may not have been the first person they asked. I can't say that's true, but

34:52

you may

34:52

have someone who said, "No, I don't want to move to Japan. I'm crazy." I was

34:55

crazy enough to say,

34:56

"Yes, I want to move to Japan. I'll mount my wife there and raise my kids there

35:00

for many years."

35:02

And it was by far one of the best experiences in my life. Do things that make

35:06

you uncomfortable?

35:07

Try the things you don't know how to do. Understand that no one knows all the

35:11

answers to everything

35:12

them all the time, my goodness. And so it's okay not to be to know. It's okay

35:17

to ask for help.

35:18

And that's a question, yeah.

35:20

And typically what I used to tell people is, if I'm the smartest person in the

35:24

room,

35:24

I'm in the wrong room. I don't want to be in a meeting where I hire people and

35:29

I work with

35:30

people who know much more than I do. That's really the signs typically of good

35:34

management. So

35:34

75% luck, 25% smart enough to know that I'm lucky.

35:39

That's brilliant. That's a great answer. And I love that answer. And that's

35:42

actually really

35:43

consistent with many of the other people I've talked to, a very similar mindset

35:47

, which is,

35:48

there's a lot of things that happen that bring you to a certain place, but then

35:51

what you do with

35:52

it is something that's up to you. But in more cases than John said, the same

35:56

thing which you did,

35:56

which is they've been lucky to have been in certain jobs around certain people

36:01

in the early days,

36:01

which gave them a boost. And they made take advantage of this opportunity.

36:05

So that's a great way to end this conversation. John, I really, really

36:09

appreciate you taking the

36:10

time today. I know in retirement you're busy in the never. So I appreciate you

36:14

taking a few

36:15

minutes today to chat with us. Thank you very much. And I'm sure we'll get a

36:18

lot of feedback on this

36:20

when listeners take the time and listen to this in the next few weeks. So thank

36:24

you, John, and have

36:25

a great day. My pleasure. Thanks again. Great seeing you. Thank you.

36:31

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36:34

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